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REVENUE PLEDGE AGREEMENT

between

CASCADIA STATE INFRASTRUCTURE AUTHORITY

and

PACIFIC NORTHWEST TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee

Securing

Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt)

Aggregate Principal Amount: $220,000,000

Dated as of October 24, 2023

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RECITALS

WHEREAS, the Cascadia State Infrastructure Authority ("CSIA" or the "Authority") is a governmental instrumentality and public body corporate of the State of Washington, duly created and existing under and pursuant to Chapter 43.160A of the Revised Code of Washington (the "RCW"), with the full legal authority to own, operate, and finance water treatment facilities and related infrastructure for the benefit of the citizens and residents of the State of Washington; and

WHEREAS, the Authority owns and operates a comprehensive water treatment system (the "System") serving fourteen (14) participating municipal water and sewer districts across the Puget Sound region of the State of Washington pursuant to long-term Wholesale Water Treatment Services Agreements entered into between the Authority and each such Participating District, which agreements obligate the Participating Districts to pay Wholesale Water Treatment Service Charges to the Authority in exchange for the provision of wholesale water treatment services; and

WHEREAS, the Board of Commissioners of CSIA (the "Board"), by Resolution No. 2023-014 duly adopted on May 9, 2023 (the "Resolution"), authorized the issuance of revenue bonds for the purpose of financing the design, construction, equipping, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility, a sixty-million-gallon-per-day (60-MGD) advanced membrane-filtration and UV-disinfection water treatment facility to be located at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501 (the "Project"), and further authorized the pledge of the Authority's Net Pledged Revenues to secure such revenue bonds and all other obligations issued on a parity basis therewith; and

WHEREAS, the Authority has entered into a Bond Indenture dated as of October 24, 2023 (the "Indenture") with Pacific Northwest Trust Company, National Association ("PNTC" or the "Trustee"), pursuant to which the Authority has established the terms and conditions for the issuance, authentication, delivery, and administration of its revenue bonds, and has further entered into a First Supplemental Indenture dated as of October 24, 2023 (the "First Supplemental Indenture" and, together with the Indenture, the "Bond Indenture"), which supplements the Indenture and authorizes the issuance of Two Hundred Twenty Million Dollars ($220,000,000) in aggregate principal amount of Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt) (the "Series 2023A Bonds" or the "Bonds"); and

WHEREAS, the Authority has covenanted and agreed to pledge its Net Pledged Revenues (as defined herein) to the Trustee for the benefit of the holders of the Bonds and all Parity Obligations (as defined herein) on a parity lien basis, such that no Parity Obligation shall have priority over any other Parity Obligation with respect to the pledge of and lien on the Net Pledged Revenues; and

WHEREAS, the pledge and lien created by this Revenue Pledge Agreement (this "Agreement") are made pursuant to the authority granted by Chapter 43.160A of the RCW, which provides for the automatic perfection of a statutory lien upon the execution and delivery of the pledging instrument, without the necessity of physical delivery, filing of financing statements under the Uniform Commercial Code, or recording in any public registry; and

WHEREAS, as of the date hereof, the existing outstanding parity debt of the Authority, secured by a parity lien on the Net Pledged Revenues, totals Three Billion One Hundred Twenty Million Dollars ($3,120,000,000), and together with the Series 2023A Bonds, the total outstanding Parity Obligations of the Authority will be Three Billion Three Hundred Forty Million Dollars ($3,340,000,000); and

WHEREAS, the Authority has determined that the issuance of the Series 2023A Bonds and the execution and delivery of this Agreement are in the best interests of the Authority and the Participating Districts, and will enable the Authority to finance the construction of the Project and thereby enhance the capacity, reliability, and environmental compliance of the System;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Authority and the Trustee agree as follows:

ARTICLE I — DEFINITIONS AND INTERPRETATION

Section 1.01 — Definitions

As used in this Agreement, the following terms shall have the meanings set forth below, unless the context clearly requires otherwise:

"Act" means Chapter 43.160A of the Revised Code of Washington, as amended, supplemented, or superseded from time to time, including any successor provisions thereto, pursuant to which the Authority was created and under which the Authority is authorized to issue revenue bonds and pledge revenues in support thereof.

"Additional Bonds" means any bonds, notes, certificates, or other obligations of the Authority hereafter issued and secured by a parity lien on the Net Pledged Revenues on an equal and ratable basis with the Series 2023A Bonds and all other Parity Obligations then outstanding, subject to satisfaction of the Additional Bonds Test set forth in Section 5.04 hereof. Additional Bonds may be issued in one or more series and may bear fixed or variable rates of interest, all as shall be determined by the Authority at the time of issuance in compliance with the terms of this Agreement and the Indenture.

"Additional Bonds Test" means the test for the issuance of Additional Bonds set forth in Section 5.04 of this Agreement.

"Agreement" means this Revenue Pledge Agreement, dated as of October 24, 2023, between the Authority and the Trustee, as it may be amended or supplemented from time to time in accordance with the provisions of Article VIII hereof.

"Annual Aggregate Parity Debt Service" means the total scheduled principal and interest payments due in any Bond Year on all Parity Obligations then outstanding, calculated without regard to any optional or extraordinary redemption provisions. As of the Closing Date, the Annual Aggregate Parity Debt Service is approximately Two Hundred Seventy-Eight Million Four Hundred Thousand Dollars ($278,400,000), which amount includes the scheduled debt service on the Series 2023A Bonds and all other Parity Obligations outstanding as of such date.

"Authority" means the Cascadia State Infrastructure Authority, a governmental instrumentality and public body corporate of the State of Washington, duly created and existing under the Act, with its principal office and headquarters located at 1100 Capitol Way South, Suite 400, Olympia, Washington 98501, Employer Identification Number 91-2058374.

"Authorized Officer" means the Executive Director (currently Harold K. Nakamura) or the Chief Financial Officer (currently Denise R. Whitford) of the Authority, or any other officer or officers of the Authority designated in writing by the Board or the Executive Director to act on behalf of the Authority for purposes of this Agreement and the Indenture.

"Board" means the Board of Commissioners of the Authority, being the governing body of the Authority as constituted under the Act. The current Board Chair is Commissioner Lorraine Chu.

"Bond Fund" means the Bond Fund established and maintained pursuant to the Indenture for the purpose of paying scheduled debt service on Parity Obligations.

"Bond Indenture" or "Indenture" means the Bond Indenture dated as of October 24, 2023, by and between the Authority and the Trustee, as supplemented by the First Supplemental Indenture dated as of October 24, 2023, and as the same may be further supplemented, amended, or restated from time to time in accordance with its terms.

"Bond Year" means the twelve-month period ending on October 1 of each year. The first Bond Year for the Series 2023A Bonds shall commence on the Closing Date and end on October 1, 2024.

"Bonds" or "Series 2023A Bonds" means the Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt), in the aggregate principal amount of Two Hundred Twenty Million Dollars ($220,000,000), dated October 24, 2023, maturing October 1, 2053, bearing interest at the rate of 3.25% per annum, CUSIP base number 148392, issued, authenticated, and delivered under and pursuant to the Indenture and the First Supplemental Indenture.

"Business Day" means any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Washington or the city in which the principal office of the Trustee is located are authorized or required by law to be closed.

"Closing Date" means October 24, 2023, the date on which the Series 2023A Bonds are initially issued, authenticated, and delivered to the original purchasers thereof.

"Connection Fees" means all fees, charges, and assessments imposed by the Authority on new connections to the System, including system development charges, capacity charges, and similar fees or assessments, whether denominated as connection fees or otherwise.

"Continuing Disclosure Agreement" means the Continuing Disclosure Agreement dated as of October 24, 2023, between the Authority and the Trustee, in its capacity as Dissemination Agent, executed and delivered in compliance with the requirements of SEC Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended.

"Costs of Issuance" means all costs and expenses incurred in connection with the authorization, sale, issuance, and delivery of the Series 2023A Bonds, including but not limited to underwriting discounts, legal fees, financial advisory fees, rating agency fees, printing costs, trustee acceptance fees, and similar costs. The Costs of Issuance for the Series 2023A Bonds are estimated at One Million Eight Hundred Seventy Thousand Dollars ($1,870,000), to be funded from Bond proceeds.

"DSRF" or "Debt-Service Reserve Fund" means the Debt-Service Reserve Fund established and maintained under the Indenture for the purpose of providing additional security for the payment of debt service on Parity Obligations in the event of a deficiency in the Bond Fund. The DSRF requirement for the Series 2023A Bonds is satisfied by the Surety Policy issued by Olympia Guaranty Insurance Corp. in the surety amount of Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000), which amount is equal to the Maximum Annual Debt Service on the Series 2023A Bonds.

"DSRF Requirement" means, with respect to any series of Parity Obligations, the amount required to be on deposit in the Debt-Service Reserve Fund (or secured by a surety bond, insurance policy, or letter of credit) as specified in the supplemental indenture authorizing such series of Parity Obligations. The DSRF Requirement for the Series 2023A Bonds is calculated as set forth in Schedule 1 hereto.

"Design-Build Contract" means GMP Contract No. CSIA-DB-2023-001, dated March 10, 2023, by and between the Authority and Northtide Environmental Engineering, Inc., providing for the design and construction of the Project at a guaranteed maximum price of One Hundred Ninety-Three Million Five Hundred Thousand Dollars ($193,500,000), subject to such change orders and modifications as may be approved by the Authority in accordance with the terms thereof.

"DTC" means The Depository Trust Company, a limited-purpose trust company organized under the New York Banking Law, the securities depository for the Series 2023A Bonds.

"Event of Default" means any of the events described in Section 6.01 of this Agreement.

"Fiscal Year" means the twelve-month period ending on June 30 of each year, or such other twelve-month period as the Authority may hereafter designate as its fiscal year for financial reporting purposes, provided that the Authority shall give not less than ninety (90) days' prior written notice to the Trustee of any change in Fiscal Year.

"General Fund" means the general fund of the Authority, into which amounts may be deposited after satisfaction of all higher-priority transfers in the flow of funds described in Section 3.02 hereof.

"Gross Pledged Revenues" means all revenues, income, receipts, and money derived by the Authority from the ownership and operation of the System, including without limitation (a) Wholesale Water Treatment Service Charges, (b) Connection Fees, and (c) Investment Earnings on amounts held in pledged funds and accounts established under the Indenture; provided, however, that Gross Pledged Revenues shall not include the items excluded pursuant to Section 2.02(b) hereof. For the Fiscal Year ended June 30, 2022, the Authority's Gross Pledged Revenues were Four Hundred Eighty-Nine Million Three Hundred Thousand Dollars ($489,300,000).

"Investment Earnings" means all earnings, gains, and income derived from the investment of amounts held in funds and accounts established under the Indenture and pledged as security for Parity Obligations, including interest, dividends, and realized capital gains, net of realized capital losses and investment expenses.

"IRC" means the Internal Revenue Code of 1986, as amended from time to time, including any successor code or statute, and the Treasury Regulations promulgated thereunder.

"Maximum Annual Debt Service" or "MADS" means the maximum amount of Annual Aggregate Parity Debt Service scheduled to be due in any single Bond Year, calculated as of the date of determination. For the Series 2023A Bonds alone, the Maximum Annual Debt Service is Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000).

"Net Pledged Revenues" means, for any period, the Gross Pledged Revenues for such period minus the Operation and Maintenance Expenses for such period. For the Fiscal Year ended June 30, 2022, the Authority's Net Pledged Revenues were Four Hundred Twelve Million Six Hundred Thousand Dollars ($412,600,000), computed as Gross Pledged Revenues of $489,300,000 minus O&M Expenses of $76,700,000. Projected Net Pledged Revenues for the Fiscal Year ending June 30, 2024, are Four Hundred Thirty-One Million Eight Hundred Thousand Dollars ($431,800,000).

"NPDES Permit" means NPDES Permit No. WA-004837-2 issued by the Washington State Department of Ecology to the Authority for the discharge of treated effluent from the System, as modified and approved on January 6, 2023, and as the same may be further modified, renewed, or replaced from time to time.

"O&M Fund" means the Operation and Maintenance Fund established and maintained under the Indenture for the purpose of paying Operation and Maintenance Expenses of the System.

"Operation and Maintenance Expenses" or "O&M Expenses" means all reasonable and necessary costs and expenses of operating, maintaining, and administering the System, including without limitation salaries and wages, employee benefits, chemicals and supplies, utilities, contractual services, insurance premiums, administrative and general expenses, and other costs properly chargeable to the operation and maintenance of the System under generally accepted accounting principles, but excluding depreciation, amortization, and any amount paid or payable as principal of or interest on any indebtedness of the Authority (whether Parity Obligations, Subordinate Obligations, or otherwise). For the Fiscal Year ended June 30, 2022, the Authority's O&M Expenses were Seventy-Six Million Seven Hundred Thousand Dollars ($76,700,000).

"Parity Obligations" means, collectively, the Series 2023A Bonds and all other bonds, notes, certificates, or other obligations of the Authority that are secured by a lien on the Net Pledged Revenues that is on a parity with the lien securing the Series 2023A Bonds, whether heretofore or hereafter issued. As of the Closing Date, the aggregate principal amount of all Parity Obligations outstanding prior to the issuance of the Series 2023A Bonds is Three Billion One Hundred Twenty Million Dollars ($3,120,000,000), and following the issuance of the Series 2023A Bonds, the aggregate principal amount of all Parity Obligations outstanding is Three Billion Three Hundred Forty Million Dollars ($3,340,000,000).

"Participating Districts" means the fourteen (14) Puget Sound-region municipal water and sewer districts that are party to Wholesale Water Treatment Services Agreements with the Authority, as more particularly described in Exhibit C attached hereto.

"Project" means the Puget Sound Regional Advanced Water Treatment Facility, a sixty-million-gallon-per-day (60-MGD) advanced membrane-filtration and UV-disinfection water treatment facility to be designed, constructed, equipped, and commissioned at the site located at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501, as more particularly described in the Design-Build Contract and the Resolution.

"Project Fund" means the Project Fund established under the Indenture for the deposit of net Bond proceeds and other amounts to be applied to the payment of costs of the Project. Net Bond proceeds deposited in the Project Fund total Two Hundred Fifteen Million Four Hundred Ninety Thousand Dollars ($215,490,000), together with a CSIA equity contribution of Seventeen Million Four Hundred Thousand Dollars ($17,400,000), for a total of Two Hundred Thirty-Two Million Eight Hundred Ninety Thousand Dollars ($232,890,000) available for Project costs.

"Rate Covenant" means the covenant of the Authority set forth in Section 5.01 of this Agreement.

"Rebate Fund" means the Rebate Fund established under the Indenture for the deposit of amounts required to be rebated to the United States Treasury pursuant to IRC § 148.

"Resolution" means Resolution No. 2023-014 of the Board of Commissioners of the Authority, duly adopted on May 9, 2023, authorizing the issuance of the Series 2023A Bonds, the execution and delivery of this Agreement and the Indenture, and the pledge of Net Pledged Revenues in connection therewith.

"Revenue Fund" means the Revenue Fund established and maintained under the Indenture (or, at the Authority's election, a revenue account maintained by the Authority) into which all Gross Pledged Revenues are to be deposited.

"SEPA Determination" means the Determination of Non-Significance issued on September 12, 2022, by the Washington State Department of Ecology pursuant to the State Environmental Policy Act (Chapter 43.21C RCW) with respect to the Project.

"Subordinate Obligations" means any bonds, notes, certificates, or other obligations of the Authority that are secured by a lien on the Net Pledged Revenues that is expressly junior and subordinate to the lien securing the Parity Obligations, as more particularly described in Section 5.10 hereof.

"Surety Policy" means the Debt-Service Reserve Fund Surety Bond, Policy No. OG-2023-MUN-4718, issued by Olympia Guaranty Insurance Corp. in favor of the Trustee, in the surety amount of Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000), for the purpose of satisfying the DSRF Requirement for the Series 2023A Bonds.

"System" means the water treatment system owned and operated by the Authority, including the Project and all existing water treatment facilities, treatment plants, pipelines, pumping stations, reservoirs, storage facilities, appurtenances, and related property and improvements, whether now existing or hereafter acquired, used or useful in the provision of wholesale water treatment services to the Participating Districts.

"Tax Regulatory Agreement" means the Tax Regulatory Agreement and Certificate, dated October 15, 2023, executed by the Authority in connection with the issuance of the Series 2023A Bonds, setting forth the Authority's covenants and representations regarding compliance with the tax-exempt requirements of the IRC.

"Total Project Cost" means the total estimated cost of the Project, being Two Hundred Thirty-Seven Million Four Hundred Thousand Dollars ($237,400,000), including design, construction, equipment, commissioning, and contingency costs.

"Trustee" means Pacific Northwest Trust Company, National Association, a national banking association duly organized and existing under the laws of the United States, chartered by the Office of the Comptroller of the Currency, with its principal corporate trust office located at 1201 Third Avenue, Suite 1600, Seattle, Washington 98101, in its capacity as Trustee under this Agreement and the Indenture, and any successor trustee appointed in accordance with Section 7.05 hereof. The current Trust Officer is Alan M. Greer, Vice President, Corporate Trust Services.

"UCC" means the Uniform Commercial Code as in effect in the State of Washington from time to time.

"Wholesale Water Treatment Service Charges" means the rates, fees, charges, and assessments imposed by the Authority on the Participating Districts for the provision of wholesale water treatment services under the Wholesale Water Treatment Services Agreements, as such rates, fees, and charges may be adjusted from time to time by the Authority in accordance with the terms of such agreements and applicable law.

"Wholesale Water Treatment Services Agreements" means, collectively, the long-term wholesale water treatment services agreements entered into between the Authority and each of the fourteen (14) Participating Districts, as more particularly described in Exhibit C hereto, pursuant to which the Participating Districts are obligated to pay Wholesale Water Treatment Service Charges to the Authority in consideration of the Authority's provision of wholesale water treatment services.

Section 1.02 — Rules of Interpretation

Unless the context otherwise requires, the following rules of interpretation shall apply to this Agreement:

(a) All capitalized terms used but not defined in this Agreement shall have the meanings ascribed to such terms in the Indenture, unless the context clearly indicates otherwise.

(b) References in this Agreement to any statute, law, regulation, or ordinance shall include all amendments, supplements, successor provisions, and implementing regulations thereto, whether adopted before or after the date of this Agreement.

(c) References to "Sections," "Articles," "Exhibits," and "Schedules" are to the Sections, Articles, Exhibits, and Schedules of this Agreement, unless otherwise expressly stated.

(d) Words importing the singular shall include the plural, and vice versa, and words importing any gender shall include all genders.

(e) The words "herein," "hereof," "hereunder," "hereby," and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement.

(f) The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."

(g) This Agreement shall be governed by, interpreted under, and construed in accordance with the laws of the State of Washington, without regard to conflicts of law principles.

(h) Headings and captions used in this Agreement are for convenience of reference only and shall not affect the interpretation or construction of any provision hereof.

(i) References to any document or agreement shall be deemed to include all amendments, supplements, restatements, and modifications thereto from time to time in effect.

Section 1.03 — Incorporation of Indenture Definitions

All terms defined in the Indenture and not separately defined in this Agreement shall have the meanings ascribed thereto in the Indenture. In the event of any conflict between a definition set forth in this Agreement and a definition set forth in the Indenture with respect to the same term, the definition set forth in this Agreement shall control for purposes of interpreting and construing this Agreement. For all other purposes, including the administration of the funds and accounts established under the Indenture, the definitions set forth in the Indenture shall control.

ARTICLE II — PLEDGE OF REVENUES

Section 2.01 — Pledge and Grant of Security Interest

(a) The Authority hereby irrevocably pledges, assigns, and grants to the Trustee, for the benefit of the holders of the Series 2023A Bonds and all Parity Obligations now or hereafter outstanding, a lien on and security interest in the Net Pledged Revenues. Such pledge, assignment, and grant of security interest is made to secure the payment of the principal of and interest on the Series 2023A Bonds and all other Parity Obligations, together with any premium payable upon redemption thereof, in accordance with the terms and provisions of this Agreement and the Indenture.

(b) The pledge made by this Section 2.01 is on a parity basis with the pledge securing all existing and future Parity Obligations. No series of Parity Obligations shall have a superior or prior claim on the Net Pledged Revenues over any other series of Parity Obligations. All Parity Obligations shall be secured equally and ratably by the pledge of Net Pledged Revenues without preference, priority, or distinction of any one Parity Obligation over any other.

(c) The pledge made by this Section 2.01 is made pursuant to and in reliance upon the authority granted to the Authority by the Act (Chapter 43.160A RCW), which authorizes the Authority to pledge revenues derived from the ownership and operation of the System as security for the payment of its revenue bonds and other obligations.

(d) The lien on Net Pledged Revenues created by this Agreement is a statutory lien under Washington State law. Pursuant to Chapter 43.160A RCW, such lien is valid and binding from the time the pledge is made and the Authority receives consideration for the Series 2023A Bonds. The Net Pledged Revenues and other property subject to such lien shall immediately be subject thereto, and the lien shall be valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the Authority, without the necessity of physical delivery of the Net Pledged Revenues or any other act. The lien does not require filing or recording of a financing statement under Article 9 of the UCC, or filing in any other public registry, to be perfected against third parties.

Section 2.02 — Components of Pledged Revenues

(a) The Net Pledged Revenues constituting the pledged collateral under this Agreement are derived from the following components of Gross Pledged Revenues:

(i) Wholesale Water Treatment Service Charges. All Wholesale Water Treatment Service Charges collected by the Authority from the fourteen (14) Participating Districts under the Wholesale Water Treatment Services Agreements, as such charges may be adjusted from time to time by the Authority. The Wholesale Water Treatment Service Charges constitute the principal source of revenue for the System and historically have represented approximately ninety-one percent (91%) of the Authority's Gross Pledged Revenues.

(ii) Connection Fees. All Connection Fees charged by the Authority for new connections to the System, including system development charges, capacity charges, and all other fees and assessments imposed on new connections.

(iii) Investment Earnings. All Investment Earnings on amounts held in funds and accounts pledged under the Indenture, including without limitation the Revenue Fund, the Bond Fund, the Debt-Service Reserve Fund, and the Project Fund.

(b) Notwithstanding the foregoing, the following items are expressly excluded from Gross Pledged Revenues and from the pledge created by this Agreement:

(i) Federal and state grants, including without limitation grants from the United States Environmental Protection Agency, the Washington State Department of Ecology, and any other federal or state agency, unless the Authority specifically elects in writing to include any such grant in Gross Pledged Revenues;

(ii) Proceeds of ad valorem property taxes, if any, levied by or on behalf of the Authority;

(iii) Insurance proceeds received by the Authority that do not constitute business interruption insurance proceeds; provided, however, that business interruption insurance proceeds shall constitute Gross Pledged Revenues to the extent they represent replacement of lost System revenues;

(iv) Amounts required to be rebated to the United States Treasury under IRC § 148 with respect to the Series 2023A Bonds or any other Parity Obligations, which amounts shall be deposited in the Rebate Fund and held exclusively for such purpose.

Section 2.03 — Parity Nature of Lien

(a) The lien on Net Pledged Revenues securing the Series 2023A Bonds shall be on a parity basis with the lien securing all other Parity Obligations outstanding as of the Closing Date. As of the Closing Date, the aggregate principal amount of Parity Obligations outstanding prior to the issuance of the Series 2023A Bonds is Three Billion One Hundred Twenty Million Dollars ($3,120,000,000). Following the issuance of the Series 2023A Bonds, the aggregate principal amount of all Parity Obligations outstanding is Three Billion Three Hundred Forty Million Dollars ($3,340,000,000). A description of the existing Parity Obligations is set forth in Exhibit B hereto.

(b) No Parity Obligation, whether heretofore or hereafter issued, shall have priority or preference over any other Parity Obligation with respect to the pledge of, lien on, or security interest in the Net Pledged Revenues. All Parity Obligations shall share ratably in the Net Pledged Revenues without distinction, preference, or priority of any one over any other.

(c) The Authority may issue Subordinate Obligations, secured by a lien on the Net Pledged Revenues that is expressly junior and subordinate to the lien securing the Parity Obligations, without compliance with the Additional Bonds Test set forth in Section 5.04 hereof, subject to the conditions set forth in Section 5.10 hereof.

Section 2.04 — Statutory Lien and Perfection

(a) Pursuant to Chapter 43.160A of the RCW, the pledge made by this Agreement creates a statutory lien that is automatically perfected upon the execution and delivery of this Agreement and the receipt by the Authority of consideration for the Series 2023A Bonds. No physical delivery of the Net Pledged Revenues or any other act is necessary to perfect such lien.

(b) The pledge and lien created by this Agreement are valid and binding against the Authority, the Participating Districts, and all third parties, including all persons and entities having claims of any kind against the Authority, whether in tort, contract, or otherwise, from and after the Closing Date. The Authority acknowledges that it is not required to file a financing statement under Article 9 of the UCC, or any other instrument or document, in any public office or registry to perfect the lien created hereby.

(c) Notwithstanding the foregoing, the Authority agrees to cooperate with the Trustee in taking any additional action that the Trustee may reasonably request to evidence or protect the pledge and lien created by this Agreement, including without limitation the execution of such additional instruments or documents as the Trustee may deem necessary or advisable.

Section 2.05 — Prior Pledges and Existing Obligations

(a) The Authority hereby acknowledges and confirms that, prior to the execution and delivery of this Agreement and the issuance of the Series 2023A Bonds, the Authority has previously pledged its Net Pledged Revenues to secure existing outstanding Parity Obligations in the aggregate principal amount of Three Billion One Hundred Twenty Million Dollars ($3,120,000,000), as more particularly described in Exhibit B hereto.

(b) The pledge of Net Pledged Revenues made by this Agreement in favor of the holders of the Series 2023A Bonds is on a parity with, and does not in any way subordinate or give priority to, the pledge of Net Pledged Revenues previously made in favor of the holders of such existing Parity Obligations. This Agreement creates no subordination or priority among any of the Parity Obligations; all Parity Obligations share ratably and on equal footing in the pledge of Net Pledged Revenues, without preference, priority, or distinction.

(c) The Authority represents and warrants that it has not created, and will not create or suffer to be created, any lien on the Net Pledged Revenues that is senior to or has priority over the parity lien securing the Parity Obligations.

ARTICLE III — FLOW OF FUNDS

Section 3.01 — Revenue Fund

(a) All Gross Pledged Revenues shall be deposited by the Authority, promptly upon receipt, into the Revenue Fund established and maintained by the Trustee pursuant to the Indenture. At the Authority's election, and subject to the terms of the Indenture, the Authority may maintain a revenue collection account (the "Revenue Collection Account") at a depository bank of the Authority's choosing, provided that all amounts deposited therein shall be transferred to the Revenue Fund held by the Trustee in accordance with the schedule and procedures set forth in the Indenture.

(b) The provisions governing the flow of funds from the Revenue Fund are set forth primarily in the Indenture. This Section 3.01 and the following Sections of this Article III are intended to provide a summary of the flow of funds for cross-reference purposes and to set forth the Authority's covenants with respect thereto. In the event of any conflict between the provisions of this Article III and the provisions of the Indenture with respect to the flow of funds, the provisions of the Indenture shall control.

(c) The Authority shall maintain accurate and complete records of all Gross Pledged Revenues received and deposited in the Revenue Fund or the Revenue Collection Account, and shall make such records available to the Trustee upon reasonable request.

Section 3.02 — Application of Revenue Fund

From the Revenue Fund, amounts shall be transferred and applied in the following order of priority, which priority shall be absolute and unconditional:

(a) First — Operation and Maintenance Expenses. On or before the fifteenth (15th) day of each month (or more frequently as the Authority may determine), there shall be transferred from the Revenue Fund to the O&M Fund an amount sufficient to pay the Operation and Maintenance Expenses of the System reasonably expected to be due and payable during such month and to maintain a reasonable working capital reserve for O&M Expenses. The Authority shall determine the amounts to be transferred to the O&M Fund based on its annual operating budget and cash flow projections, and shall provide the Trustee with a schedule of anticipated monthly transfers at the beginning of each Fiscal Year.

(b) Second — Bond Fund (Parity Debt Service). After the transfer to the O&M Fund described in paragraph (a) above, there shall be transferred from the Revenue Fund to the Bond Fund, on or before each interest payment date and principal payment date, amounts sufficient to pay the scheduled debt service (principal and interest) on all Parity Obligations as and when due. As of the Closing Date, the Annual Aggregate Parity Debt Service on all Parity Obligations is approximately Two Hundred Seventy-Eight Million Four Hundred Thousand Dollars ($278,400,000). Transfers to the Bond Fund shall be made in equal monthly installments or in such other amounts and at such other times as may be specified in the Indenture, so that sufficient funds are on deposit in the Bond Fund to pay debt service as it becomes due.

(c) Third — Debt-Service Reserve Fund. After the transfer to the Bond Fund described in paragraph (b) above, there shall be transferred from the Revenue Fund to the Debt-Service Reserve Fund such amounts as may be necessary to restore any deficiency in the Debt-Service Reserve Fund to the DSRF Requirement. As of the Closing Date, the DSRF Requirement for the Series 2023A Bonds is satisfied by the Surety Policy, and accordingly, no cash deposit is currently required with respect to the Series 2023A Bonds. If the Surety Policy is drawn upon or if the DSRF Requirement is otherwise not satisfied, the Authority shall replenish the Debt-Service Reserve Fund or replace the Surety Policy as provided in Section 3.04 hereof.

(d) Fourth — Subordinate Obligation Fund. After the transfers described in paragraphs (a) through (c) above, there shall be transferred from the Revenue Fund to any fund or account established for the payment of debt service on Subordinate Obligations amounts sufficient to pay the scheduled debt service on all Subordinate Obligations as and when due.

(e) Fifth — Rebate Fund. After the transfers described in paragraphs (a) through (d) above, there shall be transferred from the Revenue Fund to the Rebate Fund such amounts as may be required to satisfy the Authority's arbitrage rebate obligations under IRC § 148 with respect to the Series 2023A Bonds and any other tax-exempt Parity Obligations or Subordinate Obligations.

(f) Sixth — General Fund. After the transfers described in paragraphs (a) through (e) above have been made in full, any remaining amounts in the Revenue Fund may be transferred to the General Fund of the Authority and applied to any lawful purpose of the Authority, free and clear of the pledge and lien created by this Agreement and the Indenture.

Section 3.03 — Bond Fund

(a) Amounts deposited in the Bond Fund shall be held by the Trustee and applied solely to the payment of scheduled principal of and interest on Parity Obligations as and when due. The Trustee shall not apply any amounts on deposit in the Bond Fund for any other purpose.

(b) Interest on the Series 2023A Bonds is payable semi-annually on April 1 and October 1 of each year, commencing on April 1, 2024. The first interest payment, payable on April 1, 2024, shall cover the period from the Closing Date (October 24, 2023) through March 31, 2024. First-year annual interest on the Series 2023A Bonds, calculated at the rate of 3.25% per annum on the outstanding principal amount of $220,000,000, is approximately Seven Million One Hundred Fifty Thousand Dollars ($7,150,000).

(c) The Series 2023A Bonds are structured on a level debt service basis over a thirty (30)-year term, with approximate annual debt service (combined principal and interest) of Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000) per Bond Year.

(d) The Trustee shall maintain a separate sub-account within the Bond Fund for the Series 2023A Bonds and for each other series of Parity Obligations as may be required by the Indenture or any supplemental indenture. Notwithstanding the maintenance of such separate sub-accounts, all amounts in the Bond Fund are pledged for the benefit of all holders of Parity Obligations on a parity basis.

Section 3.04 — Debt-Service Reserve Fund

(a) The DSRF Requirement for the Series 2023A Bonds is Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000), being the least of the following three measures:

(i) Maximum Annual Debt Service on the Series 2023A Bonds: $11,610,000;

(ii) One hundred twenty-five percent (125%) of the average annual debt service on the Series 2023A Bonds; and

(iii) Ten percent (10%) of the original par amount of the Series 2023A Bonds: $22,000,000.

The applicable DSRF Requirement, based on the foregoing calculation, is $11,610,000, as set forth in detail in Schedule 1 hereto.

(b) The DSRF Requirement for the Series 2023A Bonds is satisfied by the Surety Policy (Policy No. OG-2023-MUN-4718) issued by Olympia Guaranty Insurance Corp. in the surety amount of Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000). The Surety Policy is maintained in lieu of a cash deposit in the Debt-Service Reserve Fund for the Series 2023A Bonds.

(c) The annual premium payable by the Authority to Olympia Guaranty Insurance Corp. for the Surety Policy is Twenty-Three Thousand Two Hundred Twenty Dollars ($23,220), calculated at the rate of 0.20% of the surety amount, payable by the Authority from legally available funds. Such premium shall be payable annually on each anniversary of the Closing Date during the term of the Surety Policy.

(d) The mechanics for drawing on the Surety Policy, including the conditions precedent to a draw, the notice requirements, and the repayment obligations of the Authority following a draw, are governed by the Debt-Service Reserve Fund Surety Bond Agreement dated as of October 24, 2023, among the Authority, the Trustee, and Olympia Guaranty Insurance Corp.

(e) In the event the Surety Policy is drawn upon, the Authority shall, within twelve (12) months following the date of such draw, either (i) replenish the Debt-Service Reserve Fund with cash or Permitted Investments in an amount equal to the amount drawn under the Surety Policy, or (ii) obtain and deliver to the Trustee a replacement surety bond, insurance policy, or letter of credit meeting the requirements of the Indenture in an amount sufficient to restore the DSRF to the full DSRF Requirement. Failure of the Authority to satisfy this replenishment obligation within such twelve-month period shall constitute an Event of Default under Section 6.01(b) hereof, subject to the notice and cure provisions therein.

Section 3.05 — Project Fund

(a) Net Bond proceeds in the amount of Two Hundred Fifteen Million Four Hundred Ninety Thousand Dollars ($215,490,000) have been deposited in the Project Fund established under the Indenture, together with a CSIA equity contribution of Seventeen Million Four Hundred Thousand Dollars ($17,400,000), for a total of Two Hundred Thirty-Two Million Eight Hundred Ninety Thousand Dollars ($232,890,000) available for the payment of Project costs.

(b) The Total Project Cost is estimated at Two Hundred Thirty-Seven Million Four Hundred Thousand Dollars ($237,400,000). The balance of Project costs not funded from the Project Fund shall be funded from the Authority's general funds, additional equity contributions, or other legally available sources.

(c) Disbursements from the Project Fund shall be made by the Trustee (or by PNTC in its capacity as Escrow Agent) upon receipt of a written requisition from an Authorized Officer of the Authority, accompanied by such supporting documentation as the Trustee may reasonably require, in accordance with the terms of the Escrow Deposit Agreement dated as of October 24, 2023, between the Authority and PNTC, as Escrow Agent. Each requisition shall certify that the amounts requested are for costs properly allocable to the Project and that no Event of Default exists under this Agreement or the Indenture.

(d) In addition to the amounts deposited in the Project Fund, Four Million Five Hundred Ten Thousand Dollars ($4,510,000) from Bond proceeds has been deposited in the Capitalized Interest Fund established under the Indenture, which amount shall be applied to the payment of interest on the Series 2023A Bonds during the construction period.

(e) Upon completion of the Project, any amounts remaining in the Project Fund, after payment of all Project costs, shall be transferred to the Bond Fund and applied to the payment of debt service on the Series 2023A Bonds, or applied in such other manner as may be permitted by the Indenture and applicable tax law.

Section 3.06 — Rebate Fund

Amounts required to be rebated to the United States Treasury under IRC § 148 with respect to the Series 2023A Bonds or any other tax-exempt obligations of the Authority shall be deposited in the Rebate Fund established under the Indenture. Amounts on deposit in the Rebate Fund are excluded from Gross Pledged Revenues and from the pledge created by this Agreement. The Authority shall cause rebate calculations to be performed at such times and in such manner as required by the IRC and the Tax Regulatory Agreement, and shall deposit in the Rebate Fund such amounts as are determined to be owed. Rebate payments shall be made to the United States Treasury not later than sixty (60) days after each fifth anniversary of the Closing Date of the Series 2023A Bonds and not later than sixty (60) days after the final retirement of the Series 2023A Bonds.

ARTICLE IV — REPRESENTATIONS AND WARRANTIES

Section 4.01 — Representations and Warranties of the Authority

The Authority hereby makes the following representations and warranties to the Trustee and to the holders of the Parity Obligations as of the Closing Date:

(a) Organization and Existence. The Authority is a governmental instrumentality and public body corporate of the State of Washington, duly created and validly existing under and pursuant to Chapter 43.160A of the Revised Code of Washington. The Authority has full legal right, power, and authority to own, operate, and maintain the System, to fix and collect rates, fees, and charges for water treatment services, and to issue revenue bonds and pledge revenues derived from the System.

(b) Authority and Authorization. The Authority has full legal right, power, and authority to execute and deliver this Agreement, to pledge the Net Pledged Revenues as provided herein, and to perform each and every obligation of the Authority hereunder, pursuant to the Act and Resolution No. 2023-014 adopted by the Board on May 9, 2023. All actions required to be taken by the Authority's Board, officers, and employees for the authorization, execution, and delivery of this Agreement and the Bonds have been duly and lawfully taken.

(c) No Conflicts. The execution, delivery, and performance of this Agreement by the Authority have been duly authorized by all necessary action of the Authority, including Resolution No. 2023-014, and do not and will not (i) conflict with or result in a breach of any provision of the Act or the Authority's enabling legislation, (ii) conflict with or result in a breach of, or constitute a default under, any existing agreement, indenture, mortgage, lease, resolution, or other instrument to which the Authority is a party or by which the Authority or any of its properties is bound, or (iii) violate any applicable law, rule, regulation, judgment, order, or decree of any governmental authority having jurisdiction over the Authority.

(d) Enforceability. This Agreement constitutes a valid, legally binding, and enforceable obligation of the Authority, enforceable against the Authority in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting the enforcement of creditors' rights generally, (ii) equitable principles, whether applied in a court of law or a court of equity, and (iii) the exercise of sovereign or governmental powers.

(e) Governmental Approvals. All governmental approvals, consents, authorizations, licenses, and permits necessary for the Authority's execution, delivery, and performance of this Agreement and the issuance of the Series 2023A Bonds have been duly obtained and are in full force and effect. Without limiting the generality of the foregoing, the Authority has obtained (i) the SEPA Determination of Non-Significance issued on September 12, 2022, by the Washington State Department of Ecology, and (ii) the modification to NPDES Permit No. WA-004837-2, approved on January 6, 2023, by the Washington State Department of Ecology, each of which is required for the construction and operation of the Project.

(f) Wholesale Water Treatment Services Agreements. The Wholesale Water Treatment Services Agreements with the fourteen (14) Participating Districts are in full force and effect as of the Closing Date and have not been amended, modified, terminated, or assigned (other than as contemplated by the terms thereof). Each Participating District is in compliance with its payment obligations under the applicable Wholesale Water Treatment Services Agreement, and no Participating District has given notice of termination, default, or dispute with respect to its Wholesale Water Treatment Services Agreement.

(g) Absence of Litigation. To the best knowledge of the Authority, after due inquiry, no litigation, proceeding, investigation, or action is pending or, to the knowledge of the Authority, threatened against or affecting the Authority before or by any court, arbitrator, administrative agency, or other governmental authority that would (i) materially adversely affect the Authority's ability to perform its obligations under this Agreement or the Indenture, (ii) challenge the validity of this Agreement, the Indenture, or the Series 2023A Bonds, (iii) challenge the validity or enforceability of the pledge of Net Pledged Revenues made hereby, or (iv) materially adversely affect the financial condition, operations, or properties of the Authority or the System.

(h) Outstanding Parity Obligations. As of the Closing Date, the Authority's existing outstanding Parity Obligations total Three Billion One Hundred Twenty Million Dollars ($3,120,000,000) in aggregate principal amount. Together with the Series 2023A Bonds, the total aggregate principal amount of all Parity Obligations outstanding as of the Closing Date is Three Billion Three Hundred Forty Million Dollars ($3,340,000,000). A description of all outstanding Parity Obligations is set forth in Exhibit B hereto.

(i) Financial Statements. The Authority's audited financial statements for the Fiscal Year ended June 30, 2022, have been audited by Hargrove & Associates CPAs, PLLC (engagement partner: Victoria L. Fong, CPA), in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States, and such financial statements fairly present, in all material respects, the financial position of the Authority as of June 30, 2022, and the results of its operations and changes in its financial position for the Fiscal Year then ended, in conformity with generally accepted accounting principles as applied to governmental entities. Since June 30, 2022, there has been no material adverse change in the financial position, results of operations, or prospects of the Authority.

(j) Revenue and Expense Data. For the Fiscal Year ended June 30, 2022, the Authority's Gross Pledged Revenues were Four Hundred Eighty-Nine Million Three Hundred Thousand Dollars ($489,300,000); O&M Expenses were Seventy-Six Million Seven Hundred Thousand Dollars ($76,700,000); and Net Pledged Revenues were Four Hundred Twelve Million Six Hundred Thousand Dollars ($412,600,000). The foregoing figures are derived from the Authority's audited financial statements for such Fiscal Year.

(k) No Existing Defaults. The Authority is not in default under any existing Parity Obligation, any prior revenue pledge agreement, the Indenture, or any other material agreement, instrument, or obligation to which the Authority is a party. No event has occurred and is continuing that, with the giving of notice or the passage of time or both, would constitute an Event of Default under this Agreement, the Indenture, or any existing Parity Obligation.

Section 4.02 — Representations and Warranties of the Trustee

The Trustee hereby makes the following representations and warranties to the Authority as of the Closing Date:

(a) Organization and Existence. PNTC is a national banking association duly organized and validly existing under the laws of the United States of America, chartered by the Office of the Comptroller of the Currency, and authorized to exercise corporate trust powers. PNTC's principal corporate trust office is located at 1201 Third Avenue, Suite 1600, Seattle, Washington 98101.

(b) Power and Authority. PNTC has full corporate power and legal authority to accept appointment as Trustee under this Agreement and the Indenture and to perform all of the duties and obligations of the Trustee as set forth herein and therein. PNTC has the requisite corporate trust powers and experience to serve as trustee for revenue bond transactions of the type and magnitude contemplated by this Agreement and the Indenture.

(c) Due Authorization. The execution, delivery, and performance by PNTC of this Agreement and the Indenture have been duly authorized by all necessary corporate action on the part of PNTC, and no further action, approval, or consent is required for PNTC to execute, deliver, and perform its obligations under this Agreement and the Indenture. This Agreement has been duly executed and delivered by PNTC and constitutes the valid and binding obligation of PNTC, enforceable against PNTC in accordance with its terms.

ARTICLE V — COVENANTS OF THE AUTHORITY

Section 5.01 — Rate Covenant

(a) The Authority hereby covenants and agrees that it will at all times fix, charge, and collect Wholesale Water Treatment Service Charges, Connection Fees, and other rates, fees, and charges for water treatment services from the Participating Districts and all other users of the System at levels sufficient to produce Net Pledged Revenues in each Fiscal Year equal to at least one and forty-hundredths times (1.40x) the Annual Aggregate Parity Debt Service for such Fiscal Year (the "Rate Covenant"). The Authority shall review and, as necessary, adjust its rate schedules at least annually to ensure ongoing compliance with the Rate Covenant.

(b) Pro Forma Compliance Demonstration. As of the Fiscal Year ended June 30, 2022, the Authority's compliance with the Rate Covenant is demonstrated as follows:

The debt service coverage ratio of 1.48x for Fiscal Year 2022 exceeds the minimum required coverage ratio of 1.40x, thereby satisfying the Rate Covenant.

(c) Cure Period. If at the end of any Fiscal Year the Authority fails to satisfy the Rate Covenant (i.e., Net Pledged Revenues for such Fiscal Year are less than 1.40 times Annual Aggregate Parity Debt Service for such Fiscal Year), such failure shall not constitute an Event of Default under this Agreement if the Authority, within ninety (90) days after such failure becomes known to the Authority or is brought to the Authority's attention by the Trustee, engages an independent consultant of recognized standing and experience in the field of municipal utility rate setting to review the Authority's rate structure, financial condition, and projected revenues, and to recommend such adjustments to the Authority's rates, fees, and charges as may be necessary to achieve compliance with the Rate Covenant in the then-current and subsequent Fiscal Years. The Authority shall implement the rate adjustments recommended by such independent consultant within one hundred eighty (180) days after receipt of the consultant's report. If the Authority engages such consultant and diligently implements the recommended rate adjustments within the time periods specified herein, the failure to satisfy the Rate Covenant in the prior Fiscal Year shall not constitute an Event of Default; provided, however, that such cure shall be available only to the extent the Authority is acting in good faith and with reasonable diligence.

(d) Annual Certification. The Authority shall furnish to the Trustee, within one hundred eighty (180) days after the end of each Fiscal Year, a certificate of the Chief Financial Officer of the Authority (or any successor officer performing such functions) demonstrating the Authority's compliance with the Rate Covenant for the completed Fiscal Year, in substantially the form set forth in Exhibit D hereto (the "CFO's Annual Rate Covenant Compliance Certificate"). Such certificate shall set forth the calculation of Gross Pledged Revenues, O&M Expenses, Net Pledged Revenues, Annual Aggregate Parity Debt Service, and the resulting debt service coverage ratio for such Fiscal Year.

Section 5.02 — Covenant to Maintain and Operate the System

(a) The Authority covenants and agrees that it will, so long as any Parity Obligations remain outstanding, maintain the System, including the Project and all existing treatment facilities, in good working order, condition, and repair, and will operate the System in an efficient, economical, and prudent manner consistent with sound utility practice.

(b) The Authority shall comply with all applicable federal, state, and local laws, rules, regulations, permits, and orders relating to the ownership, operation, and maintenance of the System, including without limitation (i) NPDES Permit No. WA-004837-2, as modified on January 6, 2023, and any subsequent modifications, renewals, or replacements thereof, (ii) all requirements of the State Environmental Policy Act (Chapter 43.21C RCW) and the SEPA Determination issued September 12, 2022, (iii) all applicable requirements of the federal Clean Water Act and the Safe Drinking Water Act, and (iv) all rules and regulations of the Washington State Department of Ecology and the Washington State Department of Health applicable to the System.

(c) The Authority shall make all necessary capital improvements, replacements, and renewals to the System to keep the System in good operating condition and to comply with all applicable regulatory requirements. The costs of such capital improvements, replacements, and renewals shall be funded from available revenues, bond proceeds, reserves, or other legally available sources.

Section 5.03 — Covenant Against Impairment of Pledge

(a) The Authority covenants and agrees that it shall not take any action, or permit any action to be taken, that would impair the pledge of Net Pledged Revenues made by this Agreement, or that would materially adversely affect the rights of the holders of Parity Obligations with respect to the security provided by such pledge.

(b) Without limiting the generality of the foregoing, the Authority shall not sell, lease, transfer, convey, or otherwise dispose of all or a material portion of the System or the assets comprising the System, except that the Authority may (i) dispose of property, equipment, or facilities that are no longer useful or necessary for the operation of the System, provided that the proceeds of any such disposition are deposited in the Revenue Fund, and (ii) enter into contracts or agreements for the operation or management of portions of the System, provided that the Authority retains ownership of the System and control over the rates, fees, and charges for water treatment services.

(c) The Authority shall not voluntarily create or suffer to exist any lien, charge, or encumbrance on the Net Pledged Revenues or on the assets of the System that is senior to or on a parity with the lien created by this Agreement, except for the parity lien securing existing and future Parity Obligations issued in compliance with the Additional Bonds Test set forth in Section 5.04.

Section 5.04 — Additional Bonds Test

(a) The Authority may issue Additional Bonds secured by a parity lien on the Net Pledged Revenues on an equal and ratable basis with the Series 2023A Bonds and all other Parity Obligations then outstanding, but only if, at the time of issuance of such Additional Bonds, each of the following conditions is satisfied:

(i) No Default. The Authority is not in default under this Agreement, the Indenture, or any existing Parity Obligation, and no event has occurred and is continuing that, with the giving of notice or the passage of time or both, would constitute an Event of Default hereunder or under the Indenture or any existing Parity Obligation.

(ii) Debt Service Coverage Test. Net Pledged Revenues for the most recently completed Fiscal Year for which audited financial statements are available (the "Historical Test"), or, at the Authority's election, estimated Net Pledged Revenues for the first full Fiscal Year following completion of the project or purpose to be financed by the Additional Bonds (the "Projected Test"), are equal

REVENUE PLEDGE AGREEMENT
between
CASCADIA STATE INFRASTRUCTURE AUTHORITY
and
PACIFIC NORTHWEST TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee
Securing
Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt)
Aggregate Principal Amount: $220,000,000
Dated as of October 24, 2023
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RECITALS
WHEREAS, the Cascadia State Infrastructure Authority ("CSIA" or the "Authority") is a governmental instrumentality and public body corporate of the State of Washington, duly created and existing under and pursuant to Chapter 43.160A of the Revised Code of Washington (the "RCW"), with the full legal authority to own, operate, and finance water treatment facilities and related infrastructure for the benefit of the citizens and residents of the State of Washington; and
WHEREAS, the Authority owns and operates a comprehensive water treatment system (the "System") serving fourteen (14) participating municipal water and sewer districts across the Puget Sound region of the State of Washington pursuant to long-term Wholesale Water Treatment Services Agreements entered into between the Authority and each such Participating District, which agreements obligate the Participating Districts to pay Wholesale Water Treatment Service Charges to the Authority in exchange for the provision of wholesale water treatment services; and
WHEREAS, the Board of Commissioners of CSIA (the "Board"), by Resolution No. 2023-014 duly adopted on May 9, 2023 (the "Resolution"), authorized the issuance of revenue bonds for the purpose of financing the design, construction, equipping, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility, a sixty-million-gallon-per-day (60-MGD) advanced membrane-filtration and UV-disinfection water treatment facility to be located at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501 (the "Project"), and further authorized the pledge of the Authority's Net Pledged Revenues to secure such revenue bonds and all other obligations issued on a parity basis therewith; and
WHEREAS, the Authority has entered into a Bond Indenture dated as of October 24, 2023 (the "Indenture") with Pacific Northwest Trust Company, National Association ("PNTC" or the "Trustee"), pursuant to which the Authority has established the terms and conditions for the issuance, authentication, delivery, and administration of its revenue bonds, and has further entered into a First Supplemental Indenture dated as of October 24, 2023 (the "First Supplemental Indenture" and, together with the Indenture, the "Bond Indenture"), which supplements the Indenture and authorizes the issuance of Two Hundred Twenty Million Dollars ($220,000,000) in aggregate principal amount of Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt) (the "Series 2023A Bonds" or the "Bonds"); and
WHEREAS, the Authority has covenanted and agreed to pledge its Net Pledged Revenues (as defined herein) to the Trustee for the benefit of the holders of the Bonds and all Parity Obligations (as defined herein) on a parity lien basis, such that no Parity Obligation shall have priority over any other Parity Obligation with respect to the pledge of and lien on the Net Pledged Revenues; and
WHEREAS, the pledge and lien created by this Revenue Pledge Agreement (this "Agreement") are made pursuant to the authority granted by Chapter 43.160A of the RCW, which provides for the automatic perfection of a statutory lien upon the execution and delivery of the pledging instrument, without the necessity of physical delivery, filing of financing statements under the Uniform Commercial Code, or recording in any public registry; and
WHEREAS, as of the date hereof, the existing outstanding parity debt of the Authority, secured by a parity lien on the Net Pledged Revenues, totals Three Billion One Hundred Twenty Million Dollars ($3,120,000,000), and together with the Series 2023A Bonds, the total outstanding Parity Obligations of the Authority will be Three Billion Three Hundred Forty Million Dollars ($3,340,000,000); and
WHEREAS, the Authority has determined that the issuance of the Series 2023A Bonds and the execution and delivery of this Agreement are in the best interests of the Authority and the Participating Districts, and will enable the Authority to finance the construction of the Project and thereby enhance the capacity, reliability, and environmental compliance of the System;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Authority and the Trustee agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.01 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below, unless the context clearly requires otherwise:
"Act" means Chapter 43.160A of the Revised Code of Washington, as amended, supplemented, or superseded from time to time, including any successor provisions thereto, pursuant to which the Authority was created and under which the Authority is authorized to issue revenue bonds and pledge revenues in support thereof.
"Additional Bonds" means any bonds, notes, certificates, or other obligations of the Authority hereafter issued and secured by a parity lien on the Net Pledged Revenues on an equal and ratable basis with the Series 2023A Bonds and all other Parity Obligations then outstanding, subject to satisfaction of the Additional Bonds Test set forth in Section 5.04 hereof. Additional Bonds may be issued in one or more series and may bear fixed or variable rates of interest, all as shall be determined by the Authority at the time of issuance in compliance with the terms of this Agreement and the Indenture.
"Additional Bonds Test" means the test for the issuance of Additional Bonds set forth in Section 5.04 of this Agreement.
"Agreement" means this Revenue Pledge Agreement, dated as of October 24, 2023, between the Authority and the Trustee, as it may be amended or supplemented from time to time in accordance with the provisions of Article VIII hereof.
"Annual Aggregate Parity Debt Service" means the total scheduled principal and interest payments due in any Bond Year on all Parity Obligations then outstanding, calculated without regard to any optional or extraordinary redemption provisions. As of the Closing Date, the Annual Aggregate Parity Debt Service is approximately Two Hundred Seventy-Eight Million Four Hundred Thousand Dollars ($278,400,000), which amount includes the scheduled debt service on the Series 2023A Bonds and all other Parity Obligations outstanding as of such date.
"Authority" means the Cascadia State Infrastructure Authority, a governmental instrumentality and public body corporate of the State of Washington, duly created and existing under the Act, with its principal office and headquarters located at 1100 Capitol Way South, Suite 400, Olympia, Washington 98501, Employer Identification Number 91-2058374.
"Authorized Officer" means the Executive Director (currently Harold K. Nakamura) or the Chief Financial Officer (currently Denise R. Whitford) of the Authority, or any other officer or officers of the Authority designated in writing by the Board or the Executive Director to act on behalf of the Authority for purposes of this Agreement and the Indenture.
"Board" means the Board of Commissioners of the Authority, being the governing body of the Authority as constituted under the Act. The current Board Chair is Commissioner Lorraine Chu.
"Bond Fund" means the Bond Fund established and maintained pursuant to the Indenture for the purpose of paying scheduled debt service on Parity Obligations.
"Bond Indenture" or "Indenture" means the Bond Indenture dated as of October 24, 2023, by and between the Authority and the Trustee, as supplemented by the First Supplemental Indenture dated as of October 24, 2023, and as the same may be further supplemented, amended, or restated from time to time in accordance with its terms.
"Bond Year" means the twelve-month period ending on October 1 of each year. The first Bond Year for the Series 2023A Bonds shall commence on the Closing Date and end on October 1, 2024.
"Bonds" or "Series 2023A Bonds" means the Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt), in the aggregate principal amount of Two Hundred Twenty Million Dollars ($220,000,000), dated October 24, 2023, maturing October 1, 2053, bearing interest at the rate of 3.25% per annum, CUSIP base number 148392, issued, authenticated, and delivered under and pursuant to the Indenture and the First Supplemental Indenture.
"Business Day" means any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Washington or the city in which the principal office of the Trustee is located are authorized or required by law to be closed.
"Closing Date" means October 24, 2023, the date on which the Series 2023A Bonds are initially issued, authenticated, and delivered to the original purchasers thereof.
"Connection Fees" means all fees, charges, and assessments imposed by the Authority on new connections to the System, including system development charges, capacity charges, and similar fees or assessments, whether denominated as connection fees or otherwise.
"Continuing Disclosure Agreement" means the Continuing Disclosure Agreement dated as of October 24, 2023, between the Authority and the Trustee, in its capacity as Dissemination Agent, executed and delivered in compliance with the requirements of SEC Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended.
"Costs of Issuance" means all costs and expenses incurred in connection with the authorization, sale, issuance, and delivery of the Series 2023A Bonds, including but not limited to underwriting discounts, legal fees, financial advisory fees, rating agency fees, printing costs, trustee acceptance fees, and similar costs. The Costs of Issuance for the Series 2023A Bonds are estimated at One Million Eight Hundred Seventy Thousand Dollars ($1,870,000), to be funded from Bond proceeds.
"DSRF" or "Debt-Service Reserve Fund" means the Debt-Service Reserve Fund established and maintained under the Indenture for the purpose of providing additional security for the payment of debt service on Parity Obligations in the event of a deficiency in the Bond Fund. The DSRF requirement for the Series 2023A Bonds is satisfied by the Surety Policy issued by Olympia Guaranty Insurance Corp. in the surety amount of Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000), which amount is equal to the Maximum Annual Debt Service on the Series 2023A Bonds.
"DSRF Requirement" means, with respect to any series of Parity Obligations, the amount required to be on deposit in the Debt-Service Reserve Fund (or secured by a surety bond, insurance policy, or letter of credit) as specified in the supplemental indenture authorizing such series of Parity Obligations. The DSRF Requirement for the Series 2023A Bonds is calculated as set forth in Schedule 1 hereto.
"Design-Build Contract" means GMP Contract No. CSIA-DB-2023-001, dated March 10, 2023, by and between the Authority and Northtide Environmental Engineering, Inc., providing for the design and construction of the Project at a guaranteed maximum price of One Hundred Ninety-Three Million Five Hundred Thousand Dollars ($193,500,000), subject to such change orders and modifications as may be approved by the Authority in accordance with the terms thereof.
"DTC" means The Depository Trust Company, a limited-purpose trust company organized under the New York Banking Law, the securities depository for the Series 2023A Bonds.
"Event of Default" means any of the events described in Section 6.01 of this Agreement.
"Fiscal Year" means the twelve-month period ending on June 30 of each year, or such other twelve-month period as the Authority may hereafter designate as its fiscal year for financial reporting purposes, provided that the Authority shall give not less than ninety (90) days' prior written notice to the Trustee of any change in Fiscal Year.
"General Fund" means the general fund of the Authority, into which amounts may be deposited after satisfaction of all higher-priority transfers in the flow of funds described in Section 3.02 hereof.
"Gross Pledged Revenues" means all revenues, income, receipts, and money derived by the Authority from the ownership and operation of the System, including without limitation (a) Wholesale Water Treatment Service Charges, (b) Connection Fees, and (c) Investment Earnings on amounts held in pledged funds and accounts established under the Indenture; provided, however, that Gross Pledged Revenues shall not include the items excluded pursuant to Section 2.02(b) hereof. For the Fiscal Year ended June 30, 2022, the Authority's Gross Pledged Revenues were Four Hundred Eighty-Nine Million Three Hundred Thousand Dollars ($489,300,000).
"Investment Earnings" means all earnings, gains, and income derived from the investment of amounts held in funds and accounts established under the Indenture and pledged as security for Parity Obligations, including interest, dividends, and realized capital gains, net of realized capital losses and investment expenses.
"IRC" means the Internal Revenue Code of 1986, as amended from time to time, including any successor code or statute, and the Treasury Regulations promulgated thereunder.
"Maximum Annual Debt Service" or "MADS" means the maximum amount of Annual Aggregate Parity Debt Service scheduled to be due in any single Bond Year, calculated as of the date of determination. For the Series 2023A Bonds alone, the Maximum Annual Debt Service is Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000).
"Net Pledged Revenues" means, for any period, the Gross Pledged Revenues for such period minus the Operation and Maintenance Expenses for such period. For the Fiscal Year ended June 30, 2022, the Authority's Net Pledged Revenues were Four Hundred Twelve Million Six Hundred Thousand Dollars ($412,600,000), computed as Gross Pledged Revenues of $489,300,000 minus O&M Expenses of $76,700,000. Projected Net Pledged Revenues for the Fiscal Year ending June 30, 2024, are Four Hundred Thirty-One Million Eight Hundred Thousand Dollars ($431,800,000).
"NPDES Permit" means NPDES Permit No. WA-004837-2 issued by the Washington State Department of Ecology to the Authority for the discharge of treated effluent from the System, as modified and approved on January 6, 2023, and as the same may be further modified, renewed, or replaced from time to time.
"O&M Fund" means the Operation and Maintenance Fund established and maintained under the Indenture for the purpose of paying Operation and Maintenance Expenses of the System.
"Operation and Maintenance Expenses" or "O&M Expenses" means all reasonable and necessary costs and expenses of operating, maintaining, and administering the System, including without limitation salaries and wages, employee benefits, chemicals and supplies, utilities, contractual services, insurance premiums, administrative and general expenses, and other costs properly chargeable to the operation and maintenance of the System under generally accepted accounting principles, but excluding depreciation, amortization, and any amount paid or payable as principal of or interest on any indebtedness of the Authority (whether Parity Obligations, Subordinate Obligations, or otherwise). For the Fiscal Year ended June 30, 2022, the Authority's O&M Expenses were Seventy-Six Million Seven Hundred Thousand Dollars ($76,700,000).
"Parity Obligations" means, collectively, the Series 2023A Bonds and all other bonds, notes, certificates, or other obligations of the Authority that are secured by a lien on the Net Pledged Revenues that is on a parity with the lien securing the Series 2023A Bonds, whether heretofore or hereafter issued. As of the Closing Date, the aggregate principal amount of all Parity Obligations outstanding prior to the issuance of the Series 2023A Bonds is Three Billion One Hundred Twenty Million Dollars ($3,120,000,000), and following the issuance of the Series 2023A Bonds, the aggregate principal amount of all Parity Obligations outstanding is Three Billion Three Hundred Forty Million Dollars ($3,340,000,000).
"Participating Districts" means the fourteen (14) Puget Sound-region municipal water and sewer districts that are party to Wholesale Water Treatment Services Agreements with the Authority, as more particularly described in Exhibit C attached hereto.
"Project" means the Puget Sound Regional Advanced Water Treatment Facility, a sixty-million-gallon-per-day (60-MGD) advanced membrane-filtration and UV-disinfection water treatment facility to be designed, constructed, equipped, and commissioned at the site located at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501, as more particularly described in the Design-Build Contract and the Resolution.
"Project Fund" means the Project Fund established under the Indenture for the deposit of net Bond proceeds and other amounts to be applied to the payment of costs of the Project. Net Bond proceeds deposited in the Project Fund total Two Hundred Fifteen Million Four Hundred Ninety Thousand Dollars ($215,490,000), together with a CSIA equity contribution of Seventeen Million Four Hundred Thousand Dollars ($17,400,000), for a total of Two Hundred Thirty-Two Million Eight Hundred Ninety Thousand Dollars ($232,890,000) available for Project costs.
"Rate Covenant" means the covenant of the Authority set forth in Section 5.01 of this Agreement.
"Rebate Fund" means the Rebate Fund established under the Indenture for the deposit of amounts required to be rebated to the United States Treasury pursuant to IRC § 148.
"Resolution" means Resolution No. 2023-014 of the Board of Commissioners of the Authority, duly adopted on May 9, 2023, authorizing the issuance of the Series 2023A Bonds, the execution and delivery of this Agreement and the Indenture, and the pledge of Net Pledged Revenues in connection therewith.
"Revenue Fund" means the Revenue Fund established and maintained under the Indenture (or, at the Authority's election, a revenue account maintained by the Authority) into which all Gross Pledged Revenues are to be deposited.
"SEPA Determination" means the Determination of Non-Significance issued on September 12, 2022, by the Washington State Department of Ecology pursuant to the State Environmental Policy Act (Chapter 43.21C RCW) with respect to the Project.
"Subordinate Obligations" means any bonds, notes, certificates, or other obligations of the Authority that are secured by a lien on the Net Pledged Revenues that is expressly junior and subordinate to the lien securing the Parity Obligations, as more particularly described in Section 5.10 hereof.
"Surety Policy" means the Debt-Service Reserve Fund Surety Bond, Policy No. OG-2023-MUN-4718, issued by Olympia Guaranty Insurance Corp. in favor of the Trustee, in the surety amount of Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000), for the purpose of satisfying the DSRF Requirement for the Series 2023A Bonds.
"System" means the water treatment system owned and operated by the Authority, including the Project and all existing water treatment facilities, treatment plants, pipelines, pumping stations, reservoirs, storage facilities, appurtenances, and related property and improvements, whether now existing or hereafter acquired, used or useful in the provision of wholesale water treatment services to the Participating Districts.
"Tax Regulatory Agreement" means the Tax Regulatory Agreement and Certificate, dated October 15, 2023, executed by the Authority in connection with the issuance of the Series 2023A Bonds, setting forth the Authority's covenants and representations regarding compliance with the tax-exempt requirements of the IRC.
"Total Project Cost" means the total estimated cost of the Project, being Two Hundred Thirty-Seven Million Four Hundred Thousand Dollars ($237,400,000), including design, construction, equipment, commissioning, and contingency costs.
"Trustee" means Pacific Northwest Trust Company, National Association, a national banking association duly organized and existing under the laws of the United States, chartered by the Office of the Comptroller of the Currency, with its principal corporate trust office located at 1201 Third Avenue, Suite 1600, Seattle, Washington 98101, in its capacity as Trustee under this Agreement and the Indenture, and any successor trustee appointed in accordance with Section 7.05 hereof. The current Trust Officer is Alan M. Greer, Vice President, Corporate Trust Services.
"UCC" means the Uniform Commercial Code as in effect in the State of Washington from time to time.
"Wholesale Water Treatment Service Charges" means the rates, fees, charges, and assessments imposed by the Authority on the Participating Districts for the provision of wholesale water treatment services under the Wholesale Water Treatment Services Agreements, as such rates, fees, and charges may be adjusted from time to time by the Authority in accordance with the terms of such agreements and applicable law.
"Wholesale Water Treatment Services Agreements" means, collectively, the long-term wholesale water treatment services agreements entered into between the Authority and each of the fourteen (14) Participating Districts, as more particularly described in Exhibit C hereto, pursuant to which the Participating Districts are obligated to pay Wholesale Water Treatment Service Charges to the Authority in consideration of the Authority's provision of wholesale water treatment services.
Section 1.02 — Rules of Interpretation
Unless the context otherwise requires, the following rules of interpretation shall apply to this Agreement:
(a) All capitalized terms used but not defined in this Agreement shall have the meanings ascribed to such terms in the Indenture, unless the context clearly indicates otherwise.
(b) References in this Agreement to any statute, law, regulation, or ordinance shall include all amendments, supplements, successor provisions, and implementing regulations thereto, whether adopted before or after the date of this Agreement.
(c) References to "Sections," "Articles," "Exhibits," and "Schedules" are to the Sections, Articles, Exhibits, and Schedules of this Agreement, unless otherwise expressly stated.
(d) Words importing the singular shall include the plural, and vice versa, and words importing any gender shall include all genders.
(e) The words "herein," "hereof," "hereunder," "hereby," and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement.
(f) The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
(g) This Agreement shall be governed by, interpreted under, and construed in accordance with the laws of the State of Washington, without regard to conflicts of law principles.
(h) Headings and captions used in this Agreement are for convenience of reference only and shall not affect the interpretation or construction of any provision hereof.
(i) References to any document or agreement shall be deemed to include all amendments, supplements, restatements, and modifications thereto from time to time in effect.
Section 1.03 — Incorporation of Indenture Definitions
All terms defined in the Indenture and not separately defined in this Agreement shall have the meanings ascribed thereto in the Indenture. In the event of any conflict between a definition set forth in this Agreement and a definition set forth in the Indenture with respect to the same term, the definition set forth in this Agreement shall control for purposes of interpreting and construing this Agreement. For all other purposes, including the administration of the funds and accounts established under the Indenture, the definitions set forth in the Indenture shall control.
ARTICLE II — PLEDGE OF REVENUES
Section 2.01 — Pledge and Grant of Security Interest
(a) The Authority hereby irrevocably pledges, assigns, and grants to the Trustee, for the benefit of the holders of the Series 2023A Bonds and all Parity Obligations now or hereafter outstanding, a lien on and security interest in the Net Pledged Revenues. Such pledge, assignment, and grant of security interest is made to secure the payment of the principal of and interest on the Series 2023A Bonds and all other Parity Obligations, together with any premium payable upon redemption thereof, in accordance with the terms and provisions of this Agreement and the Indenture.
(b) The pledge made by this Section 2.01 is on a parity basis with the pledge securing all existing and future Parity Obligations. No series of Parity Obligations shall have a superior or prior claim on the Net Pledged Revenues over any other series of Parity Obligations. All Parity Obligations shall be secured equally and ratably by the pledge of Net Pledged Revenues without preference, priority, or distinction of any one Parity Obligation over any other.
(c) The pledge made by this Section 2.01 is made pursuant to and in reliance upon the authority granted to the Authority by the Act (Chapter 43.160A RCW), which authorizes the Authority to pledge revenues derived from the ownership and operation of the System as security for the payment of its revenue bonds and other obligations.
(d) The lien on Net Pledged Revenues created by this Agreement is a statutory lien under Washington State law. Pursuant to Chapter 43.160A RCW, such lien is valid and binding from the time the pledge is made and the Authority receives consideration for the Series 2023A Bonds. The Net Pledged Revenues and other property subject to such lien shall immediately be subject thereto, and the lien shall be valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the Authority, without the necessity of physical delivery of the Net Pledged Revenues or any other act. The lien does not require filing or recording of a financing statement under Article 9 of the UCC, or filing in any other public registry, to be perfected against third parties.
Section 2.02 — Components of Pledged Revenues
(a) The Net Pledged Revenues constituting the pledged collateral under this Agreement are derived from the following components of Gross Pledged Revenues:
(i) Wholesale Water Treatment Service Charges. All Wholesale Water Treatment Service Charges collected by the Authority from the fourteen (14) Participating Districts under the Wholesale Water Treatment Services Agreements, as such charges may be adjusted from time to time by the Authority. The Wholesale Water Treatment Service Charges constitute the principal source of revenue for the System and historically have represented approximately ninety-one percent (91%) of the Authority's Gross Pledged Revenues.
(ii) Connection Fees. All Connection Fees charged by the Authority for new connections to the System, including system development charges, capacity charges, and all other fees and assessments imposed on new connections.
(iii) Investment Earnings. All Investment Earnings on amounts held in funds and accounts pledged under the Indenture, including without limitation the Revenue Fund, the Bond Fund, the Debt-Service Reserve Fund, and the Project Fund.
(b) Notwithstanding the foregoing, the following items are expressly excluded from Gross Pledged Revenues and from the pledge created by this Agreement:
(i) Federal and state grants, including without limitation grants from the United States Environmental Protection Agency, the Washington State Department of Ecology, and any other federal or state agency, unless the Authority specifically elects in writing to include any such grant in Gross Pledged Revenues;
(ii) Proceeds of ad valorem property taxes, if any, levied by or on behalf of the Authority;
(iii) Insurance proceeds received by the Authority that do not constitute business interruption insurance proceeds; provided, however, that business interruption insurance proceeds shall constitute Gross Pledged Revenues to the extent they represent replacement of lost System revenues;
(iv) Amounts required to be rebated to the United States Treasury under IRC § 148 with respect to the Series 2023A Bonds or any other Parity Obligations, which amounts shall be deposited in the Rebate Fund and held exclusively for such purpose.
Section 2.03 — Parity Nature of Lien
(a) The lien on Net Pledged Revenues securing the Series 2023A Bonds shall be on a parity basis with the lien securing all other Parity Obligations outstanding as of the Closing Date. As of the Closing Date, the aggregate principal amount of Parity Obligations outstanding prior to the issuance of the Series 2023A Bonds is Three Billion One Hundred Twenty Million Dollars ($3,120,000,000). Following the issuance of the Series 2023A Bonds, the aggregate principal amount of all Parity Obligations outstanding is Three Billion Three Hundred Forty Million Dollars ($3,340,000,000). A description of the existing Parity Obligations is set forth in Exhibit B hereto.
(b) No Parity Obligation, whether heretofore or hereafter issued, shall have priority or preference over any other Parity Obligation with respect to the pledge of, lien on, or security interest in the Net Pledged Revenues. All Parity Obligations shall share ratably in the Net Pledged Revenues without distinction, preference, or priority of any one over any other.
(c) The Authority may issue Subordinate Obligations, secured by a lien on the Net Pledged Revenues that is expressly junior and subordinate to the lien securing the Parity Obligations, without compliance with the Additional Bonds Test set forth in Section 5.04 hereof, subject to the conditions set forth in Section 5.10 hereof.
Section 2.04 — Statutory Lien and Perfection
(a) Pursuant to Chapter 43.160A of the RCW, the pledge made by this Agreement creates a statutory lien that is automatically perfected upon the execution and delivery of this Agreement and the receipt by the Authority of consideration for the Series 2023A Bonds. No physical delivery of the Net Pledged Revenues or any other act is necessary to perfect such lien.
(b) The pledge and lien created by this Agreement are valid and binding against the Authority, the Participating Districts, and all third parties, including all persons and entities having claims of any kind against the Authority, whether in tort, contract, or otherwise, from and after the Closing Date. The Authority acknowledges that it is not required to file a financing statement under Article 9 of the UCC, or any other instrument or document, in any public office or registry to perfect the lien created hereby.
(c) Notwithstanding the foregoing, the Authority agrees to cooperate with the Trustee in taking any additional action that the Trustee may reasonably request to evidence or protect the pledge and lien created by this Agreement, including without limitation the execution of such additional instruments or documents as the Trustee may deem necessary or advisable.
Section 2.05 — Prior Pledges and Existing Obligations
(a) The Authority hereby acknowledges and confirms that, prior to the execution and delivery of this Agreement and the issuance of the Series 2023A Bonds, the Authority has previously pledged its Net Pledged Revenues to secure existing outstanding Parity Obligations in the aggregate principal amount of Three Billion One Hundred Twenty Million Dollars ($3,120,000,000), as more particularly described in Exhibit B hereto.
(b) The pledge of Net Pledged Revenues made by this Agreement in favor of the holders of the Series 2023A Bonds is on a parity with, and does not in any way subordinate or give priority to, the pledge of Net Pledged Revenues previously made in favor of the holders of such existing Parity Obligations. This Agreement creates no subordination or priority among any of the Parity Obligations; all Parity Obligations share ratably and on equal footing in the pledge of Net Pledged Revenues, without preference, priority, or distinction.
(c) The Authority represents and warrants that it has not created, and will not create or suffer to be created, any lien on the Net Pledged Revenues that is senior to or has priority over the parity lien securing the Parity Obligations.
ARTICLE III — FLOW OF FUNDS
Section 3.01 — Revenue Fund
(a) All Gross Pledged Revenues shall be deposited by the Authority, promptly upon receipt, into the Revenue Fund established and maintained by the Trustee pursuant to the Indenture. At the Authority's election, and subject to the terms of the Indenture, the Authority may maintain a revenue collection account (the "Revenue Collection Account") at a depository bank of the Authority's choosing, provided that all amounts deposited therein shall be transferred to the Revenue Fund held by the Trustee in accordance with the schedule and procedures set forth in the Indenture.
(b) The provisions governing the flow of funds from the Revenue Fund are set forth primarily in the Indenture. This Section 3.01 and the following Sections of this Article III are intended to provide a summary of the flow of funds for cross-reference purposes and to set forth the Authority's covenants with respect thereto. In the event of any conflict between the provisions of this Article III and the provisions of the Indenture with respect to the flow of funds, the provisions of the Indenture shall control.
(c) The Authority shall maintain accurate and complete records of all Gross Pledged Revenues received and deposited in the Revenue Fund or the Revenue Collection Account, and shall make such records available to the Trustee upon reasonable request.
Section 3.02 — Application of Revenue Fund
From the Revenue Fund, amounts shall be transferred and applied in the following order of priority, which priority shall be absolute and unconditional:
(a) First — Operation and Maintenance Expenses. On or before the fifteenth (15th) day of each month (or more frequently as the Authority may determine), there shall be transferred from the Revenue Fund to the O&M Fund an amount sufficient to pay the Operation and Maintenance Expenses of the System reasonably expected to be due and payable during such month and to maintain a reasonable working capital reserve for O&M Expenses. The Authority shall determine the amounts to be transferred to the O&M Fund based on its annual operating budget and cash flow projections, and shall provide the Trustee with a schedule of anticipated monthly transfers at the beginning of each Fiscal Year.
(b) Second — Bond Fund (Parity Debt Service). After the transfer to the O&M Fund described in paragraph (a) above, there shall be transferred from the Revenue Fund to the Bond Fund, on or before each interest payment date and principal payment date, amounts sufficient to pay the scheduled debt service (principal and interest) on all Parity Obligations as and when due. As of the Closing Date, the Annual Aggregate Parity Debt Service on all Parity Obligations is approximately Two Hundred Seventy-Eight Million Four Hundred Thousand Dollars ($278,400,000). Transfers to the Bond Fund shall be made in equal monthly installments or in such other amounts and at such other times as may be specified in the Indenture, so that sufficient funds are on deposit in the Bond Fund to pay debt service as it becomes due.
(c) Third — Debt-Service Reserve Fund. After the transfer to the Bond Fund described in paragraph (b) above, there shall be transferred from the Revenue Fund to the Debt-Service Reserve Fund such amounts as may be necessary to restore any deficiency in the Debt-Service Reserve Fund to the DSRF Requirement. As of the Closing Date, the DSRF Requirement for the Series 2023A Bonds is satisfied by the Surety Policy, and accordingly, no cash deposit is currently required with respect to the Series 2023A Bonds. If the Surety Policy is drawn upon or if the DSRF Requirement is otherwise not satisfied, the Authority shall replenish the Debt-Service Reserve Fund or replace the Surety Policy as provided in Section 3.04 hereof.
(d) Fourth — Subordinate Obligation Fund. After the transfers described in paragraphs (a) through (c) above, there shall be transferred from the Revenue Fund to any fund or account established for the payment of debt service on Subordinate Obligations amounts sufficient to pay the scheduled debt service on all Subordinate Obligations as and when due.
(e) Fifth — Rebate Fund. After the transfers described in paragraphs (a) through (d) above, there shall be transferred from the Revenue Fund to the Rebate Fund such amounts as may be required to satisfy the Authority's arbitrage rebate obligations under IRC § 148 with respect to the Series 2023A Bonds and any other tax-exempt Parity Obligations or Subordinate Obligations.
(f) Sixth — General Fund. After the transfers described in paragraphs (a) through (e) above have been made in full, any remaining amounts in the Revenue Fund may be transferred to the General Fund of the Authority and applied to any lawful purpose of the Authority, free and clear of the pledge and lien created by this Agreement and the Indenture.
Section 3.03 — Bond Fund
(a) Amounts deposited in the Bond Fund shall be held by the Trustee and applied solely to the payment of scheduled principal of and interest on Parity Obligations as and when due. The Trustee shall not apply any amounts on deposit in the Bond Fund for any other purpose.
(b) Interest on the Series 2023A Bonds is payable semi-annually on April 1 and October 1 of each year, commencing on April 1, 2024. The first interest payment, payable on April 1, 2024, shall cover the period from the Closing Date (October 24, 2023) through March 31, 2024. First-year annual interest on the Series 2023A Bonds, calculated at the rate of 3.25% per annum on the outstanding principal amount of $220,000,000, is approximately Seven Million One Hundred Fifty Thousand Dollars ($7,150,000).
(c) The Series 2023A Bonds are structured on a level debt service basis over a thirty (30)-year term, with approximate annual debt service (combined principal and interest) of Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000) per Bond Year.
(d) The Trustee shall maintain a separate sub-account within the Bond Fund for the Series 2023A Bonds and for each other series of Parity Obligations as may be required by the Indenture or any supplemental indenture. Notwithstanding the maintenance of such separate sub-accounts, all amounts in the Bond Fund are pledged for the benefit of all holders of Parity Obligations on a parity basis.
Section 3.04 — Debt-Service Reserve Fund
(a) The DSRF Requirement for the Series 2023A Bonds is Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000), being the least of the following three measures:
(i) Maximum Annual Debt Service on the Series 2023A Bonds: $11,610,000;
(ii) One hundred twenty-five percent (125%) of the average annual debt service on the Series 2023A Bonds; and
(iii) Ten percent (10%) of the original par amount of the Series 2023A Bonds: $22,000,000.
The applicable DSRF Requirement, based on the foregoing calculation, is $11,610,000, as set forth in detail in Schedule 1 hereto.
(b) The DSRF Requirement for the Series 2023A Bonds is satisfied by the Surety Policy (Policy No. OG-2023-MUN-4718) issued by Olympia Guaranty Insurance Corp. in the surety amount of Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000). The Surety Policy is maintained in lieu of a cash deposit in the Debt-Service Reserve Fund for the Series 2023A Bonds.
(c) The annual premium payable by the Authority to Olympia Guaranty Insurance Corp. for the Surety Policy is Twenty-Three Thousand Two Hundred Twenty Dollars ($23,220), calculated at the rate of 0.20% of the surety amount, payable by the Authority from legally available funds. Such premium shall be payable annually on each anniversary of the Closing Date during the term of the Surety Policy.
(d) The mechanics for drawing on the Surety Policy, including the conditions precedent to a draw, the notice requirements, and the repayment obligations of the Authority following a draw, are governed by the Debt-Service Reserve Fund Surety Bond Agreement dated as of October 24, 2023, among the Authority, the Trustee, and Olympia Guaranty Insurance Corp.
(e) In the event the Surety Policy is drawn upon, the Authority shall, within twelve (12) months following the date of such draw, either (i) replenish the Debt-Service Reserve Fund with cash or Permitted Investments in an amount equal to the amount drawn under the Surety Policy, or (ii) obtain and deliver to the Trustee a replacement surety bond, insurance policy, or letter of credit meeting the requirements of the Indenture in an amount sufficient to restore the DSRF to the full DSRF Requirement. Failure of the Authority to satisfy this replenishment obligation within such twelve-month period shall constitute an Event of Default under Section 6.01(b) hereof, subject to the notice and cure provisions therein.
Section 3.05 — Project Fund
(a) Net Bond proceeds in the amount of Two Hundred Fifteen Million Four Hundred Ninety Thousand Dollars ($215,490,000) have been deposited in the Project Fund established under the Indenture, together with a CSIA equity contribution of Seventeen Million Four Hundred Thousand Dollars ($17,400,000), for a total of Two Hundred Thirty-Two Million Eight Hundred Ninety Thousand Dollars ($232,890,000) available for the payment of Project costs.
(b) The Total Project Cost is estimated at Two Hundred Thirty-Seven Million Four Hundred Thousand Dollars ($237,400,000). The balance of Project costs not funded from the Project Fund shall be funded from the Authority's general funds, additional equity contributions, or other legally available sources.
(c) Disbursements from the Project Fund shall be made by the Trustee (or by PNTC in its capacity as Escrow Agent) upon receipt of a written requisition from an Authorized Officer of the Authority, accompanied by such supporting documentation as the Trustee may reasonably require, in accordance with the terms of the Escrow Deposit Agreement dated as of October 24, 2023, between the Authority and PNTC, as Escrow Agent. Each requisition shall certify that the amounts requested are for costs properly allocable to the Project and that no Event of Default exists under this Agreement or the Indenture.
(d) In addition to the amounts deposited in the Project Fund, Four Million Five Hundred Ten Thousand Dollars ($4,510,000) from Bond proceeds has been deposited in the Capitalized Interest Fund established under the Indenture, which amount shall be applied to the payment of interest on the Series 2023A Bonds during the construction period.
(e) Upon completion of the Project, any amounts remaining in the Project Fund, after payment of all Project costs, shall be transferred to the Bond Fund and applied to the payment of debt service on the Series 2023A Bonds, or applied in such other manner as may be permitted by the Indenture and applicable tax law.
Section 3.06 — Rebate Fund
Amounts required to be rebated to the United States Treasury under IRC § 148 with respect to the Series 2023A Bonds or any other tax-exempt obligations of the Authority shall be deposited in the Rebate Fund established under the Indenture. Amounts on deposit in the Rebate Fund are excluded from Gross Pledged Revenues and from the pledge created by this Agreement. The Authority shall cause rebate calculations to be performed at such times and in such manner as required by the IRC and the Tax Regulatory Agreement, and shall deposit in the Rebate Fund such amounts as are determined to be owed. Rebate payments shall be made to the United States Treasury not later than sixty (60) days after each fifth anniversary of the Closing Date of the Series 2023A Bonds and not later than sixty (60) days after the final retirement of the Series 2023A Bonds.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES
Section 4.01 — Representations and Warranties of the Authority
The Authority hereby makes the following representations and warranties to the Trustee and to the holders of the Parity Obligations as of the Closing Date:
(a) Organization and Existence. The Authority is a governmental instrumentality and public body corporate of the State of Washington, duly created and validly existing under and pursuant to Chapter 43.160A of the Revised Code of Washington. The Authority has full legal right, power, and authority to own, operate, and maintain the System, to fix and collect rates, fees, and charges for water treatment services, and to issue revenue bonds and pledge revenues derived from the System.
(b) Authority and Authorization. The Authority has full legal right, power, and authority to execute and deliver this Agreement, to pledge the Net Pledged Revenues as provided herein, and to perform each and every obligation of the Authority hereunder, pursuant to the Act and Resolution No. 2023-014 adopted by the Board on May 9, 2023. All actions required to be taken by the Authority's Board, officers, and employees for the authorization, execution, and delivery of this Agreement and the Bonds have been duly and lawfully taken.
(c) No Conflicts. The execution, delivery, and performance of this Agreement by the Authority have been duly authorized by all necessary action of the Authority, including Resolution No. 2023-014, and do not and will not (i) conflict with or result in a breach of any provision of the Act or the Authority's enabling legislation, (ii) conflict with or result in a breach of, or constitute a default under, any existing agreement, indenture, mortgage, lease, resolution, or other instrument to which the Authority is a party or by which the Authority or any of its properties is bound, or (iii) violate any applicable law, rule, regulation, judgment, order, or decree of any governmental authority having jurisdiction over the Authority.
(d) Enforceability. This Agreement constitutes a valid, legally binding, and enforceable obligation of the Authority, enforceable against the Authority in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting the enforcement of creditors' rights generally, (ii) equitable principles, whether applied in a court of law or a court of equity, and (iii) the exercise of sovereign or governmental powers.
(e) Governmental Approvals. All governmental approvals, consents, authorizations, licenses, and permits necessary for the Authority's execution, delivery, and performance of this Agreement and the issuance of the Series 2023A Bonds have been duly obtained and are in full force and effect. Without limiting the generality of the foregoing, the Authority has obtained (i) the SEPA Determination of Non-Significance issued on September 12, 2022, by the Washington State Department of Ecology, and (ii) the modification to NPDES Permit No. WA-004837-2, approved on January 6, 2023, by the Washington State Department of Ecology, each of which is required for the construction and operation of the Project.
(f) Wholesale Water Treatment Services Agreements. The Wholesale Water Treatment Services Agreements with the fourteen (14) Participating Districts are in full force and effect as of the Closing Date and have not been amended, modified, terminated, or assigned (other than as contemplated by the terms thereof). Each Participating District is in compliance with its payment obligations under the applicable Wholesale Water Treatment Services Agreement, and no Participating District has given notice of termination, default, or dispute with respect to its Wholesale Water Treatment Services Agreement.
(g) Absence of Litigation. To the best knowledge of the Authority, after due inquiry, no litigation, proceeding, investigation, or action is pending or, to the knowledge of the Authority, threatened against or affecting the Authority before or by any court, arbitrator, administrative agency, or other governmental authority that would (i) materially adversely affect the Authority's ability to perform its obligations under this Agreement or the Indenture, (ii) challenge the validity of this Agreement, the Indenture, or the Series 2023A Bonds, (iii) challenge the validity or enforceability of the pledge of Net Pledged Revenues made hereby, or (iv) materially adversely affect the financial condition, operations, or properties of the Authority or the System.
(h) Outstanding Parity Obligations. As of the Closing Date, the Authority's existing outstanding Parity Obligations total Three Billion One Hundred Twenty Million Dollars ($3,120,000,000) in aggregate principal amount. Together with the Series 2023A Bonds, the total aggregate principal amount of all Parity Obligations outstanding as of the Closing Date is Three Billion Three Hundred Forty Million Dollars ($3,340,000,000). A description of all outstanding Parity Obligations is set forth in Exhibit B hereto.
(i) Financial Statements. The Authority's audited financial statements for the Fiscal Year ended June 30, 2022, have been audited by Hargrove & Associates CPAs, PLLC (engagement partner: Victoria L. Fong, CPA), in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States, and such financial statements fairly present, in all material respects, the financial position of the Authority as of June 30, 2022, and the results of its operations and changes in its financial position for the Fiscal Year then ended, in conformity with generally accepted accounting principles as applied to governmental entities. Since June 30, 2022, there has been no material adverse change in the financial position, results of operations, or prospects of the Authority.
(j) Revenue and Expense Data. For the Fiscal Year ended June 30, 2022, the Authority's Gross Pledged Revenues were Four Hundred Eighty-Nine Million Three Hundred Thousand Dollars ($489,300,000); O&M Expenses were Seventy-Six Million Seven Hundred Thousand Dollars ($76,700,000); and Net Pledged Revenues were Four Hundred Twelve Million Six Hundred Thousand Dollars ($412,600,000). The foregoing figures are derived from the Authority's audited financial statements for such Fiscal Year.
(k) No Existing Defaults. The Authority is not in default under any existing Parity Obligation, any prior revenue pledge agreement, the Indenture, or any other material agreement, instrument, or obligation to which the Authority is a party. No event has occurred and is continuing that, with the giving of notice or the passage of time or both, would constitute an Event of Default under this Agreement, the Indenture, or any existing Parity Obligation.
Section 4.02 — Representations and Warranties of the Trustee
The Trustee hereby makes the following representations and warranties to the Authority as of the Closing Date:
(a) Organization and Existence. PNTC is a national banking association duly organized and validly existing under the laws of the United States of America, chartered by the Office of the Comptroller of the Currency, and authorized to exercise corporate trust powers. PNTC's principal corporate trust office is located at 1201 Third Avenue, Suite 1600, Seattle, Washington 98101.
(b) Power and Authority. PNTC has full corporate power and legal authority to accept appointment as Trustee under this Agreement and the Indenture and to perform all of the duties and obligations of the Trustee as set forth herein and therein. PNTC has the requisite corporate trust powers and experience to serve as trustee for revenue bond transactions of the type and magnitude contemplated by this Agreement and the Indenture.
(c) Due Authorization. The execution, delivery, and performance by PNTC of this Agreement and the Indenture have been duly authorized by all necessary corporate action on the part of PNTC, and no further action, approval, or consent is required for PNTC to execute, deliver, and perform its obligations under this Agreement and the Indenture. This Agreement has been duly executed and delivered by PNTC and constitutes the valid and binding obligation of PNTC, enforceable against PNTC in accordance with its terms.
ARTICLE V — COVENANTS OF THE AUTHORITY
Section 5.01 — Rate Covenant
(a) The Authority hereby covenants and agrees that it will at all times fix, charge, and collect Wholesale Water Treatment Service Charges, Connection Fees, and other rates, fees, and charges for water treatment services from the Participating Districts and all other users of the System at levels sufficient to produce Net Pledged Revenues in each Fiscal Year equal to at least one and forty-hundredths times (1.40x) the Annual Aggregate Parity Debt Service for such Fiscal Year (the "Rate Covenant"). The Authority shall review and, as necessary, adjust its rate schedules at least annually to ensure ongoing compliance with the Rate Covenant.
(b) Pro Forma Compliance Demonstration. As of the Fiscal Year ended June 30, 2022, the Authority's compliance with the Rate Covenant is demonstrated as follows:
The debt service coverage ratio of 1.48x for Fiscal Year 2022 exceeds the minimum required coverage ratio of 1.40x, thereby satisfying the Rate Covenant.
(c) Cure Period. If at the end of any Fiscal Year the Authority fails to satisfy the Rate Covenant (i.e., Net Pledged Revenues for such Fiscal Year are less than 1.40 times Annual Aggregate Parity Debt Service for such Fiscal Year), such failure shall not constitute an Event of Default under this Agreement if the Authority, within ninety (90) days after such failure becomes known to the Authority or is brought to the Authority's attention by the Trustee, engages an independent consultant of recognized standing and experience in the field of municipal utility rate setting to review the Authority's rate structure, financial condition, and projected revenues, and to recommend such adjustments to the Authority's rates, fees, and charges as may be necessary to achieve compliance with the Rate Covenant in the then-current and subsequent Fiscal Years. The Authority shall implement the rate adjustments recommended by such independent consultant within one hundred eighty (180) days after receipt of the consultant's report. If the Authority engages such consultant and diligently implements the recommended rate adjustments within the time periods specified herein, the failure to satisfy the Rate Covenant in the prior Fiscal Year shall not constitute an Event of Default; provided, however, that such cure shall be available only to the extent the Authority is acting in good faith and with reasonable diligence.
(d) Annual Certification. The Authority shall furnish to the Trustee, within one hundred eighty (180) days after the end of each Fiscal Year, a certificate of the Chief Financial Officer of the Authority (or any successor officer performing such functions) demonstrating the Authority's compliance with the Rate Covenant for the completed Fiscal Year, in substantially the form set forth in Exhibit D hereto (the "CFO's Annual Rate Covenant Compliance Certificate"). Such certificate shall set forth the calculation of Gross Pledged Revenues, O&M Expenses, Net Pledged Revenues, Annual Aggregate Parity Debt Service, and the resulting debt service coverage ratio for such Fiscal Year.
Section 5.02 — Covenant to Maintain and Operate the System
(a) The Authority covenants and agrees that it will, so long as any Parity Obligations remain outstanding, maintain the System, including the Project and all existing treatment facilities, in good working order, condition, and repair, and will operate the System in an efficient, economical, and prudent manner consistent with sound utility practice.
(b) The Authority shall comply with all applicable federal, state, and local laws, rules, regulations, permits, and orders relating to the ownership, operation, and maintenance of the System, including without limitation (i) NPDES Permit No. WA-004837-2, as modified on January 6, 2023, and any subsequent modifications, renewals, or replacements thereof, (ii) all requirements of the State Environmental Policy Act (Chapter 43.21C RCW) and the SEPA Determination issued September 12, 2022, (iii) all applicable requirements of the federal Clean Water Act and the Safe Drinking Water Act, and (iv) all rules and regulations of the Washington State Department of Ecology and the Washington State Department of Health applicable to the System.
(c) The Authority shall make all necessary capital improvements, replacements, and renewals to the System to keep the System in good operating condition and to comply with all applicable regulatory requirements. The costs of such capital improvements, replacements, and renewals shall be funded from available revenues, bond proceeds, reserves, or other legally available sources.
Section 5.03 — Covenant Against Impairment of Pledge
(a) The Authority covenants and agrees that it shall not take any action, or permit any action to be taken, that would impair the pledge of Net Pledged Revenues made by this Agreement, or that would materially adversely affect the rights of the holders of Parity Obligations with respect to the security provided by such pledge.
(b) Without limiting the generality of the foregoing, the Authority shall not sell, lease, transfer, convey, or otherwise dispose of all or a material portion of the System or the assets comprising the System, except that the Authority may (i) dispose of property, equipment, or facilities that are no longer useful or necessary for the operation of the System, provided that the proceeds of any such disposition are deposited in the Revenue Fund, and (ii) enter into contracts or agreements for the operation or management of portions of the System, provided that the Authority retains ownership of the System and control over the rates, fees, and charges for water treatment services.
(c) The Authority shall not voluntarily create or suffer to exist any lien, charge, or encumbrance on the Net Pledged Revenues or on the assets of the System that is senior to or on a parity with the lien created by this Agreement, except for the parity lien securing existing and future Parity Obligations issued in compliance with the Additional Bonds Test set forth in Section 5.04.
Section 5.04 — Additional Bonds Test
(a) The Authority may issue Additional Bonds secured by a parity lien on the Net Pledged Revenues on an equal and ratable basis with the Series 2023A Bonds and all other Parity Obligations then outstanding, but only if, at the time of issuance of such Additional Bonds, each of the following conditions is satisfied:
(i) No Default. The Authority is not in default under this Agreement, the Indenture, or any existing Parity Obligation, and no event has occurred and is continuing that, with the giving of notice or the passage of time or both, would constitute an Event of Default hereunder or under the Indenture or any existing Parity Obligation.
(ii) Debt Service Coverage Test. Net Pledged Revenues for the most recently completed Fiscal Year for which audited financial statements are available (the "Historical Test"), or, at the Authority's election, estimated Net Pledged Revenues for the first full Fiscal Year following completion of the project or purpose to be financed by the Additional Bonds (the "Projected Test"), are equal

REVENUE PLEDGE AGREEMENT

CASCADIA STATE INFRASTRUCTURE AUTHORITY

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