03-10-10 Regular Meeting of the La Porte Area Water Authority

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ARTICLE SEVEN PLEDGE OF PLEDGED REVENUES; PARITY BONDS SECTION 7.1. Pledge of Pledged Revenues. In consideration of the purchase of the Bonds by the Bondholders, the sufficiency of which is hereby acknowledged, the Authority does hereby pledge the Pledged Revenues and all money and investments held for the credit of the Bond Fund and the Reserve Fund to the payment of and security for the principal of (and premium, if any) and interest on the Bonds and such other Parity Bonds as hereafter may be issued and the deposits to the Bond Fund and Reserve Fund required hereby and by the Parity Bonds Resolutions, without priority of any Parity Bond over any other Parity Bond, provided that the Authority reserves the right to make such further inferior and subordinate pledges of the Net Revenues from time to time as it shall elect. The pledge granted hereby shall constitute a lien on the Pledged Revenues and be valid and binding without any physical delivery of such Pledged Revenues or further act by the Authority, and the lien created hereby on the Pledged Revenues for the payment and security of the Parity Bonds shall be prior in right and claim as to any other indebtedness, liability, or obligation of the Authority or the System, except as provided in this Section. The Parity Bonds are not and will not be secured by or payable from a mortgage or deed of trust on any real, personal or mixed properties constituting the System. The Holders of the Parity Bonds shall never have the right to demand payment of such obligations out of any funds raised or to be raised by taxation by the Authority, the Participants, the State of Texas, or any subdivision of any of them, or from any source whatsoever other than the Pledged Revenues. The Authority has no taxing power. This Resolution shall not be construed as requiring the Authority to expend any funds which are derived from sources other than the operation of the System, but nothing herein shall be construed as preventing the Authority from doing so. SECTION 7.2. Issuance of Additional Bonds. In addition to inferior lien bonds permitted to be issued hereunder, the Authority expressly reserves the right hereafter to issue Additional Bonds, and the Additional Bonds, when issued, may be secured by and payable from a lien on and pledge of the Pledged Revenues in the same manner and to the same extent as the outstanding Parity Bonds but subject to the remaining provisions hereof, and the Bonds and the Additional Bonds may be in all respects of equal dignity. The Additional Bonds may be issued to provide funds for Capital Acquisitions, Capital Additions and Capital Improvements and for any lawful purpose. It is provided, however, that no Additional Bonds shall be issued unless such Additional Bonds are made to mature on March 15 in each of the years in which they are scheduled to mature and the following requirements are met: A. General. The officer of the Authority then having primary responsibility for the financial affairs of the Authority shall have executed a certificate stating that (1) to the best of his knowledge and belief, the Authority is not then in default as to any covenant, obligation, or agreement contained in any proceeding relating to any obligations of the Authority payable from and secured by a lien on and pledge of the Pledged Revenues and (2) all payments into all funds 28 HOU:3003369.!