Okaloosa County BOCC — April 1, 2014 — Loan Agreement.2BL

NGN Draft No.2 3/26/2014 019.14 OKALOOSA COUNTY, FLORIDA and AUBURN WATER SYSTEM, INC. LOAN AGREEMENT DATED AS OF APRIL 1, 2014 The rights of Okaloosa County, Florida hereunder have been assigned to ___________________, as Bond Trustee under a Bond Trust Indenture dated as of April 1, 2014, except for certain unassigned rights described herein.  TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.1. DEFINITIONS ............................................................................................1 ARTICLE II REPRESENTATIONS SECTION 2.1. REPRESENTATIONS BY ISSUER...........................................................3 SECTION 2.2. REPRESENTATIONS AND WARRANTIES BY THE BORROWER ............................................................................................4 ARTICLE III ISSUANCE OF BONDS OF THE ISSUER SECTION 3.1. AGREEMENT TO ISSUE SERIES 2014 BONDS; PROCEEDS OF SERIES 2014 BONDS; ADDITIONAL BONDS ....................................5 SECTION 3.2. MAKING OF THE LOAN..........................................................................6 SECTION 3.3. PAYMENT OF BONDS .............................................................................6 SECTION 3.4 PLEDGE OF THIS LOAN AGREEMENT ................................................6 ARTICLE IV OBLIGATION PAYMENTS, FUND DEPOSITS, PREPAYMENTS AND OTHER PAYMENTS SECTION 4.1. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST; PAYMENTS REQUIRED BY THE TAX EXEMPTION AGREEMENT ..................................................................7 SECTION 4.2. PAYMENTS IN RESPECT OF THE BONDS AND THIS LOAN AGREEMENT ..........................................................................................7 SECTION 4.3. CREDITS ON PRINCIPAL PAYMENTS .................................................7 SECTION 4.4. PREPAYMENT GENERALLY..................................................................7 SECTION 4.5. NOTICE OF PREPAYMENT.....................................................................7 SECTION 4.6. EFFECT OF PARTIAL PREPAYMENT ...................................................7 SECTION 4.7. AMORTIZATION SCHEDULES ..............................................................8 SECTION 4.8. ADDITIONAL PAYMENTS......................................................................8 SECTION 4.9. BORROWER'S OBLIGATIONS UNCONDITIONAL .............................8 ARTICLE V COVENANTS OF THE BORROWER SECTION 5.1. MAINTENANCE OF FACILITIES ...........................................................9 SECTION 5.2. COMPLIANCE WITH ORDERS AND ORDINANCES ..........................9 SECTION 5.3. SUFFICIENT REVENUES.........................................................................9 i SECTION 5.4. ISSUER'S RIGHT TO PERFORM THE BORROWER'S COVENANTS...........................................................................................9 SECTION 5.5. INDEMNITY ............................................................................................10 SECTION 5.6. NOTICE OF DEFAULT ...........................................................................11 SECTION 5.7. MAINTENANCE OF EXISTENCE .........................................................11 SECTION 5.8. FINANCIAL INFORMATION AND REPORTS ....................................11 SECTION 5.9. TAX EXEMPT BONDS ...........................................................................12 SECTION 5.10. INVESTMENTS AND ARBITRAGE......................................................12 SECTION 5.11. DISPOSITION OF PROJECT FUND AND EXPENSE FUND MONEYS................................................................................................12 SECTION 5.12. LIMITATIONS ON ADDITIONAL INDEBTEDNESS..........................12 SECTION 5.13. SUBORDINATED INDEBTEDNESS .....................................................14 SECTION 5.14. OPERATION AND MAINTENANCE ....................................................14 SECTION 5.15. ANNUAL BUDGET .................................................................................15 SECTION 5.16. RATES ......................................................................................................15 SECTION 5.17. BOOKS AND RECORDS ........................................................................15 SECTION 5.18. ANNUAL AUDIT.....................................................................................15 SECTION 5.19. NO MORTGAGE OR SALE OF THE SYSTEM ....................................15 SECTION 5.20. INSURANCE ............................................................................................16 SECTION 5.21. NO FREE SERVICE .................................................................................17 SECTION 5.22. NO IMPAIRMENT OF RIGHTS; NO COMPETING SYSTEM ............17 SECTION 5.23. ENFORCEMENT OF CHARGES............................................................17 SECTION 5.24. CONSULTING ENGINEERS ..................................................................17 ARTICLE VI EVENTS OF DEFAULT AND REMEDIES THEREFOR SECTION 6.1. EVENTS OF DEFAULT AND REMEDIES............................................18 SECTION 6.2. APPLICATION OF PROCEEDS OF REMEDIES ..................................19 SECTION 6.3. REMEDIES CUMULATIVE....................................................................20 SECTION 6.4. DELAY OR OMISSION NOT A WAIVER.............................................20 SECTION 6.5. REMEDIES SUBJECT TO PROVISIONS OF LAW ..............................20 ARTICLE VII SUPPLEMENTS AND AMENDMENTS TO THIS LOAN AGREEMENT SECTION 7.1. SUPPLEMENTS AND AMENDMENTS TO THIS LOAN AGREEMENT ........................................................................................20 ARTICLE VIII DEFEASANCE SECTION 8.1. DEFEASANCE .........................................................................................20 ARTICLE IX MISCELLANEOUS PROVISIONS SECTION 9.1 LOAN AGREEMENT FOR BENEFIT OF PARTIES HERETO ............21 ii SECTION 9.2. SEVERABILITY ......................................................................................21 SECTION 9.3. NOTICES ..................................................................................................21 SECTION 9.4. SUCCESSORS AND ASSIGNS...............................................................21 SECTION 9.5. COUNTERPARTS....................................................................................21 SECTION 9.6. GOVERNING LAW .................................................................................22 SECTION 9.7. IMMUNITY ..............................................................................................22 SECTION 9.8. OBLIGATIONS DUE ON SATURDAYS, SUNDAYS OR HOLIDAYS ............................................................................................22 SECTION 9.9. LIMITATION ON INTEREST.................................................................22 SCHEDULE A LOAN REPAYMENT SCHEDULE.......................................................A-1 iii  LOAN AGREEMENT This is a LOAN AGREEMENT dated as of April 1, 2014 (the "Loan Agreement"), between AUBURN WATER SYSTEM, INC., a Florida non-profit corporation (the "Borrower") and OKALOOSA COUNTY, FLORIDA, a political subdivision of the State of Florida (the "Issuer"). PRELIMINARY STATEMENT The Borrower desires to obtain moneys which will be used, together with certain other moneys to, (i) finance all or a portion of the costs of improvements to the Borrower's existing water system, (ii) refinance certain outstanding indebtedness of the Borrower, and (iii) pay related expenses incurred in connection with the issuance of the Bonds (as hereinafter defined), all as permitted under the Act. Pursuant to the Act, the Issuer is obtaining funds to loan to the Borrower for the purposes aforesaid through the issuance and sale of its Utilities System Revenue Bonds, Series 2014A and 2014B (Auburn Water System, Inc. Project) in the initial aggregate principal amount of $________ (the "Series 2014 Bonds"), which will be issued under and secured by a Bond Trust Indenture dated as of April 1, 2014 (the "Bond Indenture") between the Issuer and _____________________, as bond trustee (the "Bond Trustee"). The Series 2014 Bonds, together with any Additional Bonds issued under the Bond Indenture, are referred to herein as the "Bonds." Pursuant to the Bond Indenture, the Issuer will pledge and assign certain of its rights under this Loan Agreement as part of the security for the Bonds. The Bonds will be payable out of the payments to be made by the Borrower provided for in this Loan Agreement. NOW THEREFORE, in consideration of the foregoing, the mutual covenants, conditions and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, the Borrower and the Issuer hereby covenant and agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. DEFINITIONS. The terms used in this Loan Agreement, unless the context requires otherwise, shall have the same meanings as set forth below or in the Bond Indenture. "Additional Indebtedness" means any Indebtedness incurred by the Borrower after the date of this Loan Agreement. "Annual Audit" means the annual audit prepared pursuant to the requirements of Section 5.18 hereof. "Bond Trustee's Prime Rate" means a fluctuating rate of interest equal to the prime rate established from time to time by the applicable department of the Bond Trustee or the largest commercial bank with which it is affiliated if it does not have a prime rate. The Bond Trustee's Prime Rate shall change simultaneously with any corresponding change or changes in the Bond Trustee's or such affiliated bank's prime rate. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement, dated as of April 1, 2014, between the Borrower and the Bond Trustee. "Derivative Agreement" means, without limitation, (i) any contract known as or referred to or which performs the function of an interest rate swap agreement, currency swap agreement, forward payment conversion agreement or futures contract related to Indebtedness; (ii) any contract providing for payments based on levels of, or charges or differences in, interest rates, currency exchange rates, or stock or other indices; (iii) any contract to exchange cash flows or payments or series of payments; (iv) any type of contract called, or designed to perform the function of, interest rate floors or caps, options, puts or calls, to hedge or minimize any type of financial risk, including, without limitation, payment, currency, rate or other financial risk; and (v) any other type of contract or arrangement that the Borrower determines is to be used, or is intended to be used, to manage or reduce the cost of Indebtedness, to convert any element of Indebtedness from one form to another, to maximize or increase investment return, to minimize investment return risk or to protect against any type of financial risk or uncertainty. "Derivative Indebtedness" means payments for which the Borrower shall have become obligated under a Derivative Agreement. "Derivative Period" means the period during which a Derivative Agreement is in effect. "Escrowed Interest" means amounts of interest on Indebtedness for which moneys or United States Government Obligations have been deposited in escrow, which deposit has been determined by an independent certified public accountant to be sufficient to pay such Escrowed Interest. "Escrowed Principal" means amounts of principal on Indebtedness for which moneys or United States Government Obligations have been deposited in escrow, which deposit has been determined by an independent certified public accountant to be sufficient to pay such Escrowed Principal. "Fiscal Year" means any 12-month period beginning on ________ 1 of any calendar year and ending on ________ 31 of such calendar year, or such other consecutive 12-month period selected by the Borrower as the fiscal year for the Borrower. "Funded Interest" means amounts irrevocably deposited in an escrow or other trust account to pay interest on Indebtedness and interest earned on amounts irrevocably deposited in an escrow or other trust account to the extent such interest earned is required to be applied to pay interest on such Indebtedness. "Indebtedness" means (i) all indebtedness of the Borrower for borrowed money, (ii) all installment sales, conditional sales and capital lease obligations incurred or assumed by the Borrower, and (iii) Derivative Indebtedness. "Maximum Annual Debt Service" means the highest Debt Service Requirement for any succeeding Fiscal Year. 2  "Required Information Recipient" means (i) the Bond Trustee, (ii) the initial holder of the Series 2014 Bonds, (iii) all nationally recognized municipal securities information repositories, (iv) any state information repository for the State identified by the Securities and Exchange Commission, and (v) all registered owners of $500,000 or more in principal amount of Bonds that request such reports in writing (which written request shall include a certification as to such ownership). "Subordinated Debt" means Indebtedness the payment of which is specifically subordinated to the payment of principal and interest on the Bonds or other Indebtedness incurred pursuant to the provisions of Sections 5.12(a), (b), (d), (f) or (g) hereof. All accounting terms not otherwise defined herein or in the Bond Indenture shall have the meanings assigned to them in accordance with generally accepted accounting principles in effect from time to time. All references in this instrument to designated "Articles," "Sections" and other subdivisions or subsections are to the designated Articles, Sections and other subdivisions of this instrument as originally executed. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Loan Agreement as a whole and not to any particular Article, Section or other subdivision unless the context indicates otherwise. ARTICLE II REPRESENTATIONS SECTION 2.1. REPRESENTATIONS BY ISSUER. The Issuer represents and warrants that: (a) it is a political subdivision organized and existing under the laws of the State, and will do or cause to be done all things within its power necessary to preserve its existence so long as any of the Bonds are Outstanding; (b) the Issuer has duly authorized the issuance, execution, delivery and performance of this Loan Agreement, the Bond Indenture and the other documents to which it is a party associated with the issuance of the Bonds, and has duly noticed and held the public hearing required by Section 147(f) of the Code and received sufficient private activity bond allocation required by the Code in connection with the issuance of the Series 2014A Bonds; (c) The Bonds are to be issued under and secured by the Bond Indenture pursuant to which the Issuer's interest in this Loan Agreement will be pledged and assigned to the Bond Trustee by outright assignment as security for payment of the principal of, premium, if any, and interest on the Bonds; (d) The Borrower has represented to the Issuer that the Project constitutes a "manufacturing facility" and a "project" within the meaning of the Act; (e) The Issuer has jurisdiction over the entire area in which the Project is to be located; (f) the Issuer has not pledged or assigned and will not pledge or assign its interest in this Loan Agreement, or any of the other documents associated with the issuance of the Bonds, 3 other than to secure the Bonds from time to time Outstanding as provided herein and in the Bond Indenture; and (g) each of the Issuer's representations, warranties and certifications contained in this Loan Agreement, the Tax Exemption Agreement and the Purchase Contract is true and correct in all material respects as of the date hereof. SECTION 2.2. REPRESENTATIONS AND WARRANTIES BY THE BORROWER. The Borrower makes the following representations and warranties as the basis for its covenants herein: (a) the Borrower is a non-profit corporation validly organized and existing under the laws of the State; (b) each of its representations, warranties and certifications contained in this Loan Agreement, the Tax Exemption Agreement and the Borrower's Closing Certificate is true and correct in all material respects as of the date hereof; (c) it reasonably expects to own all of the Project throughout the term of this Loan Agreement, it intends to use such facilities in connection with its operation of a water production, treatment and distribution system, and no Person other than the Borrower currently owns or will own or use any portion of the Project; (d) it is duly authorized under the laws of the State and all other applicable provisions of law and its articles of incorporation and by-laws to execute and deliver this Loan Agreement, the Tax Exemption Agreement and each of the other documents or instruments being delivered by the Borrower in connection with the issuance of the Bonds, that all action on its part necessary for the valid execution and delivery of this Loan Agreement, the Tax Exemption Agreement and each of the other documents or instruments to which the Borrower is a party related to the issuance of the Bonds (collectively the "Borrower's Documents") has been duly and effectively taken, and this Loan Agreement is a legal and valid obligation of the Borrower; (e) neither the execution and delivery of the Borrower's Documents, nor the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions hereof or thereof conflicts with or results in a breach of the terms, conditions, or provisions of any agreement or instrument to which the Borrower is now a party or by which the Borrower is bound; (f) there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, known to be pending or threatened against or affecting the Borrower or any of its officers, nor to the best knowledge of the Borrower is there any basis therefor, wherein an unfavorable decision, ruling, or finding would materially adversely affect the transactions contemplated by the Borrower's Documents or which would adversely affect, in any way, the validity or enforceability of the Bonds, the Borrower's Documents, or any agreement or instrument to which the Borrower is a party, used or contemplated for use in the consummation of the transactions contemplated by the Borrower's Documents or the Bond Indenture; 4  (g) it has all material licenses and permits from all State, local and other governmental and regulatory agencies having jurisdiction required for the operation of its facilities; (h) The Tax Exemption Agreement executed and delivered by the Borrower concurrently with the issuance and delivery of the Series 2014 Bonds is true, accurate and complete in all material respects as of the date on which executed and delivered; (i) The Borrower agrees that neither it nor any related party to the Borrower (as defined in Treas. Reg. § 1.150-1(b)) will purchase any of the Series 2014A Bonds in an amount related to the obligation represented by this Loan Agreement, as described in Section 1.148-1(b) of the Code; (j) Any information that has been or will be supplied by the Borrower that has been or will be relied upon by the Issuer, the Bond Trustee and Bond Counsel with respect to the exclusion from gross income for federal income tax purposes of interest on the Series 2014A Bonds is true and correct; (k) The Project constitutes a "project," and a "manufacturing facility" within the meaning of the Act. All proceeds of the Bonds will be used to finance a "cost" within the meaning of the Act; (l) Based on current facts, estimates and circumstances, it is currently expected that the Project will not be sold or disposed of in a manner producing sale proceeds which, together with accumulated proceeds of the Series 2014 Bonds or earnings thereon, would be sufficient to enable the Borrower to retire substantially all of the Series 2014 Bonds prior to the maturity of the Series 2014 Bonds; (m) it has obtained all licenses and permits from all State, local and other governmental and regulatory agencies having jurisdiction required for the occupancy and operation of the Project which are currently obtainable, and the Borrower is not aware of any facts or circumstances which lead it to believe that all licenses and permits from all State, local and other governmental and regulatory agencies having jurisdiction required for the occupancy and operation of the Project which are not currently available will not be issued in due course; and (n) the Borrower has reviewed and is familiar with the terms and provisions of the Bond Indenture and will fully and faithfully perform all the duties and obligations which the Issuer has covenanted and agreed in the Bond Indenture to cause the Borrower to perform, and any duties and obligations which the Borrower is required in the Bond Indenture to perform. The foregoing shall not apply to any duty or undertaking of the Issuer which by its nature cannot be delegated or assigned. ARTICLE III ISSUANCE OF BONDS OF THE ISSUER SECTION 3.1. AGREEMENT TO ISSUE SERIES 2014 BONDS; PROCEEDS OF SERIES 2014 BONDS; ADDITIONAL BONDS. 5  (a) In order to provide funds to make the loan to the Borrower hereunder, the Issuer agrees to issue and sell the Series 2014 Bonds pursuant to the Purchase Contract. The Borrower agrees that the proceeds of the Bonds being loaned to the Borrower pursuant to this Loan Agreement shall be deposited with the Bond Trustee and applied as provided in the Bond Indenture. (b) Additional Bonds may be issued upon the terms and conditions provided herein and in Section 2.2 of the Bond Indenture to provide funds (i) to pay the cost of financing, refinancing, acquiring, providing, constructing, enlarging, remodeling, renovating, improving, furnishing or equipping and refinancing the acquiring, constructing, equipping or completing of the Project, (ii) to refund any Bonds theretofore issued and then Outstanding under the Bond Indenture or any other obligations that are permitted to be refunded pursuant to the Act, or (iii) for any combination of such purposes. (c) If the Borrower is not in default hereunder and otherwise meets the requirements for the issuance of Additional Bonds under the Bond Indenture, including any necessary consents thereunder, the Issuer agrees, on request of the Borrower, from time to time, to consider the issuance of the amount of Additional Bonds specified by the Borrower; provided that the terms of such Additional Bonds, the purchase price to be paid therefor and the manner in which the proceeds thereof are to be disbursed shall have been approved in writing by the Borrower, and provided further that the Borrower and the Issuer shall have entered into an amendment to this Loan Agreement to provide, among other things, for additional loan payments in an amount at least sufficient to pay principal of, premium, if any, and interest on the Additional Bonds when due. SECTION 3.2. MAKING OF THE LOAN. The Issuer hereby loans $________ to the Borrower and the Borrower accepts the loan from the Issuer on the terms and conditions provided in this Loan Agreement. The proceeds of such loan will be disbursed to the Borrower as provided in this Loan Agreement and the Bond Indenture. SECTION 3.3. PAYMENT OF BONDS. The Borrower agrees that the principal of and the interest and redemption premium, if any, on the Bonds shall be payable in accordance with the provisions of the Bond Indenture and SCHEDULE A to this Loan Agreement and that this Loan Agreement and payments to be made hereunder (excluding Unassigned Rights) shall be assigned and pledged to the Bond Trustee to secure the payment of the Bonds. The foregoing notwithstanding, the Borrower agrees that the moneys and securities, if any, on deposit in the Rebate Fund created by the Tax Exemption Agreement are not part of the "trust estate" and are not available to make payments of principal of, premium, if any, and interest on the Bonds. SECTION 3.4 PLEDGE OF THIS LOAN AGREEMENT. Except for Unassigned Rights, all of the Issuer's right, title and interest in this Loan Agreement (including the right to receive the payments to be made by the Borrower pursuant to this Loan Agreement) have been assigned to the Bond Trustee pursuant to the Bond Indenture. The Borrower consents to that assignment and agrees that the Bond Trustee may enforce any of the rights, privileges and remedies of the Issuer under this Loan Agreement, other than the Unassigned Rights. 6  ARTICLE IV OBLIGATION PAYMENTS, FUND DEPOSITS, PREPAYMENTS AND OTHER PAYMENTS SECTION 4.1. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST; PAYMENTS REQUIRED BY THE TAX EXEMPTION AGREEMENT. The Borrower will duly and punctually pay the principal of, premium, if any, and interest on the Bonds in the manner set forth in SCHEDULE A to this Loan Agreement or in the Bond Indenture, according to the true intent and meaning thereof and hereof. Notwithstanding any schedule of payments set forth herein, the Borrower agrees to make payments upon the Bonds and be liable therefor at the times and in the amounts (including principal, interest and premium, if any) equal to the principal of, premium, if any, and interest on the Bonds from time to time outstanding, whether as regularly scheduled interest or principal payments, at maturity, by mandatory or optional redemption, acceleration or otherwise; provided, however, that the Borrower may be entitled to certain credits on such payments as permitted by Section 4.3 hereof. The Borrower also agrees to make any payments as required under the Tax Exemption Agreement. SECTION 4.2. PAYMENTS IN RESPECT OF THE BONDS AND THIS LOAN AGREEMENT. The Borrower covenants and agrees to make the deposits required under Section 4.2 of the Bond Indenture for the repayment of the loan of proceeds of the Bonds and other amounts payable hereunder and under the Bond Indenture. SECTION 4.3. CREDITS ON PRINCIPAL PAYMENTS. Notwithstanding any provision contained in this Loan Agreement or in the Bond Indenture to the contrary, the principal amount of Bonds of any maturity purchased by the Borrower and delivered to the Bond Trustee, or purchased by the Bond Trustee on behalf of the Borrower and canceled, shall be credited against the obligation of the Borrower to pay the principal of the Bonds due under this Loan Agreement equal to the principal amount of the Bonds so cancelled. SECTION 4.4. PREPAYMENT GENERALLY. No prepayment or purchase of the Bonds may be made except to the extent and in the manner expressly permitted by the Bond Indenture. Such prepayments or purchases shall be made by paying to the Bond Trustee an amount sufficient to redeem (when redeemable) or purchase all or a part of the Bonds, as the case may be, at the redemption or purchase prices specified therefor in the Bond Indenture in accordance with the Bond Indenture. Any prepayment or purchase pursuant to this Section shall include accrued interest and premium, if any, required for redemption or purchase of such Bonds as shall be purchased or redeemed by such prepayment. SECTION 4.5. NOTICE OF PREPAYMENT. The Borrower shall provide the Bond Trustee and the Issuer with a Written Request of any prepayment of and redemption or purchase of the Bonds not less than thirty-five (35) days prior to the prepayment date in described in Section 5.6 of the Bond Indenture, which Written Request shall designate the date of prepayment and the amount thereof and direct the redemption or purchase of Bonds in accordance with the terms of the Bond Indenture. SECTION 4.6. EFFECT OF PARTIAL PREPAYMENT. Upon any partial prepayment or purchase of the Bonds, each installment of interest which shall thereafter be 7 payable on the Bonds shall be reduced, taking into account the interest rate on the Bonds remaining outstanding after the redemption or purchase of Bonds from the proceeds of such partial prepayment and after the purchase and delivery and cancellation of Bonds described in Section 4.3 hereof. SECTION 4.7. AMORTIZATION SCHEDULES. On the date of any partial prepayment or purchase of the Bonds, the Borrower shall deliver to the Issuer and the Bond Trustee two copies of a new amortization schedule with respect to Bonds then outstanding setting forth the amount of the principal and interest installments to be paid after the date of such partial prepayment or purchase. SECTION 4.8. ADDITIONAL PAYMENTS. The Borrower agrees to pay directly all reasonable costs incurred by or on behalf of the Issuer or the Bond Trustee in connection with or incident to the issuance and sale of the Bonds which exceed the amount on deposit in the Expense Fund described in Section 3.1 of the Bond Indenture, including, without limitation, any commitment and other financing costs, recording expenses, trustee's acceptance fees and initial annual fees, legal fees, printing expenses, bond and issuer counsel fees and other fees and expenses. The Borrower agrees to pay or cause to be paid the following items to the following persons as additional payments under this Loan Agreement: (a) to the Bond Trustee, upon demand, an amount equal to all reasonable fees of the Bond Trustee for services rendered under the Bond Indenture and all fees and charges of any Paying Agent, registrar, counsel, accountant, consultant, engineer or other persons incurred in the performance of services under the Bond Indenture on request of the Bond Trustee for which the Bond Trustee and such other persons are entitled to payment or reimbursement, including, but not limited to, fees and expenses attributable to enforcement of remedies pursuant to Article VII of the Bond Indenture; (b) to the Issuer, within thirty (30) days of receipt of invoice, all reasonable fees and expenses incurred by the Issuer in relation to this Loan Agreement or the Bonds which are not otherwise required to be paid by the Borrower under the terms of this Loan Agreement; (c) to the Issuer or the Bond Trustee, as the case may be, the amount of all advances of funds made by either of them under the provisions of this Loan Agreement or an amount equal to all advances made by either of them under the Bond Indenture, with interest thereon at the Bond Trustee's Prime Rate from the date of each such advance; and (d) to the Bond Trustee, an amount equal to any deficiency in the amount required to be on deposit in any fund under the Bond Indenture caused by a decrease in the value of the investments therein. SECTION 4.9. BORROWER'S OBLIGATIONS UNCONDITIONAL. The Borrower agrees that its obligation to make the payments described in this Loan Agreement and to perform its obligations under this Loan Agreement are absolute and unconditional and are not subject to diminution by any defense (other than payment), by any right of set off, counterclaim 8 or abatement, by the happening or non-happening of any event or for any other reason whatsoever. ARTICLE V COVENANTS OF THE BORROWER SECTION 5.1. MAINTENANCE OF FACILITIES. The Borrower agrees that it will maintain and keep the property comprising the System to be maintained and kept in good repair, working order and condition except for ordinary wear and tear, and that it will make or cause to be made all necessary repairs and replacements, except with respect to such facilities as are obsolete or no longer useful or necessary to the Borrower's operations. SECTION 5.2. COMPLIANCE WITH ORDERS AND ORDINANCES. Subject to the following sentence, the Borrower will, at its sole cost and expense, comply with all present and future laws, ordinances, orders, decrees, rules, regulations and requirements of every duly constituted governmental authority, commission, association and court (collectively, a "Governmental Rule") of which the Borrower has notice and the violation of which would materially and adversely affect its property, plant and equipment or its use, occupancy, or condition. The Borrower is not required to comply with any Governmental Rule so long as the Borrower, in good faith and at its own cost and expense, is contesting the validity of the Governmental Rule or its applicability to the Borrower or is taking other appropriate action in an appropriate manner and by appropriate proceedings which operate during its pendency to prevent the sale, forfeiture, loss or loss of use and occupancy of its property, plant and equipment; provided, that no contest, action or proceeding may subject the Issuer or the Bond Trustee to any liability unless the Borrower had indemnified the Issuer or the Bond Trustee, as the case may be, to the satisfaction of the Issuer or the Bond Trustee. SECTION 5.3. SUFFICIENT REVENUES. Notwithstanding any other provision of the Borrower's Documents, the Borrower unconditionally agrees that it will pay pursuant to this Loan Agreement the full amount needed and at the times needed to enable the Issuer (or the Bond Trustee on its behalf) to make timely payment of the principal of (whether due upon maturity, redemption, acceleration or otherwise), premium, if any, and interest on the Bonds. SECTION 5.4. ISSUER'S RIGHT TO PERFORM THE BORROWER'S COVENANTS. If the Borrower fails to make any payment or perform any act required by any of the Borrower's Documents (unless the payment or performance is one which any of the Borrower's Documents permits the Borrower to contest and the Borrower is contesting it by diligently pursuing appropriate proceedings) then the Issuer or the Bond Trustee, upon not less than five (5) days' prior written notice to the Borrower, may (but is not obligated to) remedy the default for the account of the Borrower and make advances for that purpose. No remedy by the Issuer or the Bond Trustee operates to release the Borrower from its default. Any money advanced by the Issuer or the Bond Trustee in the discharge of an obligation of the Borrower under this Loan Agreement are additional obligations of the Borrower to the one making the advance, are due from the Borrower in immediately available funds on demand and bear interest at the Bond Trustee's Prime Rate from the date of the advance until paid. 9  SECTION 5.5. INDEMNITY. (a) The Borrower agrees to pay, and agrees to protect, indemnify and save the Issuer and the Bond Trustee harmless from and against any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees), causes of action, settlements, judgments or other obligations of any nature arising through any suits, claims, demands, actions or proceedings of any nature arising from, in connection with or as a result of: (i) any injury to or death of any person or damage to property in or upon the Project or resulting from or connected with the use, non-use, condition or occupancy of the Project or any part thereof; (ii) the violation of any agreement or condition of this Loan Agreement or the Tax Exemption Agreement, except by the Bond Trustee; (iii) the violation of any contract, agreement or restriction by the Borrower relating to its property, plant and equipment; (iv) the violation of any law, ordinance or regulation arising out of the ownership, occupancy or use of its property, plant and equipment or any part thereof; (v) the construction, acquisition, equipping and installation of the Project or the failure to construct, acquire, equip or install the Project; (vi) the issuance and sale of the Bonds or the execution, delivery and performance of the Borrower's Documents or the Bond Indenture; (vii) any act of the Borrower or any of its agents, contractors or licensees; and (viii) any statement or information concerning the Borrower, its officers and members or the property, plant and equipment of the Borrower contained in the Official Statement or any other prospectus furnished to purchasers of any securities that is untrue or incorrect in any material respect and any omission from the Official Statement or any prospectus of any statement or information which should be contained in it for the purpose for which it is to be used or which is necessary to make the statements in it concerning the Borrower, its officers and members or the property, plant and equipment of the Borrower not misleading in any material respect, if such other official statement or prospectus is approved in writing by the Borrower. Nothing contained in this Loan Agreement prohibits the Borrower from pursuing its remedies against the Issuer or the Bond Trustee for damages caused by the Issuer's gross negligence or willful acts or the Bond Trustee's negligent or willful acts. (b) The Borrower also agrees to indemnify and hold harmless the Bond Trustee against any loss, liability or expense incurred without negligence or bad faith on the part of the Bond Trustee arising out of or in connection with the acceptance or administration of the Bond Indenture, including the costs and expense of a defense against any claim or liability. (c) If any suit, claim, demand, action or proceeding is brought against the Issuer or the Bond Trustee with respect to which indemnity may be sought under this Section, the Issuer and the Bond Trustee, as the case may be, agree to promptly notify the Borrower in writing, and 10 the Borrower agrees to assume the defense of the suit, claim, demand, action or proceeding, including the employment of Independent Counsel and the payment of all expenses. Each of the Issuer and the Bond Trustee may, however, retain its own counsel and still be indemnified against the cost of employing counsel and all other expenses despite an assumption of the defense by the Borrower if the Issuer or the Bond Trustee believes in good faith that there are defenses available to it which are not available to the Borrower or which are adverse to or in conflict with those available to the Borrower and which the Issuer or the Bond Trustee believes in good faith cannot be effectively asserted by common counsel. The Issuer and the Bond Trustee always have the right to employ separate Independent Counsel but, subject to the preceding sentence, fees and expenses of its separate Independent Counsel must be paid by the Issuer or the Bond Trustee unless the Borrower and the Issuer or the Bond Trustee have mutually agreed to the employment of the Issuer's or the Bond Trustee's separate Independent Counsel. The Borrower is not liable for any settlement of a suit, claim, demand, action or proceeding effected without its written consent. If the suit, claim, demand, action or proceeding is settled with the consent of the Borrower or results in a final judgment for the plaintiff, the Borrower agrees to indemnify and hold harmless the Issuer and the Bond Trustee from and against any loss or liability by reason of the settlement or judgment. All amounts payable to or with respect to the Issuer under this Section shall be deemed to be fees and expenses of the Issuer for the purposes of the provisions hereof and of the Bond Indenture dealing with the assignment of the Issuer's rights hereunder. SECTION 5.6. NOTICE OF DEFAULT. The Borrower agrees to give to the Bond Trustee notice of any event which with the lapse of time or the giving of notice or both would be an event of default hereunder (a "default") within ten (10) days of the Borrower or any of its officers learning of the occurrence of the default. SECTION 5.7. MAINTENANCE OF EXISTENCE. The Borrower agrees that during the term of this Loan Agreement it will maintain its corporate existence as a provider of utility services pursuant to the Act and will be duly qualified to transact business in the State, will not dissolve, will not sell, lease, transfer or otherwise dispose of all or substantially all of its assets, will not receive from any other corporation by sale, lease, transfer or otherwise all or substantially all of its assets, will not consolidate with or merge into another corporation and will not permit one or more other corporations to consolidate with or merge into it. SECTION 5.8. FINANCIAL INFORMATION AND REPORTS. (a) The Borrower agrees to keep proper books of record and account in which full, true and correct entries will be made of all the Borrower's business and affairs in accordance with generally accepted accounting principles consistently maintained. (b) The Borrower agrees to comply with the continuing reporting requirements set forth in the Continuing Disclosure Agreement. (c) The Borrower agrees to provide such additional information as the Bond Trustee may reasonably request to determine whether the covenants, terms and provisions of this Loan Agreement have been complied with and for that purpose all pertinent books, documents and vouchers relating to the business, affairs and Project (other than patient and personnel records), 11 to the extent permitted by law, shall upon reasonable request of the Bond Trustee be open to inspection. SECTION 5.9. TAX EXEMPT BONDS. The Borrower and Issuer intend that the interest paid on the Series 2014A Bonds will be excluded from the gross income of the Owners of the Series 2014A Bonds for federal income tax purposes pursuant to Section 103 of the Code. The Borrower agrees that it will not take any action which would, or fail to take any action the omission of which would, adversely affect the validity of the Series 2014A Bonds or any exemption from federal income taxation to which interest on the Series 2014A Bonds would otherwise be entitled. SECTION 5.10. INVESTMENTS AND ARBITRAGE. Section 4.4 of the Bond Indenture provides that money on deposit in the Bond Indenture funds will be invested in Qualified Investments as directed by the Borrower. The Borrower agrees (i) to provide written investment instructions to the Bond Trustee as needed, (ii) that all of such investment instructions are subject to the provisions of the Tax Exemption Agreement and Section 6.9 of the Bond Indenture, and (iii) that it will not make or direct any use of any funds which will cause the Series 2014A Bonds to be "arbitrage bonds" within the meaning of such term as used in Section 148 of the Code ("Arbitrage Bonds"). The Borrower agrees for the benefit of the Owners of the Series 2014A Bonds that no use will be made of the proceeds derived from the issuance and sale of the Series 2014A Bonds which will cause the Series 2014A Bonds to be Arbitrage Bonds. SECTION 5.11. DISPOSITION OF PROJECT FUND AND EXPENSE FUND MONEYS. The Borrower agrees that if after payment by the Bond Trustee of all amounts requested pursuant to Written Requests theretofore tendered to the Bond Trustee under the provisions of Sections 3.1 and 3.2 of the Bond Indenture, there shall remain any moneys in the Expense Fund or Project Fund, such moneys shall be used or deposited as provided in Sections 3.1 and 3.2 of the Bond Indenture. SECTION 5.12. LIMITATIONS ON ADDITIONAL INDEBTEDNESS. The Borrower covenants and agrees that it will not incur any Additional Indebtedness if, after giving effect to all other Indebtedness incurred by the Borrower, such Indebtedness could not be incurred pursuant to this Section 5.12. Any Indebtedness may be incurred only in the manner and pursuant to the terms set forth in such subsections. (a) Except in the case of Additional Indebtedness issued for the purpose of refunding Outstanding Bonds, the Borrower shall certify that it is current in all deposits into the various funds and accounts established by the Bond Indenture and all payments theretofore required to have been deposited or made by it under the provisions hereof and of the Bond Indenture, and the Borrower is in compliance with the covenants and agreements of this Loan Agreement. (b) An independent certified public accountant shall certify to the Borrower that the amount of the Net Revenues (excluding Investment Earnings with respect to the Project Fund) received by the Borrower during the immediately preceding Fiscal Year or any 12 consecutive months selected by the Borrower of the 24 months immediately preceding the issuance of said Additional Indebtedness, adjusted as hereinafter provided, were equal to at least 125% of the Maximum Annual Debt Service of the Outstanding Bonds, any outstanding Indebtedness and the Additional Indebtedness then proposed to be issued. 12  (c) For the purpose of determining Debt Service under this Section 5.12, the interest rate on Additional Indebtedness that is proposed to be issued as variable rate shall be deemed to be the Bond Buyer Revenue Bond Index most recently published prior to the sale of such Additional Indebtedness. (d) For the purpose of determining Debt Service under this Section 5.12, the interest rate on outstanding variable rate Bonds or Indebtedness shall be deemed to be (1) if such variable rate Bonds or Indebtedness have been outstanding for at least 12 months prior to the date of sale of such Additional Indebtedness, the highest of (a) the actual rate of interest borne by such variable rate Bonds or Indebtedness on the date of sale, and (b) the average interest rate borne by such variable rate Bonds or Indebtedness during the 12-month period preceding the date of sale, or (2) if such variable rate Bonds or Indebtedness have not been Outstanding for at least 12 months prior to the date of sale of such Additional Indebtedness, the higher of (a) the actual rate of interest borne by the variable rate Bonds or Indebtedness on the date of sale, and (b) the Bond Buyer Revenue Bond Index most recently published prior to the sale of such Additional Indebtedness. (e) For the purpose of this Section 5.12, the phrase "immediately preceding Fiscal Year or any 12 consecutive months selected by the Borrower of the 24 months immediately preceding the issuance of said Additional Indebtedness" shall be sometimes referred to as "12 consecutive months" or the "12-month period." (f) The Net Revenues calculated pursuant to the foregoing Section 5.12(b) may be adjusted upon the written advice of the Consulting Engineers, at the option of the Borrower, as follows: (1) If the Borrower, prior to the issuance of the proposed Additional Indebtedness, shall have increased the rates, fees or other charges for the product, services or facilities of the System, the Net Revenues for the 12 consecutive months shall be adjusted to show the Net Revenues which would have been derived from the System in such 12 consecutive months as if such increased rates, fees or other charges for the product, services or facilities of the System had been in effect during all of such 12 consecutive months. (2) If the Borrower shall have acquired or has contracted to acquire any privately or publicly owned existing utility system that will become part of the System, the cost of which shall be paid from all or part of the proceeds of the issuance of the proposed Additional Indebtedness, then the Net Revenues derived from the System during the 12 consecutive months shall be increased by adding to the Net Revenues for said 12 consecutive months the Net Revenues which would have been derived from said existing utility system as if such existing utility system had been a part of the System during such 12 consecutive months. For the purposes of this paragraph, the Net Revenues derived from said existing utility system during such 12 consecutive months shall be adjusted to determine such Net Revenues by deducting the cost of operation and maintenance of said existing utility system from the gross revenues of said system. Such Net Revenues shall take into account any increase in rates imposed on customers of such utility system on or prior to the acquisition thereof by the Borrower. (3) If the Borrower, in connection with the issuance of Additional Indebtedness, shall enter into a contract (with a duration not less than the final maturity of such Additional 13 Indebtedness) with any public or private entity whereby the Borrower agrees to furnish services in connection with any utility system, then the Net Revenues of the System during the 12 consecutive months shall be increased by the least amount which said public or private entity shall guarantee to pay in any one year for the furnishing of said services by the Borrower, after deducting therefrom the proportion of operating expenses and repair, renewal and replacement cost attributable in such year to such services. (4) In the event the Borrower shall be constructing or acquiring additions, extensions or improvements to the System from the proceeds of such Additional Indebtedness and shall have established fees, rates or charges to be charged and collected from users of such facilities when service is rendered, such Net Revenues for the 12 consecutive months may be adjusted by adding thereto 100% of the Net Revenues estimated by the Consulting Engineers to be derived during the first 12 months of operation after completion of the construction or acquisition of said additions, extensions and improvements from the customers of the facilities to be financed by Additional Indebtedness, together with other funds on hand or lawfully obtained for such purpose; provided such customers must represent existing occupied structures that will be added to the System upon completion of the proposed additions, extensions or improvements. (5) If the Borrower shall add new customers subsequent to the commencement of the 12 consecutive months, the Consulting Engineers may adjust the Net Revenues to reflect the Net Revenues that would have been received by the Borrower if such customers had been in place for the entire 12 consecutive months. (g) In the event any Additional Indebtedness is issued for the purpose of refunding any Bonds then Outstanding or outstanding Indebtedness, the conditions of Section 5.12(b) shall not apply, provided that the issuance of such Additional Indebtedness shall result in a reduction of the aggregate debt service. The conditions of Section 5.12(b) shall apply to Additional Indebtedness issued to refund Subordinated Indebtedness and to Additional Indebtedness issued for refunding purposes which cannot meet the conditions of this paragraph. SECTION 5.13. SUBORDINATED INDEBTEDNESS. The Borrower may at any time or from time to time issue evidences of indebtedness which is not Additional Indebtedness payable in whole or in part out of Net Revenues and which may be secured by a pledge of Net Revenues; provided, however, that such pledge shall be, and shall be expressed to be, subordinated in all respects to the pledge of the Net Revenues created by this Loan Agreement and provided further that the issuance of such Subordinated Indebtedness shall be subject to any provisions contained in financing documents securing outstanding Subordinated Indebtedness to the extent such provisions impact on the ability of the Borrower to issue other Subordinated Indebtedness. The Borrower shall have the right to covenant with the holders from time to time of any Subordinated Indebtedness to add to the conditions, limitations and restrictions under which any Additional Indebtedness may be issued under the provisions of Section 5.12 hereof. The Borrower agrees to pay promptly any Subordinated Indebtedness as the same shall become due. SECTION 5.14. OPERATION AND MAINTENANCE. The Borrower will maintain or cause the System and all portions thereof to be maintained in good condition and will operate or cause to be operated the same in an efficient and economical manner, making or causing to be made such expenditures for equipment and for renewals, repairs and replacements 14 as may be proper for the economical operation and maintenance thereof. The Borrower may contract with a responsible Person which has experience in the operation of utility systems similar to the System for the operation and maintenance of the System. SECTION 5.15. ANNUAL BUDGET. The Borrower shall annually prepare and adopt, prior to the beginning of each Fiscal Year, an Annual Budget. No expenditure for Operating Expenses shall be made in any Fiscal Year in excess of the aggregate amount provided for Operating Expenses in the Annual Budget until the Governing Body shall have approved the increased expenditures. SECTION 5.16. RATES. The Borrower shall fix, establish, maintain and collect such rates, fees and charges for the product, services and facilities of the System, and revise the same from time to time, whenever necessary, so as always to provide in each Fiscal Year Net Revenues equal to at least 125% of the Debt Service Requirement becoming due in such Fiscal Year. Such rates, fees or other charges shall not be so reduced so as to be insufficient to provide adequate Net Revenues for the purposes provided therefor by this Loan Agreement. If, in any Fiscal Year, the Borrower shall fail to comply with the requirements contained in this Section 5.16, it shall promptly cause the Consulting Engineers to review its rates, fees, charges, income, Gross Revenues, Operating Expenses and methods of operation and to make written recommendations as to the methods by which the Borrower may seek to comply with the requirements set forth in this Section 5.16. The Borrower shall forthwith commence to implement such recommendations to the extent required so as to cause it to thereafter comply with said requirements. So long as the Borrower implements such recommendations within 120 days of the receipt thereof, the Borrower's failure to comply with this Section 5.16 shall not be considered an Event of Default under Section 6.1 hereof. SECTION 5.17. BOOKS AND RECORDS. The Borrower shall keep books, records and accounts of the revenues and operations of the System, which shall be kept separate and apart from all other books, records and accounts of the Borrower, and the Holders of any Bonds Outstanding or the duly authorized representatives thereof shall have the right at all reasonable times to inspect all books, records and accounts of the Borrower relating thereto. SECTION 5.18. ANNUAL AUDIT. The Borrower shall, immediately after the close of each Fiscal Year, cause the books, records and accounts relating to the System to be properly audited by a recognized independent firm of certified public accountants, and shall require such accountants to complete their report of such Annual Audit in accordance with applicable law. Each Annual Audit shall be in conformity with generally accepted accounting principles. SECTION 5.19. NO MORTGAGE OR SALE OF THE SYSTEM. Other than with respect to the Outstanding Parity Indebtedness, the Borrower irrevocably covenants, binds and obligates itself not to sell, lease, encumber or in any manner dispose of the System as a whole or any substantial part thereof (except as provided below) until all of the Bonds and all interest thereon shall have been paid in full or provision for payment has been made in accordance with the Bond Indenture. 15  The foregoing provision notwithstanding, the Borrower shall have and hereby reserves the right to sell, lease or otherwise dispose of any of the property comprising a part of the System in the following manner, if any one of the following conditions exist: (A) such property is not necessary for the operation of the System, (B) such property is not useful in the operation of the System, (C) such property is not profitable in the operation of the System, or (D) in the case of a lease of such property, such lease will be advantageous to the System and will not materially adversely affect the security for the Bondholders. Prior to any such sale, lease or other disposition of said property: (1) if the amount to be received therefor is not in excess of five percent (5%) of the market value of the gross plant of the System, an Officer's Certificate of the Borrower shall determine that one or more of the conditions for sale, lease or disposition of property provided for in the second paragraph of this Section 5.19 have been met; or (2) if the amount to be received from such sale, lease or other disposition of said property shall be in excess of five percent (5%) of the market value of the gross plant of the System, (a) the Borrower and the Consulting Engineers shall each first make a finding in writing determining that one or more of the conditions for sale, lease or other disposition of property provided for in the second paragraph of this Section 5.19 have been met, (b) the Governing Body shall, by resolution, duly adopt, approve and concur in the finding of the Officer's Certificate and the Consulting Engineers, and (c) the Borrower shall obtain an opinion of Bond Counsel to the effect that such sale, lease or other disposition is not in violation of the Act and will not adversely affect the federal tax exempt status of interest on the Bonds (other than the Series 2014B Bonds) or shall not otherwise affect the status of any Outstanding Bonds. Notwithstanding the foregoing provisions of this Section 5.19, the Borrower shall have the authority to sell for fair and reasonable consideration any land comprising a part of the System which is no longer necessary or useful in the operation of the System. The Borrower may make contracts or grant licenses for the operation of, or grant easements or other rights with respect to, any part of the System if such contract, license, easement or right does not, in the opinion of the Consulting Engineers, as evidenced by a certificate to that effect filed with the Borrower, impede or restrict the operation by the Borrower of the System, but any payments to the Borrower under or in connection with any such contract, license, easement or right in respect of the System or any part thereof shall constitute Gross Revenues. SECTION 5.20. INSURANCE. The Borrower will carry such insurance as is ordinarily carried by private or public entities owning and operating utilities similar to the System with a reputable insurance carrier or carriers, in such amounts as the Borrower shall determine to be sufficient, and such other insurance against loss or damage by fire, explosion, hurricane, tornado or other hazards and risks, and said property loss or damage insurance shall at all times be in an amount or amounts equal to the fair appraisal value of the buildings, properties, furniture, fixtures and equipment of the System, or such other amount or amounts as the Consulting Engineers or an insurance consultant who has a favorable reputation and experience and is qualified to survey risks and to recommend insurance coverage for Persons engaged in operations similar to the System, shall recommend or approve as sufficient. The Borrower may establish certain levels of insurance for which the Borrower may self- insure. Such levels of insurance shall be in amounts as recommended in writing by an insurance 16 consultant who has a favorable reputation and experience and is qualified to survey risks and to recommend insurance coverage for Persons engaged in operations similar to the System. The proceeds from property loss and casualty insurance shall, together with other available funds of the Borrower, be used to repair or replace the damaged portion of the System; provided, however, if the Issuer makes a determination in accordance with Section 5.19 hereof that such portion of the System is no longer necessary or useful in the operation of the System, such proceeds shall (1) if such proceeds equal or exceed $500,000, (a) be applied to the redemption or purchase of Bonds or (b) be deposited in irrevocable trust for the payment of Bonds in the manner set forth in the Bond Indenture, provided the Borrower has received an opinion of Bond Counsel to the effect that such deposit shall not adversely affect the exclusion, if any, from gross income of interest on the Outstanding Bonds for purposes of federal income taxation (other than the Series 2014B Bonds) and will not otherwise affect the status of any Outstanding Bonds, or (2) if such proceeds are less than $500,000, be used for lawful purposes of the System. SECTION 5.21. NO FREE SERVICE. The Borrower will not render or cause to be rendered any free services of any nature by its System, nor will any preferential rates be established for users of the same class; provided, however, the foregoing clause shall not be construed to prevent the Borrower from establishing various classes of users based on any factors deemed necessary or desirable by the Borrower. Different rates may be established for different classes. SECTION 5.22. NO IMPAIRMENT OF RIGHTS. The Borrower will not enter into any contract or contracts, nor take any action, the results of which might impair the rights of the Holders of the Bonds. SECTION 5.23. ENFORCEMENT OF CHARGES. The Borrower shall compel the prompt payment of rates, fees and charges imposed in connection with the System, and to that end will vigorously enforce all of the provisions of any requirement of the Borrower having to do with System connections and charges, and all of the rights and remedies permitted the Borrower under law, including the requirement for the making of a reasonable deposit by each user and the requirement for lawful disconnection of services for all premises delinquent in the payment of any duly invoiced bill. SECTION 5.24. CONSULTING ENGINEERS. The Borrower shall employ Consulting Engineers, whose duties shall be to make any certificates and perform any other acts required or permitted of the Consulting Engineers under this Loan Agreement, and also to review the construction and operation of the System, to make an inspection of the System at least once every three years, and to submit to the Borrower a report with recommendations as to the proper maintenance, repair and operation of the System, including recommendations for expansion and additions to the System to meet anticipated service demands, and an estimate of the amount of money necessary for such purposes. Copies of such reports, recommendations and estimates made as hereinabove provided shall be filed with the Borrower for inspection by Bondholders, if such inspection is requested. 17  ARTICLE VI EVENTS OF DEFAULT AND REMEDIES THEREFOR SECTION 6.1. EVENTS OF DEFAULT AND REMEDIES. The occurrence and continuance of any of the following events shall constitute an "event of default" hereunder: (a) failure by the Borrower to make any payment required by Section 4.1 or 4.2 hereof for the payment of the Bonds when the same shall become due and payable, whether upon a scheduled Interest Payment Date, at maturity, upon any date fixed for prepayment or purchase, by acceleration or otherwise; or (b) failure of the Borrower to comply with or perform any of the covenants, conditions, or provisions hereof or of the Tax Exemption Agreement or Continuing Disclosure Agreement and, except in case of a failure under Section 6.1(a) hereof which shall immediately constitute an event of default, to remedy such default within sixty (60) days after written notice thereof from the Issuer or the Bond Trustee, to the Borrower, the Issuer and the Bond Trustee; provided that, if such default cannot with due diligence and dispatch be wholly cured within 60 days but can be wholly cured, the failure of the Borrower to remedy such default within such 60- day period shall not constitute a default hereunder if the Borrower shall immediately upon receipt of such notice commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch; or (c) if any representation or warranty made by the Borrower herein or in any statement or certificate furnished to the Issuer, the Bond Trustee or the purchaser of any Bonds in connection with the sale of the Bonds or furnished by the Borrower pursuant hereto proves untrue in any material respect as of the date of the issuance or making thereof and shall not be made good within sixty (60) days after written notice thereof by the Issuer to the Borrower, or the Issuer, as the case may be; or (d) if the Borrower admits insolvency or bankruptcy or its inability to pay its debts as they mature, or is generally not paying its debts as such debts become due, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee, custodian or receiver for the Borrower, or for the major part of its property; or (e) if a trustee, custodian or receiver is appointed for the Borrower or for the major part of its property and is not discharged within sixty (60) days after such appointment; or (f) if bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, proceedings under Title 11 of the United States Code, as amended, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors under federal or State law are instituted by or against the Borrower (other than bankruptcy proceedings instituted by the Borrower against third parties) and, if instituted against the Borrower, are not dismissed, stayed or otherwise nullified within 60 days after institution; or (g) if payment of any installment of interest or principal, or any premium, on any Bond shall not be made when the same shall become due and payable under the provisions of the Bond Indenture. 18  Upon the occurrence of an event of default, the Bond Trustee may, or upon receipt from the owners of at least 51% of the principal amount of the Bonds then Outstanding of a request to do so, shall, by written notice to the Borrower, declare all amounts due under this Loan Agreement to be immediately due and payable. Upon the occurrence of any event of default, the Bond Trustee as assignee of the Issuer, may take whatever action at law or in equity it deems necessary or desirable (i) to collect any amounts then due under this Loan Agreement, (ii) to enforce performance of any obligation, agreement or covenant of the Borrower under this Loan Agreement, or any other document to which the Borrower is a party associated with the issuance of the Bonds, or (iii) to otherwise enforce any of its rights. No waiver of any event of default extends to or affects any subsequent event of default or impairs any rights or remedies consequent thereon. The Borrower will give Immediate Notice to the Issuer and the Bond Trustee of any event of default. SECTION 6.2. APPLICATION OF PROCEEDS OF REMEDIES. The proceeds or avails resulting from the exercise of any such remedies, together with any other sums which then may be held by the Issuer (or the Bond Trustee, as assignee of the Issuer) under this Loan Agreement, whether under the provisions of this Article or otherwise, and which are available for such application shall be applied as follows: FIRST: To the payment of the costs and expenses of the exercise of such remedies, including reasonable compensation to the Issuer and the Bond Trustee, their agents, attorneys and counsel, and the expenses of any judicial proceedings wherein the same may be made, and of all fees, expenses, liabilities and advances made or incurred by any of them as permitted by this Loan Agreement, together with interest at the Bond Trustee's Prime Rate on such advances made by the Issuer, and to the payment of all taxes, assessments or claims prior to the claim of this Loan Agreement, except any taxes, assessments, liens or other charges, subject to which property may have been sold. SECOND: To the payment of any amounts then payable under the Tax Exemption Agreement. THIRD: To the payment of the whole amount then due, owing and unpaid on the Bonds for principal, interest and premium, if any, and in case such proceeds shall be insufficient to pay in full the whole amount so due, owing or unpaid on the Bonds, then ratably according to the aggregate of such principal and the accrued and unpaid interest and premium, if any, without preference or priority as between principal, interest or premium; such application to be made upon presentation of the Bonds and the notation thereon of the payment, if partially paid, or the surrender and cancellation thereof, if fully paid. FOURTH: To the payment of any other sums required to be paid by the Borrower pursuant to any provisions of this Loan Agreement. 19  FIFTH: To the payment of the surplus, if any, to the Borrower, its successors or assigns, upon the Written Request of the Borrower or to whomsoever may be lawfully entitled to receive the same upon its written request, or as any court of competent jurisdiction may direct. SECTION 6.3. REMEDIES CUMULATIVE. No remedy herein conferred upon or reserved to the Issuer (or the Bond Trustee, as assignee of the Issuer) is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. SECTION 6.4. DELAY OR OMISSION NOT A WAIVER. No delay or omission of the Issuer to exercise any right or power accruing upon any event of default shall impair any such right or power, or shall be construed to be a waiver of any such event of default or an acquiescence therein; and every power and remedy given by this Loan Agreement to the Issuer (or the Bond Trustee as assignee of the Issuer) may be exercised from time to time and as often as may be deemed expedient by the Issuer (or the Bond Trustee as assignee of the Issuer). SECTION 6.5. REMEDIES SUBJECT TO PROVISIONS OF LAW. All rights, remedies and powers provided by this Article may be exercised only to the extent that the exercise thereof does not violate any applicable provision of the law of the State, and all the provisions of this Article are intended to be subject to all applicable mandatory provisions of the law of the State which may be controlling and to be limited to the extent necessary so that they will not render this Loan Agreement invalid or unenforceable under the provisions of any applicable law. ARTICLE VII SUPPLEMENTS AND AMENDMENTS TO THIS LOAN AGREEMENT SECTION 7.1. SUPPLEMENTS AND AMENDMENTS TO THIS LOAN AGREEMENT. This Loan Agreement may be supplemented and amended only as provided in Article X of the Bond Indenture. ARTICLE VIII DEFEASANCE SECTION 8.1. DEFEASANCE. If the Borrower shall pay and discharge or provide, in a manner satisfactory to the Issuer, for the payment and discharge of the whole amount of the principal of, premium, if any, and interest on the Bonds, in such manner as to render all Bonds issued no longer Outstanding, and shall pay or cause to be paid all other sums payable hereunder, and all sums payable under the Bond Indenture, or shall make arrangements satisfactory to the Issuer and the Bond Trustee for such payment and discharge, then and in that case all property, rights and interest hereby conveyed or assigned or pledged shall revert to the Borrower, and the estate, right, title and interest of the Issuer therein shall thereupon cease, terminate and become void; and this Loan Agreement, and the covenants of the Borrower contained herein, shall be discharged except as provided in Section 5.5, and the Issuer or the Bond Trustee, on behalf of the Issuer, in such case on demand of the Borrower and at its cost and 20 expense, shall execute and deliver to the Borrower a proper instrument or proper instruments acknowledging the satisfaction and termination of this Loan Agreement, and shall convey, assign and transfer or cause to be conveyed, assigned or transferred, and shall deliver or cause to be delivered, to the Borrower, all property, including money, then held by the Issuer other than moneys deposited with the Bond Trustee for the payment of the principal of and premium, if any, or interest on the Bonds. The Borrower agrees to pay all reasonable costs of the Issuer, its advisors and counsel in connection with any refunding of the Bonds, including, without limitation, the cost of having a bond rating reassigned to any Bonds which are to be advance refunded, if applicable. The Borrower also agrees that prior to advance refunding the Bonds it will make available to any rating agency which is maintaining a rating on the Bonds to be refunded such information as any such rating agency may require to reassign a bond rating to any Bonds which are be advance refunded. ARTICLE IX MISCELLANEOUS PROVISIONS SECTION 9.1 LOAN AGREEMENT FOR BENEFIT OF PARTIES HERETO. Except as provided in Section 5.5, nothing in this Loan Agreement, express or implied, is intended or shall be construed to confer upon, or to give to, any person other than the parties hereto, any right, remedy or claim under or by reason of this Loan Agreement or any covenant, condition or stipulation hereof; and the covenants, stipulations and agreements contained in this Loan Agreement are and shall be for the sole and exclusive benefit of the parties hereto, their successors and assigns. SECTION 9.2. SEVERABILITY. In the event any provision of this Loan Agreement is held invalid or unenforceable by any court of competent jurisdiction, the holding is not to invalidate or render unenforceable any other provision of this Loan Agreement. SECTION 9.3. NOTICES. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when hand delivered or mailed by first class mail postage prepaid with proper address as indicated in the Bond Indenture. The Issuer, the Borrower and the Bond Trustee may, by written notice given by each to the others, designate any address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Loan Agreement. SECTION 9.4. SUCCESSORS AND ASSIGNS. Whenever in this Loan Agreement any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included and all the covenants, promises and agreements in this Loan Agreement contained by or on behalf of the Borrower, or by or on behalf of the Issuer, shall bind and inure to the benefit of the respective successors and assigns, whether so expressed or not. SECTION 9.5. COUNTERPARTS. This Loan Agreement is being executed in any number of counterparts, each of which is an original and all of which are identical. Each counterpart of this Loan Agreement is to be deemed an original hereof and all counterparts collectively are to be deemed but one instrument. 21  SECTION 9.6. GOVERNING LAW. It is the intention of the parties hereto that this Loan Agreement and the rights and obligations of the parties hereunder shall be governed by and construed and enforced in accordance with the laws of the State. SECTION 9.7. IMMUNITY. To the extent permitted by law, no recourse may be had for any claim based on this Loan Agreement or any agreement supplemental to this Loan Agreement, against any member, director, trustee or officer, past, present or future member, employee, director or agent of the Borrower, or any predecessor or successor corporation, as such, either directly or through the Borrower or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability, whether at common law, in equity, by a constitution, statute or otherwise, of members, directors, trustees or officers, as such, being released as a condition of and consideration for the execution of this Loan Agreement. SECTION 9.8. OBLIGATIONS DUE ON SATURDAYS, SUNDAYS OR HOLIDAYS. If any date upon which an obligation of the Borrower or the Issuer is to be performed falls on a day which is not a Business Day, then the payment or fulfillment of the obligation may be made on the next succeeding Business Day with the same effect as if made on the date due. SECTION 9.9. LIMITATION ON INTEREST. No provision of this Loan Agreement is intended to require the payment or permit the collection of interest in excess of the maximum permitted by law. If any provision of this Loan Agreement requires payment of interest in an amount in excess of the maximum permitted by law, the Borrower is not obligated to pay any interest in excess of the amount permitted by law. This provision controls any provisions of this Loan Agreement inconsistent with it. 22  [SIGNATURE PAGE TO LOAN AGREEMENT] IN WITNESS WHEREOF, the Borrower and the Issuer have caused this Loan Agreement to be executed in their respective corporate names and have caused their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. OKALOOSA COUNTY, FLORIDA, as Issuer (SEAL) By: Chairman, Board of County Commissioners ATTEST: By: Clerk AUBURN WATER SYSTEM, INC., as Borrower By: President 23  SCHEDULE A LOAN REPAYMENT SCHEDULE LOAN APPLICABLE TO SERIES 2014 BONDS PAYMENT DATE PRINCIPAL INTEREST TOTAL A-1