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<br />Authorization
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<br />The Bonds are issued pursuant to the general laws of the State of Texas, particularly Article 717, Vernon's Texas Civil Statutes, as
<br />amended, and a Resolution adopted by the Board of Directors of the Authority authorizing the issuance and sale of the Bonds (the "Bond
<br />Resolution ").
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<br />Use of Proceeds
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<br />The proceeds from the sale of the Bonds will be used to refimd on December 1, 1999, all of the Authority's outstanding Bonds,
<br />$4,055,000 of the Authority's Contract Revenue Bonds, Series 1988, maturing serially on December I, 2000, through and including 2015,
<br />and $4,025,000 of the Authority's Contract Revenue Bonds, Series n 1988, maturing serially on December 1,2000, through and including
<br />2016.
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<br />Security
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<br />The Bonds will constitute valid and legally binding special obligations of the La Porte Area Water Authority paYable from and secured
<br />by a first lien on and pledge of the revenues derived from the operation of the Authority's Water System, after deduction of the necessary
<br />and reasonable expenses of maintenance and operation of said system. The owner(s) of the Bonds shall never have the right to demand
<br />payment of the principal and interest on the Bonds out of any fimds raised or to be raised by taxation.
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<br />Securities DeDositor\'
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<br />The Authority intends to utilize the Book-Entry-Only System of The Depository Trust Company ("DTC"), but reserves the right on its
<br />behalf or on behalf ofDTC to discontinue such system. Such Book-Entry-Only System will affect the method and timing of payment and
<br />the method of transfer. See "BOOK-ENTRY-ONLY SYSTEM", herein.
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<br />Lee:alitv
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<br />Attorney General of the State of Texas and Akin, Gump, Strauss, Hauer & Feld, L.L.P., Attorneys, San Antonio, Texas.
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<br />Pavment Record
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<br />The Authority has never defaulted.
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<br />TAX MATTERS
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<br />ODinion
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<br />On the date of initial delivery of the Bonds, Akin, Gump, Strauss, Hauer & Feld, L.L.P., Bond Counsel, will render their opinion that,
<br />under existing law, (1) interest on the Bonds will be excludable from gross income for federal income tax purposes under section 103 of
<br />the Internal Revenue Code of 1986, as amended (the "Code") and (2) the Bonds will not be treated as "private activity bonds" within the
<br />meaning of section 141 of the Code and that, accordingly, interest on the Bonds will not be included as an alternative minimum tax
<br />preference item under section 57(aX5) of the Code. Except as stated above, Bond Counsel will express no opinion as to any other
<br />federal, state, or local tax consequences Wlder present law, or proposed legislation, resulting from the receipt or acctual of interest on or
<br />the acquisition, ownership, or disposition of the Bonds.
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<br />In rendering their opinions, Bond Counsel will rely upon representations and certifications of the Authority with respect to matters solely
<br />within the knowledge of the Authority and will assume continuing compliance by the Authority with covenants pertaining to those
<br />sections of the Code which affect the exclusion from gross income of interest on the Bonds for federal income talC purposes. If such
<br />representations and certifications are detennined to be inaccurate Of incomplete, or the Authority fails to comply with the foregoing
<br />covenants, interest on the Bonds could become includable in gross income retroactively to the date of issuance of the Bonds, regardless of
<br />the date on which the event causing such inclusion occurs.
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<br />The statutes, regulations, published rulings, and court decisions upon which Bond Counsel have based their opinions are subject to
<br />change by the Congress and to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury.
<br />There can be no assurance that such law or the interpretation thereof will not be changed in a manner which would adversely affect the
<br />tax treatment of the receipt or accrual of interest on or the acquisition, ownership, or disposition of the Bonds.
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<br />Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may hereafter come to
<br />Bond Counsel's attention or to reflect any changes in law that may thereafter occur or become effective.
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