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RES 1538 07/12/2016 OF C/ #,,,,,,„moo x r O � x . �"nmrnnnxnen„n,� TeX A`' "City of Choice" Resolution Number 1538 RESOLUTION APPROVING A BOND RESOLUTION ADOPTED BY THE BOARD OF TRUSTEES OF THE CANYON REGIONAL WATER AUTHORITY AUTHORIZING THE ISSUANCE OF OBLIGATIONS DESIGNATED AS "CANYON REGIONAL WATER AUTHORITY TAX- EXEMPT CONTRACT REVENUE AND REFUNDING BONDS (LAKE DUNLAP/MID-CITIES PROJECT), SERIES 2016"; APPROVING THE REGIONAL WATER SUPPLY CONTRACT BETWEEN THE CITY OF CIBOLO, TEXAS, SAN ANTONIO WATER SYSTEM, GREEN VALLEY SPECIAL UTILITY DISTRICT, EAST CENTRAL SPECIAL UTILITY DISTRICT, THE CITY OF MARION, TEXAS, CRYSTAL CLEAR SPECIAL UTILITY DISTRICT, SPRINGS HILL WATER SUPPLY CORPORATION AND THE CANYON REGIONAL WATER AUTHORITY; AUTHORIZING THE MAYOR OR THE CITY MANAGER OF THE CITY OF CIBOLO, TEXAS TO EXECUTE ON BEHALF OF THE CITY OF CIBOLO, TEXAS ALL DOCUMENTS, INCLUDING AN APPROVAL CERTIFICATE AFTER THE REFUNDING BONDS ARE SOLD, IN CONNECTION WITH THIS TRANSACTION; AND OTHER MATTERS IN CONNECTION THEREWITH NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CIBOLO, TEXAS THAT: Section 1. The City Council of the City of Cibolo, Texas (the "City") has reviewed and hereby approves (i)the "Bond Resolution", including the factual findings contained therein and the parameter limitations set forth in Section 1 of the Bond Resolution, adopted by the Board of Trustees of the Canyon Regional Water Authority relating to the issuance of obligations designated as "Canyon Regional Water Authority Tax-Exempt Contract Revenue and Refunding Bonds (Lake Dunlap/Mid-Cities Project), Series 2016" (the "Bonds") to be sold within 180 days from the approval date hereof, (ii) the Regional Water Supply Contract, including the factual findings contained therein, to be executed between the City of Cibolo, Texas, the San Antonio Water System, Green Valley Special Utility District, East Central Special Utility District, the City of Marion, Texas, Crystal Clear Special Utility District, Springs Hill Water Supply Corporation, and the Canyon Regional Water Authority which provides certain security for the payment of the Bonds and entered into among the parties named therein (the "Contract"), and (iii) the Sale and Offering Documents (as defined in the Contract). The Mayor (including the Mayor Pro Tem) or the City Manager (the "Authorized Officials") of the City of Cibolo, Texas is hereby authorized to execute on behalf of the City any and all documents in connection with this 36123892.2 transaction, including the Approval Certificate (as defined in the Bond Resolution). This resolution may be relied upon by the appropriate representatives to this transaction including the Texas Attorney General in their review and approval of this transaction. Section 2. The City Council recognizes that Section 50 of the Bond Resolution contains covenants of the Authority relating to the Bonds. Since certain financial information, financial status, operating data, and annual audits of the City's utility system will be entirely within the control and disposition of the City, and the Sale and Offering Documents (the "Offering Documents"), describes a continuing disclosure undertaking agreement (the "Undertaking") of the City, the City Council specifically adopts the covenants hereinafter described, which comprise the Undertaking, and shall comply therewith for so long as all or any portion of the Special Payments made by the City under the Contract act as security for or a source of repayment of the Bonds. A. Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: EMMA means the MSRB's Electronic Municipal Market Access system, accessible by the general public, without charge, on the internet through the uniform resource locator (URL) http://www.emma.msrb.org. MSRB means the Municipal Securities Rulemaking Board. Rule means SEC Rule 15c2-12, as amended from time to time. SEC means the United States Securities and Exchange Commission. B. Annual Reports. The City shall file annually with the MSRB, (1) within six months after the end of each fiscal year of the City ending in or after 2016, financial information and operating data with respect to the City of the general type included in the Offering Documents authorized by Section 50 of the Bond Resolution, being the information described in Exhibit A hereto, and (2) if not provided as part of such financial information and operating data, audited financial statements of the City, when and if available. Any financial statements so to be provided shall be (i)prepared in accordance with the accounting principles described in Exhibit A hereto, or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation, and (ii) audited, if the City commissions an audit of such financial statements and the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within such period, then the City shall file unaudited financial statements within such period and audited financial statements for the applicable fiscal year to the MSRB, when and if the audit report on such financial statements becomes available. Under current Texas law, including, but not limited to, Chapter 103, as amended, Texas Local Government Code, the City must have its records and accounts audited annually and shall have an annual financial statement prepared based on the audit. The annual financial statement, including the auditor's opinion on the statement, shall be filed in the office of the City Secretary 36123892.2 -2- within 180 days after the last day of the City's fiscal year. Additionally, upon the filing of this financial statement and the annual audit, these documents are subject to the Texas Open Records Act, as amended, Texas Government Code, Chapter 552. If the City changes its fiscal year, it will file notice of such change (and of the date of the new fiscal year end) with the MSRB prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. C. Notice of Certain Events. The City shall file notice of any of the following events with respect to the Bonds to the MSRB in a timely manner and not more than 10 business days after occurrence of the event: (1) Principal and interest payment delinquencies; (2) Non-payment related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) Modifications to rights of holders of the Bonds, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the Bonds, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership, or similar event of the City, which shall occur as described below; (13) The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) Appointment of a successor or additional paying agent/registrar or the change of name of a paying agent/registrar, if material. 36123892.2 -3- For these purposes, any event described in the immediately preceding paragraph (12) is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. The City shall file notice with the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with this Section by the time required by this Section. D. Limitations, Disclaimers and Amendments. The City shall be obligated to observe and perform the covenants specified in this Section for so long as, but only for so long as, the City remains an"obligated person" with respect to the Bonds within the meaning of the Rule, except that the City in any event will give notice of any deposit that causes the Bonds to be no longer Outstanding. The provisions of this Section are for the sole benefit of the holders and beneficial owners of the Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITH OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Section shall constitute a breach of or default under the Bond Resolution for purposes of any other provision of the Bond Resolution. 36123892.2 -4- Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1)the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a)the holders of a majority in aggregate principal amount (or any greater amount required by any other provision of the Bond Resolution that authorizes such an amendment) of the Outstanding Bonds consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The City may also repeal or amend the provisions of this Section if the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such provisions of the Rule are invalid, and the City also may amend the provisions of this Section in its discretion in any other manner or circumstance, but in either case only if and to the extent that the provisions of this sentence would not have prevented an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds, giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. If the City so amends the provisions of this Section, the City shall include with any amended financial information or operating data next provided in accordance with this Section an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. E. Information Format—Incorporation by Reference. The City information required under this Section shall be filed with the MSRB through EMMA in such format and accompanied by such identifying information as may be specified from time to time thereby. Under the current rules of the MSRB, continuing disclosure documents submitted to EMMA must be in word-searchable portable document format (PDF) files that permit the document to be saved, viewed, printed, and retransmitted by electronic means and the series of obligations to which such continuing disclosure documents relate must be identified by CUSIP number or numbers. Financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document) available to the public through EMMA or filed with the SEC. Section 3. Authorized Officials of the City will review and approve the Offering Documents. Information appearing in the Offering Documents concerning the City (including, particularly, the description of the Undertaking and in Appendix B thereto), as of its date, were and are true and correct in all material respects. Insofar as the City and its affairs, including its financial affairs, are concerned, such Offering Documents did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or 36123892.2 -5- necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Insofar as the descriptions and statements, including financial data, of or pertaining to entities, other than the City, and their activities contained in such Offering Documents are concerned, such statements and data have been obtained from sources which the City believes to be reliable, and the City has no reason to believe that they are untrue in any material respect. Section 4. The recitals contained in the preamble hereof are hereby found to be true, and such recitals are hereby made a part of this Resolution for all purposes and are adopted as a part of the judgment and findings of the City Council. Section 5. All ordinances and resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Resolution are hereby repealed to the extent of such conflict, and the provisions of this Resolution shall be and remain controlling as to the matters resolved herein. Section 6. This Resolution shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. Section 7. If any provision of this Resolution or the application thereof to any person or circumstance shall be held to be invalid, the remainder of this Resolution and the application of such provision to other persons and circumstances shall nevertheless be valid, and the City Council hereby declares that this Resolution would have been enacted without such invalid provision. Section 8. It is officially found, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time,place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by Chapter 551, as amended, Texas Government Code. Section 9. This Resolution shall be in force and effect from and after the date of its adoption, and it is so resolved. [The remainder of this page intentionally left blank.] 36123892.2 -6- APPROVED THIS THE 12th DAY OF JULY, 2016. ATTEST: 1 City Secretary Mayor 36123892.2 S-1 EXHIBIT A DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 50 of the Authority's Bond Resolution. Annual Financial Statements and Operating Data The financial information and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: The City's audited financial statements for the most recently concluded Fiscal Year or to the extent these audited financial statements are not available, the portions of the unaudited financial statements of the City referenced in the Official Statement, but for the most recently concluded Fiscal Year. Accounting Principles The accounting principles referred to in such Section are generally accepted accounting principles for governmental units as prescribed by the Government Accounting Standards Board from time to time. 36123892.2 A-1 CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS § COUNTY OF GUADALUPE § CITY OF CIBOLO § THE UNDERSIGNED HEREBY CERTIFIES that: 1. On the 12th day of July, 2016, the City Council (the Council) of the City of Cibolo, Texas (the City) convened in regular session at its regular meeting place in the City Hall of the City (the Meeting), the duly constituted members of the Council being as follows: Allen Dunn Mayor Jay Hogue Mayor Pro Tem, District 6 Jennifer Schultes Councilmember, District 1 Verlin "Doug" Garrett Councilmember, District 2 Marchell Camp-Gebhardt Councilmember, District 3 James "Jim" Doty Jr. Councilmember, District 4 Jim Russell Councilmember, District 5 Glenn Weber Councilmember, District 7 and all of such persons were present at the Meeting, except the following: thus constituting a quorum. Among other business considered at the Meeting, the attached resolution (the Resolution) entitled: RESOLUTION APPROVING A BOND RESOLUTION ADOPTED BY THE BOARD OF TRUSTEES OF THE CANYON REGIONAL WATER AUTHORITY AUTHORIZING THE ISSUANCE OF OBLIGATIONS DESIGNATED AS "CANYON REGIONAL WATER AUTHORITY TAX- EXEMPT CONTRACT REVENUE AND REFUNDING BONDS (LAKE DUNLAP/MID-CITIES PROJECT), SERIES 2016"; APPROVING THE REGIONAL WATER SUPPLY CONTRACT BETWEEN THE CITY OF CIBOLO, TEXAS, SAN ANTONIO WATER SYSTEM, GREEN VALLEY SPECIAL UTILITY DISTRICT, EAST CENTRAL SPECIAL UTILITY DISTRICT, THE CITY OF MARION, TEXAS, CRYSTAL CLEAR SPECIAL UTILITY DISTRICT, SPRINGS HILL WATER SUPPLY CORPORATION AND THE CANYON REGIONAL WATER AUTHORITY; AUTHORIZING THE MAYOR OR THE CITY MANAGER OF THE CITY OF CIBOLO, TEXAS TO EXECUTE ON BEHALF OF THE CITY OF CIBOLO, TEXAS ALL DOCUMENTS, INCLUDING AN APPROVAL CERTIFICATE AFTER THE REFUNDING BONDS ARE SOLD, IN CONNECTION WITH THIS TRANSACTION; AND OTHER MATTERS IN CONNECTION THEREWITH 36135273.1 was introduced and submitted to the Council for passage and adoption. After presentation and due consideration of the Resolution, a motion was made by Councilmember '1Jv4Y that the Resolution be finally passed and adopted in accordance with the City's Home Rule Charter. The motion was seconded by Councilmember G60-Ard-f and carried by the following vote: 7 voted "For" 4 voted "Against" 0 abstained all as shown in the official Minutes of the Council for the Meeting. 2. The attached Resolution is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the Council on the date of the Meeting are those persons shown above, and, according to the records of my office, each member of the Council was given actual notice of the time, place, and purpose of the Meeting and had actual notice that the Resolution would be considered; and the Meeting and deliberation of the aforesaid public business, was open to the public and written notice of said meeting, including the subject of the Resolution, was posted and given in advance thereof in compliance with the provisions of Chapter 551, as amended, Texas Government Code. IN WITNESS WHEREOF, I have signed my name officially and affixed the seal of the City, this 12th day of July, 2016. City Secretary City of Cibolo, Texas (SEAL) 36135273.1 - 2 - WITNESS MY HAND AND SEAL of the City this Mayor City of Cibolo (City Seal) City Manager City of Cibolo 36123874.3 S-1 GENERAL CERTIFICATE OF THE CITY THE STATE OF TEXAS § COUNTY OF GUADALUPE § CITY OF CIBOLO § We, the undersigned Mayor and City Manager of the City of Cibolo, Texas (the "City"), DO HEREBY CERTIFY as follows: 1. Relative to Incorporation. The City is duly incorporated under the general laws of the State of Texas, is a home rule municipality and is operating pursuant to Article XI, Section 5 of the Texas Constitution. 2. Relative to No-Default. Exhibit A reflects all of the bonds and other obligations of the City. The City is not in default as to any covenant, condition or obligation contained in the ordinances or resolutions authorizing the issuance of the outstanding bonds of the City shown on Exhibit A, and it has made, and intends to make, its required payments under the Contract (as defined below); and there is on hand in the special funds created for the payment and security of the aforesaid obligations the amounts now required to be on deposit therein. 3. Relative to Rate and Charges. The rates now being charged by the City for utility services provided by the City's System are as shown on Exhibit B. 4. Relative to City Officials. The duly qualified and acting officials of the City are as follows: Allen Dunn Mayor Jay Hogue Mayor Pro Tem, District 6 Jennifer Schultes Councilmember, District 1 Verlin"Doug" Garrett Councilmember, District 2 Marchell Camp-Gebhardt Councilmember, District 3 James "Jim" Doty Jr. Councilmember, District 4 Jim Russell Councilmember, District 5 Glenn Weber Councilmember, District 7 Robert T. Herrera City Manager Peggy Cimics City Secretary 5. Relative to Utility System. A schedule of the gross revenues, operating expenses and net revenues of the City's Utility System for the years stated is shown on Exhibit C. 6. Relative to Debt Service Requirements and Sufficiency of Rates. The average annual debt service requirement for the City's obligations with respect to the Bonds (as defined in the Contract) and with respect to the City's outstanding obligations is shown on Exhibit D ("Debt Service"). The City has covenanted in the Contract to establish, assess, and collect rates sufficient to make contract payments sufficient to make the "Annual Payments" and "Special 36123874.3 Payments" (as defined in the Bond Resolution) to pay the City's Debt Service on the Bonds. To the extent the amount available for debt service (as shown on Exhibit C-"Available for Debt Service") is insufficient to cover the Debt Service and the City's existing contractual obligations, the City covenants to increase its rates in an amount sufficient to pay the difference. 7. Relative to the Contract. The Regional Water Supply Contract, dated June 14, 2016 (the "Contract"), between the Canyon Regional Water Authority (the "Authority") and the City has been duly authorized and is in compliance with any applicable statutory requirements. The Contract, as submitted to the Attorney General of Texas, is still in full force and effect and has not otherwise been amended or has not been rescinded. No litigation is pending or threatened concerning the title or authority of the officers or concerning the Contract. The Bond Resolution (as defined in the Contract) and the Sale and Offering Documents (as defined in the Contract) comply with the Contract. The City has approved the Bond Resolution authorizing the issuance of not to exceed $40,000,000 Canyon Regional Water Authority Tax-Exempt Contract Revenue and Refunding Bonds (Lake Dunlap/Mid-Cities Project), Series 2016 (the `Bonds") and acknowledges that the payment of principal of and interest on such Bonds is payable from the Annual Payments to be made by the Authority under and pursuant to the Contract. 8. Relative to Signature Identification. Appearing below are the true and correct signatures of the persons holding the offices of Mayor and City Manager. By his signature hereon, the Mayor certifies that the signature of the City Manager appearing hereon is his genuine signature and by his signature hereon, the City Manager certifies that the signature of the Mayor appearing hereon is his genuine signature. Authorization of Attorney General to Date Certificate 9. This certificate is submitted pursuant to Title 1, Chapter 53, Texas Administrative Code. Upon the approval of the Bonds by the Attorney General of the State of Texas, he is authorized to date this certificate as of the date of such approval. If any litigation should develop, or if any other event should occur which should make this certificate inaccurate before the Attorney General's approval of the Bonds, we will notify the Attorney General at once by both telephone and facsimile transmission. With this assurance, the Attorney General is entitled to rely on the accuracy of this certificate at the time of approval of the Bonds unless we advise him otherwise. [The remainder of this page intentionally left blank.] 36123874.3 2 WITNESS MY HAND AND SEAL of the City this (: 2 Mayor City of Cibolo (City Seal) City Manager City of Cibolo 36123874.3 S-1 EXHIBIT A OUTSTANDING OBLIGATIONS OF THE CITY 1. Utility System Revenue Bonds, Series 2006 $1,740,000.00 2. Utility System Revenue Bonds, Series 2012 6,660,000.00 TOTAL $8,400,000.00 36123874.3 A-1 EXHIBIT B UTILITY RATES 36123874.3 B-1 EXHIBIT C SCHEDULE OF GROSS REVENUES, OPERATING EXPENSES &NET REVENUES 36123874.3 C-1 EXHIBIT D COMBINED DEBT SERVICE 36123874.3 D-1 CITY OF CIBOLO, TEXAS ayor ATTEST City Secretary (CITY SEAL) 36121484.9 S-7 NORTON ROSE FULBRIGHT July 6, 2016 Norton Rose Fulbright US LLP Via E-Mail and 300 Convent Street, Suite 2100 Via Federal Express San Antonio,Texas 78205-3792 United States W.Jeffrey Kuhn Ms. Peggy Cimics Partner City Secretary Direct line +1 210 270 7131 City of Cibolo w.jeffrey.kuhn@nortonrosefulbright.com 200 South Main Cibolo, Texas 78108 Tel +1 210 224 5575 Fax+1 210 270 7205 norton rosefu I bright.corn Re: Canyon Regional Water Authority Tax-Exempt Contract Revenue and Refunding Bonds (Lake Dunlap-Mid-Cities Project), Series 2016 Dear Peggy: I enclose the following updated documents in connection with the captioned financing for execution at the July 12, 2016 regular meeting of the City Council: 1. City of Cibolo, Texas Resolution approving the Canyon Regional Water Authority's Bond Resolution (one copy and five signature pages); 2. Certificate of City Secretary pertaining to the above Resolution (two copies and five signature pages); 3. City of Cibolo, Texas General Certificate (one copy and five signature pages); and 4. New Water Supply Contract (executed by Canyon Regional Water Authority on June 14, 2016) (one copy and five signature pages). Please return one completed copy of the Certificate of City Secretary, and all executed signature pages to me. The completed copies of the aforementioned documents should be retained for the files of the City. Thank you, in advance, for your prompt attention to this matter. If I can provide any additional assistance concerning this matter, please do not hesitate to contact me. Very truly you s, Je rey Kuhn WJK/slt Enclosures Norton Rose Fulbright US LLP is a limited liability partnership registered under the laws of Texas. 36288990.1 Norton Rose Fulbright US LLP, Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP and Norton Rose Fulbright South Africa Inc are separate legal entities and all of them are members of Norton Rose Fulbright Verein, a Swiss verein. Norton Rose Fulbright Verein helps coordinate the activities of the members but does not itself provide legal services to clients. Details of each entity,with certain regulatory information,are available at nortonrosefulbright.com. Ms. Peggy Cimics NORTON ROSE FULBRIGHT July 6, 2016 Page 2 cc: Mr. Robert T. Herrera (City of Cibolo, Texas) Mr. Tim Fousse (City of Cibolo, Texas) Mr. Habib Erkan (Denton, Navarro, Rocha, Bernal, Hyde & Zech, P.C.) Mr. David Davenport (Canyon Regional Water Authority) Mr. Humberto Ramos (Canyon Regional Water Authority) Mr. Lou Rosenberg (Rosenberg Law Firm) Mr. Mark McLiney (SAMCO Capital Markets, Inc.) Mr. Andrew Friedman (SAMCO Capital Markets, Inc.) Ms. Veronica Alonzo (SAMCO Capital Markets, Inc.) Mr. George W. Scofield (Firm) Mr. Clay Binford (Firm) Ms. Stephanie V. Leibe (Firm) Mr. Arnold Cantu III (Firm) Ms. Lauren Ferrero (Firm) Mr. Matthew A. Lee (Firm) 36288990.1 FINAL REGIONAL WATER SUPPLY CONTRACT June 14, 2016 between CANYON REGIONAL WATER AUTHORITY and CITY OF CIBOLO, TEXAS, CITY OF MARION, TEXAS, CRYSTAL CLEAR SPECIAL UTILITY DISTRICT, EAST CENTRAL SPECIAL UTILITY DISTRICT, GREEN VALLEY SPECIAL UTILITY DISTRICT, SPRINGS HILL WATER SUPPLY CORPORATION, and CITY OF SAN ANTONIO, TEXAS, ACTING BY AND THROUGH THE SAN ANTONIO WATER SYSTEM LAKE DUNLAP/MID-CITIES PROJECT 36121484.9 TABLE OF CONTENTS Page ARTICLE I Definitions................................................................ Section 1.01 Definitions..........................................................................................3 Section 1.02 Construction............... ...................................... .................................. ARTICLE II Representations and Warranties.....................................................................8 Section 2.01 Representations and Warranties of Authority.............. Section 2.02 Representations and Warranties of Participating Parties...................9 ARTICLE III Construction of Project and Issuance of Bonds.................................. Section 3.01 Construction of Project......................................................................9 Section 3.02 Issuance of Bonds..............................................................................9 Section 3.03 Liens......................... ............................................ 10 ............................ Section 3.04 Tax-Exempt Bonds .......................................................................... 10 Section 3.05 Payment to Rebate Fund.................................................................. 11 Section 3.06 Sale and Offering Documents......................................... .. Section 3.07 Authority's Rights Assigned to Trustee............ .. ............................... 11 ARTICLE IV Sale and Purchase of Treated Water; Operating Requirements................... 11 Section 4.01 Water Conveyance; Option to Purchase.......................................... 11 Section 4.02 Points of Delivery............................................................................12 Section4.03 Resale............................................................................................... 12 Section 4.04 Other Contracts................................................................................ 13 Section4.05 Quality.............................................................................................. 13 Section 4.06 Metering Equipment........................................................................ 14 Section 4.07 Pressure, Backflow, Maximum Rate of Flow.................................. 14 Section 4.08 Cross-Utilization of Lines................................................................ 15 ARTICLE V Fiscal Provisions.......................................................................................... 15 Section 5.01 Annual Requirement........................................................................ 15 Section5.02 Annual Budget................................................................................. 16 Section 5.03 Payments by Participating Parties........................................... Section 5.04 Unconditional Payments.................................................................. 19 Section 5.05 Continuing Right to Treated Water..................................................20 ARTICLE VI Additional Participating Parties...................................................................20 Section 6.01 Additional Participating Parties.......................................................20 ARTICLE VII Special Conditions...................................................... ......20 . ........................... Section 7.01 Operation and Maintenance of the Project.......................................20 Section 7.02 Project Schedule...............................................................................20 Section 7.03 Permits, Financing, and Applicable Laws .......................................21 Section 7.04 Title to Water; Indemnification .......................................................21 Section 7.05 Payments Solely From Revenues.....................................................21 Section 7.06 Operating Expenses .........................................................................21 36121484.9 -1- TABLE OF CONTENTS (continued) Page Section 7.07 Rates for Water....... .......................................................22 Section 7.08 Use of Funds and System................................................................. 22 Section 7.09 Rights-of-Way..................................................................................22 Section7.10 Insurance..........................................................................................22 Section 7.11 Additional Special Provisions..........................................................23 ARTICLE VIII Continuing Disclosure ......................... 23 ................ Section 8.01 Annual Reports ...................................................... 23 .......................... Section 8.02 Material Event Notices ................ 23 ............................... Section 8.03 Limitations, Disclaimers, and Amendments....................................24 Section 8.04 Information Format—Incorporation by Reference..........................26 Section 8.05 Allocation of Water During Drought...............................................26 Section 8.06 Conservation....................................................... ...... 26 ................ .... Section 8.07 Term of Contract.................................................... ....... ... ................26 Section 8.08 Approval and Consent......................................................................27 Section 8.09 Modification and Amendment.........................................................27 Section 8.10 Addresses and Notice.......................................................................27 Section 8.11 State or Federal Laws, Rules, Orders, or Regulations.....................28 Section 8.12 Remedies Upon Default...................................................................29 Section8.13 Severability......................................................................................29 Section8.14 Venue...............................................................................................29 Section 8.15 Assignment ........................................................... ...30 ........................ Section 8.16 Entire Agreement.............................................................................30 Section 8.17 Applicable Law................................................. .........30 Section 8.18 No Sale, Lease, or Other Transfer of Participating Parties' UtilitySystem........................................................... .30 ...................... Section 8.19 Counterparts................................................................. .......30 ............. Section 8.20 Goods and Services; Waiver of Sovereign Immunity; Limitation on Damages............................. .........30 .............................. Section 8.21 Termination of Lake Dunlap Contract and Mid-Cities Contract............................................................................................30 36121484.9 -11- REGIONAL WATER SUPPLY CONTRACT 2016 THIS REGIONAL WATER SUPPLY CONTRACT(this "Contract")dated as of June 14, 2016 (the "Contract Date") is between the CANYON REGIONAL WATER AUTHORITY, a regional water authority created under and essential to accomplish the purposes of Article XVI, Section 59 of the Constitution of the State of Texas (the "Authority"), and CITY OF SAN ANTONIO, TEXAS, ACTING BY AND THROUGH THE SAN ANTONIO WATER SYSTEM(AS SUCCESSOR IN INTEREST TO THE BEXAR METROPOLITAN WATER DISTRICT) and the CRYSTAL CLEAR SPECIAL UTILITY DISTRICT, a special utility district created by a special act of the Texas Legislature, the EAST CENTRAL SPECIAL UTILITY DISTRICT and the GREEN VALLEY SPECIAL UTILITY DISTRICT, each a special utility district created under Chapter 65, as amended, Texas Water Code, the SPRINGS HILL WATER SUPPLY CORPORATION, a non-profit water supply corporation duly organized and operating under the laws of the State of Texas, including Section 67.001 of the Texas Water Code, et seq., as amended, and the Texas Non-Profit Corporation Act, the CITY OF CIBOLO, TEXAS, a home rule municipality, and the CITY OF MARION, TEXAS, a Type A general law municipality (as the "Original Participating Parties", which, together with any Additional Participating Parties as hereinafter defined, are collectively or individually referred to herein as "Participating Parties"). PREAMBLE AND WITNESSETH: WHEREAS, the Authority was created to purchase, own, hold, lease, and otherwise acquire sources of a potable water supply; to build, operate, and maintain facilities for the treatment and transportation of water; to sell potable water to local governments, water supply corporations, and other persons in the State of Texas; and to protect, preserve, and restore the purity and sanitary condition to water in the Authority; and WHEREAS, the Authority's boundaries currently include all of the territory located in the service area of its members as provided in their respective certificates of convenience and necessity issued by the Texas Commission on Environmental Quality(the "Commission"); and WHEREAS, each of the Authority's members currently provides potable water utility service to its customers; and WHEREAS, in the pursuit of its purposes, the Authority and the Participating Parties have previously entered into a certain "Water Purchase Contract among Guadalupe-Blanco River Authority and Canyon Regional Water Authority and City of Cibolo, City of Marion, East Central Water Supply Corporation, Green Valley Special Utility District, Springs Hill Water Supply Corporation, and Bexar Metropolitan Water District", dated October 13, 1998, as amended and to include any future amendments thereto (the "GBRA Contract") with the Guadalupe Blanco River Authority ("GBRA"), providing in part for the purchase of raw water from GBRA in Lake Dunlap and the Authority has and anticipates entering into additional contracts to acquire surface water rights permitted by the State of Texas to purchase raw water for treatment and resale to the Participating Parties; and WHEREAS, in the pursuit of its purposes, the Authority, Crystal Clear Water Supply Corporation, East Central Water Supply Corporation, and Springs Hill Water Supply Corporation have previously entered into a certain "Regional Taxable Water Supply Contract," dated August 1, 1998, as amended (the"Lake Dunlap Taxable Contract"), providing in part that the Authority will treat raw water purchased by the Authority under the GBRA Contract, or raw water from other sources, at the Lake 36121484.9 _1_ Dunlap water treatment plant and resell such treated water to the other parties to the Lake Dunlap Taxable Contract; and WHEREAS, in the pursuit of its purposes, the Authority, Green Valley Special Utility District, Bexar Metropolitan Water District, the City of Cibolo, Texas, and the City of Marion Texas have previously entered into a certain "Regional Tax-Exempt Water Supply Contract," dated August 1 1998, as amended (the "Lake Dunlap Tax-Exempt Contract"), providing in part that the Authority will treat raw water purchased by the Authority under the GBRA Contract, or from other sources, at the Lake Dunlap water treatment plant and resell such treated water to the other parties to the Lake Dunlap Tax- Exempt Contract (the Lake Dunlap Taxable Contract and Lake Dunlap Tax-Exempt Contract are collectively referred to as the"Lake Dunlap Contract"); and WHEREAS, in the pursuit of its purposes, the Authority previously entered into certain Amendment No. 1 (dated November 1, 2003) and Amendment No. 2 (dated May 8, 2006) to the Lake Dunlap Contract (the "Mid-Cities Contract"), providing in part that the Authority will design and construct a water transmission line and related facilities to transport water purchased by some of the parties to the Lake Dunlap Contract or from other sources, treated at the Lake Dunlap water treatment plant, to such other parties; and WHEREAS, the Authority previously issued three series of contract revenue refunding bonds to finance and refinance the original project and these contract revenue refunding bonds are supported by a separate take-or-pay contract by the contracting entities to those contracts, as amended, and this new Regional Water Supply Contract(2016) will refinance those contract revenue refunding bonds and this new take-or-pay contract will secure the issuance of a new series of tax-exempt contract revenue and refunding bonds to be issued in 2016; and WHEREAS, in accordance with the Lake Dunlap Contract, the Authority has built, operates, and maintains an expanded water treatment facility located at Lake Dunlap and certain related facilities (the "Lake Dunlap Project") for the purposes of receiving, treating, storing, and transmitting certain of the water purchased pursuant to the GBRA Contract or purchased or leased pursuant to certain other contracts now in force or to be entered into in the future; and WHEREAS, the parties to the Lake Dunlap Contract and the Mid-Cities Contract desire that the Authority design, construct, and install improvements at the Lake Dunlap water treatment plant enabling the Authority to add additional water disinfecting improvements including ozone to the Raw Water purchased under the GBRA Contract, as more specifically described in Exhibit D, attached hereto for all purposes (the"Ozone Project"); and WHEREAS, in accordance with the Mid-Cities Contract, the Authority has also built, operates, and maintains transmission lines, including the use of certain Participating Parties' existing transmission lines and related facilities (the "Mid-Cities Project")for the purpose of transmitting certain of the water purchased pursuant to the GBRA Contract or purchased under the Lake Dunlap Contract and other contracts now in force or to be entered into in the future (the Lake Dunlap Project, Ozone Project, and Mid-Cities Project are collectively, the "Project"); and WHEREAS, some of the Participating Parties hold and may acquire additional rights to Raw Water for treatment pursuant to the provisions of this Contract and thereafter to supply, redeliver, or sell this treated water in accordance with the provisions of this Contract; and 36121484.9 -2- opl WHEREAS, to refinance the costs of the acquisition, construction, and equipping of the Project and to prepay, redeemed, and defease the Refunded Obligations (hereinafter defined), the Authority Intends to issue one or more series of its contract revenue refunding bonds or other debt obligations (the "Bonds") pursuant to a negotiated public sale of those Bonds, to be secured by and payable from revenues received by the Authority pursuant to this Contract; and WHEREAS, for and in consideration of the Authority acquiring the right to purchase Raw Water for treatment and resale as provided herein, the Participating Parties are willing and have agreed to contract with the Authority as hereinafter provided to acquire treated water from the Project and to pay the costs of the Project by assisting in the amortization of the principal of and interest on the Bonds and paying the Authority's Operation and Maintenance Expenses(hereinafter defined); and WHEREAS, the Authority and the Participating Parties are authorized to enter into this Contract pursuant to the Authority's enabling statute, Chapter 670, Acts of the 71 st Legislature, Regular Session, 1989, as amended (the "Act"), and Chapter 791, Texas Government Code, as amended (the "Interlocal Cooperation Act"), Chapter 1207 and 1371, as amended, Texas Government Code, and other applicable laws; and WHEREAS, the Authority agrees that the Participating Parties shall continue to own their respective Certificates of Convenience and Necessity issued by the Commission, shall continue to own and operate their respective water pumping, storage, and distribution facilities, and any respective water treatment facilities currently or in the future owned by each of the Participating Parties; and WHEREAS, the Authority's Board of Trustees has directed that a portion of the Raw Water be made available (following treatment by the Authority) on a firm basis to parties who contract with the Authority pursuant to this Contract; and WHEREAS, each of the Participating Parties under this Contract proposes to pay its share of the Operations and Maintenance Expenses for the treated water secured under this Contract; provided, however, that (i) only the parties to the Lake Dunlap Contract pay for Operations and Maintenance Expenses arising from the Lake Dunlap Project and Ozone Project; (ii) only the parties to the Mid-Cities Contract pay for Operations and Maintenance Expenses arising from the Mid-Cities Project; and (iii)any other Operations and Maintenance Expenses arising from other water be allocated to the parties who purchase such water, if any, as provided in this Contract; and WHEREAS, the Parties agree to amend and restate the Lake Dunlap Contract and Mid-Cities Contract by the adoption of this Contract; provided, however, that this Contract supersedes the Lake Dunlap Contract and Mid-Cities Contract; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and subject to the terns and conditions hereinafter set forth, the Authority and each of the Participating Parties agree and contract as follows: ARTICLE I Definitions Section 1.01 Definitions. The following terms and expressions as used in this Contract, unless the context clearly shows otherwise, shall have the following meanings: 36121484.9 -3- (1) "Act" means Chapter 670, Acts of the 71st Legislature, Regular Session, 1989, as amended. s (2) "Additional Participating Party(ies)" means any entity or entities hereafter agreeing pursuant to Section 6.01 of this Contract to be bound by the terms of this Contract, as it may be amended from time to time. (3) "Adjusted Annual Payment" means the Annual Payment as adjusted by the Board during or after an Annual Payment Period, as provided by this Contract. (4) "Annual Payment" means the amount of money to be paid to the Authority by each Participating Party during each Annual Payment Period as its share of the Annual Requirement. (5) "Annual Payment Period"means the Authority's Fiscal Year, which currently begins on October 1 of each calendar year and ends on September 30 of the next following calendar year, but which may be any twelve consecutive month period fixed by the Authority; the first Annual Payment Period under this Contract is anticipated to be the period of October 1, 2015 through September 30, 2016. (6) "Annual Requirement" means, during an Annual Payment Period, the total amount required to pay all Operation and Maintenance Expenses of the Authority and the Project and all costs and payments due and payable for the amortization of the Bonds. (7) "Authority" means the Canyon Regional Water Authority, a regional water authority created under and essential to accomplish the purposes of Article XVI, Section 59 of the Constitution of the State of Texas created in accordance with the Act. Except as otherwise noted herein, actions required or permitted to be taken by the Authority under this Contract may be taken by the General Manager on behalf of the Board. (8) "Board" means the governing body of the Authority. (9) "Boardmembers"means a member or members of the Board. (10) "Bond Resolution"means any resolution or other financing documents of the Authority which authorizes any Bonds. (11) "Bonds" means all bonds, notes, or other debt obligations payable from and secured, in whole or in part, from the payments to the Authority under this Contract, and the interest thereon, hereafter issued by the Authority to finance the costs to acquire, construct, expand, renovate, improve, and equip the Project, and/or all bonds, notes, or other obligations issued subsequently to finance costs to improve and extend the Project, and any bonds or other obligations issued to refund any other bonds, notes, or other obligations to refund any other refunding bonds or other obligations. (12) "Code" means the Internal Revenue Code of 1986, and any amendments thereto, as in force and effect on the date of delivery of any series of Bonds. (13) "Commission" means the Texas Commission on Environmental Quality or any successor entity thereto. (14) "Contract" means this new Regional Water Supply Contract, as initially executed and as it may be amended from time to time. (15) "Credit Agreement" means any credit agreement, as defined in and authorized by the provisions of Chapter 1371, as amended, Texas Government Code which the Authority enters into relating to its obligations with respect to the Bonds. 36121484.9 _4_ (16) "EMMA" means the MSRB's Electronic Municipal Market Access system, accessible by the general public, without charge, on the internet through the uniform resource locator (URL) http://Www.emma.msrb.org. (17) "Fiscal Year"means the Authority's fiscal year, which currently begins on October 1 of each year and ends on September 30 of the following year, as it may be changed from time to time by the Authority with notice to the Participating Parties. (18) "Force Majeure"means such term as it is defined in Section 5.04 of this Contract. (19) "General Manager" means the general manager of the Authority's operations, including any party or entity that the Authority enters into a management contract to provide these services. (20) "Lake Dunlap Contract" means such term as it is defined in the preamble of this Contract. (21) "Lake Dunlap Project" means such term as it is defined in the preamble of this Contract. (22) "Lake Dunlap Tax-Exempt Contract" means such term as it is defined in the preamble of this Contract. (23) "Lake Dunlap Taxable Contract" means such term as it is defined in the preamble of this Contract. (24) "Land Interests" means the easements, right-of-way, and other interests in real property necessary for the acquisition, construction, and operation of the Project. (25) "Mid-Cities Contract"means such term as it is defined in the preamble of this Contract. (26) "Mid-Cities Project" means such term as it is defined in the preamble of this Contract. duties. (27) "MSRB" means the Municipal Securities Rulemaking Board and any successor to its (28) "Operation and Maintenance Expenses" means, during an Annual Payment Period, all direct costs and expenses incurred and paid by the Authority for the operation and maintenance of the Project, including (for greater certainty but without limiting the generality of the foregoing) amounts payable under the GBRA Contract and/or any contract with any federal, state, or local agency for the construction, operation, and/or water storage rights or other interests in water from any source of Raw Water acquired by the Authority, any contribution or payment in lieu of taxes or any fee or charge by any government authority relating to the Authority's sale of treated water hereunder, the costs of utilities, supervision, engineering, accounting, auditing, legal services, insurance premiums, supplies, services, and administration of the Project, Overhead Expenses, and costs of operating, repairing, maintaining, and replacing equipment for proper operation and maintenance of the Project. The term "Operation and Maintenance Expenses" does not include depreciation charges or such portion of the above-described costs to the extent such costs are paid pursuant to an agreement other than this Contract. (29) "Original Participating Parties" means City of San Antonio, Texas, acting by and through the San Antonio Water System, Crystal Clear Special Utility District, East Central Special Utility District, Green Valley Special Utility District, Springs Hill Water Supply Corporation, and the Cities of Cibolo and Marion, Texas, each contracting with the Authority pursuant to the terms of this Contract. 36121484.9 -5- (30) "Overhead Expenses" means the reasonable and necessary costs and expenses incurred and paid by the Authority which are directly related to the issuance and servicing of the Bonds; the acquisition of Land Interests required for the Project, if any; the design, permitting, financing, acquisition, construction, and ownership of the Project; and any other activities required of or involving the Authority directly in connection with or attributable to the Project or the Bonds, including, but not limited to: (a) per diem and reimbursable expenses incurred by the Board for special meetings of the Board related solely to the Project, or a portion of such expenses if a special meeting relates to other Board matters in addition to the Project; (b) services of the professional, technical skilled and unskilled persons and firms engaged by or associated with the Authority, other than Authority staff personnel, together with the reimbursable expenses of such persons and firms paid by the Authority; (c) salaries of the Authority's staff attributable to the Project or the Bonds based on time expended, as documented or reasonably estimated by the General Manager of the Authority, times an overhead factor of two (2), which factor shall be subject to adjustment by the Authority from time to time in response to actual or reasonably projected overhead expenses of the Authority; (d) the costs of preparing applications for and obtaining all approvals and authorizations required for the Project or the Bonds from the regulatory authorities having jurisdiction; (e) the cost of property casualty and public liability insurance; including any insurance deductible charged to or required to be paid by the Authority; (0 all costs incurred in litigation involving or relating to the Project; and (g) any and all other costs and expenses, including out-of-pocket expenses, incurred by the Authority attributable to the Project or the Bonds, whether enumerated above or not and whether or not included in the definition or as a part of Project Costs. (31) "Ozone Project" means such term as it is defined in the preamble of this Contract. (32) "Participating Party(ies)" means certain of the Original Participating Parties and all Additional Participating Parties from time to time subject to this Contract. (33) "Permitted Liens"means: (a) Minor irregularities, charges, liens, encumbrances, defects, easements, licenses, rights-of-way, servitudes, restrictions, mineral rights, and clouds on title which, in the opinion of counsel to the Authority, do not materially impair the use of the Project for the purposes for which it is designed. (b) Easements for roads (as used in this Contract, the term "roads" shall include, without limitation, streets, curbs, gutters, drains, ditches, sewers, conduits, canals, mains, aqueducts, aerators, connections, ramps, docks, viaducts, alleys, driveways, parking areas, walkways, and trackage), utilities (which for purposes of this Contact shall include, without limitation, water, sewer, electricity, gas, telephone, pipeline, railroad, and other collection, transportation, light, heat, power, and communication systems) and similar easements and other easements, rights-of-way, rights of flowage, flooding, diversion or outfall, licenses, restrictions, and obligations relating to the operation of the Project which, in the opinion of counsel to the 36121484.9 -6- Authority, do not materially impair the use of the Project for the purposes for which it is designed. (c) Rights of the United States or any state or political subdivision thereof, or other public or governmental authority or agency or any other entity vested with the power of eminent domain to take or control property or to terminate any right, power, franchise, grant, license, or permit previously in force. (34) "Point(s) of Delivery"means the point or points designated in Exhibit B to this Contract or by subsequent agreement where water will be delivered by the Authority to Participating Parties from the Project. (35) "Project" means the "Project" as defined in the preamble of this Contract and reflects the expansion of the original projects commonly known as the Lake Dunlap Project and the Mid-Cities Project and the construction of the new Ozone Project. (36) "Project Costs" means and includes, without limitation, the following costs incurred for the Project by or on behalf of the Authority: (a) the cost of acquisition of the Land Interests, including appraisals, closing costs and title insurance policies; (b) the cost of acquisition, construction, repair, replacement, or improvement of any structure, item of equipment, or other item, used for, or in connection with,the Project; (c) the cost of site preparation of the Land Interests, including demolition or removal of structures and improvements as necessary or incident to accomplishing the Project; (d) the cost of engineering, legal, architectural or other related services; (e) the preparation cost of plans, specifications, studies, surveys, cost estimates, and other expenses necessary or incident to planning, providing, or financing the Project; (f) the cost of machinery, equipment, furnishings, and facilities necessary or incident to placing the Project in operation; (g) finance charges and interest before, during, and after construction; (h) costs incurred in connection with financing the Project, including, without limitation: a. financing, legal, accounting, financial advisory, rating agency, and auditing fees, expenses and disbursements; b. the costs of a Credit Agreement; C. the cost of printing, engraving, and reproduction services; and d. the cost of a trustee's or paying agent's initial or acceptance fee and subsequent fees. (i) all costs, fees and expenses of litigation of all kinds; 0) the cost of property casualty and public liability insurance; (k) the Authority's Overhead Expenses; and (1) other costs generally recognized as a part of project construction costs. 36121484.9 -7- (37) "Raw Water" means untreated water delivered by GBRA pursuant to the GBRA Contract or surface water rights acquired by the Authority permitted by the State of Texas. (38) "Refunded Obligations" means (1) Canyon Regional Water Authority Tax-Exempt Contract Revenue Refunding Bonds, Series 2006 (Lake Dunlap Project), dated May 1, 2006, in the original principal amount of $21,130,000; (2) Canyon Regional Water Authority Taxable Contract Revenue Refunding Bonds, Series 2006 (Lake Dunlap Project), dated May 1, 2006, in the original principal amount of $5,245,000; and (3) Canyon Regional Water Authority Tax-Exempt Contract Revenue Refunding Bonds, Series 2006 (Mid-Cities Project), dated May 1, 2006, in the original principal amount of$27,910,000. (39) "Rule"means SEC Rule 15c2-12, as amended from time to time. (40) "SEC" means the United States Securities and Exchange Commission and any successor to its duties. (41) "Sale and Offering Documents" means any official notice of sale, official bid form, preliminary official statement, official statement, application to the Texas Water Development Board, or other offering document for the Bonds. (42) "State"means the State of Texas. (43) "System" means all properties, facilities and plants (including the Project) currently owned, operated, and maintained by the Authority for the supply, treatment, and transmission of treated potable water, together will all future extensions, improvements, replacements and additions thereto, whether situated within or without the limits of the Authority; provided, however, that notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term System shall not mean to include facilities of any kind which are declared not to be a part of the System and which are acquired or constructed by or on behalf of the Authority with the proceeds from the issuance of Special Facilities Bonds, which are hereby defined as being special revenue obligations of the Authority which are not payable from revenues of the System but which are payable from and equally and ratably secured by other liens on and pledges of any revenues, sources or payments, not pledged to the payment of the Bonds including, but not limited to, special contract revenues or payments received from any other legal entity in connection with such facilities. Section 1.02 Construction. Unless the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular number shall be construed to include correlative words of the plural number and vice versa. This Contract and all the terms and provisions hereof shall be constructed to effectuate the purposes set forth herein and to sustain the validity of this Contract. ARTICLE 11 Representations and Warranties Section 2.01 Representations and Warranties of Authority, The Authority hereby represents and warrants that the GBRA Contract, the Lake Dunlap Contract, and the Mid-Cities Contract have been duly executed by each of the parties thereto and that the GBRA Contract, the Lake Dunlap Contract, and the Mid-Cities Contract are in full force and effect; the Authority has full power and authority to sell or otherwise convey treated water to the Participating Parties in accordance with the terms of the GBRA Contract and this Contract and the execution and 36121484.9 -$- delivery of this Contract by the Authority and the performance by the Authority of the provisions hereof do not and will not conflict with or constitute on the part of the Authority a breach or a default of any provision of the GBRA Contract or any other contract or agreement of the Authority. Section 2.02 Representations and Warranties of Participating Parties. Each of the Participating Parties hereby represents and warrants that it has full power and authority to purchase treated water from the Authority in accordance with the terms of this Contract; and the execution and delivery of this Contract by each Participating Party and the performance of the provisions hereof by each Participating Party do not and will not conflict with or constitute on the part of such Participating Party a breach or a default of any provision of any other contract or agreement of such Participating Party. ARTICLE III Construction of Project and Issuance of Bonds Section 3.01 Construction of Project. The Authority agrees that the acquisition, construction, and improvement of the Project by the Authority has been and will be accomplished in accordance with generally accepted engineering practices and, subject to the issuance of the Bonds pursuant to Section 3.02 to provide part or all of the source of funds, with all practical dispatch, and that the Ozone Project, that has had a successful full scale pilot operations since the Fall of 2015, will be completed and operational no later than August 1, 2017. Section 3.02 Issuance of Bonds. A. Subject to approval by each Participating Party, the Authority may issue its Bonds, payable from and secured by a pledge of the Annual Payments from this Contract to finance the costs of acquiring, constructing, extending, enlarging, repairing, renovating, equipping, and otherwise improving the Project. B. Each Bond Resolution of the Authority shall specify the exact principal amount of the Bonds to be issued thereunder, which Bonds shall mature within the maximum allowable period or such shorter period as determined by the Authority and shall bear interest not exceeding the maximum allowable rates, all as permitted by law, and each Bond Resolution shall contain such other terms and provisions pertaining to the security and payment of Bonds and the operation and maintenance of the Project as may be necessary for the marketing and sale of the Bonds. Subject to approval by each Participating Party, the Authority may from time to time issue its Bonds in such amounts as are within its judgment and discretion sufficient to achieve full implementation of the Project. C. Prior to the final adoption of a Bond Resolution or any amendment of a Bond Resolution by the Authority's Board of Trustees, a draft of the proposed Bond Resolution, and the Sale and Offering Documents shall be presented to the Participating Party for review and approval. Within sixty days of receipt of the drafts, each Participating Party shall either approve or disapprove the proposed documents by written notice to the Authority. If approved, the approval shall be evidenced by a resolution of the Participating Party's governing body approving the issuance of Bonds and delegating to an authorized representative the approval of the final terms and provisions of the Bonds, including the principal amount, as reflected in the final Bond Resolution. 36121484.9 -9- D. Upon the Participating Party approval of(i) each form of Bond Resolution hereafter adopted by the Authority, (ii) any amendments to any Bond Resolution, and (iii) the Sale and Offering Documents and the delivery to the Authority of a certification signed by the authorized representative of the Participating Party to the effect that the Bond Resolution and the Sale and Offering Documents comply with this Contract, then upon the adoption and approval of the Bond Resolution in such final form by the Authority's Board of Trustees, the execution of an approval certificate by the authorized representatives of each of the Participating Parties approving the final terms and provisions of the Bonds and the Bond Resolution, and the issuance and delivery of the Bonds to the purchaser thereof, the Bond Resolution shall for all purposes be considered approved by the Authority and deemed to be in compliance with this Contract in all respects, and the Bonds issued thereunder will constitute Bonds as defined in this Contract for all purposes. Any owner of Bonds is entitled to rely fully and unconditionally on any such approval. E. All covenants and provisions in the Bond Resolution affecting, or purporting to bind, the Participating Party, shall, upon the delivery of the Bonds, become absolute,unconditional,valid, and binding covenants and obligations of the Participating Party so long as said Bonds and interest thereon are outstanding and unpaid, and may be enforced as provided in this Contract and the Bond Resolution. Particularly, the obligation of the Participating Party to make, promptly when due, all Annual Payments specified in this Contract and all payments described in Section 5.03 hereof shall be absolute and unconditional, and said obligation may be enforced as provided in this Contract. In addition, subject to the approval of the Participating Party, the Authority may enter into Credit Agreements, to the extent permitted by law, for the purpose of achieving the lowest financing costs for the Project. Section 3.03 Liens. Neither the Participating Parties nor the Authority will create or permit or suffer to exist any lien, encumbrance, or charge upon the Project or any interest therein at any time, except Permitted Liens. Section 3.04 Tax-Exempt Bonds. The parties hereto understand and agree that the Authority will use its best efforts to provide for, but will not be liable for a failure to produce, the lowest overall debt service cost for the Bonds to be issued for the Project. In connection therewith, the parties intend that the Authority will issue Bonds the interest on which is excludable from the gross income of the owners thereof for federal income tax purposes. The parties hereto acknowledge their understanding that the federal income tax laws impose certain restrictions on the use and investment of proceeds of such tax-exempt bonds and on the use of the property financed therewith and the output produced therefrom. Accordingly, the parties agree and covenant that if the Bonds are offered to investors with the understanding that the interest will be exempt from federal income taxation, then the parties, their assigns and agents, will take such action to assure, and refrain from such action which will adversely affect the treatment of such Bonds as obligations described in section 103 of the Code. Should either party fail to comply with such covenant, the effect of which being that the Bonds no longer qualify as obligations described in the Code, such defaulting party shall be liable for all costs resulting from the loss of the tax-exempt status of the Bonds. The parties hereby agree and covenant to comply with all of the representations and covenants relating to such exemption which are set out in any Bond Resolution. The parties further agree and covenant that in the event the Bonds issued are to be tax-exempt, they will modify such agreements, make such filings, restrict the yield on investments, and take such other action necessary to fulfill the applicable provisions of the Code. For these purposes, the parties may rely on the respective opinion of any firm of nationally-recognized bond attorneys selected by them. In the event that a conflict arises in the opinions of the respective firms of each of the parties, the parties will identify a different firm, that is mutually acceptable to both parties, in order to resolve the conflict of opinion. 36121484.9 -10- Section 3.05 Payment to Rebate Fund. In the event that tax-exempt Bonds are issued as provided in Section 3.04, the Authority hereby covenants and agrees to make the determinations and to pay any deficiency into a rebate fund, at the times and as described in the Bond Resolution to comply with the provisions of section 148(0)(2) of the Code. In any event, if the amount of cash held in the rebate fund shall be insufficient to permit the trustee or paying agent to make payment to the United States of America of any amount due on any date under section 148(f)(2) of the Code, the Authority forthwith shall pay the amount of such insufficiency on such date to the trustee or paying agent in immediately available funds for such purpose. Section 3.06 Sale and Offering Documents. At the request of the Authority,the Participating Parties shall provide to the Authority current and historical information concerning their respective utility systems, general fund information, the financial conditions results, and prospects of the Participating Parties, and such other information concerning the Participating Parties as the Authority shall deem advisable for inclusion in the Sale and Offering Documents for the Bonds of each series and shall certify to the Authority and the underwriters of any offering of Bonds to be made by means of such Sale and Offering Documents when and if the Participating Parties deem such Sale and Offering Documents to be complete and final for purposes of the Rule. The Participating Parties represent and warrant that all statements concerning the Participating Parties (including, without limitation, their financial condition, results, and prospects, their utility system, and any demographic and economic information concerning the area served by their utility system) that are contained in any Sale and Offering Document shall be true in all material respects and shall not omit to state any material fact necessary to make the statements made in such Sale and Offering Document, in the light of the circumstances in which they are made,not misleading. Section 3.07 Authority's Rights Assigned to Trustee. The Participating Parties are advised and recognize that as security for the payment of the Bonds, the Authority may assign to a trustee, pursuant to one or more trust indentures to be authorized by the Bond Resolution, the Authority's rights under this Contract, including the right to receive the Annual Payments hereunder and the amounts described in Section 5.03 hereof. The Participating Parties herewith assent to such assignment and will make the Annual Payments and the payments described in Section 5.03 hereof directly to the trustee without defense or set-off by reason of any dispute between the Participating Parties and the Authority or the trustee. All rights against the Participating Parties arising under this Contract or the Bond Resolution and assigned to the trustee may be enforced by the trustee, or the owners of the Bonds, to the extent provided in the Bond Resolution, and the trustee, or the owners of the Bonds, shall be entitled to bring any suit, action, or proceeding against the Participating Parties, to the extent provided in the Bond Resolution, for the enforcement of this Contract, and it shall not be necessary in any such suit, action, or proceeding to make the Authority a party thereto. ARTICLE N Sale and Purchase of Treated Water, Operating Requirements Section 4.01 Water Conveyance; Option to Purchase. A. The Participating Parties hereby agree to pay for the right to receive from the Authority and the Authority hereby agrees to sell to the Participating Parties all of the treated Raw Water produced by the Authority through the Project not to exceed the quantities described in Exhibit A subject to the terms and provisions of this Contract or other contracts which generate System revenues, including a general rate tariff approved by the Board; provided, however, that upon no less than two years' written notice from the Authority to the Participating Parties, the Authority shall have the right to purchase, and the Participating Parties hereby each agree to relinquish their right to purchase, treated water produced 36121484.9 _11- by the Project upon reduction, on a proportionate basis, of the Participating Parties' share of their Annual Payments under this Contract as provided in Section 5.04 hereof. It is expressly recognized that the treated water delivered to each Participating Party as disclosed in Exhibit A shall be owned by such Participating Party and may be sold or otherwise conveyed by such Participating Party in accordance with applicable law; provided, however, before any Participating Party enters into a contract or other agreement to transfer, sell, or convey any treated water received from the Authority pursuant to the terms of this Contract, such Participating Party shall afford the Authority the right of first refusal for a period of 90 days to obtain such treated water for redistribution to other Participating Parties. The Authority in the development of its rate methodology pursuant to this Contract may provide for a "surcharge" against a Participating Party or Parties that receives more treated water than their allocation as set forth in Exhibit A. Any such "surcharge" shall not apply to water acquired by the Authority. In addition, the Authority shall at least semiannually account for this "surcharge" by making any necessary changes to the Authority's budget to reflect these additional revenues received from a Participating Party from this "surcharge" and will "true up" these additional surcharge revenues or any other budget amendments to be reflected in the next year's annual budget for the Participating Parties as set forth in Section 5.02 hereof. B. Each of the Participating Parties shall be entitled to receive from the Authority the quantities of treated water identified in Exhibit A attached hereto and in accordance with this Contract. To the extent the Authority has acquired additional water under the GBRA Contract or from some other source, or to the extent any Participating Party does not request all of its allotted treated water as set forth on Exhibit A, or to the extent the Authority acquires a percentage share of the treated water produced by the Project pursuant to Paragraph A of this Section, the Authority may sell or otherwise use the allotted treated water not requested or the share of treated water produced by the Project and acquired by the Authority to supply treated water or spot water sales to other Participating Parties, to retail customers, if any, of the Authority, or on a spot basis. The Authority agrees to utilize the revenues from this potential sale of water pursuant to this Paragraph B to benefit all Participating Parties as these revenues will be accounted for at least semiannually and disclosed in connection with the Authority's next succeeding budget. Section 4.02 Points of Delivery. Each Participating Party agrees to take treated water at the Point(s) of Delivery for such Participating Party set forth in Exhibit B hereto. Modification of such Points of Delivery may be mutually agreed to in writing between each Participating Party, respectively, and the Authority. The Authority will maintain ownership of the connection (being any device, including welded pipe connections, water installations, valves, meter vaults, or similar devices) between the Authority's System and the utility system of the Participating Parties. Section 4.03 Resale. Participating Parties hereby agree not to sell treated water purchased from the Authority under this Contract to any person or entity outside such Participating Party's boundaries or prescribed service area (as the boundaries or prescribed service area may be adjusted by the Participating Party in its sole discretion and as approved by any regulatory authority with jurisdiction from time to time) unless the Participating Party has received prior written approval from the Board and are subject to compliance with Section 4.01A above, which shall not be unreasonably withheld or delayed. Approval to make retail sales of treated water to individual customers outside such boundaries or prescribed service area may be granted by the General Manager of the Authority, which shall not be unreasonably withheld or delayed. Approval to make wholesale sales of treated water, other than spot water sales, pursuant to this 36121484.9 -12- Contract outside the Participating Party's boundaries or prescribed service area shall require the specific prior approval of the Board and are subject to compliance with Section 4.01A above, which shall not be unreasonably withheld or delayed. Notwithstanding any provision in this Section to the contrary, each Participating Party shall have the right and authority to continue to sell treated water on a retail or wholesale basis to all existing customers situated outside its corporate boundaries or prescribed service area and without the approval or consent of the Board or General Manager. Additionally, the Participating Parties shall have the right and authority to sell treated water received from other sources other than the Authority on a wholesale basis or otherwise without any limitation imposed by this Contract or approval by the Board or General Manager. Section 4.04 Other Contracts. A. If the Authority exercises its right to water under this Contract pursuant to Section 4.0 1, the Authority reserves the right to supply treated water from the Project or some other source to others on wholesale or retail basis. Each such contract with other entities shall be limited to the Authority's share of treated water covered by this Contract or some other source and shall not contain any provision which would adversely affect the Participating Parties' percentage share of treated water covered by this Contract, except as permitted by Section 4.01. In addition, the Authority shall not sell treated water (or such sales will be suspended) pursuant to this Section 4.04 to any entity other than a Participating Party when a condition of drought or other water conservation measure exists which resulted in all Participating Parties having their allocation of treated water reduced on a pro rata basis. B. The parties hereto recognize and acknowledge that the Authority shall have the right and authority to contract or make other arrangements with respect to its percentage share of water from the Project without limitation or approval of any Participating Party subject to Section 4.04 A. Section 4.05 Qualily. A. The water to be delivered by the Authority and received by each Participating Party shall be treated water from the Project of a quality and chemical characteristics acceptable to the Participating Parties as described in Exhibit E and sufficient quality to meet the requirements for potable water established by the Commission and the United States Environmental Protection Agency, to be analyzed at the Point of Delivery. Each Participating Party has satisfied itself that such water if delivered in compliance with this section will be suitable for its needs. The Authority shall not be responsible for maintaining any particular amount of chlorine residuals at any point in any Participating Party's utility system. B. The Authority shall periodically and at a minimum, no less than as may be required by any regulatory authority having jurisdiction, collect samples at the Point of Delivery of treated water delivered to Participating Parties and other customers and cause same to be analyzed consistent with guidelines established by the Commission using the then-current edition of Standard Methods for Examination of Water and Wastewater as published by the American Water Works Association ("AWWA") and others. C. The Authority shall cooperate with any Participating Party in responding to any regulatory or legal inquiry related to the quality of water delivered under this Contract. 36121484.9 -13- Section 4.06 Metering Equipment. A. The Authority will furnish, install, operate, and maintain at its expense the necessary equipment and devices (including a meter house or pit) of standard type required for measuring the quantity of water delivered under this Contract from the Project to each Participating Party's Point or Points of Delivery. Such meters and other equipment so installed shall be the property of the Authority. The Authority shall inspect, calibrate, and adjust its meters at least annually as necessary to maintain accurate measurements of the quantity of water being delivered. Each Participating Party shall have access to the metering equipment at all reasonable times for inspection and examination, but the reading, calibration, and adjustment thereof shall be done only by employees or agents of the Authority. The Authority will notify each Participating Party of any scheduled reading, inspection, calibration, or adjustment at least three (3) business days in advance of the scheduled date. If a Participating Party so requests, the Participating Party may observe such reading, inspection, calibration, and adjustment of meters. Any measuring device which fails to function or which functions incorrectly shall promptly be adjusted, repaired, or replaced by the Authority, Replacement shall be by a like device having the required accuracy. A meter registering not more than five percent (5%) above or below the test results shall be deemed to be accurate. The previous readings of any meter disclosed by tests to be inaccurate shall be corrected for a period equal to one-half(1/2) the time elapsed since the date of the immediately preceding meter test at which no inaccuracy was discovered, but in no event will a period of correction exceed six (6) months, in accordance with the percentage of inaccuracy found by such tests. If any meter fails to register for any period, the amount of water furnished during such period shall be deemed to be the amount of water delivered in the corresponding period immediately prior to the failure, unless the Authority and the Participating Party shall agree upon a different amount. All readings of meters will be entered upon proper books of record maintained by the Authority. Any Participating Party may have access to said record books during the Authority's normal business hours. B. Under the GBRA Contract, the Authority is required to install metering devices to measure the amount of water taken from Canyon Lake and purchased from GBRA. Such metering devices shall be considered to be a part of the Project. C. Notwithstanding the requirements for other notices provided in this Contract, any notice, communication, request, reply, or advice from the Authority to a Participating Party, or vice versa, relating to the activities described in Subsection A above, or any other communication relating to the devices for metering of water, may be by electronic or telephone communication, provided receipt of the notice is confirmed by the intended recipient. Section 4.07 Pressure, Backflow,Maximum Rate of Flow. A. The Authority shall deliver treated water to the Point(s) of Delivery for each Participating Party (subject to the provisions of.Section 4.08) at a pressure of not less than 35 psi or at such other pressure agreed upon by the Authority and the Participating Party. If a Participating Party requires a greater or lesser pressure, such Participating Party shall bear all of the costs of providing such greater or lesser pressure. Pressure failure due to supply line breaks, power failures, flood, fire, earthquakes, other catastrophes, or use of water to fight fires, or any other cause beyond the reasonable control of the Authority shall relieve the Authority from compliance with this provision for such reasonable period of time as may be necessary to restore pressure. B. The Authority shall install and maintain at its sole expense at each Point of Delivery a backflow preventor of AWWA-approved quality. Each Participating Party shall have the right to 36121484.9 -14- inspect the backflow preventor at each of its Points of Delivery at such reasonable times at such Participating Party in its discretion may determine are required. C. The maximum rate of flow per day that may be provided to each Participating Party by the Authority is established in Exhibit A hereto and incorporated by reference for all purposes to this Contract. Section 4.08 Cross-Utilization of Lines. A. Each Participating Party acknowledges that it may be efficient for certain of its transmission lines to be utilized in order for the Authority to transmit treated water to another Participating Party. In such case, the Authority may make a written request for use of the transmission line to the Participating Party that is the owner. The Participating Party that is the owner may approve or disapprove the request in its sole discretion, but shall provide a written response to the Authority within sixty (60) days of the Authority's request. In the event such use is approved, the Participating Parties involved agree to inform the Authority of any special requirements with respect to pressure or other matters relating to the transmitting Participating Party's lines. B. The Authority will furnish, install, operate, and maintain at its expense meters at the point of exit from a Participating Party's lines to maintain accurate measurements of the quantity of water being delivered by the Authority to a Participating Party through the lines of another Participating Party. Such meters shall be subject to inspection and examination by both Participating Parties in accordance with the provisions of Section 4.06. C. In the event that repairs are required to be made to any lines of a Participating Party which are utilized for the transmission of treated water to another Participating Party, the receiving Participating Party shall participate in the cost of such repairs as may be agreed from time to time. ARTICLE V Fiscal Provisions Section 5.01 Annual Requirement. Subject to the terms and provisions of this Contract, the Authority will provide and pay for the cost of the Project through the issuance of the Bonds. It is acknowledged and agreed that payments by the Participating Parties to the Authority under this Contract will be the sole or primary source of funds available to the Authority to provide the Annual Requirement. Each Participating Party shall be obligated to pay the full amount of its Annual Requirement notwithstanding that it may elect not to receive the full amount of treated water available to it under this Contract. In compliance with the Authority's duty to fix and from time to time to revise the rates and charges for services rendered under this Contract, the Annual Requirement may change from time to time. Each such Annual Requirement shall be allocated among the Participating Parties and the Authority based upon a rate methodology to be developed by the Authority according to their respective percentage shares of treated water covered by this Contract, including, but not limited to, Exhibit A, and the Annual Requirement for each Annual Payment Period shall be identified in each annual budget and shall at all times be not less than an amount sufficient to pay or provide for the payment of the following: A. all Operation and Maintenance Expenses; provided, however, that such methodology shall provide and ensure that (i) only the parties to the Lake Dunlap Contract shall pay for Operations and Maintenance Expenses arising from the Lake Dunlap Project and 36121484.9 -15- Ozone Project; (ii) only the parties to the Mid-Cities Contract pay for Operations and Maintenance Expenses arising from the Mid-Cities Project; and (iii) any other Operations and Maintenance Expenses arising from water to be allocated to the Parties who purchase such water, if any; and .B. an amount to fund a special reserve for the Operation and Maintenance Expenses or for additional capital improvements to the Project; the total amount to be accumulated annually (subject to replenishment) for such operating and additional capital improvements reserve shall not exceed 25% of the annual Operation and Maintenance Expenses (estimated to be approximately three (3) months' expenses); provided, however, that such methodology shall provide and ensure that the parties' pro-rata obligations to fund this special reserve are consistent with their obligations to pay for Operations and Maintenance Expenses; and C. when the Authority and the Participating Parties agree to issue Bonds to finance the costs of the Project, a capital component, including principal, interest, premium, reserve funds, and other funds established or required by any Bond Resolution and to pay the principal of and interest on the Bonds; provided, however, that such methodology shall provide and ensure that (i) only the Participating Parties to the Lake Dunlap Contract shall pay for the Bonds arising from the Lake Dunlap Project and Ozone Project; (ii)only the Participating Parties to the Mid-Cities Contract pay for the Bonds arising from the Mid-Cities Project; and(iii) any other Bonds arising from water to be allocated to the Participating Parties who purchase such water, if any. Section 5.02 Annual Budget. Each annual budget for the acquisition and/or operation and maintenance of the Project shall always provide for amounts sufficient to pay the Annual Requirement. Each Participating Party will be furnished a copy of such annual budget, and each Participating Party hereby acknowledges its ability to pay its share of the Annual Requirement from available funds budgeted therefor. On or before July 15 of each year thereafter commencing June 14, 2016, the Authority shall furnish to each Participating Party a preliminary estimate of the Annual Payment required from each Participating Party for the next following Annual Payment Period. Not less than 60 days before the commencement of each Annual Payment Period beginning in Fiscal Year [2016-2017], the Authority (i) shall cause to be prepared a preliminary budget for the Project for the next ensuing Annual Payment Period and (ii) shall provide a copy of such preliminary budget to each Participating Party. A Participating Party who disputes any information in the preliminary budget shall submit written comments, questions, or requests for clarification about the preliminary budget directly to the Authority, with copy to each member of the Board, not less than thirty (30) days before the commencement of the Annual Payment Period. The Board may adopt the preliminary budget or make such amendments thereof as to it may seem proper; provided, however, no change or amendment to the preliminary budget will be made by the Board after such preliminary budget has been submitted to the Participating Parties which change or amendment would in effect increase the Annual Requirement without resubmitting such amended preliminary budget to the Participating Parties not less than 10 days prior to the date of the Board meeting scheduled for approval of the annual budget. The Board shall thereupon approve the annual budget. With respect to budgetary matters, the Participating Parties shall have the right only to comment on the preliminary budget; their approval of the preliminary or final annual budget shall not be required. The annual budget thus approved by the Board shall be the annual budget for the next ensuing Annual Payment Period. The 36121484.9 -16- annual budget, including the first annual budget, may be amended by the Authority at any time to transfer funds from one account or fund to another account or fund, provided such transfer will not increase the total budget and the transfer of funds is attributable to the costs of the Project or to the Project's maintenance and operation. Subject to notification to the Participating Parties, the amount for any account or fund, or the amount for any purpose, in the annual budget may be increased through formal action by the Board even though such action might cause the total amount of the annual budget for the Project to be exceeded; provided, however, such action shall be taken only in the event of an emergency or special circumstances which shall be clearly stated in the notice to the Participating Parties and in the resolution at the time such action is taken by the Board. Notwithstanding anything herein to the contrary, no failure of the Authority to estimate, and no mistake by the Authority in any estimate of, the amount of or schedule for Annual Payments due from the Participating Parties in any Fiscal Year shall relieve the Participating Parties from (or allow them to defer)their absolute and unconditional obligation to make all Annual Payments in full when due. Section 5.03 Payments by ParticipatingParties. A. Subject to Sections 4.06 and 4.07B, each Participating Party agrees to pay a connection fee for each Point of Delivery equal to the total cost of material, labor, and equipment required to implement such connection. B. For the treated water available to the Participating Parties under this Contract(whether or not the Participating Parties elect to receive such water), each of the Participating Parties agrees to pay, at the time and in the manner hereinafter provided, its share of the Annual Requirement. Each of the Participating Parties shall pay its part of the Annual Requirement for each Annual Payment Period directly to the Authority (or its assigns), in monthly installments in accordance with the schedule of payments furnished by the Authority, as hereinafter provided. C. Each Participating Party shall pay a proportionate share of the Annual Requirement according to the rate methodology established in Section 5.01 of this Contract. The Authority shall charge each Participating Party its share of pumping costs according to the volume of water actually delivered. D. Each Participating Party's allocated share of the Annual Requirement for each Annual Payment Period shall be made in accordance with a written schedule of payments for the appropriate Annual Payment Period which will be supplied to each of the Participating Parties by the Authority. E. Notwithstanding the foregoing, the Annual Requirement, and each Participating Party's share thereof, shall be redetermined, after consultation with each of the Participating Parties, at any time during any Annual Payment Period,to the extent deemed necessary or advisable by the Authority, if. (1) the Authority exercises its option to acquire treated water pursuant to Section 4.01; (2) unusual, extraordinary, or unexpected Operation and Maintenance Expenses are required which are not provided for in the Authority's annual budget or reserves for the Project; (3) Operation and Maintenance Expenses of the Project are substantially less than estimated; (4) a Participating Party's interest under this Contract is terminated as provided herein or Additional Participating Parties become subject to this Contract; 36121484.9 -17- (5) the Authority issues Bonds for the Project; or (6) the Authority receives either substantially more or substantially less revenues or other amounts than those anticipated by the Authority at the time a Participating Party elects to execute this Contract or at the time any annual Preliminary Budget is distributed by the Authority. "Substantially" in this subsection (6) means by an amount of 15% or greater, determined in accordance with generally accepted accounting practices. F. Each Participating Party hereby agrees that it will make payments to the Authority required by this Contract at the Authority's offices within thirty(30) days of the date a bill for service is deposited in the United States mail. If any Participating Party at any time disputes the amount to be paid by it to the Authority, such complaining party shall nevertheless promptly make such payment or payments; but if it is subsequently determined by agreement or by appropriate administrative, board, agency, or court decision that such disputed payments should have been less, or more, the Authority shall promptly revise and reallocate the charges in such manner that the Participating Party will recover its overpayment or the Authority will recover the amount due it. All amounts due and owing to the Authority by each Participating Party or due and owing to any Participating Party by the Authority shall, if not paid when due, bear interest at the maximum lawful nonusurious rate of interest per annum from the date when due until paid. G. The Authority shall, to the extent permitted by law, suspend the delivery of services or water from the Project to any Participating Party which remains delinquent in any payments due under the preceding paragraph for a period of forty-five(45) days, and shall not resume delivery of services or water while such Participating Party is so delinquent. The Authority also retains the right to charge a reconnection fee or other appropriate charges prior to commencing utility service to the delinquent Participating Party. It is further provided and agreed that if any Participating Party should remain delinquent in any payments due hereunder for a period of one hundred twenty days, and if such delinquency continues during any period thereafter, such Participating Party's minimum amount specified in Exhibit A, shall be deemed to have been zero gallons during all periods of such delinquency, for the purpose of calculating and redetermining the percentage of each Annual Payment to be paid by the non-delinquent Participating Parties and the Authority, and the Authority shall redetermine such percentage on that basis in such event so that the non-delinquent Participating Parties and the Authority collectively shall be required to pay all of the Annual Requirement; provided, however,that the delinquent Annual Payment amount shall be recalculated and redetermined as follows: (i) only the Participating Parties to the Lake Dunlap Contract shall pay for the portion of the delinquent Annual Payment that is related to the payment obligations arising from the Lake Dunlap Project and Ozone Project, based upon each Participating Party's pro-rata share specified in Exhibit A, as redefined in this Section; (ii) only the Participating Parties to the Mid-Cities Contract shall pay for the portion of the delinquent Annual Payment that is related to the payment obligations arising from the Mid-Cities Project, based upon each Participating Party's pro-rata share specified in Exhibit A, as redefined in this Section, and (iii) only the Participating Parties receiving other water shall pay for the portion of the delinquent Annual Payment that is related to the payment obligations arising from such other water. However, the Authority shall pursue all legal remedies against any such delinquent Participating Party to enforce and protect the rights of the Authority, the other Participating Parties, and the holders of the Bonds, if Bonds have been issued or incurred. The delinquent Participating Party shall not be relieved of the liability to the Authority for the payment of all amounts which would have been due hereunder had no default occurred or the percentage had not been redetermined as provided in this Section. It is understood that the foregoing provisions are for the benefit of the Authority and holders of the Authority's Bonds, if Bonds have been issued or incurred, so as to insure that all of the Annual Requirement will be paid by the non-delinquent Participating Parties and the Authority during each Annual Payment Period regardless of the delinquency of a particular Participating Party. If any amount 36121484.9 -18- due and owing the Authority by any Participating Party is placed with an attorney for collection, such Participating Party shall pay to the Authority all attorneys' fees, in addition to all other payments provided for herein, including interest. H. If, during any Annual Payment Period, any Participating Party's Annual Payment is redetermined in any manner as provided or required in this Section, the Authority will promptly furnish such Participating Party with an updated schedule of monthly payments reflecting such redetermination. Section 5.04 Unconditional Payments. A. Notwithstanding any provision of this Contract to the contrary, while this Contract remains in effect each of the Participating Parties agrees to pay its share of the total cost of the Project and the Bonds. If the Authority elects to exercise its option to acquire a percentage share of the treated water covered by this Contract as provided in Section 4.01, the Annual Payment of each Participating Party shall be reduced to the proportion that each Participating Party's amount of water identified in Exhibit A bears to the total amount of water available from the Project. Initially, the Participating Parties agree to pay 100% of the Annual Requirement, but, if the Authority exercises its option to acquire treated water from the Project pursuant to Section 4.01, the Participating Parties and the Authority shall share the cost of the Project and the Bonds in proportion to quantities of treated water each is entitled to take from the Project pursuant to this Contract. B. Recognizing that the Participating Parties urgently require the facilities and services of the Project, and that such facilities and services are essential and necessary for actual use and for standby purposes, and further recognizing the fact that the Authority will use payments received from the Participating Parties to pay and secure the Bonds, it is hereby agreed that each of the Participating Parties shall be unconditionally obligated to pay, without offset or counterclaim, its share of the Annual Requirement, as provided and determined in this Contract, regardless of whether or not the Authority actually acquires, constructs, or completes the Project or is actually delivering water from the Project to any Participating Party hereunder, or whether or not any Participating Party actually receives or uses water from the Project whether due to Force Majeure or any other reason whatsoever, regardless of any other provisions of this or any other contract or agreement between any of the parties hereto. This covenant by the Participating Parties shall be for the benefit of and enforceable by the holders of the Bonds as well as the Authority. C. If by reason of Force Majeure a Participating Party or the Authority shall be rendered unable wholly or in part to carry out its obligations under this Contract, other than the obligation of each Participating Party to make the payments required under Section 5.03 of this Contract,then if such party shall give notice and full particulars of such Force Majeure in writing to the other Participating Parties and/or the Authority, as appropriate, within a reasonable time after occurrence of the event or cause relied on, the obligation of the Participating Party or the Authority giving such notice, so far as it is affected by such Force Majeure, shall be suspended during the continuance of the inability then claimed, but for no longer period, and such Participating Party or the Authority 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 Government of the United States or the State of Texas, or any civil or military authority, insurrection, riots, epidemics, landslides, lightning, earthquake, 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, or on account of any other causes not reasonable within the control of the party claiming such inability. 36121484.9 -19- Section 5.05 Continuing Right to Treated Water. For and in consideration of agreeing to the unconditional payments to be made under this Contract, each Participating Party is entitled to a firm right to treated water from the Project in the amounts indicated in Exhibit A, as such amount may be modified from time to time by the terms of this Contract. That right shall continue for the term of this Contract and any renewals thereof, subject to the terms of the GBRA Contract. ARTICLE VI Additional ParticipatingParties Section 6.01 Additional Participating Parties. If water is available, the Authority and the Original Participating Parties agree that additional entities may become subject to the provisions of this Contract as Additional Participating Parties by providing the following to the Authority and the then Participating Parties: A. an executed signature page to this Contract in form satisfactory to the Authority; B. to the extent any representation contained in this Contract relating to Participating Parties does not correctly describe such entity, a revision of such representations satisfactory in form and content to the Authority in the Authority's sole discretion to be included on Exhibit C to this Contract; C. a revised Exhibit A to this Contract satisfactory to the Authority and all then Participating Parties; D. a revised Exhibit B to this Contract setting forth the Point(s) of Delivery for such entity which shall be satisfactory to the Authority; E. a completed Exhibit C to this Contract to the extent applicable to such entity and in form satisfactory to the Authority; and F. such other certifications and information as may be reasonably requested by the Authority and the then Participating Parties, ARTICLE VII Special Conditions Section 7.01 Operation and Maintenance of the Project. The Authority will continuously operate and maintain the Project in an efficient manner and in accordance with good business and engineering practices, and at reasonable cost and expense. The Authority recognizes its right and duty to operate the Project in the most prudent and economical manner for the benefit of all Participating Parties. Section 7.02 Project Schedule. It is the intent of the parties that the Project be placed in operation as soon as practicable, and the Authority agrees to proceed diligently with the evaluation of feasibility, the securing of regulatory 36121484.9 -20- permits, and the design and construction of the Project to meet such schedule, subject to the other terms and conditions in this Contract. Section 7.03 Permits Financing, and nd Applicable Laws. Any obligations on the part of the Authority to acquire, construct, and complete the Project and related facilities and to provide treated water from the Project to the Participating Parties shall be (i) conditioned upon the Authority's ability to obtain all necessary permits, material, labor, and equipment; (ii) subject to the Authority's final determination of feasibility of transportation of the treated water from the Project; (iii) conditioned upon the ability of the Authority to finance the cost of the Project through the sale of the Bonds; and (iv) subject to all present and future valid laws, orders, rules, and regulations of the United States of America, the State of Texas, the Commission, and any regulatory body having jurisdiction. Section 7.04 Title to Water; Indemnification. Title to all water supplied to each Participating Party shall be in the Authority up to the Point of Delivery for such Participating Party, at which point title shall pass to the receiving Participating Party. Title to treated water transmitted through the lines of a Participating Party pursuant to Section 4.08 for the use of another Participating Party shall remain in the Authority until it reaches the Point(s) of Delivery of the receiving Participating Party. The Authority and each of the Participating Parties shall, to the extent permitted by law, save and hold each other harmless from all claims, demands, and causes of action which may be asserted by anyone on account of the transportation and delivery of said water while title remains in such party. Section 7.05 moments Solely From Revenues. The Authority shall never have the right to demand payment by any Participating Party of any obligations assumed by it or imposed on it under and by virtue of this Contract from funds raised or to be raised by taxes, and the obligations under this Contract shall never be construed to be a debt of such kind as to require any of the Participating Parties to levy and collect a tax to discharge such obligation. Nonetheless, any Participating Party may make payments from its utility system revenues, or from any other lawful source, including ad valorem taxes, if lawfully available to such Participating Party. Section 7.06 Operating;Expenses. Each of the Participating Parties represents and covenants that, to the extent payments under this Contract are made with utility system revenues, such payments shall constitute reasonable and necessary "operating expenses" of its utility system, as defined in Chapter 1502, as amended, Texas Government Code, and that all such payments will be made from the revenues of its utility system or any other lawful source. Each Participating Party represents and has determined that the treated water supply to be obtained .from the Project is absolutely necessary and essential to the present and future operation of its utility system and that the Project represents a long-term source of supply of treated water to meet current and projected water needs of the Participating Party's utility system and facilities, and, accordingly, all payments required by this Contract to be made by each Participating Party shall constitute reasonable and necessary operating expenses of its utility system as described above, with the effect that such payments from revenues of such systems shall be deducted from gross revenues of the system in the same manner as other system operating and maintenance expenses for purposes of determining net revenues available to pay bonds or other similar obligations heretofore or hereafter 36121484.9 -21- issued by such Participating Party, which obligations are payable from and secured by a pledge of the revenues of the system or facilities after deduction of maintenance and operating expenses. Section 7.07 Rates for Water. Each of the Participating Parties agrees throughout the term of this Contract to continuously operate and maintain its utility system and to fix and collect such rates and charges for utility services to be supplied by its system as aforesaid as will produce revenues in an amount equal to at least (i) all of the expenses of operation and maintenance expenses of such system, including specifically, its Annual Payment under this Contract, and (ii) all other amounts as required by law and the provisions of the ordinance or resolutions authorizing its revenue bonds or other obligations now or hereafter outstanding, including the amounts required to pay all principal of and interest on such bonds and other obligations. Section 7.08 Use of Funds and System. The Authority covenants and agrees that neither the proceeds from the sale of the Bonds, nor the money paid it pursuant to this Contract, nor any earnings from the investment of any of the foregoing, will be used for any purposes, except those directly relating to the Project and the Bonds as provided in this Contract. Section 7.09 Rights-of-Way. A. Except as limited by the Special Provisions set forth in Exhibit C, each Participating Party hereby grants to the Authority without additional cost to the Authority, the use of the streets, easements, rights-of-way, and pipelines under its control for the construction, emergency repairs, operation, and maintenance of the Project and the provision and transmission of treated water hereunder; provided, however, such grant of the use of streets, easements, rights-of-way, and pipelines to the Authority is subject to and conditioned on the Authority (i) complying with all applicable policies, practices, and regulations of the Participating Parties governing and regulating such use of the streets, easements, rights-of-way, and pipelines and (ii) paying all costs, if any, of restoring such streets, easements, rights-of-way, and pipelines to substantially the same state of condition that existed prior to the Authority's use. B. Except as limited by the Special Provisions set forth in Exhibit C and to the extent they have such ownership authority, each Participating Party agrees that, without prior written approval, the Authority may use streets, alleys, and public rights-of-way within the Participating Party's boundaries for pipeline purposes. Section 7.10 Insurance. The Authority agrees to carry and arrange for fire, casualty, public liability, and/or other insurance, including self-insurance, on the Project for purposes and in amounts which, as determined by the Authority, ordinarily would be carried by a privately owned utility company owning and operating such facilities, except that the Authority shall not be required to provide liability insurance except to insure itself against risk of loss due to claims for which it can, in the opinion of the Authority's legal counsel, be liable under the Texas Tort Claims Act or any similar law or judicial decision. Such insurance will provide, to the extent feasible and practicable, for the restoration of damaged or destroyed properties and equipment, to minimize the interruption of the services of such facilities. Premiums for such insurance that relate directly to the Project or, under generally accepted cost accounting practices, is allocable to the Project, shall constitute an Operation and Maintenance Expense. 36121484.9 -22- Section 7.11 Additional Special Provisions. The parties hereto acknowledge and agree to the Special Provisions, if any, which are set forth in Exhibit C hereto. The Special Provisions for this Contract reflect circumstances or issues for specific Participating Parties which may be different from those of other Participating Parties and therefore constitute a modification of or requirement in addition to the standard provisions otherwise contained in this Contract. To the extent of any conflict between any Special Provision and any other provision of this Contract,the Special Provision shall control. ARTICLE VIII Continuing;Disclosure Section 8.01 Annual Reports. The Authority (and each Participating Party if required by the Rule in its Approval Certificate for any series of Bonds) shall file annually with the MSRB, (1) within six months after the end of each Fiscal Year of the Authority ending in or after 2016, financial information and operating data with respect to the Authority of the general type included in the Sale and Offering Documents authorized by Section 33 of the Bond Resolution, being the information described in Exhibit E to the Bond Resolution, and (2) if not provided as part of such financial information and operating data, audited financial statements of the Authority, when and if available. Any financial statements so to be provided shall be (i)prepared in accordance with the accounting principles described in Exhibit E to the Bond Resolution, or such other accounting principles as the Authority may be required to employ from time to time pursuant to state law or regulation, and (ii)audited, if the Authority commissions an audit of such financial statements and the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within such period, then the Authority shall file unaudited financial statements within such period and audited financial statements for the applicable Fiscal Year to the MSRB, when and if the audit report on such financial statements becomes available. The Authority must have its records and accounts audited annually and shall have an annual financial statement prepared based on the audit. The annual financial statement, including the auditor's opinion on the statement, shall be filed in the office of the Secretary, Board of Trustees, within 180 days after the last day of the Authority's Fiscal Year. Additionally, upon the filing of this financial statement and the annual audit, these documents are subject to the Texas Open Records Act, as amended, Texas Government Code, Chapter 552. If the Authority changes its Fiscal Year, it will file notice of such change (and of the date of the new Fiscal Year end) with the MSRB prior to the next date by which the Authority otherwise would be required to provide financial information and operating data pursuant to this Section. Section 8.02 Material Event Notices. The Authority shall file notice of any of the following events with respect to the Bonds to the MSRB in a timely manner and not more than 10 business days after occurrence of the event: (1) Principal and interest payment delinquencies; (2) Non-payment related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; 36121484.9 -23- (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final detenninations of taxability,Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) Modifications to rights of holders of the Bonds, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the Bonds, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership, or similar event of the Authority, which shall occur as described below; (13) The consummation of a merger, consolidation, or acquisition involving the Authority or the sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) Appointment of a successor or additional paying agent/registrar or the change of name of a paying agent/registrar, if material. For these purposes, any event described in the immediately preceding paragraph (12) is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Authority in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Authority, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Authority. The Authority shall file notice with the MSRB, in a timely manner, of any failure by the Authority to provide financial information or operating data in accordance with this Section by the time required by this Section. Section 8.03 Limitations, Disclaimers, and Amendments. The Authority shall be obligated to observe and perform the covenants specified in this Section for so long as, but only for so long as, the Authority remains an "obligated person" with respect to the 36121484.9 -24- Bonds within the meaning of the Rule, except that the Authority in any event will give notice of any deposit that causes the Bonds to be no longer Outstanding. The provisions of this Section are for the sole benefit of the holders and beneficial owners of the Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The Authority undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the Authority's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The Authority does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE AUTHORITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE AUTHORITY, WHETHER NEGLIGENT OR WITH OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the Authority in observing or performing its obligations under this Section shall constitute a breach of or default under this Contract for purposes of any other provision of this Contract. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the Authority under federal and state securities laws. The provisions of this Section may be amended by the Authority from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the Authority, but only if(1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2)either(a)the holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Contract that authorizes such an amendment) of the Outstanding Bonds consent to such amendment or (b) a person that is unaffiliated with the Authority (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The Authority may also repeal or amend the provisions of this Section if the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such provisions of the Rule are invalid, and the Authority also may amend the provisions of this Section in its discretion in any other manner or circumstance, but in either case only if and to the extent that the provisions of this sentence would not have prevented an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds, giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. If the Authority so amends the provisions of this Section, the Authority shall include with any amended financial information or operating data next provided in accordance with this Section an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. 36121484.9 -25- Section 8.04 Information Format—Incorporation by Reference. The Authority information required under this Section shall be filed with the MSRB through EMMA in such format and accompanied by such identifying information as may be specified from time to time thereby. Under the current rules of the MSRB, continuing disclosure documents submitted to EMMA must be in word-searchable portable document format (PDF) files that permit the document to be saved, viewed, printed, and retransmitted by electronic means and the series of obligations to which such continuing disclosure documents relate must be identified by CUSIP number or numbers. Financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document) available to the public through EMMA or filed with the SEC. Section 8.05 Allocation of Water During Drought. During drought conditions or in any other condition when water cannot be supplied to meet the demands of all Participating Parties,the water to be distributed shall be divided among all Participating Parties of stored water pro rata, according to the amount each may be entitled to, subject to reasonable conservation and drought management plans and requirements based on particular purposes of use of the water, so that preference is given to no one and everyone suffers alike. Section 8.06 Conservation. The Authority and Participating Party each agree that it will operate and maintain the facilities associated with this Contract in a manner that will minimize the waste of water and to comply with the GBRA Contract provisions for conservation. Participating Parties further agree to implement water conservation and drought management plans applicable to the use of treated water from the Project that are consistent in purpose, provisions and application with those implemented by other Participating Parties to the extent practicable considering any differences in the legal authority of Participating Parties and other Participating Parties to institute those plans. Section 8.07 Term of Contract. A. This Contract shall be effective on and from the Contract Date, and shall terminate on December 31, 2038, unless extended by mutual agreement of the Authority and all Participating Parties, or unless terminated sooner by any Participating Party in accordance with subsection B. It is understood and agreed by the Authority and each Participating Party that the right to receive treated water hereunder shall continue throughout any renewals or extension of this Contract. The Authority's obligation to provide treated water services hereunder shall commence from the date the Project becomes operational and functional as certified by the consulting engineers for the Project or on such other date that one or more of the Participating Parties receives treated water by virtue of or in exchange for treated water from the Project. B. This Contract may be terminated by any Participating Party effective December 31, 2029, by providing written notice of termination to the Authority and all other Participating Parties no later than December 31,2028. C. This Contract constitutes the sole agreement between the parties hereto with respect to the Project. 36121484.9 -26- Section 8.08 Approval and Consent. Unless otherwise provided herein, any approval or consent required by the provisions of this Contract by a Participating Party or the Authority shall be evidenced by a written resolution adopted by the governing body of the party giving such approval or consent (or by the General Manager on behalf of the Authority when permitted). Upon receipt of such written resolution duly certified by the appropriate party, the Authority or the Participating Party can conclusively act on the matter requiring such approval. Section 8.09 Modification and Amendment. A. No change, amendment, or modification of this Contract shall be made or be effective which will affect adversely the prompt payment when due of all money required to be paid by any Participating Party under this Contract or any similar contract, and no such change, amendment, or modification shall be made or be effective which would cause a violation of any provisions of any Bond Resolution. B. This Contract may be amended upon the written consent of the Authority and all then Participating Parties; provided, however, no amendment to this Contract shall impair the rights of any holder of any of the Authority's Bonds. Section 8.10 Addresses and Notice. Unless otherwise provided herein, any notice, communication, request, reply, or advice (herein severally and collectively, for convenience, called "Notice") herein provided or permitted to be given, made or accepted by any party to any other party 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 telegram when appropriate, addressed to the party to be notified. Notice deposited in the mail in the manner hereinabove described shall be conclusively deemed to be effective, unless otherwise stated herein, from and after the expiration of three 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 purposes of notice,the addresses of the parties hereto shall, until changed as hereinafter provided, be as follows: A. If to the Authority,to: Canyon Regional Water Authority 850 Lakeside Pass New Braunfels, Texas 78130 Attention: General Manager B. If to the City of San Antonio, Texas, acting by and through the San Antonio Water System to:. San Antonio Water System 2800 U.S. Highway 281 North San Antonio, Texas 78212 Attention: President/Chief Executive Officer 36121484.9 '27_ C. If to the Crystal Clear Special Utility District to: Crystal Clear Special Utility District 2370 FM 1979 San Marcos, Texas 78666 Attention: General Manager D. If to the East Central Special Utility District to: East Central Special Utility District 5520 F.M. 1628 Adkins, Texas 78101 Attention: General Manager E. If to Green Valley Special Utility District, to: Green Valley Special Utility District Post Office Box 99 Marion,Texas 78124 Attention: General Manager F. If to Springs Hill Water Supply Corporation to: Springs Hill Water Supply Corporation 5510 South Highway 123 Bypass Seguin, Texas 78156 Attention: General Manager G. If to the City of Cibolo, Texas to: City of Cibolo, Texas 200 South Main Street Post Office Box 826 Cibolo, Texas 78108 H. If to the City of Marion, Texas to: City of Marion,Texas Post Office Box 158 Marion, Texas 78124-0158 The parties hereto 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 parties hereto. Section 8.11. State or Federal Laws, Rules Orders or Regulations. This Contract is subject to all applicable federal and state laws and any applicable permits, ordinances, rules, orders, and regulations of any local, state, or federal governmental authority having or 36121484.9 -28- asserting jurisdiction, but nothing contained herein shall be construed as a waiver of any right to question or contest any such law, ordinance, order, rule, or regulation in any forum having jurisdiction. Section 8.12 Remedies Upon Default. It is not intended hereby to specify (and this Contract shall not be considered as specifying) an exclusive remedy for any default, but all such other remedies (other than termination) existing at law or in equity may be availed of by any party hereto and shall be cumulative. Recognizing, however,that the Authority's undertaking to provide and maintain the Project is an obligation, failure in the performance of which cannot be adequately compensated in money damages alone, the Authority agrees, in the event of any default on its part, that each Participating Party shall have available to it the equitable remedy of mandamus and specific performance in addition to any other legal or equitable remedies (other than termination) which may also be available. Recognizing that failure in the performance of any Participating Party's obligations hereunder could not be adequately compensated in money damages alone, each Participating Party agrees in the event of any default on its part that the Authority shall have available to it the equitable remedy of mandamus and specific performance in addition to any other legal or equitable remedies (other than termination) which may also be available to the Authority. Notwithstanding anything to the contrary contained in this Contract, any right or remedy or any default hereunder, except the right of the Authority to receive the Annual Payment which shall never be determined to be waived, shall be deemed to be conclusively waived unless asserted by a proper proceeding at law or in equity within two (2)years plus one (1) day after the occurrence of such default. No waiver or waivers of any breach or default (or any breaches or defaults) by any party hereto or of performance by any other party of any duty or obligation hereunder shall be deemed a waiver thereof in the future, nor shall any such waiver or waivers be deemed or construed to be a waiver of subsequent breaches or defaults of any kind, character, or description, under any circumstance. Section 8.13 Severability. The parties hereto specifically agree that in case any one or more of the sections, subsections, provisions, clauses, or words of this Contract or the application of such sections, subsections, provisions, clauses, or words to any situation or circumstance should be, or should be held to be, for any reason, invalid or unconstitutional, under the laws of the State or the United States of America, or in contravention of any such laws, such invalidity, unconstitutionality, or contravention shall not affect any other sections, subsections, provisions, clauses, or words of this Contract or the application of such sections, subsections, provisions, clauses, or words to any other situation or circumstance, and it is intended that this Contract shall be severable and shall be construed and applied as if any such invalid or unconstitutional section, subsection, provision, clause or word had not been included herein, and the rights and obligations of the parties hereto shall be construed and remain in force accordingly. Section 8.14 Venue. All amounts due under this Contract, including, but not limited to, payments due under this Contract or damages for the breach of this Contract, shall be paid and be due in Guadalupe County, Texas, which is the County in which the principal administrative offices of the Authority are located. It is specifically agreed among the parties to this Contract that Guadalupe County, Texas, is the place of performance of this Contract; and in the event that any legal proceeding is brought to enforce this Contract or any provision hereof, the same shall be brought in Guadalupe County, Texas. 36121484.9 -29- Section 8.15 Assignment. Neither the Authority nor any Participating Party may assign any interest it may have under this Contract without the prior written consent of the other parties hereto; provided, however, the foregoing restriction shall not prevent the Authority from taking any action in connection with the issuance of the Bonds to secure the payment of the Bonds with amounts to be received by the Authority under this Contract. Section 8.16 Entire Agreement. This Contract constitutes the entire agreement among the parties with respect to the sale of treated water by the Authority to the Participating Parties. Section 8.17 Applicable Law. This Contract shall be governed by and construed in accordance with the laws of the State, including Chapter 186, Subchapter A, as amended, Texas Utilities Code, and the obligations, rights, and remedies of the parties hereunder shall be determined in accordance with such laws without reference to the laws of any other state or jurisdiction, except for applicable federal laws, rules, and regulations. Section 8.18 No Sale,Lease, or Other Transfer of Participating Parties' Utility stem. Pursuant to the terms of this Contract, a Participating Party, to the extent permitted by law, shall not sell, lease, or otherwise transfer any significant interest (constituting at least 50% of the fair market value of its utility system) in such Participating Party's utility system without the written consent of the Authority. Section 8.19 Counterparts. This Contract may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 8.20 Goods and Services; Waiver of Sovereign Immunity; Limitation on Damages. The Participating Parties under the Contract agree that the mutual commitment stated in the Contract to provide water, emergency water service, water treatment services, and funding for utility system improvements constitute an agreement by each party for providing goods and services to the other parties, and that the Contract, as amended, is subject to Chapter 271, Subchapter 1, of the Texas Local Government Code. In addition, each Participating Party agrees that the services provided by this Contract are governmental acts and not proprietary acts. Section 8.21 Termination of Lake Dunlap Contract and Mid-Cities Contract. Upon the execution of this Contract by each Participating Party and the issuance of the Bonds on or about July 1, 2016, the existing Lake Dunlap Contract and Mid-Cities Contract shall be terminated and be of no future force or effect as those contracts are now replaced by this Contract. [The remainder of this page intentionally left blank.] 36121484.9 -30- IN WITNESS WHEREOF, the parties hereto acting under authority of their respective governing bodies have caused this Contract to be duly executed as of the day and year first above written. CANYON REGIONAL WATER AUTHORITY By: Chairman, Board of Trustees ATTEST: Secretary, Board of Trustees (AUTHORITY SEAL) 36121484.9 S-1 CITY OF SAN ANTONIO, TEXAS, acting by and through the SAN ANTONIO WATER SYSTEM Ernesto Arrellano, Jr., Secretary Berto Guerra, Jr., Chairman 36121484.9 S-2 CRYSTAL CLEAR SPECIAL UTILITY DISTRICT By: President, Board of Directors ATTEST: Secretary, Board of Directors (SEAL) 36121484.9 S-3 EAST CENTRAL SPECIAL UTILITY DISTRICT By: President,Board of Directors ATTEST: Secretary-Treasurer, Board of Directors (SEAL) 36121484.9 S-4 GREEN VALLEY SPECIAL UTILITY DISTRICT By: President, Board of Directors ATTEST: Secretary, Board of Directors (SEAL) 36121484.9 S-5 SPRINGS HILL WATER SUPPLY CORPORATION By: President, Board of Directors ATTEST: Secretary, Board of Directors (SEAL) 36121484.9 S-6 R CITY OF CIBOLO, TEXAS ayor ATTEST- City Secretary (CITY SEAL) 36121484.9 S'7 CITY OF MARION, TEXAS By: Mayor ATTEST: City Secretary (CITY SEAL) 36121484.9 S-8 Exhibit A Allocations and Maximum Rate of Flow Lake Dunlap Project and Mid Cities Project Ozone Project Participating Parties Percentage Water Ownership Water Ownership of Debt Production (%) Production (%) Service (Acre Feet) (Acre Feet) SAWS 46.36% 4,000 36.43% 4,000 57.35% City of Cibolo 11.84% 1,230 11.20% 875 12.54% City of Marion 1.84% 100 0.91% 200 2.87% East Central SUD 16.22% 1,400 12.75% 1,400 20.07% Green Valley SUD 12.02% 1,800 16.39% 500 7.17% Springs Hill WSC(I) 9.33% 1,950 17.76% 0 0.00% Crystal Clear SUD(1) 2.39% 500 4.55% 0 0.00% Totals 100.00% 10,980 100.00% 6,975 100.00% (1) Because neither Springs Hill Water Supply Corporation nor Crystal Clear Special Utility District have an ownership interest in the Mid-Cities Project, neither entity shall be obligated to pay any Operation and Maintenance Expenses, Overhead Expenses, and/or Project Costs relating to the Mid- Cities Project without the express written consent from the governing body of the Springs Hill Water Supply Corporation or the Crystal Clear Special Utility District,as appropriate. 36121484.9 A-1 Schedule A Part 1 Lake Dunlap Plant Contracts The attached table for Plant Contracts lists the amount of production of finished water from the Lake Dunlap Plant (the "Plant"); expressed in acre-feet (AF) and gallons-per-day (GPD), that have been contracted with the Participating Parties. In addition to the Plant contract figures, Canyon Regional Water Authority recognizes a peaking factor of 1.3 (30%) as a logical and necessary requirement and the peaking GPD figures are also listed. Canyon Regional Water Authority agrees to use its best efforts to supply to each individual entity, on any given day, the amount of water specified in the peaking figures. The total capability of the Plant is listed in the Ownership column in the table cited above. The Participating Parties can be provided with this amount of water from the Plant on any given day, at the discretion of the Lake Dunlap Plant Manager. Additional water, over the peaking GPD and up to the Ownership GPD, will be provided to the Participating Party without penalty; however, any water processed over and above the amounts listed in the Ownership column will incur a System Capacity Fee as determined by the Participating Parties. The total amount of water processed through the Plant for each Participating Party must be supported by a sufficient amount of Raw Water that is under contract to each individual entity and that water must be available to Canyon Regional Water Authority for processing at the Plant. Lake Dunlap Project Water Contract 1.3 Peak Ownership of Participating Production Ownership Capacity in Capacity in 15,200,000 Par /Customer (Acre Feet) (%) GDP GDP GPD SAWS 4000 36.43% 3,570,970 4,642,261 5,537,341 City of Cibolo 1230 11.20% 1,098,073 1,427,495 1,702,732 City of Marion 100 0.91% 89,274 116,057 138,434 East Central SUD 1400 12.75% 1,249,839 1,624,791 1,938,069 Green Valley SUD 1800 16.39% 1,606,936 2,089,017 2,491,803 Springs Hill WSC 1950 17.76% 1,740,848 2,263,102 2,699,454 Crystal Clear SUD 500 4.55% 446,371 580,283 692,168 Totals 10980 100.00% 9,802,311 12,743,006 15,200,001 36121484.9 A-2 Exhibit A for Mid-Cities Pipeline Capacities Ownership Table 1 Table 2 Table 3 Percent Capacity Dunlap/Wag Wag/1604 1604/1518 SAWS 57.35% 5,780,880 8,671,320 5,780,880 City of Cibolo 12.54% 1,264,032 1,896,048 1,264,032 City of Marion 2.87% 289,296 433,944 289,296 East Central SUD 20.07% 2,023,056 3,034,584 2,023,056 Green Valley SUD 7.17% 722,736 1,084,104 722,736 Springs Hill WSC 0.00% - - Crystal Clear SUD 0.00% - - 100.00% 10,080,000 15,120,000 10,080,000 Contract Table 1 Table 2 Table 3 Percent Capacity Dunlap/Wag Wag/1604 1604/1518 SAWS 57.35% 3,571,115 3,571,115 3,571,115 City of Cibolo 12.54% 780,851 780,851 780,851 City of Marion 2.87% 178,711 178,711 178,711 East Central SUD 20.07% 1,249,735 1,249,735 1,249,735 Green Valley SUD 7.17% 446,467 446,467 446,467 Springs Hill WSC 0.00% - - - Crystal Clear SUD 0.00% - - 100.00% 6,226,879 6,226,879 6,226,879 Peak Table 1 Table 2 Table 3 Percent Capacity Dunlap/Wag Wag/1604 1604/1518 SAWS 57.35% 4,642,449 4,642,449 4,642,449 City of Cibolo 12.54% 1,015,106 1,015,106 1,015,106 City of Marion 2.87% 232,325 232,325 232,325 East Central SUD 20.07% 1,624,655 1,624,655 1,624,655 Green Valley SUD 7.17% 580,407 580,407 580,407 Springs Hill WSC 0.00% - - - Crystal Clear SUD 0.00% - - - 100.00% 8,094,942 8,094,942 8,094,942 36121484.9 A-3 Schedule A Part 2 Mid Cities Pipeline Contracts The attached tables lists' the amount of finished water(Pipeline Capacity and Percent of Ownership) through the Mid Cities Pipeline that each Party entity has contracted for with Canyon Regional Water Authority. This contract is expressed in acre-feet(AF) and gallons-per-day(GPD.) In addition to the Pipeline Capacity contract figures, Canyon Regional Water Authority recognizes a peaking factor of 1.3 (30%)as a logical and necessary requirement and the peaking GPD figures are also listed. Additionally,the total capability of the Mid Cities Pipeline is also listed under the Ownership column. The individual Participating Party contract amounts expressed as Pipeline Capacity and Percent of Ownership and Contract Capacity; 1.3 Peak Capacity; and Ownership, are listed on the attached tables as follows: Table 1: Lake Dunlap Plant to the Wagner Booster Station. Table 2: Wagner Booster Station to Loop 1604. Table 3: Loop 1604 to FM 1518. At this time,the amounts of water in the above listed tables are not cumulative from table to table. The volume and rate of water that can be transmitted through the Mid Cities Pipeline is dependent upon several factors,such as the amount of water produced at a plant,pumps,storage facilities,etc. Due to these variables,the current amount of water available to the individual Parties,is the amount listed in Table 1. As additional sources of treated water and pumping stations become available the increased amounts listed in Tables 2 and 3 may become available simultaneously with the amount listed in Table 1. Canyon Regional Water Authority agrees to use its best efforts to supply to each individual Participating Party, on any given day,the amount of water specified in the peaking figures listed in Table 1,through the Mid Cities'Pipeline, dependent upon the Participating Party's diversion point along the Mid Cities Pipeline. Additionally, the total capability(Ownership)of the Mid Cities Pipeline, depending upon the diversion point, is available to each Participating Party, on any given day, at the discretion of the Lake Dunlap Plant Manager. Additional water transmission over the peaking GPD and up to the Ownership GPD will be provided to the Participating Party without penalty; however, any water delivered over and above the amounts listed in the Ownership column will incur a Pipeline Capacity Fee as determined by the Participating Parties. 36121484.9 A-4 Exhibit B Points of Delivery Crystal Clear Water SUD Intersection of State Highway 123 and Farm to Market 758 East Central SUD Wiechold Road,Linnie Road, Graytown Road,Pfiel Road and Tex Mix 1518 location Springs Hill Water Supply Corp. Hwy 46 at the CRWA standpipe Green Valley SUD Lake Dunlap Plant at the Fire School Hardy Road Meter Station Wagner Booster Station Haeckerville Rd Meter Station 1518 Elevated Tank Liessner Booster Station City of San Antonio,Texas, acting by and through the San Antonio Water System 1604 Booster Station City of Cibolo Haeckerville Meter Station Wagner Booster Station City of Marion Marion Meter Station—Youngsford Road 36121484.9 B-1 Exhibit C Special Provisions (1) Section 7.09. The provisions of Section 7.09 shall not apply to the City of San Antonio, Texas, acting by and through the San Antonio Water System, which shall have no obligation to grant hereunder, and does not grant, to the Authority the use of any streets, easements, rights-of-way, or pipelines under its control for any purpose under this Contract. However, the City of San Antonio, Texas, acting by and through the San Antonio Water System, agrees to consider any written request for such use from the Authority and provide a written response to the Authority within sixty(60) days of receipt of the written request. (2) Section 8.18. The provisions of Section 8.18 shall not apply to the City of San Antonio, Texas, acting by and through the San Antonio Water System, which shall have an unencumbered and unrestricted right to sell, lease, or transfer any or all interest in its utility system without the written consent of the Authority. 36121484.9 C-1 Exhibit D Ozone Project Description Proposed improvements at the Lake Dunlap Water Treatment Plant include the addition of ozone disinfection equipment and a 1.25 million gallon storage tank for ozone contact. The proposed improvements estimated at $2,950,000.00 are detailed in a preliminary engineering report prepared by River City Engineering, and dated 3-17-16. 36121484.9 D-1 Exhibit E Water Quality Characteristics TCEQ At Delivery Point Analyte Parameters CRWA Grab TTHMs ppb 80 ppb <45 ppb pH > 7.0 7 – 8.5 Range Alkalinity as Calcium Carbonate (mg/L) - 90 –350 Range CA2+ Hardness as Calcium Carbonate in - 50– 150 Range (mg/L)HCO3- TDS (mg/L) < 1000 < 500 Non- LSI > 0.2 Corrosivity Corrosive *Reported Monthly CRWA delivered water shall comply with TCEQ primary and secondary maximum contaminant levels (MCL's) for public water systems. CRWA shall deliver Positive LSI water which is slightly scaling using the indices below to determine the Stability of the water. It is understood that it is important to meet the regulatory compliance at the Participating Party's points of delivery to meet or exceed TCEQ Drinking Water parameters. Entity's Point of Delivery (Exhibit B) CRWA water quality parameters at delivery point shall only be applicable to Participating Parties who are taking water at >_50% of contracted quantities over previous twenty-four hour period. Minimum Revluirements for Corrosion Indices RequiredMmm�—Corrosion Indices Langelier Saturation Index (LSI) >0.2 Rynzar Index (RI) <8 Calcium Carbonate Precipitation Potential 4-1Omg/L (CCPP) Aggressive Index (AI) >12 Chloride To Sulfate Mass Ratio (CSMR) <0.58 Larson's Ratio (LR) <0.8 36121484.9 E-1 Definitions LANGELIER SATURATION INDEX (LSI) LSI is defined as the difference between the actual pH and the pH at which calcium carbonate (CaCO3) precipitation can occur based on equilibrium. LSI does not indicate that CaCO3 precipitation will occur rather only that it is possible. Precipitation. of calcium carbonate can help protect pipes from corrosion by providing a protective layer between water and the pipe material. A positive LSI is typically specified as a water quality goal. LSI is calculated as follows, where pHs is the pH at CaCO3 saturation and pHa is the actual pH: LSI = pHa-pHs RYNZAR INDEX (RI) The Rynzar Index (RI) is similar to LSI in that it uses calcium carbonate saturation to predict the scale formation or scale dissolution potential of water. RI is an empirical index developed through observations of the thickness of scale layers in municipal systems. RI is calculated as follows,where pHs is the pH at CaCO3 saturation and pHa is the actual pH: RI= 2pHs-pHa The potential to form a protective CaCO3 film increases as RI decreases. The correlations suggested with this index are as follows: • RI < 7 protective scale is expected to form. • RI > 8 corrosion can become a problem. CALCIUM CARBONATE PRECIPITATION POTENTIAL (CCPP) While LSI only indicates whether calcium carbonate precipitation is possible, CCPP is calculated to estimate how much calcium carbonate precipitation is expected. CCPP is calculated iteratively with equilibrium expressions. When CCPP is negative, the water will tend to dissolve the protective CaCO3 coating on the pipe wall. If CCPP is positive but too low, the protective coating may not be formed adequately. When CCPP is too high, excessive CaCO3 precipitation can occur forming a scale layer that reduces pipe capacity. The recommended range for CCPP is generally between 4 mg/L and 10 mg/L. CCPP is calculated as follows where TALKi is the initial alkalinity, TALK, is the total alkalinity at equilibrium and alkalinity is in units of mg/L as CaCO3. • CCPP = [TALKi-TALK-e] with all of the parameters in the equation in mg/L as CaCO3 AGGRESSIVE INDEX (AI) The aggressive index is used to evaluate the corrosion potential of the water with respect to asbestos/cement pipes. Aggressive Index is calculated as follows where Alkalinity and Hardness are in units of mg/L as CaCO3. • AI =pH + log(Alkalinity x Hardness) Al values are correlated to aggressiveness to asbestos/cement pipe as follows: • < 10 = extremely aggressive. • 10 to < 12 = moderately aggressive e >_ 12 =nonaggressive 36121484.9 E-2 BUFFER INTENSITY (BI) Buffer intensity is defined as the moles per liter of a strong base (or OH-) which when added to water causes a one unit change in pH. Consequently, BI is a measure of the buffering capacity of water to resist changes in pH due to chemical addition or corrosion reactions. BI is greatest at pH 6.3 and is lowest between pH 8.3 and pH 8.7. Bicarbonate (HCO3-) and carbonate (C032-) are the most important pH buffering species in drinking water, and therefore buffer intensity increases as alkalinity increases. CHLORIDE TO SULFATE MASS RATIO (CSMR) Studies have shown that lead release increases as the mass ratio of chloride to sulfate increases. Researchers have suggested <_ O.S8 as a safe mass ratio of chloride to sulfate. LARSON'S RATIO (LR) Larson's ratio is a measure of chloride (Cl-) and sulfate (SO4-2) concentrations relative to alkalinity. LR is calculated as follows where the concentrations of each of the species involved in the formula should be expressed in milliequivalents per liter (meq/L). When the Larson ratio is less than 0.8 there is little risk of chloride and sulfate interfering with calcium carbonate film formation. LR=[ct ]+[so42-] (A tka tinityl 36121484.9 E-3