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<br />3. TOWN'S and BORROWER'S authority to contract. The TOWN and the BORROWER warrant that <br />both the Board of Selectmen of the TOWN and the governing body of the BORROWER have <br />complied with all statutory and other requirements and duly passed resolutions, which shall be <br />irrepealable for the term of this loan contract, authorizing: <br /> <br />a. The TOWN and the BORROWER to enter into and comply with the terms of this contract with <br />the STATE; <br /> <br />b. The TOWN to establish and collect water user charges, rates and fees in amounts sufficient <br />to repay the loan made under this contract; <br /> <br />c. The BORROWER to make annual loan payments in accordance with the promissory note; <br /> <br />d. The BORROWER to pledge revenues from water user charges, rates and fees ("water system <br />revenues") to repay this loan and to execute a Security Agreement to convey a security <br />interest to the STATE in the pledged water system revenues; <br /> <br />e. The TOWN and the Borrower to set aside sufficient water system revenues each year to pay <br />the annual installment in a special account, separate and apart from other revenues of the <br />TOWN and the BORROWER, in accordance with the Pledge of Revenues provisions of this <br />contract; <br /> <br />f. The BORROWER to establish a reserve debt service fund by making an annual deposit <br />equivalent to one-tenth of an annual payment every year for 10 years, and to replenish that <br />fund anytime it is depleted; <br /> <br />g. The BORROWER to execute a deed of trust, security agreement and stock assignment to <br />convey a security interest to the STATE in the FHL Shares as security for the loan, as <br />described in the Collateral Provisions of this contract; <br /> <br />h. The BORROWER to execute a security agreement to convey a security interest to the STATE in <br />the water system revenues pledged herein; and <br /> <br />4. Said resolutions are attached hereto as Appendix 1 and incorporated herein. The actions of the <br />TOWN and the BORROWER adopting said resolutions and executing the necessary documents to <br />convey the security interests required by this contract are conditions precedent to performance <br />by the STATE under this contract. <br /> <br />5. Attorney's opinion letter. Prior to the execution of this contract by the STATE, the TOWN and the <br />BORROWER shall submit to the STATE an opinion from the Town's counsel that the contract will be <br />duly executed by officers of the TOWN and the BORROWER who are duly elected or appointed and <br />are authorized to execute the contract and to bind the TOWN and the BORROWER; that the <br />ordinances of the TOWN and the BORROWER authorizing the execution and delivery of the <br />contract were duly adopted by the Board of Selectmen of the TOWN and the governing body of <br />the BORROWER; that there are no provisions in the Colorado Constitution or any other state or <br />local law that prevent this contract from binding the TOWN and the BORROWER; and that the <br />contract will be valid and binding against the TOWN and the BORROWER if entered into by the <br />STATE. <br /> <br />6. Promissory Note Provisions. The Promissory Note setting forth the terms of repayment and <br />evidencing this debt in the amount of up to $190,000 at an interest rate of 5.25% per annum for a <br />term of 30 years is attached as Appendix 2 and incorporated herein. <br /> <br />a. Interest During Project Completion. As the loan funds are disbursed by the STATE to the <br />BORROWER during PROJECT completion, interest shall accrue at the rate of 5.25%. The <br /> <br />Town of Georgetown & Town of Georgetown <br />Water and Sewer Activity Enterprise <br /> <br />Page 3 of 11 <br />