NIPOMO SUPPLEMENTAL WATER PROJECT SUPPLEMENTAL WATER MANAGEMENT AND GROUNDWATER REPLENISHMENT AGREEMENT This Nipomo Supplemental Water Project Supplemental Water Management and October Groundwater Replenishment Agreement ("Agreement') is made this Ibf'day of September, 2015, between the Nipomo Community Services District, Rural Water Company, The Woodlands Mutual Water Company of San Luis Obispo County and Golden State Water Company with regards to the following facts: I. RECITALS: A. The Nipomo Community Services District ("NCSD") is a public entity, independent special district organized and operated pursuant to Govt. Code section 61000 et seq. NCSD provides water and related services within the NCSD boundary located in the southern portion of San Luis Obispo County, within an area generally B. Golden State Water Company ("GSWC") is a California corporation and a public utility water corporation as defined by Public Utilities Code SS 216 and 241 providing water service to customers within the Nipomo Mesa subject to California C. Rural Water Company ("RWC") is a California corporation and a public utility water corporation as defined by Public Utilities Code SS 216 and 241 providing water service to customers within the Nipomo Mesa subject to PUC regulation. D. The Woodlands Mutual Water Company of San Luis Obispo County ("WMWC") isa California corporation and a mutual water company providing water service to its E. Collectively, GSWC, RWC and' WMWC, are referred to as the Water Companies" and individually as a "Water Company". NCSD, GSWC, RWC and WMWC are collectively referred to as the "Parties" and individually as a "Party". F. The Parties, along with hundreds of other individuals and entities are parties to ac certain legal proceedings entitled "Santa Maria Valley Water Conservation District V. City of Santa Maria, et al., Superior Court oft the State of California, County of Santa Clara, Consolidated Cases CV770214 ("Santa Maria Litigation"), regarding the respective rights of the litigants to groundwater resources in the Santa Maria G. After lengthy proceedings, the court entered an amended judgment NSWP Supplemental Water Management and Groundwater Replenishment Agreement referred to as the Nipomo Mesa. Public Utilities Commission ("PUC")r regulation. shareholder = customers within the Nipomo Mesa. Groundwater Basin ("Basin"). Page 1 of20 03677410183113275004.1 9/7/15 ("Judgment") on April 17, 2014, which provides for the long-term management of the H. The court retained jurisdiction over the Judgment to ensure the parties manage Basin water resources. the Basin water resources consistently with the Judgment. I. Incorporated into and made a part of the Judgment is a Stipulation dated June 30, 2005 ("Stipulation"), which establishes a detailed management plan for three subareas within the Basin. The Nipomo Mesa is included in the subarea called the J. The Judgment (through the Stipulation) requires NCSD to purchase and transmit to the NMMA a minimum of 2,500 acre-feet of' Nipomo Supplemental Water" each year. NCSD is further required to employ its best efforts to timely implement the K. The Judgment further provides that once the Nipomo Supplemental Water is capable of being delivered, the Parties shall purchase the following portions of the Nipomo Supplementar Water each year to offset groundwater pumping within the Nipomo Mesa Management Area ("NMMA"). Nipomo Supplemental Water Project (NSWP). NMMA. Entity NCSD GSWC RWC WMWC Total Percent Allocation 66.68 8.33 8.33 16.66 100.00 AFY (2,500 AF NSWP Yield) 1667.00 208.25 208.25 416.50 2500.00 L. NCSD has entered into a Wholesale Water Supply Agreement with the City of Santa Maria (City), dated May 7, 2013, ('NCSD-City Agreement,' attached and incorporated as Exhibit "A"). The NCSD-City Agreement provides a mechanism through which NCSD may purchase Nipomo Supplemental Water for sale and distribution in the NSWP, consistent with the obligations in the Judgment. M. NCSD has completed construction of the first stage of the NSWP such that NCSD is taking delivery of Nipomo Supplemental Water as ofJuly 1, 2015. The additional stages of the NSWP to allow increased water delivery of a minimum of 2,500 AFY, as required under the Judgment, are currently being planned. N. On or about June 25, 2015, the PUC approved GSWC's acquisition of RWC. Upon completion of GSWC's acquisition of RWC, GSWC will assume the entirety of O. NCSD has designed the NSWP to deliver 3,000 AFY. All costs associated with NSWP Supplemental Water Management and Groundwater Replenishment Agreement RWC's benefits and obligations under this Agreement. Page 2 of20 9/7/15 the capacity in excess of 2,500 AFY are solely assigned to NCSD. Should the Parties, or any faction thereof, elect to expand NSWP facilities to deliver water in excess of 3,000 AFY, further negotiation and agreement among the participating Parties will be P. The purpose of this Agreement is to implement the Parties' obligations with respect to the NSWP as provided in the Stipulation and the Judgment. Inc consideration of the foregoing recitals that are incorporated herein by reference and the mutual terms and conditions set forth herein, the Parties agree as follows: required. II. DEFINITIONS: Terms used herein with initial capitalization, whether in singular or plural, shall have the following meanings: A. "AFY" shall mean acre-feet per year. B. "Costs" shall mean all the administrative, planning, design, permitting, capital, financing, construction, operation, maintenance, repair, replacement and overhead allocation costs associated with and arising out of the construction and ongoing operation of the NSWP, excluding costs of Points of Interconnection, which shall be funded as provided in Section VII. Costs shall include both actual expenses and reasonably anticipated NSWP related expenses expected to be incurred for the completion of the NSWP and for the ongoing operations of the NSWP. Costs include future financing of phases of the NWSP and future changes in water costs resulting from renegotiation oft the NCSD-City Agreement. C. "Effective Date" shall mean July 1, 2015. D. "Fiscal Year" shall mean the twelve (12) month period commencing each July 1st during the term of this Agreement and ending the following June 30th. E. "NSWP Enterprise Fund" shall mean the NSWP Enterprise Fund used by F. Judgment" shall mean the amended judgment entered by the Court in that case entitled Santa Maria Valley Water Conservation District V. City of Santa Maria, et al., Superior Court of the State of California, County of Santa Clara, consolidated G. "NCSD-City Agreement" shall mean the agreement between the City of Santa Maria and Nipomo Community Services District titled Wholesale Water Supply NCSD to account for, budget and track the Costs. cases CV770214. Agreement," dated May 7, 2013. NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 3of20 03677410183113275004.1 9/7/15 H. "Nipomo Mesa Management Area" or "NMMA" shall mean the area sO defined and described in the Judgment. I. "Nipomo Supplemental Water" shall mean up to 2,500 AFY ofv water delivered J. "Nipomo Supplemental Water Project" or "NSWP" shall mean the facilities and appurtenances, including each Point of Interconnection, necessary to deliver Nipomo Supplemental Water as provided in Section VI.(A) of the Stipulation. K. "NMMA Technical Group" is the group formed pursuant to the requirements of L. "Point of Interconnection" shall mean those components of the NSWP extending from NCSD's water distribution system to each Water Company through which Nipomo Supplemental Water may be delivered to each Water Company. M. "Prudent Utility Practice" shall mean the practices, methods, and acts which, in the exercise of reasonable judgment in light of the facts (including but not limited to the practices, methods, and acts engaged in or approved by a significant portion of the water utility industry prior thereto) known at the time the decision was made, would have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety, and expedition, taking into account the fact that Prudent Utility Practice is not intended to be limited to the optimum practice, method, or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods, or acts which could have been expected to accomplish the desired result. Prudent Utility Practice includes due regard for manufacturers' warranties and requirements of agencies of competent, jurisdiction. N. "PUC" shall mean the California Public Utilities Commission, the entity with O. "PUC Application" shall mean those materials and testimony required sO that GSWC and RWC may obtain PUC approval adequate to satisfy the conditions within the NMMA to offset groundwater pumping. the Stipulation and Judgment. regulatory oversight responsibility for RWC and GSWC. subsequent set forth in Section Vb below. P. "Stipulation" shall mean the agreement dated June 30, 2005, by and between the majority of the litigants in the Santa Maria Litigation, settling their disputes and imposing a physical solution on the management of water resources in the Santa Maria Basin. The Stipulation is incorporated in and is a part oft the Judgment. Q. Uncontrollable Force" shall mean any cause or event which is beyond the control oft the Party affected, including, but not restricted to, failure of or threat of failure of facilities, flood, earthquake, storm, fire, lightning, epidemic, war, riot, civil disturbance or disobedience, labor dispute or strike, labor or material shortage, sabotage, restraint by court order or public authority and action or non-action by or NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 4 of20 9/7/15 failure to obtain the necessary authorizations or approvals from any governmental agency or authority which by exercise of due diligence such party could not reasonably have been expected to avoid and which by exercise of due diligence it shall be unable to overcome. PURPOSE: III. A. The purpose of this Agreement is to enable the Parties to meet their respective obligations under the Judgment, based on the percentage allocations presented in Section I.K, regarding the NSWP. In particular, the Parties intend this Agreement to provide for: (1) payment to NCSD for each Party's allocation of Costs, and (2) B. The underlying premise of the NSWP is to use Nipomo Supplemental Water within the NMMA to offset 2,500 AFY of groundwater pumping in those areas within the NMMA where groundwater levels are most depressed and thus augment the replenishment of groundwater in those critical areas within the NMMA. As described herein, the Parties will use the Nipomo Supplemental Water to increase groundwater replenishment within the NMMA and improve the long-term reliability and integrity of groundwater availability within the NMMA. The Nipomo Supplemental Water delivered to the Parties pursuant to this Agreement shall be used exclusively for the benefit of properties within the existing. jurisdictions and service areas of the Parties and in distribution and use of Nipomo Supplemental Water. accordance with the Judgment and Stipulation. EFFECTIVE DATE AND TERM: IV. A. This Agreement shall be effective on July 1, 2015 and shall terminate on June B. Notwithstanding the Term, the delivery of Nipomo Supplemental Water to the Parties subsequent to June 30, 2035, is subject to the renewal of the contract for state water between the City and the Central Coast Water Authority. The NCSD-City Agreement provides that it is subject to renegotiation in the event that the City's contract with the Central Coast Water Authority is not renewed as of. June 30, 2035 or ifthe renewal terms would create a significant financial burden to the City or impair the ability of the City to provide Nipomo Supplemental Water in the quantities set forth in C. Should renegotiation of the NCSD-City Agreement be required, NCSD and the City are required to negotiate and use their best efforts to equitably amend the terms oft the NCSD-City Agreement to allow for the continued delivery of Nipomo Supplemental Water on terms mutually beneficial to both parties for the duration of the Term. NCSD will consult and confer with the Water Companies prior to entering into any material amendments to the NCSD-City Agreement. 30, 2085 ("Term"). the NCSD-City Agreement. NSWP Supplemental Water Management and Groundwater Replenishment, Agreement Page 50 of20 3674.08343275004-1 9/7/15 D. Obligations incurred hereunder but not satisfied prior to termination of this Agreement shall survive such termination until fully discharged, including any payments due by one Party to another Party hereunder. V. CONDITIONS SUBSEQUENT: This Agreement shall terminate and shall be of no further force and effect as to either A. As promptly as is reasonably practicable and in no event later than October 30, 2015, GSWC shall apply for PUC approval for imposition of the necessary rate adjustments so that GSWC may meet its financial obligations provided under this Agreement. GSWC shall provide NCSD with written notice of the satisfaction or waiver oft this provision. If GSWC fails to obtain this PUC approval, through a PUC decision or order that is no longer subject to appeal, on or before December 31, 2017, either NCSD or GSWC may, each in its sole discretion, declare a failure to satisfy this condition and terminate this agreement as to GSWC. If either NCSD or GSWC exercises this termination right, the provisions of Article X(D)(1) of the Stipulation shall B. As promptly as is reasonably practicable and in no event later than October 30, 2015, RWC shall apply to for PUC approval for imposition of the necessary rate adjustments sO that RWC may meet its financial obligations provided under this Agreement. RWC shall provide NCSD with written notice of the satisfaction or waiver of this provision. If RWC fails to obtain this PUC approval, through a PUC decision or order that is no longer subject to appeal, on or before December 31, 2017, either NCSD or RWC may, each ini its sole discretion, declare a failure to satisfy this condition and terminate this agreement as to RWC. Ifeither NCSD or RWC exercises this termination right, the provisions of Article X(D)(1) of the Stipulation shall apply. C. The Parties shall make every reasonable business effort to coordinate and cooperate in providing any necessary data, information and testimony to support the D. GSWC and RWC shall each be responsible for its own PUC Application. However, each entity expects its PUC Application to be substantially the same in its content. Each PUC Application shall include a request for full financial participation in the NSWP as provided in this Agreement, as of the Effective Date. RWC and GSWC shall make their reasonable best efforts to obtain a prompt and reasonable response to the PUC Application from the PUC, including making every reasonable attempt to reach an acceptable settlement of the PUC Application in lieu of processing the PUC Application through a contested administrative hearing at the PUC. The Parties acknowledge that obtaining PUC approval of each PUC Application may take 12 months or more, following the date of submission of the PUC Application, and that neither GSWC nor RWC have control over the time it takes the PUC to process and NSWP Supplemental Water Management and Groundwater Replenishment, Agreement or both GSWC and RWC, subject to the following conditions. apply. PUC approval processes contemplated in this Section. Page 6of20 9/7/15 resolve each PUC Application. Notwithstanding the Effective Date, neither GSWC's, nor RWC's financial obligations provided in this Agreement accrue and are enforceable as to either entity, unless and until the PUC provides GSWC and RWC approval to make the necessary customer water rate adjustments equal to each entity's respective share of the Costs provided in this Agreement as oft the Effective E. Until the conditions subsequent in this section are satisfied with written notice, or waived, neither NCSD, RWC, nor GSWC waive their rights to exercise the Date and otherwise consistent with Section IX.B. provisions of Article X(D)(1) of the Stipulation. VI. USE OF NIPOMO SUPPLEMENTAL WATER. NCSD shall be responsible for the distribution and use oft the Nipomo Supplemental A. Subject to the groundwater management and recharge protocols provided in this Agreement, the presumed quantity and rate of delivery of Nipomo Supplemental Water for each Party shall be as provided in the table below, based upon an assumed delivery of 2,500. AFY. To the extent Nipomo Supplemental Water is not available for delivery at the volumes or rates shown, each Party's deliveries shall be reduced on a proportional basis. To the extent the implementation of groundwater management and recharge protocols provide for alternative deliveries, each Party shall be responsible for its portion of the Costs as otherwise provided in this Agreement. Water between and among the Parties subject to the following: Entity NCSD GSWC RWC WMWC Annual (AF) 1668 208 208 416 Quarterly (AF) 417 52 52 104 Maximum per Month (AF) 139 17 17 35 B. The highest priority use of Nipomo Supplemental Water shall be to offset groundwater pumping within those regions within the NMMA where depressed C. Provided that such reduction does not materially and adversely affect its ability toy provide water for the reasonable and beneficial use ofi its customers, for each AF of the 2,500 AFY Nipomo Supplemental Water used within the NMMA, the user shall reduce its groundwater pumping by the same amount. The Parties shall develop a D. Over the term of this Agreement, the Advisory Committee (as defined in XII.A) shall periodically meet and confer with the NMMA Technical Group regarding the distribution of the Nipomo Supplemental Water between the Parties, given the priority NSWP Supplemental Water Management and Groundwater Replenishment. Agreement groundwater levels exist. method of confirming this reduction in groundwater use. Page 7of20 67A1018343275004.1 9/7/15 specified in subsections VI.A and B, above. Based on the input from the Advisory Committee and the NMMA Technical Group, the status of Points of Interconnection as provided in the Section VIL.A below and other relevant hydrologic conditions, NCSD shall determine the distribution of Nipomo Supplemental Water among the Parties. NCSD shall make its determination regarding the distribution of Nipomo Supplemental Water, following the consultation described in this subsection and based upon a reasonable, good faith interpretation of how best to manage the then existing hydrologic conditions within the NMMA, the availability of Nipomo Supplemental Water and the ability to rely on existing Points of! Interconnection and establish a new Point of Interconnection with RWC, if one has not yet been established. E. Pursuant to section VI(B)(3) of the Stipulation, provided WMWC is concurrently using or has made arrangements for other Parties to use within the NMMA the Nipomo Supplemental Water allocated to the WMWC under Section VI(A), above, WMWC shall not be subject to restriction in the reasonable and beneficial use ofg groundwater necessary for full development of its service area; provided however, nothing in this Agreement is intended to modify or amend the benefits and obligations provided in the Stipulation and the Judgment applicable to WMWC, or the court's retained jurisdiction pursuant to the Stipulation and the Judgment. VII. POINTS OF INTERCONNECTION, CONTROL AND MEASUREMENT OF A. Point(s) of Interconnection. As oft the Effective Date, NCSD's water system is interconnected with GSWC and WMWC water systems. Each of these existing interconnections will require improvements, and possibly reconstruction, to be fully functional "Point(s) of Interconnection. * No Point of Interconnection is in place between NCSD and RWC. If, pursuant to Section VI.D, the Parties determine each or all Points of Interconnection are necessary to make optimal use of Nipomo Supplemental Water, NCSD and each Water Company shall develop the most cost effective design and arrange for the construction of the Points of Interconnection as promptly as practical. The Cost of each Point of Interconnection, including the improvements required for existing Points of Interconnection with WMWC and GSWC, shall be incorporated into the NSWP Costs and NSWP Enterprise Fund as provided in this Agreement. The Parties acknowledge and agree that the Point of Interconnection with RWC, ifand when established, will be included as a component of the NWSP. However, the Parties agree that allocation of Costs for the pipeline portion of the RWC Point of Interconnection may differ from the allocation set forth in Section I.K above, to be agreed upon by the Parties once those Costs are determined. The Costs for the RWC Point of! Interconnection, excluding the Costs of the pipeline portion of the RWC Point of Interconnection, shall be shared consistent with the allocation set forth in Section .Kin a magnitude equivalent to that included in the Costs for the WMWC and B. Each Point of Interconnection shall include flow control and metering devices NSWP Supplemental Water Management and Groundwater Replenishment Agreement NIPOMO SUPPLEMENTAL WATER DELIVERIES. GSWC Points of Interconnection. Page 8of20 9/7/15 used to control and measure the delivery of Nipomo Supplemental Water at the Point ofl Interconnection. Each Point of Interconnection and the appurtenant facilities shall be considered part of the NSWP and shall be owned, operated and maintained by C. NCSD shall arrange for the inspection and testing of the metering devices at least once per calendar year, unless more frequent testing and inspection is appropriate as a result of repairs to or replacements of a metering device. NCSD shall provide reasonable advance notice to and coordinate with each Water Company D. The operation and maintenance of any Point of Interconnection will be detailed ina an Operation Memorandum of Understanding that will be approved by the NCSD and other affected parties prior to connection. If the Parties cannot agree on the terms oft the Operations Memorandum of Understanding then the disputed terms will be subject to the dispute resolution procedures referenced in XII of this Agreement. NCSD. to accomplish required testing ori inspection activities. VIII. NSWP ENTERPRISE FUND BUDGET: A. NCSD shall operate the NSWP as an enterprise fund ('NSWP Enterprise Fund"), separating all Costs related to the NSWP within and only to that NSWP Enterprise Fund. Prudent Utility Practices shall apply to NCSD's management of the B. Each Fiscal Year NCSD shall prepare a NSWP Enterprise Fund Budget ("Budget") for all revenues and expenditures related to the NSWP Enterprise Fund. The Budget shall include a summary of projected Nipomo Supplemental Water deliveries and the Costs associated with those deliveries. Adraft of the Budget shall be available to each Water Company for review by May 15t of each year. NCSD shall make every reasonable effort to adopt the final Budget during June of each year at a regularly scheduled NCSD board meeting. The Advisory Committee shall determine the most effective content, format and reporting frequency for financial and budget C. The Budget shall provide the basis for and detail the cost allocations and D. Unless the Parties agree otherwise, every five years, a third party expert accounting firm shall perform an overhead allocation analysis for NCSD, including the NSWP Enterprise Fund. The overhead allocation recommendations oft that study shall be applied in the next annual budgeting cycle for the NSWP Enterprise Fund. The cost of this study shall be included in the administrative overhead allocated to the NSWP Enterprise Fund. The Advisory Committee shall appoint the accounting firm to E. The Water Companies acknowledge and agree that NCSD has incurred NSWP Supplemental Water Management and Groundwater Replenishment Agreement NSWP Enterprise Fund and the NSWP. reports for the NSWP Enterprise Fund. quarterly billings described in Section IX. perform the overhead allocation analysis. Page 9 of20 3677.083432750041 9/7/15 substantial Costs related to the completed portions of the NSWP as of the Effective Date and will incur additional Costs to complete the NSWP. These costs include, but are not limited to, planning, environmental reviews, legal fees, acquisition of easements, an assessment election, and the construction and financing of the primary distribution pipeline extending from the City to NCSD facilities and future stages of the NSWP project. These Costs have been funded by NCSD, with very limited F. The Budget shall include the amortized recovery of the NSWP capital costs (whether funded by NCSD with internal funds or borrowed funds) attributable to each Water Company, pursuant to Section I.K above, plus interest on the unamortized balance of such costs. The capital costs to be amortized in each Budget shall include amounts expended to date and the additional costs necessary to complete the NSWP. NCSD shall not recover interest on the capital portion of NSWP Costs that are funded through the use of NSWP Enterprise Fund assets or reserves. G. The amortization period for capital costs shall be 30 years beginning July 1, 2015. Interest will be charged monthly on the remaining unamortized balance as of H. Each Water Company may elect to make early payments of its amortized portion of the capital costs and such early payments shall be credited against the contributions from the Water Companies. the prior month end. capital obligation oft that Water Company. I. follows: The interest rates to be charged to each Water Company will be determined as 1. For GSWC and RWC, the interest rate charged will be equal to the interest rate on amounts NSCD has borrowed to finance a portion oft the project Costs plus one-half of one percent. In the event GSWC's credit rating drops materially below its current rating of A+, and such change would have a material impact on any expected borrowing or financial security related to the NSWP Enterprise Fund, the interest rate charged will be subject to renegotiation between GSWC, RWC and NCSD. The interest specified in this subsection applicable to RWC is predicated on expectation that GSWC will complete its acquisition of RWC prior to the PUC approval of this Agreement. The interest rate and security assurance applicable to RWC's capital obligation shall be subject to renegotiation should GSWC fail to complete its acquisition 2. For WMWC, the interest rate charged will be equal to the interest rate on amounts NSCD has borrowed to finance a portion of the project Costs plus two percent. In the event there is a material change in' WMWC's financial condition, the interest rate charged will be subject to renegotiation between NCSD and WMWC. WMWC acknowledges that its agreement to amend its bylaws to authorize recordation and enforcement of liens under Corporations NSWP Supplemental Water Management and Groundwater Replenishment. Agreement prior to the PUC's approval of this Agreement. Page 10 of20 3677.01831375004.1 9/7/15 Code S 14304 ("Section 14304 Lien Rights") constitutes a material inducement to NCSD to forego other forms of security for repayment of WMWC's capital obligations, and agrees that it shall not subsequently revise its bylaws to relinquish its Section 14304 Lien Rights without having previously agreed to provide alternate security reasonably acceptable to NCSD. 3. In the event NCSD makes additional borrowings to finance subsequent stages of the NSWP, the interest rates charged GSWC, RWC and WMWC will be adjusted based on the weighted average of the interest rates attributable to unamortized balances of prior stages of the NSWP and the interest rate attributable to the capital costs of the new stage. J. The NSWP Enterprise Fund shall include a funded replacement reserve ("NSWP Enterprise Fund Reserve-") to accumulate funds for the future replacement of NSWP equipment and facilities. The initial NSWP Enterprise Fund Reserve amount shall be set at one percent of total project Costs. Thereafter, the NSWP Enterprise Fund Reserve shall be increased annually based upon the percentage increase int the Consumer Price Index (CPI) - All Urban Consumers (Los Argees-versdeolange Co., CAarea) for the immediately preceding calendar year, subject to the following. 1. The maximum balance in the NSWP Enterprise Fund Reserve shall be $3,000,000. The NSWP Enterprise Fund Reserve maximum shall be increased annually based upon the percentage increase in the Consumer Price Index (CPI) - All Urban Consumers (Los Argees-versde-Orange Co., CA area) for the immediately preceding calendar year. Once the balance in the NSWP Enterprise Fund Reserve reaches the maximum then in effect, the annual reserve shall cease to be collected until such time as the NSWP Enterprise Fund Reserve balance drops below the maximum. Should required expenditures exceed the balance then in the NSWP Enterprise Fund Reserve, the Advisory Committee will establish a plan for funding the deficit in a timely manner. The maximum balance in the NSWP Enterprise Fund Reserve may be increased or decreased subject to unanimous approval by the Advisory 2. Subject to approval by the Advisory Committee, the balance int the NSWP Enterprise Fund Reserve can be used to fund extraordinary unbudgeted operations and maintenance expenses in those cases where the NSWP Enterprise Fund does not have sufficient operating funds to cover the 3. Interest income earned on the NSWP Enterprise Fund Reserve shall RATES AND CHARGES: Based on the Budget, NCSD shall allocate Costs to Committee. expenditure. remain in the NSWP Enterprise Fund. IX. and invoice the Water Companies as follows: NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 11 of20 3677101834327500641 9/7/15 A. Each Water Company shall be responsible for its share of the Costs of Nipomo Supplemental Water and the NSWP based on the pro-rata shares of the NSWP as provided in Section I.K and the Budget. The Cost allocations shall take into account all Costs for the NSWP. An energy (pumping) credit shall be provided to each Party for any portion of its Nipomo Supplemental Water not delivered directly to that Party, B. During the term of this Agreement, and where applicable subject to the jurisdiction and approval by the PUC, each Water Company shall charge and collect rates and charges for the water services furnished in its service area which will yield gross revenues sufficient to pay all costs of operating and maintaining the water system within the designated area, including all payments due under this Agreement, C. Following each calendar quarter, NCSD shall provide a written invoice to each Water Company for its share of the Costs during the prior quarter. All invoices will be payable within thirty (30) days of delivery of the invoice. NCSD shall have the right to charge late fees of up to five (5) percent of the overdue amount for any invoice that is D. Until such time as GSWC and RWC receive approval from the PUC as provided in Section V, NCSD will not charge late fees on outstanding GSWC and RWC invoices; however, interest will accrue on outstanding charges at the rate E. Int the event a Party disputes any charges on an invoice, the undisputed amount shall be paid and no late fee will be assessed pending resolution of the disputed amount. Along with payment oft the undisputed amount, the Party shall provide a detailed written description of the nature and amount in dispute. NCSD and the Party with the dispute shall make every reasonable business effort to resolve the F. Within 90 days after the end of each fiscal year, NCSD shall compare prior year actual Costs to the total amount billed to the Parties for that year. If actual Costs exceed the amount billed for that year, each Party will be billed fori its allocated share oft the excess costs. If actual Costs are less than the amount billed for that year, each party will have the option to have its allocated share of the difference be (1) credited against any unamortized capital costs then due NCSD or (2) be refunded. but instead used by another Party pursuant to Section VI. as they become due and payable. not paid within such period. specified in Section VIII. dispute promptly. X. CONTINUITY OF SERVICE: A. NCSD reserves the right to temporarily interrupt or curtail delivery of Nipomo Supplemental Water to make repairs, replacements, modifications, or to perform maintenance work on the NSWP, or to respond to an existing or impending Uncontrollable Force, as determined in NCSD's sole judgment. NCSD shall use its NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 12of20 36771018313275004.1 9/7/15 reasonable best business efforts to provide advance written notice to the Water Companies of any restriction or interruption in the use of the NSWP or planned B. In addition to limitations specified in X.A. above, NCSD may interrupt or curtail the use of the NSWP to the extent that the continued use of the NSWP could: () materially and adversely affect the reliability of the NSWP; or (i) cause NCSD to violate the terms of any rule, regulation, or binding obligation it may otherwise have with respect to the production, treatment or delivery of Nipomo Supplemental Water. DEVELOPMENT OF EXPANDED GROUNDWATER MANAGEMENT AND deliveries of Nipomo Supplemental Water. XI. RECHARGE CAPABILITY: The Parties acknowledge and agree that the availability of additional Nipomo Supplemental Water would be beneficial for use within the NMMA. The Parties agree to negotiate an amendment to this Agreement to include the expanded use of Nipomo Supplemental Water for the benefit of the groundwater resources water balance within the NMMA. The Parties shall use their reasonable best efforts to complete the negotiation as promptly as practical. XII. RESOLUTION OF DISPUTES: The Parties' shall attempt to amicably and promptly resolve any dispute arising between the Parties and under this Agreement. Nothing in this Agreement shall preclude any Party from taking any lawful action it deems appropriate to enforce its rights under this Agreement. The Parties shall initially attempt to resolve any dispute by the means set forth below: A. Advisory Committee. The Parties shall exercise best efforts to resolve disputes through consensus. An Advisory Committee shall be established and be comprised of two representatives of each Party. The Advisory Committee shall be convened whenever necessary to ensure this Agreement is being administered and implemented consistent with the intentions of all the Parties. An NCSD representative shall chair the Advisory Committee. The Chair shall be responsible for scheduling all meetings under this section. Any Party may request a meeting of the Advisory B. Annual Meeting. The Advisory Committee shall meet annually, or as often as necessary, to review the administration and implementation of this Agreement. The Advisory Committee shall use its best efforts to obtain consensus on the resolution of technical, administrative, financial, legal and operational issues that may arise from C. Dispute Resolution Procedure. The Parties shall submit any dispute related to or arising out of this Agreement to the Advisory Committee for consideration. The NSWP Supplemental Water Management and Groundwater Replenishment Agreement Committee. time to time with regard to this Agreement. Page 13 of20 367018319375004.1 9/7/15 Chair may request the Party or Parties to any dispute to submit a description of the dispute in writing prior to convening the Advisory Committee. As soon as practical, and within 14 days of the submission of a written description of a dispute, the Chair shall schedule a meeting of the Advisory Committee. The Advisory Committee shall convene within 30 days of the submission of a written description of a dispute and D. Failure of the Advisory Committee to Resolve the Dispute. Ift the Advisory Committee fails to resolve a dispute, the Parties may elect to refer the dispute to mediation. If the Parties are unable to agree promptly upon a mediator or a mediation process, each Party may freely pursue any equitable and legal remedy. E. Emergencies. Where an unresolved dispute may pose an imminent danger to the public, health, safety or welfare, the Parties shall not be subject to the provisions shall make every reasonable effort to resolve the dispute. oft this Section. XIII. LIABILITY AND INDEMNIFICATION: A. Limitation of Liability: Except as to the negligent or willful misconduct of a Party, each Party shall release and hold harmless the other Parties from and against any and all liability, loss, damage and expense arising from, alleged to arise from, in connection with, ori incident to the services rendered under this Agreement. B. Indemnification and Defense: Each Party shall indemnify, defend and hold harmless the other Parties, its directors, members, officers, employees and agents from and against any and all third-party claims, suits or actions instituted on account of personal injuries or death of any person (including but not limited to workers and the public) or physical damage to property resulting from or arising out of the indemnitor's willful misconduct or negligent act or omission while engaged in the performance of obligations or exercise of rights under this Agreement. C. Limitation on Damages: No Party shall be liable to any other Party for any consequential, incidental, punitive, special or exemplary damages or lost opportunity costs, lost profit or other business interruption damages, by statute or in tort or D. Water Quality. NCSD shall be responsible for ensuring that the quality of the Nipomo Supplemental Water made available for delivery is of the same pressure and quality of water that NCSD delivers to its residential customers. The quality ofwater which is delivered by NCSD toi its residents shall comply with all federal, state and local laws, regulations and permit requirements which are applicable to NCSD, including standards applicable to wastewater discharge, as amended from time to time and subject to any compliance waiver granted to NCSD ("Quality Standards"). NCSD shall provide GSWC, RWC and' WMWC with a copy oft the Quality Standards (and any change thereto) which are applicable to NCSD and GSWC, RWC and WMWC shall be solely responsible for ensuring that the Quality Standards meet the federal, state and local laws, regulations and NSWP Supplemental Water Management and Groundwater Replenishment Agreement contract, under any provision of this Agreement. Page 14 of20 0367400313275004.1 9/7/15 permit requirements for potable water delivery by GSWC, RWC and WMWC to its customers, including the discharge ofs such water. To the extent that the quality standards which are applicable to GSWC, RWC and' WMWC exceed the Quality Standards, then GSWC, RWC and WMWC shall be responsible for any necessary additional treatment of the Nipomo Supplemental Water. NCSD agrees to indemnify and hold GSWC, RWC and WMWC harmless from any liability which arises as a result oft the failure oft the Nipomo Supplemental Water which is delivered to the GSWC, RWC and WMWC to meet the Quality Standards. GSWC, RWC and' WMWC shall be solely responsible for any actual liability resulting from a change in water quality following the Point of Interconnection (including any additional treatment undertaken by GSWC, RWC and' WMWC) and shall indemnify and hold NCSD harmless from any actual liability which arises from any such change. NCSD and GSWC, RWC and' WMWC shall promptly notify the other in the event that either becomes aware of a material adverse change in the quality of the Nipomo Supplemental Water and shall cooperate to identify the cause of such change. XIV RELATIONSHIP OF THE PARTIES: The covenants, obligations and liabilities oft the Parties are intended to be several and notj joint or collective and nothing herein contained shall ever be construed to create an association, joint venture, trust or partnership, or to impose a trust or partnership covenant, obligation or liability on or with regard to any Party. Each Party shall be individually responsible for its own covenants, obligations and liabilities as herein provided. No Party shall be under the control of or shall be deemed to control another Party. No Party shall be the agent of or have a right or power to bind another Party without such other Party's express written consent, except as provided in this Agreement. XV. UNCONTROLLABLE FORCES: Ift the existence of an Uncontrollable Force, as defined in Section II.Q above, disables aF Party from performing its obligations under this Agreement (except for such Party's obligations to make payments hereunder), such Party shall not be considered to be in default in the performance of any such obligations while such disability of performance exists. A Party rendered unable to fulfill any of its obligations under this Agreement by reason of an Uncontrollable Force shall exercise due diligence to remove such inability with all reasonable dispatch. Nothing contained herein shall be construed sO as to require a Party to settle any strike or labor dispute in which it may be involved. XVI. AUDITS: Each Party shall have the right to audit any costs, payments, settlements or other supporting information pertaining to this Agreement, including the Costs and the Budget. Any such audit shall be undertaken by the requesting Party or its representative at reasonable times and in conformance with generally accepted auditing standards. The audited Party shall fully cooperate with any such audit, the cost of which shall be paid by the requesting Party. The right to audit a billing shall extend for a period of three (3) years NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 150 of20 3677.063432750041 9/7/15 following the rendering of the bill. Each Party shall retain all necessary records or documentation for the entire length of such three (3) year period and shall, to the extent permitted by law, take all steps reasonably available to assure the confidentiality of the audited Party's accounting records and supporting documents. XVII. THIRD PARTY BENEFICIARIES: There are no third Party beneficiaries to this Agreement. This Agreement shall not confer any right or remedy upon any person or entity other than the Parties and their respective successors and assigns permitted under Section XVIII. This Agreement shall not release or discharge any obligation or liability of any third party to any Party or give any third party any right of subrogation or action over or against a Party. XVIII. ASSIGNMENT OF INTERESTS: A. No Party shall assign this Agreement without the prior written consent of the other Parties, which consent shall not be unreasonably withheld or delayed. Each Water Company expressly understands and agrees that it shall not be unreasonable for NCSD to withhold or delay its consent to any proposed or purported assignment to any person or entity ("Assignee") that has not demonstrated to NCSD's reasonable satisfaction that NCSD's interests as contemplated herein will not be adversely B. Any assignment by a Party ofi its interest in this Agreement which is made without the prior written consent of the other Parties shall not relieve the assigning Party from primary liability for any ofi its duties and obligations under this Agreement, and in the event of any such assignment, the assigning Party shall continue to remain primarily liable for payment of any and all money due the other Parties as provided under this Agreement, and for the performance and observance of all covenants, duties and obligations to be performed and observed under this Agreement by the Party to the same extent as though no assignment had been made. C. Whenever an assignment of a Party's interest ini this Agreement is made with the written consent of the other Parties, the assigning Party's assignee shall expressly assume in writing the duties and obligations under this Agreement of the assigning party and, within thirty (30) days after any such assignment and assumption of duties and obligations, the assigning Party shall furnish, or cause to be furnished, to the other Party a true and correct copy of such assignment and assumption of duties and obligations. Upon the effective date of such assignment, the assigning Party shall be D. Subject to the foregoing restrictions on assignment, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Parties and their affected thereby. relieved of its obligations and duties under this Agreement. respective successors and assigns. NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 16of20 0367741018343275004-1 9/7/15 XIX. NO DEDICATION OF FACILITIES: Any undertaking by a Party to another Party under this Agreement shall not constitute the dedication of the system, or any portion thereof, of that Party to the public or to another Party, nor affect the status of that Party as an independent system. XX. COMPLETE AGREEMENT: This Agreement contains the entire agreement and understanding between the Parties as to the subject matter of this Agreement and supersedes all prior commitments, representations and discussions between the Parties. XXI. CONSTRUCTION OF AGREEMENT: Ambiguities or uncertainties in the wording of this Agreement shall not be construed for or against any Party, but shall be construed in a manner that most accurately reflects the intent oft the Parties when this Agreement was executed and is consistent with the nature of the rights and obligations of the Parties with respect to the matter being construed. XXII. NON-DISCRIMINATION: During the performance of this Agreement, no Party shall deny the Agreement's benefits to any person, nor shall any Party discriminate unlawfully against any employee or applicant for employment, on the grounds of or because ofr race, color, creed, national origin, ancestry, age, sex, sexual orientation, marital status or disability, including the medical condition of Acquired Immune Deficiency Syndrome (AIDS) or any condition related thereto. Each party shall insure that the evaluation and treatment of employees and applicants for employment are free of such discrimination. XXIII. EVENTS OF DEFAULT: Int the event that a Party shall materially default in the performance ofi its obligations under this Agreement, the Authorized Representatives of the non-defaulting Parties may give written notice of the default to the Authorized Representative of the defaulting Party. If within thirty (30) days after the non-defaulting Parties' Authorized Representative shall have given such written notice to the defaulting Party's Authorized Representative, the defaulting Party shall have failed to cure the default in its performance of this Agreement, or ifs such default requires more than thirty (30) days to cure and the defaulting Party fails to commence such cure and diligently prosecute such cure to completion, in addition to any other remedies provided by law, the non-defaulting Parties may terminate this Agreement by written notice of termination as provided for in Section XXVIII. In addition to any other cause of default arising hereunder, a Party shall be in a default if: A. Itbecomes insolvent; or NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 17of20 367710183432750064 9/7/15 B. Itn makes a general assignment of substantially all ofi its assets for the benefit of its creditors, files a petition for bankruptcy or reorganization or seeks other relief under C. Ithas filed against it a petition for bankruptcy, reorganization or other relief under any applicable insolvency laws and such petition is not dismissed within sixty D. Int the event of a default and termination of the Agreement as to the defaulting Party, the non-defaulting Parties shall use commercially reasonable best efforts to negotiate any revisions to this Agreement that are necessary or appropriate in light of such termination, which revisions shall be consistent with the purpose and intent or this Agreement and shall preserve, to the maximum extent possible, all material consideration tot the remaining parties. Termination of this Agreement, either in its entirety or as to one or more Parties, shall not affect the validity or enforceability of the Stipulation and Judgment or the rights and obligations of any Party thereunder. any applicable insolvency laws; or (60) days after it is filed. XXIV. AMENDMENTS: executed by the Parties. XXV. WAIVERS: This Agreement may be modified, supplemented or amended only by a writing duly A. Any waiver at any time by any Party ofi its rights with respect to a default under this Agreement, or with respect to any other matter arising in connection with this Agreement, shall not be deemed a waiver with respect to any subsequent default or other matter arising in connection therewith. Any delay, short of the statutory period of limitation in asserting or enforcing any right, shall not be deemed a waiver of such B. Nothing in this Agreement shall limit, nor act as a waiver, of any Party's rights or defenses in pursuing or defending against any legal or equitable claim or remedy that may be asserted regarding each Party's rights and obligations to participate in the NSWP and bear its percentage allocation of the Costs of the NSWP (as presented in right. Recital K). XXVI. SECTION HEADINGS: All captions and headings appearing in this Agreement are inserted to facilitate reference and shall not govern, except where logically necessary, the interpretations of the provisions hereof. XXVI.GOVERNING LAW: NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 180f20 03674083132750041 9/7/15 This Agreement shall be interpreted, governed by and construed under the laws oft the State of California or the laws of the United States as applicable, as ife executed and to be performed wholly within the State of California. XXVIII. NOTICES: A. Any notice, demand or request provided for in this Agreement, or served, given or made in connection with it, shall be in writing and shall be deemed properly served, given or made if delivered in person, by email or sent by United States mail, postage prepaid, to the persons specified below, unless otherwise provided for in this Agreement: Nipomo Community Services District Attention: General Manager P.O. Box 326 Nipomo, California 93444-326 generalmangerc@csd.ca.gov Golden State Water Company 630 East Foothill Blvd San Dimas, CA91773 Rural Water Company clo Frank B. & Associates Attention: Frank Brommenschenke! 134 Davis Street Santa Paula, CA 93060 Woodlands Mutual Water Company clo Wallace Group Attention: Robert S. Miller 612 Clarion Ct. San Luis Obispo, CA 93401 Attention: Senior Vice President of Regulated Utilities B. Any Party may at any time, by written notice to the other Parties, change the designation or address of the person so specified as the one to receive notices pursuant to this Agreement. [signatures on following page] NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 19of20 9/7/15 XXIX. SIGNATURE CLAUSE: The signatories hereto represent that they have been appropriately authorized to enter into this Agreement on behalf of the Party for whom they sign. NIPOMO COMMUNITY SERVICES DISTRICT MewMidur By: MICHAEL S. LEBRUN GENERAL MANAGER Date: Detober 16 2015 GOLDEN STATE WATER COMPANY Date: BY: 2015 RURAL WATER COMPANY Date: BY: 2015 WOODLANDS MUTUAL WATER COMPANY Date: BY: 2015 NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 20 of20 9/7/15 XXIX. SIGNATURE CLAUSE: The signatories hereto represent that they have been appropriately authorized to enter into this Agreement on behalf of the Party for whom they sign. NIPOMO COMMUNITY SERVICES DISTRICT Date: 2015 By: MICHAEL S. LEBRUN GENERAL MANAGER GOLDEN STATE WATER COMPANY Rolutl Apronla Date: September 10 2015 BY: RobeeT J. SPRONLS PResidewT 1 CEO RURAL WATER COMPANY Date: BY: 2015 WOODLANDS MUTUAL WATER COMPANY Date: BY: 2015 NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 20 of20 0367741018343275004.1 9/7/15 XXIX. SIGNATURE CLAUSE: The signatories hereto represent that they have been appropriately authorized to enter into this Agreement on behalf of the Party for whom they sign. NIPOMO COMMUNITY SERVICES DISTRICT Date: 2015 By: MICHAEL S. LEBRUN GENERAL MANAGER GOLDEN STATE WATER COMPANY Date: BY: 2015 RURAL WATER COMPANY ChaalwMGr Scpr 9 BY: Chuck Baker Date: 2015 WOODLANDS MUTUAL WATER COMPANY Date: BY: 2015 NSWP Supplemental Water Management and Groundwater Replenishment Agreement Page 20 of20 03677410.-743275004.1 9/7/15 XXIX. SIGNATURE CLAUSE: The signatories hereto represent that they have been appropriately authorized to enter into this Agreement on behalf of the Party for whom they sign. NIPOMO COMMUNITY SERVICES DISTRICT Date: 2015 By: MICHAEL S. LEBRUN GENERAL MANAGER GOLDEN STATE WATER COMPANY Date: BY: 2015 RURAL WATER COMPANY Date: BY: 2015 WOODLANDS MUTUAL WATER COMPANY Da R. Date: IEb BY: Twlt 2015 NSWP Supplemental Water Management and Groundwater Replenishment, Agreement Page 20 of20 03674.018343275004.1 9/7/15