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agreement or other instrument to which the Authority is now a party or by which it or any of its properties or assets is bound, or be in conflict with, result in a breach of or constitute a default (with due notice or the passage of time or both) under any such indenture, agreement or other instrument, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority. (e) The interest components of Tax - Exempt Installment Payment Obligations will not be includable in the gross income of the owners of such Obligations for federal income tax purposes. ARTICLE III ACQUISITION AND CONSTRUCTION OF PROJECT SECTION 3.01. Acquisition and Construction of Project; Components. The Authority agrees to apply proceeds of its Obligations in accordance with Section 5.02 of the Indenture, and in connection therewith, the Authority hereby agrees to cause the Project or any Component thereof to be constructed, acquired and installed by the City, as agent of the Authority. The City shall enter into contracts and provide for, as agent of the Authority, the complete construction, acquisition and installation of the Project or any Component thereof as may be necessary. The City hereby agrees that it will cause the construction, acquisition and installation of the Project to be diligently performed. It is hereby expressly understood and agreed that, except to the extent of proceeds of Authority Obligations which are deposited in an Acquisition Fund, the Authority shall be under no liability of any kind or character whatsoever for the payment of any cost of the Project or any Components. In the event the proceeds of Authority Obligations deposited in an Acquisition Fund are insufficient to complete the construction, acquisition and installation of the Project or any Components, the City shall cause to be deposited in such Acquisition Fund (or shall otherwise appropriate and encumber) from and to the extent of available amounts on deposit in the Water Revenue Fund (or other lawfully available honeys) an amount equal to that necessary to complete the construction, acquisition and installation of the Project or such Components. The Authority will not undertake to cause any component of the Project to be constructed, acquired or installed unless and until the City and the Authority have entered into a Supplement specifying the components of the Project to be installed or refinanced, the date of completion, the purchase price to be paid by the City hereunder for that component of the Project, and the Installment Payments or the method of calculating Installment Payments. SECTION 3.02. Chances to the Proiect. (a) From time to time and at any time, the City may modify or amend the description of the Project, to eliminate any part thereof and/or to substitute another Project or Projects, all without obtaining any consent, by filing an amended Exhibit A with the Authority and the Trustee; provided however, that no such amendment shall substitute a Project or Projects which are not to be owned by the City or shall in any way impair the obligations of the City payable from the Water Revenue Fund and contained in any Supplement executed and delivered prior to any such amendment. 55394.00011 \8819608.3 14