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e e (d) The terms "City" and "Issuer" shall mean the City of La Porte, Texas, or where appropriate the City Council thereof. (e) The term "City Council" shall mean the governing body of the City. (1) The term "Interest and Sinking Fund" means the fund provided for in Section 10 hereof. (g) The term "Municipal Bond Guaranty Insurance Policy" shall mean the municipal bond guaranty insurance policy issued by AMBAC Indemnity insuring the payment when due of the principal of and interest on the Bonds as provided therein. (h) The term "Net Revenues" means all gross revenues of the System after deducting the necessary and reasonable expenses of operation and maintenance of the System, including all salaries, labor, material, repairs, and extensions necessary to renGer efficient service; provided, however, that only such repairs and extensions, as in the judgment of the City Council, reasonably and fairly exercised, are necessary to keep the System in operation and render adequate service to the City and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the Parity Bonds shall be deducted in determining the "Net Revenues". Depreciation and payments into and out of the Interest and Sinking Fund and the Reserve Fund shall never be considered as expenses of operation and maintenance. (i) The term "Parity Bonds" shall mean collectively the Previously Issued Parity Bonds, the Bonds, and any Additional Bonds. G) The term "Parity Bonds Ordinances" shall mean Collectively the ordinances authorizing the Previously Issued Parity Bonds, the Bonds, and any Additional Bonds. (k) The term "Previously Issued Parity Bonds" shall mean the outstanding "City of La Porte, Texas, Waterworks and Sewer System Revenue Bonds, Series 1985" originally issued in the aggregate principal amount of $6,000,000. (I) The term "Reserve Fund" shall mean that fund described in Section 11 hereof. (m) The term "Sys~em" shall mean the City's entire existing waterworks and sanity sewer system, together with all future extensions, enlargements, additions, replacements, and improvements thereto. (n) The "System Fund" shall mean that fund described in Section 9 hereof. (0) The term "Year" or "fiscal year" shall mean the regular fiscal year used by the City in connection with the operation of the System, which may be any 12 consecutive months period established by the City. SECl10N 7. PuIDoB. The Parity Bonds, redemption premium, if any, and any interest payable thereon, are and shall be secured by and payable from a first lien on and pledge of the 13