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/ bonds shall be set aside in the B ond Service Fund in cash at least one m onth prior to the date said next m aturity or instalm ent o f principal or interest becom es due. A n y am ount required to b e set aside, transferred to and placed in the B ond Service Fund m ay be prepaid in w hole or in part b y being earlier set aside, transferred to and placed in the Bond Service Fund and in that event the m onthly transfer w hich has been so prepaid need not be made at the tim e appointed therefor. In any event, at least one m onth prior to the due date o f any m aturity or installment o f principal of or interest on the bonds all sums required for the paym ent thereof must be in such B ond Service Fund in cash. T h e Board o f D irectors o f said D istrict directs that such sums be set aside from the Revenue Fund through transfers or paym ent m ade into the B ond Service Fund in such am ounts as may be necessary to com ply w ith the foregoin g provisions o f this section. D uring the period o f construction of any o f the w orks referred to in the bond proposal set forth in the recitals hereof and for six m onths thereafter, if, for any reason, the m oneys in the B ond Service Fund plus any sum available in the R eserve Fund for transfer thereto are insufficient to pay an instalm ent of interest when the same becom es due, there shall be set aside from the C onstruction Fund and transferred to and placed in the B ond Service Fund such am ount as will, with any sum then in such B ond Service Fund, plus the am ount available therefor in the Reserve Fund, be sufficient to pay such interest as it becom es due. M oneys set aside and placed in said Bond Service Fund shall remain therein until from tim e to tim e expended for the paym ent o f principal and interest and shall not be used for any other purpose w hatsoever except that any such m oneys so set aside and placed in the Bond Service Fund w hich at any tim e m ay be in excess of the am ount w hich at that tim e is required by the term s o f this section to be in the B ond Service Fund in cash m ay be tem porarily invested as hereinafter provided, but such investm ent shall not affect the obligation o f the D istrict to cause the full am ount required b y the terms o f this section to be available in said Bond Service Fund in cash at the tim e required b y the term s of this section. A ll m oney rem aining in said Bond Service Fund in excess o f the am ount required to accom plish the purpose o f its establishment shall be transferred to the R evenue Fund. If at the tim e any bond or interest coupon is presented for paym ent the m oneys in the Bond Service Fund are insufficient to make such paym ent, m oneys sufficient for such paym ent shall be set aside from the Reserve Fund and transferred to and placed in said Bond Service Fund. Section 19. Reserve Fund. N ot later than the first day o f the fourth m onth next succeeding that m onth in w hich the D istrict shall acquire the water facilities of the Las V egas Land and W ater Com pany and on the first day of each m onth thereafter, there shall be set aside from the R evenue Fund and transferred to and placed in the R eserve Fund a sum at least equal to l/3 6 th o f the maxim um annual debt service. A s used in this resolution “ m axim um annual debt service” shall mean the m axim um am ount required to be paid out of the Bond Service Fund in any year after the date o f the bonds (except the year w hich ends M arch 1, 1990) on account o f interest to accrue and principal to becom e payable on the bonds. Said m onthly transfers shall continue until such tim e as there has been paid into said R eserve Fund a sum at least equal to the m axim um annual debt service, and thereafter there shall be maintained in said R eserve Fund a sum at least equal to said m axim um annual debt service. N o paym ent need be made into the R eserve Fund so lon g as there shall be in said fund a sum at least equal to said m axim um annual debt service. W henever m oneys are withdraw n from the Reserve Fund to pay principal and interest of bonds, the am ount o f the Reserve Fund shall be restored to the am ount required in this section b y m onthly transfers from the R evenue Fund made on the first day o f each calendar m onth thereafter, each such transfer (except the last) to be not less than l/3 6 th o f the maxim um annual debt service. E xcept as hereinafter in this paragraph provided, m oneys in the R eserve Fund shall be used solely for the purpose o f paying the principal o f and interest on the bonds in the event that the m oneys in the B ond Service Fund are insufficient therefor, and for that purpose m ay be withdraw n and transferred to the Bond Service Fund. W henever the aggregate m oneys available in the B ond Service Fund, the R edem ption Fund, and the Reserve Fund are sufficient to call and redeem, prior to maturity, all o f the outstanding bonds o f this issue, then the m oneys in the B ond Service Fund and the Reserve Fund m ay be transferred to the Redem ption Fund and all such outstanding bonds may be purchased prior to m aturity or called and redeemed prior to 7 maturity. W henever the aggregate amounts of m oney available in the Bond Service Fund and the R eserve Fund shall be sufficient to pay the principal and interest thereafter com ing due and payable on all outstanding bonds of this issue, all or any part o f the m oneys in the Reserve Fund m ay be transferred to the B ond Service Fund and used for the purpose o f paying principal and interest upon such outstanding bonds. Section 20. Additional Fund Uses. So lon g as all principal and interest o f the bonds are paid in accordance w ith the terms hereof, and all paym ents required to be made into the Bond Service Fund, Redem ption Fund and R eserve Fund have been made, and all other covenants of the D istrict contained herein have been duly perform ed, any m oneys in the R evenue Fund may be used for any purpose o f the D istrict n ow or hereafter authorized by law, including but not lim ited to, transfers to the B ond Service Fund or R eserve Fund for prepaym ent o f sums required to be placed therein, transfers to the R edem ption Fund for the purchase or redem ption of bonds prior to maturity, the acquisition and construction o f extensions, additions, im provem ents, renewals and replacements (other than ordinary maintenance and repairs) to the w orks and properties of the District. Section 21. Warranty. Las V egas V alley W ater D istrict shall preserve and protect the security o f the bonds and the rights o f the bondholders and warrant and defend their rights against all claims and demands of all persons. In order to fully preserve and protect the priority and security o f the bonds the D istrict shall pay and discharge all lawful claims for labor, materials and supplies which, if unpaid, m ay becom e a lien or charge upon the revenues prior to or superior to the lien o f the bonds or impair the security o f the bonds. Section 22. Covenants. So long as any o f the bonds issued hereunder are outstanding and unpaid, or so lon g as provision for the full paym ent and discharge thereof at m aturity or upon redem ption prior to m aturity through the setting apart in the Bond Service Fund or in the Redem ption Fund or in a special trust fund to insure the paym ent or redem ption thereof (as the case m ay be) o f m oney sufficient for that purpose has not been made, the D istrict covenants with the bondholders as fo llo w s : Covenant 1. A s soon as funds are available therefor, the D istrict will com m ence the acquisition and construction o f revenue producing w orks and properties and continue the same to com pletion w ith all practical dispatch and in an econom ical manner. Covenant 2. T h e D istrict shall at all times operate its w orks and properties in a sound and econom ical manner and shall maintain, preserve and keep the same, with appurtenances and every part and parcel thereof, properly or cause the same to be so maintained,' preserved and kept, in g ood repair, w orking order and condition, and w ill from tim e to tim e make, or cause to be made, all necessary and proper repairs, replacements and renewals so that at all times the operation of the w aterw orks may be properly and advantageously conducted. Covenant 3. T h e w orks and properties o f the D istrict shall not be sold or leased or other­w ise disposed o f as a whole, or substantially as a whole, unless such sale, lease or other disposition be so arranged as to provide for a continuance o f paym ents into the Sinking Fund at least sufficient in am ount to provide the sums required for such fund under the terms of this resolution, and unless sold or leased in such manner the D istrict shall operate its w orks and properties continuously. Covenant 4. T h e D istrict shall at all times maintain w ith responsible insurers all such insurance as is custom arily maintained with respect to w orks and properties of like character against loss o f or dam age to such w orks or properties and against public or other liability to the extent reasonably necessary to protect the interest o f the D istrict and the bondholders. If any useful part o f the w orks and properties shall be dam aged or destroyed, the D istrict shall repair or replace the dam aged works or properties so as to restore the same to use. T he proceeds o f any insurance policies covering any such loss or damage shall be payable to the District, and shall be applied to the D istrict’s reasonable and necessary reconstruction costs and, to the extent not so applied, shall be paid into the Revenue Fund and used in the same manner as other m oneys in said fund. Covenant 5. T h e D istrict will keep proper books of record and account, in accordance with sound accounting practice, in w hich com plete and correct entries shall be made of its trans­actions relating to its w orks and properties and the revenues received therefrom , which, together with all other books and papers and properties o f the D istrict shall at all tim es be sub­ject to the reasonable inspection o f the holder or holders of not less than five per cent (5% ) in 8