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R-85-701 - 3/28/1985ATTEST: NNE LAND, City Secretary RESOLUTION NO 90A4? AK WHEREAS, the City Council has for the past several years promoted the concept of regionalization of wastewater treatment services, and WHEREAS, the Brushy Creek Water Control and Improvement District #1 (WCID) has sought and received from the Texas Water Development Board designation as the regional provider for wastewater treatment services, and WHEREAS a contract has been prepared whereby the City of Round Rock and other customers purchase on a wholesale basis wastewater treatment services from the WCID, and WHEREAS the Council wishes to enter into the agreement with the WCID, Now Therefore, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS That the Mayor is hereby authorized and directed to execute on behalf of the City a contract for regional wastewater treatment services with the WCID, a copy of said contract being attached hereto and incorporated herein for all purposes. RESOLVED this 28th day of March, 1985. MIKE ROBINSON, Mayor City of Round Rock WASTEWATER DISPOSAL CONTRACT BETWEEN BRUSHY CREEK WATER CONTROL AND IMPROVEMENT DISTRICT NO. 1 AND THE CITY OF ROUND ROCK, TEXAS This Agreement is entered into between Brushy Creek Water Control and Improvement District No. 1 of Williamson and Milam Counties and the City of Round Rock. RECITALS WHEREAS, the District was created by order of the State of Texas Board of Water Engineers (presently the Texas Department of Water Resources) by order dated November 1, 1956, which creation was confirmed by an election held within the District on January 8, 1957, and was validated by Acts, 1957, 55th Legislature, Regular Session, Chapter 341, Page 807 as amended by Acts, 1957, 55th Legislature, Second Called Session, Chapter 10, Page 166; WHEREAS, the District's boundaries include all of the Brushy Creek Watershed, an area in Williamson and Milam Counties, Texas; WHEREAS, the District is authorized to provide Waste- water collection and treatment services to lands within the District and in the vicinity of the District; WHEREAS, there is a need to establish in the upper Brushy Creek Watershed, generally in the area outlined in the Engineering Report, the System for the purpose of providing facilities to adequately receive, transport, treat and dispose of Wastewater in such area; WHEREAS, the Contracting Party presently owns, operates and maintains a Wastewater collection system to collect Wastewater from the areas served by the Contracting Party; WHEREAS, the Contracting Party desires to discharge Wastewater from its Wastewater collection system into the District's System in order to achieve efficiencies of cost and operation and to protect and preserve the environment of the area served by the Contracting Party and the District; WHEREAS, the District is willing to acquire, construct and expand the System to receive Wastewater from the Con- tracting Party's Wastewater collection system and to treat and dispose of such Wastewater; WHEREAS, the District and the Contracting Party are authorized to make this Agreement under the provisions of Chapter 30, Texas Water Code, and Article 1109i -1 and Article 4413(32c), Vernon's Annotated Texas Civil Statutes; and WHEREAS, the parties hereto recognize: (a) That the District will use the payments to be received under this and similar contracts for the payment of the expenses of acquiring, constructing, financing and operating the System; (b) That contracts similar to this Agreement will be executed between the District and the Other Custom- ers and may, in the future, be executed with Additional Customers; (c) That the District plans to secure cash contributions and /or to issue and sell its Bonds to raise funds to finance the acquisition and construction of the System; (d) That the District is preparing to issue and sell its Bonds to provide a portion of the funds to enable it to acquire and construct the System; (e) That the District will issue Bonds from time to time in the future or receive additional cash contributions from Customers and /or Additional Cus- tomers to further expand, extend, enlarge, repair and improve the System; and (f) That the Contracting Party and the District are subject to all valid rules, regulations and re- quirements of the Texas Department of Water Resources, the Environmental Protection Agency and such State, federal and local laws, rules and regulations as now exist or may be enacted during the term of this Agree- ment; NOW, THEREFORE, the Contracting Party and the District do hereby contract and agree as follows: ARTICLE I DEFINITIONS Section 1.01. DEFINITION OF TERMS. Terms and expres- sions as used in this Agreement, unless the context clearly shows otherwise, shall have the following meanings: (a) "Additional Customer" means any party not defined as a Customer with whom District makes a contract for receiving, transporting, treating and disposing of Wastewater through the System. Additional Customers shall be designated as either Category A Additional Customers or Category B Additional Customers under the same criteria as used for determining Catego- ry A Customers and Category B Customers. (b) "Agreement" means this agreement. (c) "Annual Debt Service Requirement" means the principal of and redemption premium, if any, and the interest on Bonds, if any, issued by the District on behalf of a Category B Customer or Additional Category B Customer as such principal, redemption premium, if any, and interest become due during any Fiscal Year, less interest to be paid out of Bond proceeds as permitted by the Bond Resolution and less any other funds which are dedicated by the District for payment of principal, redemption premium and interest on the Bonds during such Fiscal Year; plus the amounts, if any, required to be deposited to restore any deficiency in the Debt Service Reserve Fund in accordance with the provisions of the Bond Resolution; and plus any amounts required to pay charges, fees or expenses of any trustee, paying agent or registrar for the Bonds. (d) "Annual Operation and Maintenance Expense Requirement" means the amount paid or payable for all Operation and Maintenance Expenses during any Fiscal - 2 - Year together with any amount required or necessary to replenish and maintain the Repair and Replacement Reserve Fund and the Operation and Maintenance Reserve Fund for the System. (e) "Bond" means any bond, note or other evidence of indebtedness (including, without limitation, any Improvement Bonds) to be issued by the District pursu- ant to this Agreement to provide temporary, interim or permanent financing for the acquisition, construction, expansion, extension, enlargement, improvement or repair of the System, whether one or more issues, or any bond issued to refund the same, or issued for any purpose necessary to acquire, construct, expand, extend, enlarge, improve or repair the System, but does not include any other bonds of the District issued heretofore or hereafter for any other District purpose. (f) "Bond Issuance Costs" means all costs associ- ated with the authorization, issuance, sale and deliv- ery of the Bonds, including all legal, financial advisory and engineering fees related thereto, expenses of printing the Bonds, expenses to retain a trustee, paying agent or registrar for the Bonds, advertising expenses and all other out -of- pocket expenses directly related to the authorization, issuance, sale and delivery of the Bonds. In addition, "Bond Issuance Costs" shall include an amount equal to eighteen months interest on the Bonds, which amount shall be deposited into the Interest Account of the Debt Service Reserve Fund and be used to pay interest on the Bonds. (g) "Bond Resolution" means any resolution of the Board of Directors of the District (including, without limitation, any Improvement Bond Resolution) authoriz- ing the issuance of Bonds and providing for their security and payment, as such resolution may be amended from time to time as therein permitted; without limita- tion, "Bond Resolution" shall include any trust inden- ture pursuant to which the Bonds are issued. (h) "Capacity Charge" means a lump sum payment made in accordance with the terms of any contract between the District and a Category A Customer, which payment shall equal such Category A Customer's propor- tionate share of the Project Costs of the System. (i) "Capital Recovery Fee" means the fee estab- lished by the District pursuant to Section 6.07(a) -(d) of this Agreement. (j) "Common Facilities" means the facilities described in Section 6.07 of this Agreement, which while constituting a part of Phase I of the System, also either benefit the Additional Customers or consti- tute a necessary expense of accomplishing Phase I of the System as a regional system. (k) "Construction Fund" means the fund estab- lished by the District to receive that portion of the Capacity Charges from Category A Customers and that portion of the proceeds of Bonds issued by the District on behalf of Category B Customers which are allocable to the cost of acquiring or constructing Phase I of the System. - 3 - Rock. (1) "Contracting Party" means the City of Round (m) "Customers" means the Contracting Party and the Other Customers. There shall be two classes of Customers, and every Customer shall be designated as either a "Category A Customer" or a "Category B Custom- er," as defined herein, as appropriate. Category A Customer: Shall be any Customer who pays for its proportionate share of the Project Costs of Phase I of the System by payment of a Capacity Charge. Category B Customer: Shall be any Customer who pays for its proportionate share of the Project Costs of Phase I of the System by monthly payment of a Facility Charge. (n) "Debt Service Fund" means the fund estab- lished in the Bond Resolution for the purpose of receiving deposits of Facility Charge payments and paying debt service on the Bonds, which fund shall be comprised of a Principal Account and an Interest Account. (o) "Debt Service Reserve Fund" means the fund established in the Bond Resolution authorizing the issuance of Bonds on behalf of a Category B Customer or Additional Category B Customer which will be used as a reserve to secure payment of debt service on such Bonds. (p) "District" means the Brushy Creek Water Control and Improvement District No. 1 of Williamson and Milam Counties. (q) "Eligible Securities" means obligations of the United States or obligations unconditionally guaranteed by the United States or an agency of the United States, and certificates of deposits of banks and savings and loan associations authorized to do business in the State of Texas provided such deposits are secured in the manner provided by law for the deposit of county funds. (r) "Engineering Report" means a report of Haynie & Kallman, Inc., and Espey, Huston & Associates, Inc., Consulting Engineers, entitled A Feasibility Study of a Potential Regional Wastewater Treatment Facility for the Upper Brushy Creek Watershed of Southwest William- son County, Texas, dated July 1984, as such report may be amended, modified and changed and superseded by the District at its direction at any time prior to the execution of construction contracts for improvements, additions and enlargements to Phase I of the System or as modified and changed by change orders issued after execution of such construction contracts; provided, however, that no such change orders shall affect the Reserved Capacity, rate of discharge or Point of Entry for any Customer without such Customer's consent. (s) "Expansion" means any facilities or equipment which constitute an expansion, extension or enlargement - 4 - beyond Phase I of the System other than Required Improvements. (t) "Facility Charge" means the annual charge which each Category B Customer or Additional Category B Customer agrees unconditionally to pay to the District calculated in accordance with Section 6.03 of this Agreement. (u) "Fiscal Year" means the twelve (12) month period beginning January 1 of each year and applies only to District or such other twelve (12) month period as may be established in the future to constitute the District's Fiscal Year. (v) "Funding Date" means the date established by the District pursuant to Article Six of this Agreement. (w) "Improvement Bond" means any bond, note or other evidence of indebtedness to be issued by the District pursuant to Article VII this Agreement to provide temporary, interim or permanent financing for the improvement or repair of the System as deemed necessary by the Board of Directors of the District to cause the System to be in compliance with State or federal law or with the requirements of any regulatory body, other than the District, whether one or more issues, or any Bond issued to refund same, but does not include any other bonds of the District issued hereto- fore or hereafter for any other District purpose. (x) "Improvement Bond Resolution" means any resolution of the Board of Directors of the District authorizing the issuance of Improvement Bonds and providing for their security and payment, as such resolution may be amended from time to time as therein permitted; without limitation, "Improvement Bond Resolution" shall include any trust indenture pursuant to which the Improvement Bonds are issued. (y) "LUE" means the amount of sewage collection and treatment capacity needed by one living unit equivalent which amount shall be 350 gallons per day based on a 30 -day average. (z) "Month" means a calendar month. (aa) "Net Bond Proceeds" means the proceeds received by the District upon the sale of its Bonds less all Bond Issuance Costs. (bb) "Operation and Maintenance Expense" means all costs of operation and maintenance of the District's System including, but not limited to, repairs and replacements to the extent not paid from the Repair and Replacement Reserve Fund or the Operation and Mainte- nance Reserve Fund, costs of maintaining any permits or licenses necessary to operate and maintain the System, and cost of utilities, supervision, engineering, accounting, auditing, legal services, and any other supplies, services, administrative costs and equipment necessary for proper operation and maintenance of the District's System, and payments made by the District in satisfaction of judgments resulting from claims not covered by the District's insurance or not paid by one - 5 - particular Customer or Additional Customer arising in connection with the operation and maintenance of the System. Depreciation shall not be considered an item of Operation and Maintenance Expense. (cc) "Operation and Maintenance Reserve Fund" means the fund to be established by the District to provide moneys to operate and maintain the System in the event current revenues of the System are insuffi- cient to meet the Operation and Maintenance Expenses of the System. (dd) "Other Customer" means any party other than the Contracting Party with whom the District enters into a contract, similar to this Agreement, for receiv- ing, transporting, treating and disposing of Wastewater through the System prior to the Funding Date for Phase I of the System. (ee) "Phase I of the System" means an interceptor line and related facilities and a 15.1 MGD Wastewater treatment plant or such other size plant as will adequately provide the Reserved Capacity needs of the Contracting Party and all Other Customers in the System, all as generally described in the Engineering Report, including existing Wastewater treatment facil- ities of the Customers to be purchased by the District, interim components which may be abandoned as future expansions are added and Project Costs associated with acquisition or construction of downsized components which may be smaller than ultimately necessary to receive the Reserved Capacity of all Customers. (ff) "Point of Entry" means a point at which Wastewater enters the District's System. (gg) "Project Costs" includes all acquisition and construction costs and reconstruction costs as those terms are generally understood in standard accounting practice as applied to projects of the nature of the System, and without limiting the generality of the foregoing, the term shall include the costs of obtain- ing all licenses and permits; purchase of equipment, property, rights in property, costs of land, easements and rights -of -way, including damages to land and property; engineering, administrative, auditing and legal expenses incurred in connection with the plan- ning, development, acquisition and construction of the System; any and all tools and equipment required for the operation and maintenance of the System; costs of the same nature for any expansion, extension, enlarge- ment, improvement or replacement of the System; the costs of establishing the Operation and Maintenance Reserve Fund and the Repair and Replacement Reserve Fund; legal and other expenses incurred by the District in accomplishing the acquisition or construction of the System; and a reasonable amount for contingencies, not to exceed ten (10) percent of the construction contract amount. The Project Costs shall be composed of two components: (1) "Line Project Costs" which shall be all Project Costs related to constructing interceptor lines, collection lines and related facilities to collect and transport Wastewater to the District's proposed wastewater treatment plant and (2) "Treatment Project Costs" which shall be all Project Costs related - 6 - to constructing the District's wastewater treatment plant (such Treatment Project Costs consisting of [a] "Treatment Project Common Facilities Costs" being those Treatment Project Costs for Common Facilities and [b] "Treatment Project Phase Costs" being those Treatment Project Costs for a particular phase of the Project which are not related to the cost of Common Facil- ities). (hh) "Repair and Replacement Reserve Fund" means the fund to be established by the District, the moneys from which will be used to repair the System or to replace worn or obsolete parts of the System. (ii) "Required Improvement" means any facilities or equipment which constitute an improvement to or modification of the System, the construction, acquisi- tion and ownership of which is undertaken pursuant to Article VII this Agreement as the result of the re- quirement of a regulatory body other than the District or repairs and replacements which cost more than the amount of money on hand in the Repair and Replacement Reserve Fund. (33) "Reserved Capacity" means, with respect to any given period of time, the total quantity of Wastewater that a particular Customer or Additional Customer is entitled to deliver into the System pursuant to this Agreement and similar contracts with Other Customers and Additional Customers. (kk) "Service Charge" means a monthly charge which will be paid by every Customer and Additional Customer of each Category (Categories A and B), to enable the District to meet the Annual Operation and Maintenance Expense Requirement. (11) "System" means all of the District's facil- ities for receiving, transporting, treating and dispos- ing of Wastewater generally in the upper Brushy Creek Watershed, together with any expansions, extensions, enlargements or improvements to said facilities and any replacements of said facilities constructed or other- wise incorporated into said facilities in the future, including any Required Improvements. Said term shall include only those facilities which are used, con- structed or acquired, or the use of which is arranged for, by the District to afford service to the Customers and Additional Customers. (mm) "Total Reserved Capacity" means, with respect to any given period of time, the total quantity of Wastewater that all Customers and /or Additional Cus- tomers are entitled to deliver into the System pursuant to this Agreement and similar agreements with Other Customers and Additional Customers. (nn) "Wastewater' means liquid and water carried waste discharged from sanitary conveniences of dwell- ings, business buildings, institutions and the like including garbage which has been shredded to such degree that all particles will be carried freely under flow conditions normally prevailing in public sewers, with no particle greater than one -half (1/2) inch in any dimension and the liquid wastes from industrial - 7 - processes, and includes any infiltration water that has migrated from the ground into the System. Section 1.02. INTERPRETATION. Terms used in this Agreement with initial letters capitalized and not otherwise defined in this Agreement have the meanings assigned to them in Section 1.01. Except where the context otherwise re- quires, words imparting the singular number shall include the plural number and vice versa. Reference to any document means that document as amended or supplemented from time to time. Reference to any party means that party and its successors and assigns. ARTICLE II RESERVED CAPACITY; CUSTOMER CATEGORY Section 2.01. RESERVED CAPACITY. The Contracting Party shall be entitled to 1.715 MGD (4,900 LUEs) of Reserved Capacity in Phase I of the System, including: (1) 1.715 MGD (4,900 LUEs) of Reserved Capacity in the District's Wastewater lines constructed in Phases IA and IB of the System, (2) .2849 MGD (814 LUEs) of Reserved Capacity in the Wastewater treatment plant constructed in Phase IA of the System, (3) .85505 MGD (2,443 LUEs) of Reserved Capacity in the wastewater treatment plant constructed in Phase IB of the System, and (4) .57505 MGD (1,643 LUEs) of Reserved Capacity in the wastewater treatment plant constructed in Phase IC of the System. Section 2.02. CATEGORY OF CUSTOMER. For purposes of this Agreement, the Contracting Party shall be a Category Customer for purposes of the payments made to the District on the initial Funding Date. Thereafter, the Contracting Party agrees to notify the District at least sixty (60) days in advance of each subsequent Funding Date as to whether the Contracting Party desires to be a Category A or Category B Customer for purposes of the payments made at each subse- quent Funding Date. ARTICLE III CONSTRUCTION OF SYSTEM BY DISTRICT Section 3.01. CONSTRUCTION. In order to provide services for receiving, transporting, treating and disposing of Wastewater for the Contracting Party, the Other Customers and Additional Customers, the District will design and acquire or construct the System as described in the Engi- neering Report, will acquire all necessary lands, easements and rights -of -way, and will own, operate, maintain and from time to time expand, extend, enlarge, improve and repair the System. The District shall exercise due diligence to complete construction of Phase IA of the System within 18 months after the Funding Date and to complete construction of Phase IB of the System within 36 months after the Funding Date. Phase IC shall be constructed and completed as necessary. Section 3.02. ACQUISITION AND CONSTRUCTION. The District agrees to proceed promptly with the acquisition and construction of Phase I of the System as described in Article VI and as necessary to the performance of its obligations hereunder subject to the provisions of Section 3.03 of this Agreement. The District shall not be liable to - 8 - the Contracting Party for any damages occasioned by delay in the commencement of such service to the Contracting Party. After the District has notified the Contracting Party of readiness to accept such Wastewater at the Point or Points of Entry, the District shall, subject to other terms and conditions of this Agreement, continually hold itself ready, willing and able to supply such service to the Contracting Party. Liability of the District under this covenant shall be subject to the provisions of Sections 6.08 and 8.08 of this Agreement. Section 3.03. CONDITIONS PRECEDENT. It is expressly understood and agreed that any obligation on the part of the District to acquire, construct and operate the System or Phase I thereof, as appropriate, shall be conditioned upon the following: (1) the District's obtaining sufficient funds to pay the Project Costs of the System, or Phase I thereof, as appropriate, including the payment of all Capacity Charges and the sale and delivery upon terms satisfactory to the District of the Bonds for the System, or Phase I thereof, as appropriate; (2) the District's ability to reasonably obtain all sites, rights -of -way, easements, labor, equipment and materials required for acquisition or construction of the System, or Phase I thereof, as appropriate; (3) the District's obtaining all permits, approvals and licenses required to acquire, construct or operate the System, or Phase I thereof, as appropriate, including waste discharge permits issued by the Texas Water Commission or its successors; and (4) In the case of Phase I of the System, execution of contracts in substantially the same form as this Agreement with the City of Austin, Williamson County Municipal Utility District No. 2 and Williamson County Municipal Utility District No. 3. ARTICLE IV DISCHARGE OF WASTEWATER AND METERING Section 4.01. RIGHTS OF CONTRACTING PARTY. The Contracting Party shall have the right to discharge Wastewater into the System under this Agreement on the effective date of this Agreement, or upon the com- pletion of Phase IA of the System described in the Engineering Report, whichever is later. Section 4.02. DISCHARGE. The Contracting Party shall have the right to discharge Wastewater into the System meeting the requirements for quantity set forth in this Article and the requirements of quality as set forth in District regulations to be adopted from time to time as described in Article V. - 9 - Section 4.03. POINT OF ENTRY. The Contracting Party shall discharge its Wastewater at a Point or Points of Entry designated for the Contracting Party in the Engineering Report, or at such additional Points of Entry as may be mutually agreed upon by the parties hereto. Section 4.04. CONVEYANCE TO POINT OF ENTRY. It shall be the sole responsibility of the Contracting Party to convey such Wastewater to the Point or Points of Entry. Section 4.05. QUANTITY AT POINT OF ENTRY. (a) The quantity of Wastewater conveyed to the Point or Points of Entry shall be metered and the total annual contributing flow of Wastewater received during any Fiscal Year shall be used to determine the Con- tracting Party's payment of the Variable Charges of the Service Charge as set forth in Article VI. (b) The Contracting Party's maximum discharge rate for each Point of Entry is designated in the Engineering Report, and is set forth in Exhibit "A" which is attached hereto and hereby incorporated herein by reference for all intents and purposes. Section 4.06. LIABILITY FOR DAMAGES AND RESPON- SIBILITY FOR TREATMENT AND DISPOSAL OF WASTEWATER. Liability for damages arising from the reception, transportation, delivery and disposal of all Wastewater discharged hereunder shall remain in the Contracting Party to the Points of Entry, and immediately prior to passing through meters installed at the Points of Entry liability for such damages shall pass to the District. As between the parties, each party hereto agrees to save and hold the other party harmless from all claims, demands and causes of action which may be asserted by anyone on account of the reception, transportation, delivery and disposal of Wastewater while the Wastewa- ter is in the control of such party. This covenant is not made for the benefit of any third party. The District takes the responsibility as between the parties hereto for the proper reception, transporta- tion, treatment and disposal of all such Wastewater received by it at Points of Entry. Section 4.07. METERING. The District will furnish, install, operate and maintain at its expense at each Point of Entry the necessary equipment and devices of standard type for measuring properly all Wastewater to be discharged under this Agreement as such devices are specified in the Engineering Report. Such meters and other equipment shall remain the property of the District. The Contracting Party shall have access to such metering equipment at all reason- able times for inspection and examination, and the reading, calibration and adjustment thereof shall be done by employees or agents of the District in the presence of a representative of the Contracting Party if requested by the Contracting Party. All readings of meters will be entered upon proper books of record maintained by the District and a copy of said readings supplied to the Contracting Party. Upon written - 10 - request the Contracting Party may have access to said record books during reasonable business hours. Not more than three times in each year of opera- tion, the District shall calibrate its meters, if requested in writing by the affected Contracting Party to do so, in the presence of a representative of such Contracting Party, and such parties shall jointly observe any adjustments which are made to the meters in case any adjustment is found to be necessary. If, for any reason, any meters are out of service or out of repair, or if, upon any test, the percentage of inac- curacy of any meter is found to be in excess of five percent (5 %), registration thereof shall be corrected for a period of time extending back to the time when such inaccuracy began, if such time is ascertainable, and if not ascertainable, then for a period extending back one -half (?) of the time elapsed since the date of the last calibration, but in no event further back than a period of six (6) months. Any Contracting Party may, at its option and its own expense, install and operate a check meter to check each meter installed by the District, but the measurement for the purpose of this Agreement shall be solely by the District's meters, except as in this section specifically provided to the contrary. All such check meters shall be of standard make and shall be subject at all reasonable times to inspection and examination by any employee or agent of the District, but the reading, calibration and adjust- ment thereof shall be made only by the Contracting Party or Parties, except during any period when a check meter may be used under specific written consent by the District for measuring the amount of Wastewater de- livered into the System in which case the reading, calibration and adjustment thereof shall be made by the District with like effect as if such check meter or meters had been furnished or installed by the District. Section 4.08. UNIT OE MEASUREMENT. The unit of measurement for Wastewater delivered hereunder shall be one thousand (1,000) gallons, U.S. Standard Liquid Measure. ARTICLE V QUALITY AND TESTING Section 5.01. GENERAL. The Contracting Party agrees to limit its discharge into the System to wastes defined by the District as admissible discharges, and to prohibit entry into the System of any wastes that have the characteristics of prohibited discharges, also as defined by the District. 5.02. ADMISSIBLE DISCHARGES. Wastes discharged into the System shall consist only of wastes which the System is capable of handling, so that: (a) effluent from the System meets the current and future legal standards of the Texas Department of Water Resources or of any governmental body having legal authority to set standards for such effluents; and (b) the System is not damaged to the extent to cause unnecessary repairs or replacements result- ing in increased Operation and Maintenance Ex- pense. 5.03. DISTRICT REGULATIONS. The District may, from time to time, after giving sixty (60) days notice to all Customers and Additional Customers, establish by regulation the quality of Wastewater which will qualify as admissible discharges and be accepted into the System from Customers and Additional Customers at the Points of Entry and to establish the quality of Waste- water which will qualify as prohibited discharges and not be accepted into the System. The District may establish standards which are stricter than those required from time to time by applicable law, rule or regulation by a 4 /5ths majority vote of the Board of Directors of the District; provided, however, the District may not establish any standards to require pretreatment of normal domestic wastewater unless such treatment is required by applicable federal or State law or regulation. The District shall immediately notify all Customers and Additional Customers of such regulations after they are adopted by the District. Each Customer and Additional Customer shall have one hundred and eighty (180) days after the date of adop- tion of any such regulations to bring the quality of its Wastewater into compliance with such regulation unless a shorter period is required by applicable State or federal law or regulation. The District may also provide in such regulations for the testing of Wastewa- ter delivered into the System. Such regulations may provide that the District may terminate service to any Customer or Additional Customer which continues to violate said regulations after being notified by the District in writing and given a reasonable period of time (not to exceed thirty (30) days) to correct such violation. The regulations shall establish reasonable procedures for terminating such service and shall make reasonable provisions for due process rights of the Contracting Party. The District may also establish, charge and collect a surcharge from any such Customer or Additional Customer for discharge of admissible discharges which, because of the excessive concen- tration of biochemical oxygen demand, suspended solids or other characteristic, are exceedingly difficult or expensive to treat, which surcharge shall be in addi- tion to the Customer's or Additional Customer's Service Charge as described in Section 6.09. Section 5.04. INDUSTRIAL WASTES. The effects of certain types of industrial waste upon Wastewater and Wastewater treatment processes are such as to require that careful consideration be made of each industrial connection. This is a matter of concern both to the District and to the Contracting Party. Accordingly, the District, upon request by the Contracting Party, will work jointly in processing applications for discharge of industrial waste into any sewers ultimate- ly discharging into the District's System. The Con- tracting Party covenants that it will have in effect and will enforce an industrial waste ordinance accept- able to federal and State agencies or departments having lawful jurisdiction to set standards for waste discharges. - 12 - The Contracting Party will allow the District access to the Contracting Party's records to gather information and data that will be useful to the Dis- trict as statistical data for planning the operation, improvement and expansion of the District's System. ARTICLE VI FISCAL PROVISIONS Section 6.01. COST OF PHASE IA OF SYSTEM. (a) The District intends to construct Phase I of the System in three stages to be known as Phases IA, IB and IC, as described in the Engineering Report. The parties recognize that Phases IA, IS and IC of the System will be designed and advertised for bid by the District at separate times as described later in this section. The parties further recognize that although the Contracting Party will not become fully liable for its prorata share of the construction costs of the various phases until such time as construction bids are obtained by the District, that nevertheless the Dis- trict will incur Project Costs for design of the System, preparation of plans and specifications for construction of the System, and certain engineering, legal, administrative and other expenses included in the Project Costs of the System prior to the time that construction bids are accepted. The District has no source of funds to pay the Project Costs of the System other than those provided by the Contracting Party and the Other Customers. Therefore, the parties agree that forty -five (45) days after the execution of this Agreement, the Contracting Party shall pay to the District the sum of forty -nine and ninety -five one - hundredths (49.95) dollars per LUE of the Contracting Party's Reserved Capacity in Phase I of the System for Line Project Costs of Phase IA and twelve and six one hundredths (12.06) dollars per LUE of the Contracting Party's Reserved Capacity in the Wastewater treatment plant constructed in Phase I for Treatment Project Costs of Phase IA, which represents the Contracting Party's prorata share of the estimated Project Costs to be incurred by the District prior to the Funding Date for Phase IA of the System, (1) the Contracting Party's share of such Line Project Costs to be paid prior to the Funding Date being determined by dividing the estimated Line Project Costs of Phase IA of the System to be incurred prior to the Funding Date by the number of LUEs of Total Reserved Capacity in Phase I of the System and multiplying the result times the Contracting Party's number of LUEs of Reserved Capacity in Phase I of the System, (2) the Contracting Party's share of Treatment Project Phase Costs of Phase IA of the System to be paid prior to the Funding Date being determined by dividing the estimated Treatment Project Phase Costs of Phase IA of the System to be incurred prior to the Funding Date by the number of LUEs of Total Reserved Capacity in Phase IA of the System and multiplying the result times the Contracting Party's number of LUEs of Reserved Capacity in Phase IA of the System and (3) the Contracting Party's share of Treatment Project Common Facilities Costs being determined by dividing the Treatment Project Common Facilities Costs of Phase IA of the System by the total number of LUEs of Total - 13 - Reserved Capacity of all Customers in Phase I of the System and multiplying the result times the Contracting Party's number of LUEs of Reserved Capacity in Phase I of the System. The total estimated Project Costs of Phase IA of the System to be incurred prior to the Funding Date, is presently estimated to be two million one hundred and fifty thousand, three hundred and forty -eight (2,150,348) dollars for Line Project Costs and five hundred and nineteen thousand, one hundred and eighty -three (519,183) dollars for Treatment Project Costs. For Category B Customers, the District agrees to use its best efforts to issue Bonds on behalf of such Customers in the same manner as that described in Section 6.01(e) to allow a deposit of the Customer's prorata share of the Project Costs to be paid prior to the Funding Date for Phase IA of the System. All such amounts paid by the Contracting Party shall be used solely for the purpose of paying the Project Costs of Phase IA of the System which are incurred by the District prior to the Funding Date, and, in the event that Phase IA of the System is constructed, any such amount paid by the Contracting Party shall be credited against the Contracting Party's prorata share of the Project Costs for Phase IA of the System. In the event Phase IA of the System is not constructed, any excess proceeds paid by the Contracting Party and the Other Customers to the District which are not used to pay Project Costs for Phase IA of the System incurred prior to the Funding Date shall be returned to the Contract- ing Party and the Other Customers on the same prorata basis as previously described in allocating the amount of such payments to the Contracting Party and the Other Customers. (b) Immediately upon the execution of this agreement by the Contracting Party and the execution of similar agreements by the Other Customers, the District shall notify the District's engineers to proceed with the preparation of plans and specifications for Phase IA of the System. The District shall also proceed to take all other action necessary to construct Phase IA of the System, including obtaining appropriate easements, making appropriate surveys, obtaining appropriate permits and governmental approvals and taking all other necessary and proper actions. The District.anticipates that within three (3) months after the execution of this Agreement by the Contracting Party and similar agreements by the Other Customers, that plans and specifications for Phase IA of the System will be completed. The plans and specifications shall be submitted to the Customers for their comments which must be received within thirty (30) days after receipt of same. The District shall make any adjust- ments to the plans and specifications which it deems appropriate thereafter. The District anticipates that after Final plans and specifications have been pre- pared, that a period of thirty (30) days will be necessary in order to obtain approval by all appropri- ate regulatory bodies of the plans and specifications. After all such approvals have been obtained, the District shall proceed to advertise for bids for construction of Phase IA of the System. Upon receipt of such bids, the District shall tabulate the bids and notify the Contracting Party and Other Customers of the bids which have been received and shall recommend - 14 - approval of the lowest and best bid for the con- struction of Phase IA of the System. The District shall also notify the Customers, based on such lowest and best bid, of the estimated Project Costs of Phase IA of the System. If the recommended bid does not exceed the estimated cost of the construction contract by more than ten (10) percent, then the District shall establish a Funding Date for Phase IA of the System, which date shall be prior to the time that construction bids for Phase IA of the System expire, but shall not be less than forty -five (45) days after the date the District notifies the Customers of the recommended low bid. If the recommended bid exceeds the estimated cost of the construction contract by more than ten (10) percent, then within thirty (30) days after receiving such notice from the District, the Contracting Party shall notify the District as to whether or not it desires the District to proceed with the construction of Phase IA of the System. If the Contracting Party and all Other Customers notify the District that they desire the District to proceed with the construction of Phase IA of the System, the District shall thereafter establish a Funding Date for Phase IA of the System, which date shall be prior to the time that construction bids expire for Phase IA of the System, but shall be not less than forty -five (45) days after the receipt of notice from all Customers to proceed with the con- struction of Phase IA of the System. (c) In order to obtain the Project Cost per LUE for Phase IA of the System, which shall be used in determining the amount of the Capacity Charge to be paid by a Category A Customer for Phase IA of the System and which shall be used in determining the amount of Bonds which must be issued for a Category B Customer for Phase IA of the System, Project Costs of Phase IA of the System shall be divided into Line Project Costs, Treatment Project Phase Costs and Treatment Project Common Facilities Costs. The Con- tracting Party's share of Line Project Costs of Phase IA of the System shall be determined by dividing the Line Project Costs of Phase IA of the System by the number of LUEs of Total Reserved Capacity in Phase I of the System, and multiplying the result times the Contracting Party's number of LUEs of Reserved Capacity in Phase I of the System. The Contracting Party's share of the Treatment Project Phase Costs for Phase IA of the System shall be determined by dividing the estimated Treatment Project Phase Costs in Phase IA of the System by the Total Reserved Capacity of all Customers in Phase IA of the System and multiplying the result times the number of LUEs of Reserved Capacity of the Contracting Party in Phase IA of the System. The Contracting Party's share of Treatment Project Common Facilities Costs of Phase IA of the System shall be determined by dividing the Treatment Project Common Facilities Costs in Phase IA of the System by the number of LUEs of Total Reserved Capacity in Phase I of the System and multiplying the result times the Con- tracting Party's number of LUEs of Reserved Capacity in Phase I of the System. After the Funding Date, if the District, on the advice of the District's engineer, determines that its estimate of the cost of acquisition and construction of Phase IA of the System should be increased, it shall calculate the additional cost per - 15 - LUE in the manner described above and shall promptly notify each Customer in writing of the additional amount that said Customer must pay to the District for deposit into the Construction Fund, the Operation and Maintenance Reserve Fund and the Repair and Replacement Reserve Fund, as appropriate. Each Customer shall within ninety (90) days of receipt of such notice pay to the District the additional amount; provided that at the request of any Category B Customer which must pay an additional amount in excess of ten thousand (10,000) dollars which request must be in writing and received by the District at least sixty (60) days prior to the date such additional amounts are payable to the Dis- trict, the District agrees that it will use its best efforts to issue Bonds on behalf of such Category B Customer to allow for the payment of such amounts; and provided further, that the failure or inability of the District to issue, sell and deliver such Bonds shall not relieve the Category B Customer from its obligation to pay the additional amount. Upon completion of acquisition or construction of Phase IA of the System and payment of all costs of acquisition and con- struction then due and owing, any remaining moneys in the Construction Fund shall be credited to the Custom- er's prorata share of the costs of Phase IB of the System. (d) If the Contracting Party elects to be treated as a Category A Customer, it shall pay to the District a Capacity Charge equal to the Contracting Party's share of Line Project Costs determined by dividing the Line Project Costs of Phase IA of the System by the number of LUEs of Total Reserved Capacity in Phase I of the System, and multiplying the result times the Contracting Party's number of LUEs of Reserved Capacity in Phase I of the System plus (2) the Contracting Party's share of the Treatment Project Phase Costs for Phase IA of the System determined by dividing the Treatment Project Costs in Phase IA of the System by the number of LUEs of Total Reserved Capacity of all Customers in Phase IA of the System and multiplying the result times the number of LUEs of Reserved Capacity of the Contracting Party in Phase IA of the System plus (3) the Contracting Party's share of Treatment Project Common Facilities Costs determined by dividing the Treatment Project Common Facilities Costs for Phase IA of the System by the number of LUEs of Total Reserved Capacity in Phase I of the System and multiplying the result times the number of LUEs of the Reserved Capaci- ty of the Contracting Party in Phase I of the System. The Capacity Charge shall be paid on the Funding Date and shall be deposited by the District into the Con- struction Fund, the Operation and Maintenance Reserve Fund and the Repair and Replacement Reserve Fund, as appropriate. The Capacity Charge may be paid by delivery of an irrevocable letter of credit payable to the District on demand in the amount of the Capacity Charge and in a form and from a Danz acceptable to the District. The District may draw on said letter of credit, as necessary, to pay the Contracting Party's share of the Project Costs as such costs are incurred. Notwithstanding anything in this Section 6.01(d) however, it is specifically provided that if the Contracting Party elects to be treated as a Category A - 16 - Customer and if the Contracting Party has a rating of "A" or better from Moody's Investor Service on its water and wastewater utility system bonds, then the Contracting Party may elect to pay its prorata share of the Project Costs of Phase IA of the System (other than the Initial Funding) as provided in this paragraph. Upon notifying such Contracting Party of the Funding Date for Phase IA of the System, the District shall also provide such Contracting Party with an estimate of the Contracting Party's prorata share of the Project Costs of Phase IA of the System to be due on a quarter- ly (four times per year) basis, the initial amount being due on the Funding Date for Phase IA of the System. Thereafter, the Contracting Party may pay such amounts on each quarterly due date rather than paying the Contracting Party's total prorata share of the Project Costs of Phase IA of the System on the Funding Date for Phase IA of the System. The District may, at any time, revise its estimate of such quarterly pay- ments due by the Contracting Party by giving the Contracting Party thirty (30) days written notice of any such change. (e) If the Contracting Party elects to be treated as a Category B Customer, the District shall use its best efforts to issue Bonds on behalf of the Contract- ing Party in the amount necessary to allow for a deposit of the Net Bond Proceeds in an amount equal to the sum of (1) the Contracting Party's share of Line Project Costs determined by dividing the Line Project Costs of Phase IA of the System by the number of LUEs of Total Reserved Capacity in Phase I of the System, and multiplying the result times the Contracting Party's number of LUEs of Reserved Capacity in Phase I of the System plus (2) the Contracting Party's share of the Treatment Project Phase Costs for Phase IA of the System determined by dividing the Treatment Project Phase Costs in Phase IA of the System by the number of LUEs of Total Reserved Capacity of all Customers in Phase IA of the System and multiplying the result times the number of LUEs of Reserved Capacity of the Con- tracting Party in Phase IA of the System plus (3) the Contracting Party's share of Treatment Project Common Facilities Costs of Phase IA of the System determined by dividing the Treatment Project Common Facilities Costs for Phase IA of the System by the number of LUEs of Total Reserved Capacity in Phase I of the System and multiplying the result times the number of LUEs of Reserved Capacity of the Contracting Party in Phase I of the System into the Construction Fund, the Operation and Maintenance Reserve Fund and the Repair and Re- placement Reserve Fund, as appropriate, and to allow for a deposit into the Debt Service Reserve Fund of the amount required to be deposited therein pursuant to the Bond Resolution. The Contracting Party shall pay a Facility Charge to the District to meet the Annual Debt Service Requirement on the Bonds issued on behalf of the Contracting Party. All Facility Charge payments shall be deposited by the District in the Debt Service Fund created by the Bond Resolution. Except as provid- ed below, (i) the Facility Charge will be payable to the District in monthly installments, which shall be due and payable, in immediately available funds, on the last business day of each calendar month and (ii) the monthly Facility Charge shall equal the sum of (w) an - 17 - amount equal to one - twelfth of the principal of and any redemption premium on Bonds which mature (or are to be redeemed) during the twelve months following such monthly payment date, plus (x) an amount equal to the amount of interest which will be due and payable on the Bonds on the next interest payment date divided by the number of months (or 30 -day periods) between the last succeeding interest payment date and the next preceding interest payment date, plus (y) any fees or expenses of the trustee, paying agent or registrar for the Bonds and plus (z) the amount required to restore any defi- ciency in the Debt Service Reserve Fund; provided that the Contracting Party shall pay as a special Facility Charge payment on the fifth business day prior to any date on which the District is required to pay princi- pal, premium or interest on the Bonds, the amount, if any, necessary to cause the amount on deposit in the Debt Service Fund created under the Bond Resolution to equal the amount required to be paid to the owners of the Bonds by the District on the next succeeding payment date; and provided further that the obligation of the Contracting Party to pay the amounts described in clauses (w) and (x) above shall be offset by the respective amounts in the Principal Account and the Interest Account of the Debt Service Fund of the Contracting Party. (f) The Contracting Party, to the extent it is a Category B Customer, agrees that its obligation to pay the Facility Charge shall be absolute and uncondition- al, irrespective of any rights of set -off, diminution, abatement, recoupment or counterclaim the Contracting Party might otherwise have against the District or any other person, and the Contracting Party covenants not to seek and hereby waives, to the extent permitted by applicable law, the benefits of any rights which it may have at any time to any stay or extension of time for performance or to terminate, cancel or limit its liability to pay the Facility Charge. The Contracting Party hereby agrees that the holders from time to time of the District's Bonds shall be entitled to rely upon the agreement of the Contracting Party to pay the Facility Charge regardless of the validity of the remainder of this Agreement or any other agreement. (g) The preceding paragraph shall not be con- strued to release the District from the performance of any of its agreements contained in this Agreement or, except to the extent provided in this section, prevent or restrict the Contracting Party from asserting any rights which it may have against the District or any other person under this Agreement or under any pro- vision of law or prevent or restrict the Contracting Party, at its own cost and expense, from prosecuting or defending any action or proceeding against or by third parties or taking any other action to secure or protect its rights under this Agreement. (h) To the extent it elects to become a Category B Customer, the Contracting Party recognizes that the Bonds issued by the District on its behalf will be supported by the pledge of the payment of the Facility Charge by the Contracting Party under the terms of its agreement with the District. In order to enable the District to issue the Bonds, the Contracting Party - 18 - agrees, if requested to do so by the District, to execute a separate agreement with the District, the owners of the Bonds or a trustee acting on behalf of the owners of the Bonds evidencing its unconditional obligation to pay the Facility Charge to enable the District to pay debt service on the Bonds issued by the District on behalf of the Contracting Party. Such additional agreements shall in all respects be consis- tent with the requirements of this Agreement regarding the payment of the Facility Charge by the Contracting Party. (i) To the extent deemed necessary by the Dis- trict, the District may maintain separate accounts in the Construction Fund for each Customer to account for the Customer's prorata share of the costs of Phase IA of the System. Section 6.02. CONSTRUCTION OF PHASE IB OF SYSTEM. The District anticipates that it will notify the District's engineers to proceed with the development of plans and specifications of Phase IB of the System immediately after the execution of this Agreement by the Contracting Party and similar agreements by the Other Customers. The provisions of Section 6.01 of this Agreement shall apply to the duties and respon- sibilities of the parties in regard to the design and construction of Phase IB of the System in the same manner as applicable to Phase IA of the System, except that the phrase "Phase IA" in such Section 6.01 shall instead be "Phase IB." Also, the estimated Project Costs of Phase IB of the System to be incurred prior to the Funding Date for Phase IB of the System is estimat- ed by the District to be seven hundred and sixty -one thousand one hundred and twenty -four (761,124) dollars for Line Project Costs and seven hundred and five thousand one hundred and fifty -nine (705,159) dollars for Treatment Project Costs, with the Contracting Party's share of such amounts being seventeen and sixty - eight one hundredths (17.68) dollars per LUE of the Contracting Party's Reserved Capacity in Phase I of the System and sixteen and thirty -eight one hundredths (16.38) dollars per LUE of the Contracting Party's Reserved Capacity in Phase I of the System, respec- tively. The Contracting Party's prorata share of such amounts shall be payable to the District in the same manner as provided for Project Costs to be paid prior to the Funding Date for Phase IA of the System as described in Section 6.01(a). Notwithstanding anything herein or in Section 6.01 to the contrary, however, it is specifically provided that if the recommended low bid for construction of Phase IB of the System exceeds the estimated construction cost by more than ten (10) percent, then the Customers shall establish a committee to review the District's recommendation. Each Customer shall appoint a representative to the Committee whose vote shall be weighted on the basis that that Custom- er's Reserved Capacity in Phases 1B and IC of the System bears to the Total Reserved Capacity in Phases IB and IC of the System. The Committee may decide to allow the District to accept the recommended bid or to reject the bid and redesign or readvertise the con- tract. In any event, the District shall be obligated to accept the Committee's recommendation only one time. - 19 - Thereafter, the District's recommendation shall be final and conclusive. Section 6.03. CONSTRUCTION OF PHASE IC OF THE SYSTEM. The District shall in its sole discretion determine when to notify the District's engineers to proceed with the development of plans and specifica- tions and construction of Phase IC of the System. The District shall give the Contracting Party forty -five (45) days prior written notice of its intent to so advise the District's engineers. The provisions of Section 6.01 of this Agreement shall apply to the duties and responsibilities of the parties in regard to the design and construction of Phase IC of the System in the same manner as applicable to Phase IA of the System, except that the phrase "Phase IA" in such Section 6.01 shall instead be "Phase IC." Also, the estimated Project Costs of Phase IC of the System to be incurred prior to the Funding Date for Phase IC of the System is estimated by the District to be zero (0) dollars for Line Project Costs and five hundred and ninety -nine thousand six hundred and eighty -seven (599,687) dollars for Treatment Project Costs, with the Contracting Party's share of such amounts being zero (0) dollars per LUE of the Contracting Party's Reserved Capacity in Phase I of the System and thirteen and ninety -three one hundredths (13.93) dollars per LUE of the Contracting Party's Reserved Capacity in Phase I of the System, respectively. The Contracting Party's prorata share of such amounts shall be payable to the District in the same manner as provided for Project Costs to be paid prior to the Funding Date for Phase IA of the System as described in Section 6.01(a). Not- withstanding anything herein or in Section 6.01 to the contrary, however, it is specifically provided that if the recommended low bid for construction of Phase IC of the System exceeds the estimated construction cost by more than ten (10) percent, then the Customers shall establish a committee to review the District's recom- mendation. Each Customer shall appoint a representa- tive to the Committee whose vote shall be weighted on the basis that Customer's Reserved Capacity in Phases IB and IC of the System bears to the Total Reserved Capacity in Phases IB and IC of the System. The Committee may decide to allow the District to accept the recommended bid or to reject the bid and redesign or readvertise the contract. In any event, the District shall be obligated to accept the Commit- tee's recommendation only one time. Thereafter, the District's recommendation shall be final and conclu- sive. Section 6.04. DEPOSITS ON FUNDING DATE. After the District obtains all funds on the Funding Date for any Phase of the System from the payment of Capacity Charges and from Net Bond Proceeds, the District shall deposit all of said funds into the Construction Fund, the Operation and Maintenance Reserve Fund and the Repair and Replacement Reserve Fund, as appropriate. Section 6.05. SERVICE CHARGE. Every Customer and Additional Customer of each Category (Categories A and B), shall be required to pay a monthly charge (the "Service Charge ") to meet the Annual Operation and Maintenance Expense Requirement. The rate used in - 20 - determining the amount of the Service Charge shall be established by the Board of Directors of the District and shall be adjusted by said Board from time to time, and in any event at least annually, for all Customers and Additional Customers in order to recover the Operation and Maintenance Expenses of the System during any applicable period. The Service Charge shall be composed of two components, one representing those Operation and Maintenance Expenses which are incurred by the District regardless of the amount of actual use by any Customer or Additional Customer (the "Fixed Charges ") and the other representing those Operation and Maintenance Expenses which are directly related to the amount of service actually provided by the District (the "Variable Charges ") which shall be all Operation and Maintenance Expenses other than the Fixed Charges. The rate for Fixed Charges shall be calculated by multiplying a Fixed Charge rate times the Reserved Capacity of each Customer and Additional Customer in the System and Variable Charges shall be calculated by multiplying a Variable Charge rate times the actual amount of Wastewater delivered to the System, expressed in U.S. gallons and determined in accordance with Article IV of this Agreement. Section 6.06. PAYMENTS BY CUSTOMERS AND ADDITIONT AL CUSTOMERS FOR FUTURE SYSTEM CAPACITY. (a) All Customers shall be required to share in Project Costs of Expansions of the System if, and only to the extent that, those Customers request additional Reserved Capacity. A Customer which requests addition- al Reserved Capacity shall be treated as an Additional Customer for such purposes. However, to the extent that a Customer does not request additional Reserved Capacity in the Expansion its obligation to pay the Capacity Charge or Facility Charge will not be in- creased to reflect the additional Project Costs of the Expansion. (b) At such time as the District desires to acquire or construct an Expansion of the System for Additional Customers, it may enter into additional agreements with such Additional Customers, similar to this Agreement, whereby such Additional Customers may acquire Reserved Capacity in the System by payment of either a Capacity Charge or a Facility Charge, as appropriate, and by payment of the Service Charge all in a manner consistent with that previously described herein for Phase I of the System. The parties recog- nize that the Bonds issued by the District for any Expansion of the System for Additional Category B Customers shall be supported by and be payable from solely the Facility Charges of the Additional Category B Customers under separate contracts to be signed between the Additional Category B Customers and the District and the Customers shall in no way be responsi- ble for payment of Facility Charges or debt service of Bonds issued to construct an Expansion of the System for the Additional Category B Customers. (c) After the Expansion of the System by the District to serve Additional Customers, each Customer and Additional Customer shall be required to pay a - 21 - Service Charge calculated in accordance with Section 6.05 above. (d) Any Customer or Additional Customer which requires an Expansion of the System shall request such Expansion in writing to the District and shall specify in such request the amount of capacity required in the Expansion. Upon receiving a request for Expansion of the System, the District shall, within five (5) days, contact all Customers and Additional Customers to determine whether or not such Customers and Additional Customers desire additional capacity in the Expansion. Any such other requests from the Customers and Addi- tional Customers shall be provided in writing to the District within thirty (30) days after such Customer or Additional Customer receives such notice from the District. If the total of the requests is at least 1 MGD, then the District shall proceed as indicated below. If the total of the requests is less than 1 MGD, the District may deny the request or proceed as indicated below, at its discretion. After receipt of all such requests for Expansion of the System, the District shall determine what capacity in the System is presently being utilized by all Customers and Addition- al Customers. If less than eighty (80) percent of the then Total Reserved Capacity of the System is being utilized, the District need not commence the Expansion for the Customers and Additional Customers as requested by them immediately, but may defer the acquisition or construction of the requested Expansion to a later date to be determined by the District, but to be no later than the date at which time eighty (80) percent or more of the existing Total Reserved Capacity in the System is being utilized by the Customers and Additional Customers; provided that the District is able to find a Customer which is willing to lease its excess capacity in the System to such Additional Customer(s) under terms and at prices to be approved by the District. However, no Customer shall be required to lease its Reserved Capacity in the System. If no Customer is willing to lease such excess capacity or, in any event, once the District determines that eighty (80) percent or more of the existing Total Reserved Capacity in the System is being utilized, the District must commence the requested Expansion if the total requests are at least 1 MGD. If the District fails or is not obligated to commence the required Expansion as indicated herein, any Customer or Addi- tional Customer requesting such Expansion may commence the Expansion at the sole cost of the Customer or Additional Customer and, upon completion of the Expan- sion, convey the Expansion to the District to own and operate on behalf of the Customer or Additional Custom- er making the Expansion. The District shall have the right to review and approve any construction of an Expansion by a Customer or Additional Customer. Section 6.07. CAPITAL RECOVERY FEE AND EXCESS CAPACITY CHARGE. (a) The Parties recognize that certain of the facilities being acquired or constructed in Phase I of the System (1) are designed and built to serve the - 22 - needs not only of the Customers of Phase I of the System, but are designed and will be constructed to benefit all Customers and Additional Customers of the System, or (2) are facilities which the District is required to construct or acquire in order to accomplish Phase I of the System as a regional system. It is recognized and agreed between the Parties that these facilities, referred to as the Common Facilities, include the following: (1) ( (3) (5) Interceptor Line; Plant Site; Davis Spring Interim Lift Station and Pumpover Facility; (4) Facilities purchased from Williamson County Municipal Utility District No. 2; Facilities purchased from Williamson County Municipal Utility District No. 3; and (6) Such other items as determined by the District. (b) The parties recognize that the Customers, by paying the Project Costs of Phase I of the System, will be funding the cost of the Common Facilities. The Parties therefore agree that the District, prior to the time that it enters into agreements with Additional Customers, will establish a Capital Recovery Fee for Additional Customers of the System designed to recover from such Additional Customers a prorata share of the cost of the Common Facilities. (c) The Capital Recovery Fee shall be calculated as follows: upon completion of acquisition and con- struction of Phase I of the System, the District will determine the cost of each Common Facility, including an appropriate amount for Project Costs incurred by the District in the acquisition or construction of Phase I of the System which should be allocated to all Custom- ers and all Additional Customers because such costs are related to implementing the System for the entire Brushy Creek Watershed as opposed to only benefiting specific Customers. The District will also determine for each of the Common Facilities the number of LUEs that can ultimately be served from such facilities. In order to determine the Capital Recovery Fee per LUE, the District will divide the cost of the Common Facil- ities by the number of LUEs to be ultimately served from the System. The resulting cost per LUE for all of the Common Facilities shall be used in determining the Capital Recovery Fee to be charged by the District per LUE of Reserved Capacity for any Additional Customer. The District shall, within sixty days after completion of acquisition and construction of Phase I of the System, or any portion thereof, determine the Capital Recovery Fee in accordance with this formula and shall establish such a Capital Recovery Fee by appropriate action of the District's Board of Directors. The Capital Recovery Fee thus established shall be in- creased by ten (10) percent each year in order to - 23 - compensate for the effects of inflation and interest which would have been earned by the Customers on funds which they have used to pay for the Common Facilities which form the basis of the Capital Recovery Fee. (d) In addition to all other charges previously described herein, at the time the District executes an agreement with any Additional Customers for Reserved Capacity in any Expansion of the System, the District shall require payment by the Additional Customer of the Capital Recovery Fee. The Capital Recovery Fee shall be paid to the District prior to the commencement of acquisition and construction of any Expansion of the System. After receipt of the Capital Recovery Fee by the District, the District shall pay the moneys thus received to the Customers in the proportion that each Customer's Reserved Capacity in Phase I of the System bears to the Total Reserved Capacity of all Customers in Phase I of the System. (e) The parties recognize that even after an Additional Customer acquires capacity in the System, that even though the Additional Customer has paid the Capital Recovery Fee, there will still be Project Costs related to the Common Facilities which have been paid by the Customers. In order to defray the burden on the Customers of carrying those costs, the District, in addition to the Capital Recovery Fee and all other charges described herein, shall charge the Additional Customer an additional fee, to be known as the "Over- sized Carrying Cost Fee," which fee shall be determined by the District and shall be collected monthly and used by the District to defray the Annual Debt Service Requirement of Category B Customers or to make payments to the Category A Customers, to compensate them for the proportional amount of Project Costs related to the Common Facilities which have not been recovered by the Capital Recovery Fee and which are allocable to the Additional Customer based on the proportion that the Additional Customer's Reserved Capacity in the System bears to the Total Reserved Capacity in the System after the Expansion. Section 6.08. DEFAULT. (a) In the event any Customer or Additional Customer defaults in the payment of the Facility Charge or Service Charge required hereunder, the District shall immediately give notice of such default to such Customer or Additional Customer and other Customers or Additional Customers; provided, however, that nothing in this section shall prevent any Customer from paying under protest any amount alleged as owed by the Dis- trict or prevent the Distract from accepting any payment even if less than the amount alleged by the District as owed by the Customer. Payment or receipt of any such disputed amount shall not be construed as a waiver of any right of the party making or receiving such disputed amount to contest such matter and to demand payment on receipt of a different amount. Thereafter, the defaulting Customer or Additional Customer shall take all appropriate steps to correct such default and shall correct such default within ten (10) days after receipt of such notice. Any past due amount shall be paid, together with interest at ten - 24 - (10) percent per annum thereon, or the maximum legal rate of interest then in effect, whichever is lesser. In the event such default remains unremedied for a period of thirty (30) days from the date of receipt of notification of default, then the District may termi- nate service to such defaulting Customer or Additional Customer after providing ten days' written notice to such defaulting Customer or Additional Customer of its intention to so terminate service hereunder. If such default remains unremedied for a continuous period of ninety (90) days from the date of receipt of notifica- tion of default, then the District shall notify all Customers and Additional Customers of such fact and the District shall, after giving the defaulting Customer or Additional Customer ten (10) days' written notice, terminate the contract between the District and such defaulting Customer or Additional Customer by delivery of a written notice to such Customer or Additional Customer. The Contracting Party agrees that the District shall have the right to so terminate this Agreement in the event the Contracting Party is in default of any of its obligations hereunder as de- scribed in this section and the Contracting Party, in the event of termination of this Agreement by the District as provided herein, waives any and all of its rights to seek any damages or other remedy against the District or any of the Customers or Additional Custom- ers of the District or to claim any amounts as due and owing to it from the District or Other Customers or Additional Customers either from amounts then on hand or to be paid in the future to the District or such Other Customers and Additional Customers. (b) It is specifically provided that regardless of any other provisions in this Agreement or in similar contracts executed between the District and Other Customers and Additional Customers, in the event a Category B Customer or Additional Category B Customer defaults in the payment of its Facility Charge, then the following shall occur: (1) The District shall immediately give written notice to such defaulting Category B Customer or Additional Category B Customer and to all other Customers and Additional Customers of such default. If such default is not fully remedied within ten (10) days after receipt of such notice by the defaulting party, then the District shall immediately take all actions necessary and appropriate to cause such defaulting party to correct such default including pursuing all legal remedies such as mandamus of the officials of such defaulting party. (2) If such default remains unremedied for a continuous period of ninety (90) days from the date of receipt of notification of default, then the District shall notify all Customers and Additional Customers of such fact and shall take all actions necessary to terminate service to such defaulting party. If the District terminates service to such defaulting Category B Customer or Additional Category B Customer and terminates the - 25 - contract entered into between the District and such defaulting party, then the Reserved Capacity in the System of such defaulting party shall be owned by the District. The District may execute additional contracts with Customers, Additional Customers or other persons similar to this Agreement, which contracts would provide the District with the necessary revenues to pay the Annual Debt Service Requirement related to Bonds issued on behalf of such defaulting Category B Customer or Additional Category B Customer for the System and the District may reserve for any such party that enters into any such contract with it that portion of the Reserved Capacity in the System that was previously reserved for the defaulting Category B Customer or Additional Category B Customer. All Customers agree to cooperate with the District in enabling the District to enter into any such contracts in order to prevent a default in the payment of the debt service on Bonds issued by the District to acquire or construct the System. Section 6.09. SURCHARGE. The Annual Operation and Maintenance Expense Requirement allocable to a Customer or Additional Customer may be increased by a surcharge as described in Section 5.03. In the event the Contracting Party is assessed a surcharge, the District will bill the Contracting Party for such surcharge monthly as determined by the District follow- ing the determination of the surcharge and the Con- tracting Party shall pay such surcharge within ten (10) days of the receipt of any such bill. Any such sur- charge collected by the District shall be applied by the District against the total cost of Operation and Maintenance Expense of the System. Section 6.10. PAYMENTS BY CONTRACTING PARTY. (a) Recognizing that the District will use payments received from the Contracting Party to the extent it is a Category B Customer to pay, secure and finance the issuance of the Bonds, it is hereby agreed that upon the effective date of this Agreement, the Contracting Party, to the extent it is a Category B Customer, shall be unconditionally obligated to pay the Facility Charge regardless of whether or not the Contracting Party actually discharges Wastewater hereunder, whether due to Force Majeure or otherwise. (b) On or before August 1 of each year the District will furnish the Contracting Party with an estimated schedule of monthly payments to be made by the Contracting Party for the ensuing Fiscal Year. On or before November 1 of each year, the District shall furnish the Contracting Party with a finalized schedule of the monthly payments to be made by such the Con- tracting Party to the District for the ensuing Fiscal Year. The Contracting Party hereby agrees that it will make such payments to the District on or before the last day of each month of such Fiscal Year. If the Contracting Party at any time disputes the amount to be paid by it to the District, the Contracting Party shall - 26 - nevertheless promptly make the payment or payments de- termined by District, and, if it is subsequently determined by agreement, arbitration, administrative agency or court decision that such disputed payments made by the Contracting Party should have been less, the District shall promptly revise and reallocate the charges among all parties then being served by the District in such manner that the Contracting Party will recover its overpayment together with interest thereon at reasonable rate to be determined by the District. (c) If the Contracting Party's Facility Charge or Service Charge is redetermined as herein provided, the District will promptly furnish the Contracting Party with an updated schedule of monthly payments reflecting such redetermination. (d) All interest income earned by the investment of any funds created in the Bond Resolution or any other funds related to the System shall be taken into account in determining the Facility Charge and the Service Charge. ARTICLE VII REQUIRED IMPROVEMENTS Section 7.01. DISTRICT TO DETERMINE REQUIRED IMPROVEMENTS. In the event that Required Improvements of the System are necessary in order to treat and dispose of waste adequately in accordance with the orders, rules, regulations or requirements of any regulatory body, other than the District, the District will determine the Required Improvement which is necessary. The District's determination that Required Improvements are necessary to enable the System to meet the waste treatment and disposal requirements of the Customers and Additional Customers shall be supported by a certificate from the District's consulting engi- neer which certificate shall be submitted to the Con- tracting Party. Section 7.02. DISTRICT'S DUTY TO MAKE REQUIRED IMPROVEMENTS. The District shall design, acquire, construct, own, operate, maintain and repair all Required Improvements. The District's obligation to acquire or construct any Required Improvement shall be contingent upon and subject to: (1) the District's obtaining sufficient funds to pay the Project Costs of the Required Improvement of the System including the payment of any Capacity Charges and the sale and delivery upon terms satisfactory to the District of the Improvement Bonds for any Required Improvement of the System; (2) the District's ability to obtain all sites, rights -of -way, easements, labor, equipment and materials required for acquisition or con- struction of any Required Improvement of the System; and (3) the District's obtaining all permits, approvals and licenses required to acquire or - 27 - construct the Required Improvement and to operate the System thereafter, including waste discharge permits issued by the Texas Water Commission or its successors and approval of the project and Improvement Bonds issued therefor by the Texas Water Commission or its successors. Section 7.03. CONTRACTING PARTY'S OBLIGATIONS IN EVENT OF REQUIRED IMPROVEMENT. (a) In the event the District determines that a Required Improvement is necessary, it shall notify all Customers and Additional Customers in writing of such fact. Such notice shall specify a date by which such Customer or Additional Customer shall be liable for contribution of its share of all funds necessary for acquisition or construction of the Required Improvement, either by way of a Capacity Charge therefor or by the District's issuance of Bonds therefor on behalf of such Customer or Additional Customer. The date so specified shall be not less than forty -five (45) days after such notice is mailed. Such notice shall include the estimated total Project Costs of the Required Improve- ment, the estimated Project Cost of the Required Improvement per LUE, and the number of LUE's for which each Customer and Additional Customer is responsible. At least thirty (30) days prior to such date, the Contracting Party shall notify the District as to whether it desires to be treated as a Category A Customer or (Additional Category A Customer) or Category B Customer (or Additional Category B Customer) for the purposes of such Required Improvement. (b) In the event the Contracting Party elects to be treated as a Category A Customer (or Additional Category A Customer) for purposes of such Required Improvement, it shall pay a Capacity Charge to the District by the date specified in the notice, which Capacity Charge shall be determined in the manner described in Article VI. (c) In the event the Contracting Party elects to be treated as a Category B Customer (or Additional Category B Customer) for purposes of the Required Improvement, the District shall use its best efforts to issue Improvement Bonds on behalf of the Contracting Party in an amount sufficient to provide from the Net Bond Proceeds the amount sufficient to pay the Contracting Party's share of the Project Costs of the Required Improvement in the manner described in Article VI. (d) If, thereafter, the estimated costs of the Required Improvement increase, the District shall notify the Contracting Party of such fact in the same manner as provid- ed in Section 6.01 hereof in connection with the acquisition or construction of Phase IA of the System and the Contract- ing Party shall be required to provide additional Capacity Charge payments or be responsible for additional Improvement Bonds, as appropriate, in the same manner as provided in Section 6.01 hereof in connection with the acquisition or construction of Phase IA of the System. (e) The Contracting Party shall thereafter be respon- sible for payment of any Facility Charge, if appropriate, and any Service Charge related to the Required Improvement in the same manner as provided in Article VI hereof. - 28 - ARTICLE VIII GENERAL PROVISIONS Section 8.01. OBLIGATIONS OF CONTRACTING PARTY. [FOR CITIES ONLY]. The District shall never have the right to demand payment by the Contracting Party of any obligation assumed or imposed on it under and by virtue of this Agree- ment from funds raised or to be raised by taxation, it being expressly understood by the parties hereto that all payments due by the Contracting Party hereunder are to be made from the revenues and income received by the Contracting Party from its waterworks and sanitary sewer systems. Section 8.02. PAYMENTS TO CONSTITUTE OPERATING EX- PENSES BY CONTRACTING PARTY. [FOR CITIES ONLY]. The Contracting Party represents and covenants that the services to be obtained pursuant to this Agreement are essential and necessary to the operation of the Contracting Party and its own Wastewater facilities, and that all payments to be made hereunder by it will constitute reasonable and necessary "operating expenses" of the Contracting Party's waterworks and sanitary sewer systems, within the meaning of Arti- cle 1113, Vernon's Texas Civil Statutes, and the provisions of all ordinances authorizing the issuance of all bonds of the Contracting Party which are payable from revenues of the Contracting Party's waterworks and sewer systems. Section 8.03. CONTRACTING PARTY TO ESTABLISH ADEQUATE RATES. [FOR CITIES ONLY]. The Contracting Party agrees to establish and collect such rates and charges for its water- works and Wastewater services to be supplied by its system as will make possible the prompt payment of all expenses of operating and maintaining its system including the payments contracted hereunder, and the prompt payment of the princi- pal of and interest on its obligations, if any, payable from the revenues of its waterworks and Wastewater systems. Section 8.04. MANDAMUS AND OTHER REMEDIES AGAINST CATEGORY B CUSTOMERS. To the extent the Contracting Party is a Category B Customer, the parties recognize that the District will be issuing its Bonds on behalf of the Con- tracting Party and will pledge the revenues from the Facili- ty Charge to secure payment of principal of, premium, if any, and interest on the Bonds. Therefore, the parties agree that, in addition to all other remedies provided herein or at law or in equity, the Contracting Party agrees that the District or any Other Customer shall be entitled to a writ of mandamus issued by a court of competent jurisdic- tion compelling and requiring the Contracting Party to take all actions covenanted herein and to make prompt payment of the Facility Charge and other payments contracted to be made herein and to observe and perform the covenants, obligations and conditions imposed in this Agreement. Section 8.05. OTHER REMEDIES. The District also agrees that the Contracting Party shall be entitled to a writ of mandamus or injunctive relief from a court of competent jurisdiction compelling and requiring the District to perform the covenants, obligations and conditions imposed upon the District in this Agreement. Section 8.06. USE OF PUBLIC PROPERTY. By these presents, the Contracting Party authorizes use by the District of streets and general utility or sewer easements - 29 - of the Contracting Party for construction, operation and maintenance of the District's System, so long as such use by the District is in compliance with the terms of any easement utilized by the District and does not interfere with any lawful use by the Contracting Party and subject to all of the Contracting Party's ordinances, rules and regulations respecting the manner of such use and restoration of lands, pavement or improvements resulting from exercise of the rights provided in this section, including the cost of relocation of any facilities located within any such ease- ment as an expense of the District's System. The District will cooperate with the Contracting Party in the timing, planning and installation of the System to be constructed and installed by the District. Section 8.07. USE OF REVENUES OF SYSTEM. All revenues received from any source whatsoever by the District by reason of its ownership of this System shall, to the extent permitted by law, be credited to the funds of the System as established herein and in the Bond Resolutions and, to the extent required or permitted, be credited to the appropriate Customer. To the extent permitted by law, if the District receives income from the use of treated Wastewater, prior to its discharge into a public stream of the State of Texas, the District will apply said income against the Operation and Maintenance Expense of the System. No funds derived from the Customers and Additional Customers shall ever be used for the benefit of any project the revenues of which have been excluded from the pledge for payment of the Bonds hereunder or which may be so excluded in the future. Section 8.08. FORCE MAJEURE. In case by reason of "Force Majeure" either party hereto shall be rendered unable wholly or in part to carry out its obligations under this Agreement, then if such party shall give notice and full particulars of such "Force Majeure" in writing to the other party within a reasonable time after occurrence of the event or cause relied on, the obligation of the party giving such notice, so far as it is affected by such Force Majeure, with the exception of the obligation of the Contracting Party to pay Facility Charges, if appropriate, shall be suspended during the continuance of the inability then claimed, but for no longer period, and any such party shall endeavor to remove or overcome such inability with all reasonable dispatch. The term "Force Majeure" as employed herein, shall means acts of God, strikes, lockouts or other indus- trial disturbances, acts of public enemy, orders of any kind of the United States or the State of Texas or any civil or military authority, insurrections, riots, epidemics, land- slides, lightning, earthquakes, fires, hurricanes, storms, floods, washouts, droughts, arrests, restraint of government and people, civil disturbances, explosions, breakage or accidents to machinery, pipelines or canals, partial or entire failure of water supply and inability on part of the Contracting Party to provide water necessary for operation of its water and Wastewater system hereunder or of District to receive Wastewater on account of any other causes not reasonably within the control of the party claiming such inability. It is understood and agreed that the settlement of strikes and lockouts shall be entirely within the dis- cretion of the party having the difficulty and that the above requirement that any Force Majeure shall be remedied with all reasonable dispatch shall not require the settle- ment of strikes and lockouts by acceding to the demands of the opposing party or parties when such settlement is - 30 - unfavorable in the judgment of the party having the diffi- culty. Section 8.09. INSURANCE. The Bond Resolution will contain appropriate provisions requiring the District to carry insurance for purposes and in amounts which would ordinarily be carried by a privately owned utility company under contract to perform services similar to those under- taken by the District in this Agreement. Such provisions will be so designed as to afford protection not only for the owners of the Bonds but to assure and facilitate, to the extent feasible and practicable, the restoration of damaged or destroyed properties and to minimize the interruption of service to the Contracting Party and others. Section 8.10. REGULATORY BODIES. This Agreement shall be subject to all valid rules, regulations and laws applica- ble hereto passed or promulgated by the United States of America, the State of Texas or any governmental body or agency having lawful jurisdiction or any authorized rep- resentative or agency of any of them. Section 8.11. DISTRICT CONTRACTS WITH OTHERS. The District reserves the right to contract with other persons, natural or corporate, private or public, to perform services similar to those to be performed under this Agreement or other services; provided, however, that no contract will be made for service within the Contracting Party's limits or within the extraterritorial jurisdiction of any Contracting Party, if appropriate, as defined, in Article 970a, Vernon's Annotated Civil Statutes, on the date of such contract, without the District first allowing the Contracting Party a reasonable opportunity (not to be less than three months) to agree to provide Wastewater service to any such person. Section 8.12. ADDITIONAL CAPACITY AND FACILITIES. As the responsible agency for the establishment, adminis- tration, operation and maintenance of the System, the District will, from time to time, as provided previously herein, determine when it is necessary to provide additional facilities to receive, transport, treat and dispose of additional Wastewater of the Customers and any Additional Customers. In making the determinations called for herein, District covenants that such determinations will be made only after requests from Customers or Additional Customers and after detailed studies of statistical data available as to the need and feasibility have been made and after con- sulting with consulting engineers and financial advisors. The Contracting Party will be kept advised at all times of planning and proposed development of the System. In no event shall any contract with an Additional Customer be on terms more favorable than is available to the Contracting Party hereunder unless the governing body of the Contracting Party shall approve such contract. Section 8.13. CONTRACTS WITH OTHERS. The Contracting Party shall have the right to enter into contracts with other persons natural or corporate, private or public, to receive Wastewater from such persons. The Contracting Party covenants that it will advise the District of all such written contracts and will, if requested by the District, furnish the District with a list of all Customers other than retail, residential customers. - 31 - Section 8.14. ANNUAL REPORT AND AUDIT OF SYSTEM. The District shall, at the close of each Fiscal Year, cause to be prepared an Annual Report and Audit of the System. Such report shall contain such matters and information as may be considered necessary and useful by the District and as customarily supplied in an audit performed by a certified public accountant. A copy of the Annual Report and Audit and accompanying Management Letter shall be promptly provid- ed to the Contracting Party. Section 8.15. GOVERNMENTAL REGULATIONS. In each instance herein where reference is made to a federal or State regulation, it is the intention of the parties that at any given time the then current edition of any such federal or State regulation shall apply. New standards shall be adopted by the District which are in compliance with appli- cable State and federal laws and any valid rules and regu- lations issued pursuant thereto. Section 8.16. OPERATION OF THE SYSTEM. The District covenants that it will operate the System in accordance with accepted good business and engineering practices and in accordance with requirements of the Clean Water Act and the Texas Water Code, as amended, and as said laws may be amended in the future, and any rules and regulations issued and to be issued by appropriate agencies in the adminis- tration of said laws. The Contracting Party and the Dis- trict agree that their obligations hereunder shall include compliance with the requirements made under said laws, and any rules and regulations issued pursuant thereto. Section 8.17. NO ADDITIONAL WAIVER IMPLIED. No waiver or waivers of any breach or default (or any breaches or defaults) by either party hereto of any term, covenant, condition, or liability hereunder, or of performance by the other party of any duty or obligation hereunder, shall be deemed or construed to be a waiver of subsequent breaches or defaults of any kind, under any circumstances. Section 8.18. ADDRESSES AND NOTICE. Unless otherwise provided in this Agreement, any notice, communication, request, reply, or advice (herein severally and collective- ly, for convenience, called "Notice ") herein provided or permitted to be given, made or accepted by either party to the other must be in writing and may be given or be served by depositing the same in the United States mail postpaid and registered or certified and addressed to the party to be notified, with return receipt requested, or by delivering the same to an officer of such party, or by prepaid tele- gram, when appropriate, addressed to the party to be no- tified. Notice deposited in the mail in the manner hereinabove described shall be conclusively deemed to be effective, unless otherwise stated in this Agreement, from and after the expiration of four (4) days after it is so deposited. Notice given in any other manner shall be effective only if and when received by the party to be notified. For the purpose of Notice, the addresses of the parties shall, until changed as hereinafter provided, be as follows: - 32 - If to the District, to: If to the Contracting Party, to: ?AY A E. r enal_ (oaa: f 77 Kock, IIX41 The parties shall have the right from time to time and at any time to change their respective addresses and each shall have the right to specify as its address any other address by at least fifteen (15) days' written notice to the other party. Section 8.19. MODIFICATION. This Agreement shall be subject to change or modification only with the mutual consent of the governing bodies of each of the parties hereto, but the Contracting Party recognizes that the Bond Resolution may contain covenants by the District not to consent to certain changes or modifications of this Agree- ment. Section 8.20. ASSIGNABILITY. This Agreement shall not be assignable by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. Section 8.21. SEVERABILITY. The provisions of this Agreement are severable, and if any provision or part of this Agreement or the application thereof to any person or circumstance shall ever be held by any court of competent jurisdiction to be invalid or unconstitutional for any reason, the remainder of this Agreement and the application of such provision or part of this Agreement to other persons or circumstances shall not be affected thereby. Section 8.22. MERGER. This Agreement constitutes the entire agreement between the parties relative to the subject matter thereof. There have been and are no agreements, covenants, representations or warranties between the parties other than those expressly stated herein or expressly provided for herein. ARTICLE IX DISTRICT ANNUAL BUDGET Section 9.01. FILING WITH CONTRACTING PARTY. Not less than forty (40) days before commencement of the second Fiscal Year and not less than forty (40) days before the commencement of each Fiscal Year thereafter while this Agreement is in effect, District snail cause to be prepared and filed with each Customer and Additional Customer its tentative budget for the operation of the System only for the next ensuing Fiscal Year. If no protest or request for a hearing on such tentative budget is presented to District within thirty (30) days after such filing of the tentative budget by one or more Customers or Additional Customers, the tentative budget for the System, when adopted by District's - 33 - Board of Directors, shall be considered for all purposes as the "Annual Budget" for the next ensuing Fiscal Year. But if a protest or request for a hearing is duly filed, it shall be the duty of the District to fix a date and time for a hearing on the tentative budget before the Board of Directors of the District and the District shall so advise all Customers and Additional Customers in writing. After said hearing, the Board of Directors of District may adopt the budget or make such amendments thereof as to it may seem proper. The budget thus approved by the Board of Directors of the District shall be the Annual Budget for the next ensuing Fiscal Year. ARTICLE X OTHER MATTERS Section 10.01. AGREEMENT CONCERNING EXISTING UTILITY SYSTEMS. (a) It is expressly understood and agreed that the Contracting Party has acquired the plant site for the District's Wastewater treatment plant at great expense to the Contracting Party and the Contracting party hereby agrees, if allowed by applicable law, to convey to the District ownership of such plant site free and clear of all liens and encumbrances except as otherwise agreed to by the District. The purchase price shall be eighteen thousand five hundred (18,500) dollars per acre for approximately thirty (30) acres as described on Exhibit "A" attached hereto. Such sale shall be consumated not later than three (3) months from the Funding Date for construction of Phase IA of the System. (b) By the execution of similar Agreements with the District, each Customer of the District agrees that said Customer will not protest or take any action to prevent or delay any permit amendment, renewal, extension, temporary order or other authorization sought by the Contracting Party to enable the Contracting Party to continue operation of its existing Wastewater treatment plants pending completion of construction and operation of Phase I of the System. (c) The District agrees also to reimburse the Contracting Party for any and all out -of- pocket expenses incurred prior to the Initial Funding Date for Phase IA of the System by the Contracting Party in design of Phase IA of the System and for other items related to Phase IA of the System (except for costs of acquiring any governmental permits), such reimbursement to occur on the Initial Funding Date for Phase IA of the System. (d) By execution of this Agreement, the Contracting Party acknowledges that it has read the provisions of the agreements between the District and the Other Customers, including particularly Article X of such agreements and the Contracting Party hereby confirms, consents, and agrees to said provisions to the extent applicable to the Contracting Party. - 34 - ARTICLE XI EFFECTIVE DATE AND TERM OF AGREEMENT Section 11.01. EFFECTIVE DATE. This Agreement shall become effective upon execution by all Customers specified in Section 3.03(4), and such fact shall be communicated in writing to the Contracting Party. This Agreement shall constitute the sole and only contract between the Contract- ing Party and the District regarding Wastewater disposal services and the Contracting Party hereby recognizes and affirms its duty of making the payments required hereunder. Section 11.02. TERM OF AGREEMENT. This Agreement shall continue in force and effect from the effective date hereof for a period of forty (40) years, and thereafter shall continue in effect until any Bonds, or Bonds issued to refund same, if any, have been paid in full. The Contract- ing Party shall have the right to the continued performance of services provided hereunder for the useful life of the System after amortization of the District's investment in the System, upon payment of charges by the Contracting Party, reduced to take into consideration such amortization. IN WITNESS WHEREOF, the parties hereto acting under authority of their respective governing bodies have caused - 35 - s this Agreement to be duly executed in several counterparts, each of which shall cpnstitute an original, all as of the day of i Q , 1985. BRUSHY CREEK WATER CONTROL & IMPROVEMENT DISTRICT NO. 1 OF WILLIAMSON AND MILAM COUNTIES ATTEST: Secretary (SEAL) ATTEST: (SEAL) er Collinsworth Jo nne Land City Secretary BY - 36 - Bob E. Livel President CITY OF ROUND ROCK, TEXAS BY: Mike Robinson Mayor Buck Telander 73 AC. r ,; L c' \ J O S t' W. E . gi J C r t y 32. 43 AO. 504 /342 31.372 AC. to v, City of Round Rock y 3.5G3 A0. n1 M A RS 85° /5"V 377 Z' 23' A. G. Rossow Estate 31.00 A G. 550 /404 . ,r) 3 ,\ g X73 B A I_ I_ SURVEY 0409 ti • Ir °.t p,., i mh of 0 Sron pow s pit" A p � 4 / tl3TATE OF TEXAS KNOW ALL` MIN at TN on- #AiiDAa . cutoffs of WIWL AM$0F1 ' vO it THAT t, w K. FOPE &T, do MrebV certlry that the above ltefc pact was sjrveyed under my supennscn and trot did descn^ , oft I J M true and Cont et to the nest of my Mnowrei a i b _ 65 TO CERTIFY Wtiil a WtT$ SS my : .ar i ani. sem rt Fwory jya -1 s on this Ito B'`4 Ana 4t /Ow,. so a stia 79 h' r , lr,i .. �I --I' Li. �, N t F. ` ^ :j •. J f' yr. 934dEll f L ( ) Y `l'. 4 1 ti Mrs. V. A. Southern THE STATE OF TEXAS COUNTY OF WILLIAMSON INTERIM WASTEWATER DISPOSAL CONTRACT This agreement is entered into by and among Brushy Creek Water Control and Improvement District No. 1 of Williamson and Mile. Counties the ( "District "), the City of Austin ( "Austin "), the City of Round Rock ( "Round Rock "), Williamson County Municipal Utility District No. 2 ( "MUD 2 "), and Williamson County Municipal Utility District No. 3 ( "MUD 3 "): all of such parties other than the District being collectively referred to as the "Customers ". WHEREAS, the District and the Customers have heretofore entered into a Wastewater Disposal Contract dated December 18, 1985, hereinafter referred to as the "Contract ", providing for the construction and operation of a regional wastewater system, and; WHEREAS, Article 10, Section 10.02 of said Wastewater Disposal Contract provides for the District to enter into an agreement with Round Rock, to obtain interim wastewater transportation and treatment capacity and services in the Round Rock Wastewater Transportation and Treatment System, and; WHEREAS, Round Rock is willing to provide such capacities as provided for hereinafter; NOW, THEREFORE, the District, Round Rock, and the other Customers hereby agree as follows: ARTICLE I. WASTEWATER TRANSPORTATION. SECTION 1.01 NECESSARY IMPROVEMENTS: The parties hereto recognize that Round Rock does not now have complete facilities to provide the wastewater transportation contemplated by this agreement and any obligation of Round Rock to provide such transportation 1s contingent upon the completion of certain additional facilities. SECTION 1.02 FACILITIES TO BE COMPLETED: The facilities which must be completed before Round Rock can provide any wastewater transportation hereunder are: a. Round Rock's Onion Branch CIP. b. Round Rock's Lake Creek 36" Interceptor and 60" Interceptor and Round Rock's 60" Brushy Creek Interceptor. c. Round Rock's 2.5 MGD wastewater treatment plant d. (1) Round Rock's Lake Creek Pumpover, which shall be constructed and financed by the City of Austin according to plans and specifications approved by the City of Round Rock, and upon completion thereof shall be owned and operated by the City of Round Rock. or (2) District Contract 6. SECTION 1.03 AREA OF TRANSPORTATION: Upon completion of the facilities set forth in Section 1.02, Round Rock agrees to provide the District with wastewater transportation from the northern terminus of its existing Onion Creek Interceptor "Point of Entry" to its proposed 2.5 MGD wastewater treatment facility and /or the District's proposed 10 MGD wastewater treatment facility, in the amounts provided herein below. ARTICLE II. ALLOCATION OF TRANSPORTATION CAPACITY SECTION 2.01 CONFLICT AS TO ALLOCATION: Insofar as the allocation of wastewater transportation capacity herein conflicts with the allocation of wastewater transportation capacity as set forth in Section 10.02 of the Contract, this agreement shall prevail and be binding upon all parties hereto. SECTION 2.02 FACILITIES AFFECTING CAPACITY: The volume of wastewater which Round Rock will be able to transport hereunder depends upon certain facilities to be constructed. These facilities are: a. A 16" force main and 24" gravity interceptor described as contract 5 of the District's Regional System as defined in the Contract under Option IV F. b. A 60" gravity interceptor described as contract 8 of the District's Regional System as defined in the Contract under Option IV F. c. A 12" force main to be constructed pursuant to an Agreement regarding construction, ownership, purchase and use of specific wastewater transportation facilities 2 among the parties hereto and Bill Milburn, Inc., and Fern Bluff Municipal Utility District. d. District's gravity interceptor and tunnel described as contracts 20 and 21 of the District's Regional System as defined in the Contract under Option IV F. SECTION 2.03 PRIOR TO COMPLETION OF DISTRICT CONTRACTS 5 AND 6: Prior to completion of the facilities described in Contracts 5 and 6 above, the ability of Round Rock to transport wastewater hereunder will be limited by the transportation capacity of Round Rock's Lake Creek Pumpover and such capacity shall be allocated as follows: Throughout this contract 1 LUE shall be deemed to be equal to 350 gallons per day on a monthly average basis: a. Up to 750 LUE's per day: (1) Austin - 600 LUEs (2) Round Rock - 150 LUEs b. All in excess of 750 LUE's per day: (1) Austin - 75% (2) Round Rock - 25% SECTION 2.04 AFTER COMPLETION OF CONTRACT 6, AND BEFORE COMPLETION OF CONTRACT 5: After the completion of the District's Contract 6 facilities described in 2.02 b. above and before the completion of the District's Contract 5 facilities described in 2.02 a. above the total capacity which will be transported by Round Rock will be limited to the capacity of the facilities described in 2.02 c. above, and such transportation by the City of Round Rock shall be allocated as set forth in 2.03 above. SECTION 2.05 AFTER COMPLETION OF TRANSPORTATION FACILITIES: After completion of the facilities described in 2.02 a., b., and c. above, the total capacity which will be transported by Round Rock will be limited by the initial pumping capacity of the Onion Creek Lift Station of approximately 1850 LUEs per day and such initial pumping capacity will be allocated as follows: a. Round Rock - 150 LUEs per day b. Austin - 800 LUEs per day c. MUD 2 - 900 LUEs per day d. All excess: (1) Austin - 75% (2) Round Rock - 25% 3 SECTION 2.06 LIMIT ON TRANSPORTATION: At no time will the transportation of wastewater hereunder through any of Round Rock's facilities exceed 5.000 LUEs per day. ARTICLE III. EXPANSION OF ONION BRANCH LIFT STATION SECTION 3.01 PROVISION FOR EXPANSION OF ONION BRANCH LIFT STATION: It is understood that the capacity of the Onion Branch Lift Station is limited to approximately 1650 LUEs per day, and, if a Customer wants the capacity of such lift station to be expanded, such Customer shall request such expansion in writing to the District which shall process such request in general accordance with the procedure requirement provisions of Section 6.05 (d) of the Contract. SECTION 3.02 ALLOCATION OF CAPACITY: Each Customer requesting additional Onion Branch Lift Station Capacity shall be entitled to such percentage of the total additional capacity requested by all Customers as its percentage of Reserved Capacity in the Regional System. SECTION 3.03 ADDITIONAL CAPACITY: In the event the expansion to be made results in additional capacity over and above that required by the requesting Customer, no other Customer shall be allowed to use all or part of the additional capacity until reimbursement. on a pro -rata basis of use of such capacity created by the expansion, of all costs of the construction is made to the Customer or Customers which funded the expansion. SECTION 9.04 TERMINATION: The interim wastewater transportation services agreed to be provided by Round Rock to the District shall terminate upon completion of all of the District's facilities under its proposed Contracts 6, 20 and 21. ARTICLE IV. TREATMENT SECTION 4.01 COMMENCEMENT OF TREATMENT: Subject to the contingency provisions of Section 4.02, Round Rock agrees to provide to the District interim wastewater treatment services as provided below beginning at the time the facilities provided for in Section 1.02 have been completed and are operational and the District commenced delivery of wastewater into Round Rock's Onion Creek Interceptor. 4 SECTION 4.02 CONTINGENCY: Round Rock's obligation to furnish wastewater treatment services at its 2.5 MGD wastewater treatment plant as provided herein is contingent upon the following: a. Round Rock having treatment capacity in such Plant. b. At such time as actual metered flow into the Plant reaches or exceeds eighty percent (80%) of such Plant capacity, the District upon request of any Customer or Customers shall immediately commence or cause to be commenced the engineering, design and approval of temporary wastewater treatment facilities to be located at the Round Rock 2.5 MGD Plant which shall increase total capacity of the Plant by no less than an additional 100,000 gallons per day, average daily flow. At such time as actual metered flow into the Plant reaches or exceeds ninety percent (90 %) of such capacity, actual construction and /or acquisition of said temporary wastewater treatment facilities shall be commenced immediately. The costs of constructing or otherwise obtaining such temporary facilities including but not limited.to engineering and design, shall be born by such Customer or Customers requesting the same, and any subsequent Customers requesting capacity therein shall reimburse the Customer or Customers bearing the initial cost, their pro rata share of such costs based upon requested capacity. The operation and maintenance thereof shall be considered "operating expenses" and shall be born by the Customers based on a pro rata basis according to their actual use. Such temporary facilities shall be the property of and operated by the District. Subsequent phases, each providing an additional capacity of no less than 100,000 gallons per day, shall be added to the Plant, on the same basis: design, construction and approval to be commenced by the District upon the request of any Customer or Customers each time actual flow into the Plant reaches or exceeds eighty percent (80 %) of the then total Plant capacity, with actual construction to commence Immediately upon actual flow reaching ninety percent (90 %) of said existing capacity. Notwithstanding anything contained herein to the contrary, the District shall not be required to construct or obtain temporary wastewater treatment facilities if the actual flow into the plant above eighty percent (80 %) of the total plant capacity is generated solely by Round Rock, and neither the District nor the customers have requested additional 5 capacity, and the parties may, at any time, agree to size any succeeding expansion sufficient to meet the needs of the District. All discharge through the temporary facilities shall be through the District's Wastewater Permit. SECTION 4.03 TERMINATION: The interim wastewater treatment services agreed to be provided by Round Rock to the District herein shall terminate at such time as the District's proposed 10 MOD wastewater treatment plant is completed and operational. SECTION 4.04 CHARGES: The price for the services to be provided by Round Rock to the District hereunder shall be: a. For wastewater transportation services, such services shall be provided at no charge; however, the gravity portion of the District's Onion Creek Interceptor shall become sole property of the City of Round Rock upon termination thereof as set forth in Section 3.04. b. For wastewater treatment services, such services shall be provided at 2 times the lowest in -city rate for any residential customer. SECTION 4.05 QUALITY OF WASTEWATER: a. The District shall have the right to discharge wastewater into the Round Rock wastewater system under this Agreement meeting the requirements for quantity as set forth in this Agreement and the requirements of quality as set forth in the Contract. The point of entry of wastewater from the District's System to the Round Rock wastewater system shall be at the northern end of the existing Round Rock Onion Creek Interceptor. SECTION 4.08 METERING: a. The District will furnish, install, operate and maintain at its expense at the Point of Entry the necessary equipment and device of standard type for measuring properly all wastewater to be discharged under this Agreement. Such meter or other equipment shall remain the property of the District. Round Rock shall have access to such metering equipment at all reasonable times for inspection and examination and the reading, calibration and adjustment thereof shall be done jointly by employees or agents of the District and Round Rock. 6 All readings of meters will be entered upon proper books of record maintained by the District and a copy of said readings supplied to Round Rock. Upon written request. Round Rock may have access to said record books during reasonable business hours. b. Not more than three times In each year of operation, the District shall calibrate the meters, if requested in writing by Round Rock, in the presence of a representative of Round Rock, and the parties shall jointly observe any adjustments which are made to the meter in case any adjustment is found to be necessary. If, for any reason, the meter is out of service or out of repair or if, upon any test, the percentage of inaccuracy of the meter is found to be in excess of five (5) percent, registration thereof shall be corrected for a period of time extending back to the time when such inaccuracy began, if such time is ascertainable, and if not ascertainable, then for a period extending back one -half (1/2) of the time elapsed since the date of the last calibration, but in no event further back than a period of six (6) months. The unit of measurement for wastewater delivered hereunder shall be one thousand (1,000) gallons, U.S. Standard Liquid Measure. ARTICLE V. LIABILITY SECTION 5.01 LIABILITY OF PARTIES: The District and Round Rock shall each be responsible for the control of wastewater within each entity's system or facilities. As between the parties. each party hereto agrees to save and hold harmless the other party from all claims, demands and causes of action which may be asserted by anyone on account of the reception, transportation, delivery and disposal of wastewater while the wastewater is in the control of such party. This covenant is not made for the benefit of any third party. ARTICLE VI. FORCE MAJEURE SECTION 6.01 In case by reason of "Force Majeure" any party hereto shall be rendered unable wholly or in part to carry out its obligations under this Agreement, then if such party shall give notice and full particulars of such "Force Majeure" in writing to the other parties within a reasonable time after occurrence of the event of cause relied on, the obligation of the party giving such notice, so far as it is affected by such "Force 7 Majeure", with the exception of the obligation to make monetary payments hereunder, shall be suspended during the continuance of the inability then claimed, but for no longer period, and any such party shall endeavor to remove or overcome such inability with all reasonable dispatch. The term "Force Majeure" as employed herein shall mean Acts of God. strikes. lockouts, or other industrial disturbances, acts of public enemy, orders of any kind of the United States or of the State of Texas or any civil or military authority, insurrections, riots, epidemics, landslide, lightning, earthquakes, fires. hurricanes, storms, floods, washouts, droughts, arrests, restraint of government and people, civil disturbances, explosions, breakage or accidents to machinery, pipelines or canals, partial or entire failure of water supply, and inability on the part of such party to provide water necessary for operation of its water and wastewater system hereunder or of Round Rock to receive wastewater on account of any other causes not reasonably within the control of the party claiming such inability. It is understood and agreed that the settlement of strikes and lockouts shall be entirely within the discretion of the party having the difficulty, and that the above requirement that any "Force Majeure" shall be remedied with all reasonable dispatch shall not require the settlement of strikes and lockouts by acceding to the demands of the opposing party or parties when such settlement is unfavorable in the judgment of the party having the difficulty. ARTICLE VII. INTERPRETATION SECTION 7.01 This Agreement shall be subject to all valid rules, regulations and laws applicable hereto passed or promulgated by the United States of America, the State of Texas or any other governmental body or agency having lawful Jurisdiction or any authorized representative or agency or any of them. No waiver or waivers of any breach or default (or any breaches or defaults) by any party hereto of any term, covenant, condition or liability hereunder or of the performance by the other party of any duty or obligation hereunder, shall be deemed or construed to be a waiver of subsequent breaches or defaults of any kind, under any circumstances. ARTICLE VIII. AMENDMENT SECTION 8.01 This Agreement shall be subject to change or modification only with the mutual consent of the governing body of each party hereto. 8 If to Round Rock, to: City of Round Rock 214 East Main Street Round Rock, Texas 78664 Attn: City Manager If to Austin, to: City of Austin P. 0. Box 1088 Austin, Texas 78767 -8828 If to MUD 2, to: ARTICLE IX. ASSIGNMENT SECTION 9.01 This Agreement shall not be assignable by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. ARTICLE X. SEVERABILITY SECTION 10.01 The provisions of this Agreement are severable, and if any provision or part of this Agreement or the application thereof to any person or circumstance shall ever be held by any court of competent jurisdiction to be invalid or unconstitutional for any reason, the remainder of this Agreement and the application of this provision or part of this Agreement to other persons or circumstances shall not be affected thereby. ARTICLE XI. NOTICES SECTION 11.01 Unless otherwise provided in this Agreement, the addresses of the parties for purposes of any communications to be made under this Agreement are as follows: If to the District, to: Brushy Creek Water Control and Improvement District No. 1 of Williamson & Milani Counties P. 0. Box 882 Taylor, Texas 76574 Attn: President, Board of Directors Attn: Director of Water and Wastewater Attn: President, Board of Directors 9 Williamson County Municipal Utility District No. 2 3737 Hairy Man Road Round Rock, Texas 78681 ATTEST: If to MUD 3, to: Williamson County Municipal Utility District No. 3 P. 0. Box 986 Cedar Park, Texas 78613 Attn: General Manager If to Fern Bluff, to: Fern Bluff Municipal Utility District 2600 One American Center Austin, Texas 78701 Attn: President Roscoe Conoley Secretary ARTICLE XII. ENTIRE AGREEMENT SECTION 12.01 This Agreement constitutes the entire agreement between the parties relative to the subject matter thereof. There have been and are no agreements, covenants, representations or warranties between the parties other than those expressly stated herein or expressly provided for herein. IN WITNESS WHEREOF, the parties hereto acting under the authority of their respective governing bodies have caused this Agreement to be duly executed in several counterparts, each of which shall constitute an original, all as of the day of . 190e. 10 BRUSHY CREEK WATER CONTROL AND IMPROVEMENT- •DISTRICT NO. 1 OF WILLIAMSON AND MILAM COUNTIES P. 0. Box 882 Taylor, Texas 78574 Dan Mize President v Executed / , 1986 ATTEST: 6 51a4 E. Aldridg e City Clerk ATTEST: / i * _AO/ /. .tiS / / //! J.� nne Land Secretary ATTEST: 7. Al Par cio Secretary ATTEST: 12,a c 11 CITY OF AUSTIN P. 0. Box 1088 Austin, Texas 78767 -8828 '�- 4�u�o✓s�c� Jorge Carrasco City Manager Executed , 1986 CITY OF ROUND ROCK 214 E. Main Round Rock, Texas 78664 Mike Robinson Mayor Executed , 1986 WILLIAMSON COUNTY MUNICIPAL UTILITY DISTRICT NO. 2 3737 Hairy Man Road Round Rock. Texas 78881 �� Wayne od President Executed , 1986 WILLIAMSON — COUNTY MUNICIPAL UTILITY DISTRICT NO. 3 408 Ridgewood Road Cedar Park, Texas 78613 Danny Mal ne 1a s P(, a khurst Secretar President Executed , 1986