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HomeMy WebLinkAbout2020.01.14 Council Workshop PacketWorkshop Meeting - New AGENDA PASCO CITY COUNCIL 7:00 p.m. January 14, 2020 Page 1. CALL TO ORDER: 2. ROLL CALL: (a) Pledge of Allegiance 3. VERBAL REPORTS FROM COUNCILMEMBERS: 4. ITEMS FOR DISCUSSION: 3 - 143 (a) HUD Section 108 Loan Contract Documents for Pasco Market Plaza Construction 144 - 168 (b) Purchase and Sale Agreement and Memorandum of Understanding - Catholic Charities 169 - 170 (c) City Council Representation on Boards and Committees 171 - 175 (d) House Bill 1406 (MF# INFO 2020-001) 176 - 222 (e) Water Rights Contract with Washington State Dept. of Ecology 5. MISCELLANEOUS COUNCIL DISCUSSION: 6. EXECUTIVE SESSION: 7. ADJOURNMENT: (a) REMINDERS: • Monday, JANUARY 13, 11:45 AM: Pasco Chamber of Commerce Membership Luncheon – Pasco Red Lion Hotel • Thursday, JANUARY 16, 3:30 PM: Franklin County Emergency Management Board Meeting – FCEM Office, 1011 E. Ainsworth (COUNCIMEMBER CRAIG MALONEY, Rep.; VACANT, Alt.) Page 1 of 222 Workshop Meeting - New January 14, 2020 • Thursday, JANUARY 16, 4:00 PM: Tri-Cities National Park Committee Meeting – Tri-Cities Regional Business & Visitor Center, Bechtel Board Room, 7130 W. Grandridge Blvd., Kennewick (VACANT) • Friday, JANUARY 17, 11:30 PM: Benton-Franklin Council of Governments Board Meeting – Ben-Franklin Transit, 1000 Columbia Park Trail, Richland (MAYOR PRO TEM BLANCHE BARAJAS, Rep., COUNCILMEMBER RUBEN ALVARADO, Alt.) This meeting is broadcast live on PSC-TV Channel 191 on Charter/Spectrum Cable in Pasco and Richland and streamed at www.pasco-wa.gov/psctvlive. Audio equipment available for the hearing impaired; contact the Clerk for assistance. Servicio de intérprete puede estar disponible con aviso. Por favor avisa la Secretaria Municipal dos días antes para garantizar la disponibilidad. (Spanish language interpreter service may be provided upon request. Please provide two business day's notice to the City Clerk to ensure availability.) Page 2 of 222 AGENDA REPORT FOR: City Council January 8, 2020 TO: Dave Zabell, City Manager Workshop Meeting: 1/14/20 FROM: Rick White, Director Community & Economic Development SUBJECT: HUD Section 108 Loan Contract Documents for Pasco Market Plaza Construction I. REFERENCE(S): Power Point Presentation HUD Award & Loan Contract Documents II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion III. FISCAL IMPACT: Limited Obligation Debt: $3,781,000 Annual Impact for Debt Service: $200,000 Funding Source: CDBG Annual Entitlement Grant. Impact: Reduction in CDBG availability for other eligible activities. Additional Collateral: First lien position for HUD on PWRF Crop Circle # 4 which will encumber that property for the duration of the loan. IV. HISTORY AND FACTS BRIEF: The Planning Commission (City's Block Grant Advisory Committee) recommended approval of the Section 108 Program in December of 2017 and City Council authorized the application in August 2018. HUD Awarded the Loan in March of 2019. V. DISCUSSION: The Section 108 loan approved for Pasco will provide for the restoration and renovation of the Pasco Market Plaza, which includes the Pasco Farmers Market and Peanuts Park. Page 3 of 222 The renovation will also generate economic activity for businesses in the surrounding area and will complement the City’s investment in the adjacent Peanuts Park as well as the Pasco Specialty Kitchen. Using Section 108 financing allows the city to complete the project in one construction contract in one year, rather than funding phases over several years, lessening disruption to the business district, park users and resulting in more efficient use of funding. Page 4 of 222 Pasco Market Plaza Section 108 Loan Contracts January 14, 2020 Page 5 of 222 Background Section 108 is the loan guarantee provision of the Community Development Block Grant (CDBG) program, which allows CDBG recipients to borrow up to 5 times their annual CDBG allocation for CDBG eligible activities. Section 108 is a common source of financing for economic development, affordable housing, and public facilities. Section 108 loan projects must meet all rules, public benefit standards, and national objectives of CDBG. CDBG must always be pledged as security for the loan, and may be used for debt service. Page 6 of 222 Background Based on the 2018 CDBG allocation, Pasco was eligible to apply for $3,781,000 December 2017 --Planning Commission recommended approval August 2018 –City Council authorized application to HUD by Resolution 3855 March 18, 2019 –HUD approved loan award for $3,781,000 for the Pasco Market Plaza construction.Page 7 of 222 Loan Structure Term: 20 years Interest rate --Variable: 3-month London Interbank Offered Rate (LIBOR) plus 20 basis points (0.2%). Current estimate --LIBOR: 2.0%. Plus 20 BP = 2.2% Loans may move to fixed rate at times of Public Offering by HUD. Once fixed, a loan may only be paid off through a defeasance of bonds. Not typically an issue with public facilities projects. Annual debt service to be paid by CDBG: $190,000.Page 8 of 222 Collateral HUD requires 125% of loan value in collateral, even when backed by CDBG for public facilities. 125% of $3,781,000 equals $4,726,250 required collateral value Pledged collateral: First lien position on PWRF Crop Circle #4 No impact on operations of PWRF or Crop Circle Leases. Collateral value appraisal has been completed and accepted by HUD.Page 9 of 222 Contract Documents Legal Opinion –Provided by Don Boyd of Hummer Boyd Law Fiscal Agency Agreement Custodial Agreement Loan Contract Loan Note Page 10 of 222 QUESTIONS?Page 11 of 222 U.S.DEPARTMENTOF HOUSINGANDURBANDEVELOPMENTWASHINGTON,D.C.20410-7000OFFICEOFCOMMUNITYPLANNINGANDDEVELOPMENTMr.DaveZabellCityManagerCityofPascoMAR182019525N.Third AvenuePasco, WA99301DearMr.Zabell:Congratulations!IampleasedtoinformyouthattheCityofPasco’s (hereafter,the“City”)requestforloanguarantee assistance underSection108oftheHousingandCommunityDevelopmentActof1974,asamended,hasbeen approved.Suchassistanceistoconsist oftheguaranteeofnotesorother obligationsintheprincipalamountof$3,781,000,plusinterestthereon, whichshallbeissuedtofinance activities describedintheCity’sapplication(B-18-MC-53-0009) forthePascoMarketRedevelopmentProject.This offer ofcommitment(“Commitment”)issubject,however,totheconditionsspecifiedinItem8oftheFundingApproval(FormHUD-7082).Thefirst condition providesthatintheeventtheCityfailstosubmitnotesorotherobligationsforinspectionandguaranteebytheSecretary of HousingandUrbanDevelopment(HUD)beforeMarch31,2020, theCommitmentwillexpireasofsuchdate.Thesecondcondition providesthattherepaymentschedulefortheindebtednessevidencedbythe notesorother obligations(the“GuaranteedLoan”)mustbeacceptabletoHUD.ThethirdconditionprovidesthattheCityshallprovideadditionalsecurityfortheGuaranteedLoanandsuchadditional securitymustbeacceptabletoHUD.Theadditionalsecurityshall beidentifiedintheContractforLoanGuarantee Assistance(“Contract”),specifiedby24CFR570.705(b)(1),whichwillbeexecutedatthetimetheguaranteedobligationsareissued. The City’sapplicationandothersupportingmaterialidentifytheCity’spledgeofrealpropertyasadditionalsecurityfortheGuaranteedLoan.Notethatanypropertyofferedassecurityshallbesubjecttoloantovalue ratiostobeidentifiedintheContract.Inaddition,theContractshallprovidethatHUDmayuseexisting pledgedgrantstoprepay(ordefease)theGuaranteedLoanifHUDdeterminesthatthestandardpledgeoffutureCommunityDevelopmentBlockGrant(“CDBG”)fundsisinsufficienttoassurepaymentofamountsduethereunder.HUDreservestherighttorequirefurthersecurityuponevaluationoftheforegoingsecurityarrangementsandtheCitymaysubstituteothercollateralsecurityforsucharrangements,subjecttoHUD’sapprovalofsuchsubstitution.A. Award LetterPage 12 of 222 Thefourthconditionprovidesthatpriortosubmittingnotes orotherobligationsforinspectionandguaranteebyHUD,theCityshallsubmitinformation requiredunderSection102(b)oftheDepartment ofHousingandUrbanDevelopmentReformActof1989(42U.S.C.3545).ThisinformationshallbesubmittedonForm HUD-2880toHUD’sSeattle RegionalOffice.AcopyofFormHUD-2880isenclosedforthispurpose.The fifthcondition providesthattheCityisrequiredtopayafeeof2.23%oftheprincipalamountofloanguaranteedunderthisCommitmenttocoverthecreditsubsidycostsasannouncedintheFederalRegisteronOctober5,2018(83FR50257).ThisfeeappliestoallSection108guaranteedloancommitmentsissuedinFiscal Year2019.Thefeeisappliedonlyatthetimeofloandisbursements.Theamounttobepaidatthattimeisequalto2.23%oftheprincipalamountoftherequestedGuaranteedLoanadvance.ThefeemaybepaiddirectlybytheCityor,alternatively,itmaybedeductedfromtheGuaranteedLoan advance(s). Ifthe feeispaid directlybythe City,itmaybepaid fromCDBGgrant funds drawn downundertheCDBGlineofcreditorwithanothersource.Inadditiontothespecialconditionscited above,thereleaseoffundsfortheprojecttobecarriedoutwithloanguaranteeassistanceisconditioneduponcompliancebytheCitywithallapplicableprovisionsofthe HUDEnvironmentalReviewProcedures(24CFR Part58).TheCityisremindedthattheseProceduresincludelimitationsonthecommitmentofHUDandnonHUDfundsonanactivityorprojectpriortoHUD’sapprovaloftherequestforreleaseoffundsandrelatedcertificationofcompliancewithenvironmentalrequirements. Pleasereferto 24CFR58.22foradescriptionofthelimitationsandtheentitiestowhomtheyapply.Pleasefurnishus,attheaddressspecifiedbelow,yourtimetableforexecutionoftheactivities describedinyourapplication. TheseactivitieswillbefinancedthroughapublicofferingofSection108obligations. Ifyouneedfunds priortothenextpublic offering,pleasenotifyHUDattheaddressbelowandinstructionsforobtaininginterimfinancingwillbeprovided.PleaseexecutethethreeenclosedcopiesoftheFundingApproval(FormHUD-7082)andreturntwocopiestotheDepartmentofHousingandUrbanDevelopment,FinancialManagementDivision, Room7282,451SeventhStreet,S.W.,Washington,D.C.20410.Onecopy shouldberetainedforyourfiles.TheFundingApproval amendstheGrantAgreementauthorizedbyHUDonAugust7,2018,undertheFundingApprovalforgrantnumberB-18-MC-53-0009toincludeloanguaranteeassistance.TheGrantAgreementtherebyincorporatesthisFundingApproval,theloanguarantee application,andSubpartMoftheblockgrantregulationsgoverningloanguarantees,aswellassuchagreements, schedules,andotherdocumentation required forsubmissionorexecutioninconnectiontherewith.2Page 13 of 222 Pleasedonothesitatetoreachoutifwe cansupportyouintheuseofyourSection108funds.PleasecontactPaulD.Webster,Director,FinancialManagementDivisionat(202)402-4563,ifyouneedassistance.Sincerely,StanleyDeputy AssistantSecretaryforGrantProgramsEnclosures(2)3Page 14 of 222 LEGAL OPINION LETTER B. Legal Opinion Page 15 of 222 opinion-VFR entitlement 3-26-13 Secretary of Housing and Urban Development 451 7th Street, SW Washington, DC 20410 Dear Sir or Madam: The undersigned, being duly licensed and in good standing to practice law in the State of Washington, is legal counsel to the City of Pasco ("Borrower"). As such, I have represented Borrower regarding that certain Variable/Fixed Rate Note, referred to as Note No. B-18-MC-53-0009 in the Maximum Commitment Amount of $3,781,000(the "Note"), to be executed by Borrower payable to the order of the Registered Holder thereof, and to be guaranteed by the Secretary of Housing and Urban Development ("HUD") under section 108 of the Housing and Community Development Act of 1974, as amended, 42 U.S.C. 5308 ("Section 108"). The Note will initially be issued to the interim lender, which will make advances to the Borrower in the amount requested by the Borrower under the Note. HUD's guarantee of the Note will be governed by the Contract for Loan Guarantee Assistance under Section 108 between the Borrower and HUD (the "Contract"), in which the Borrower pledges Community Development Block Grants pursuant to 24 CFR 570.705(b)(2), as well as any other security specified therein, as security for HUD's guarantee. It is anticipated that the Note, as authorized by the Contract, will be included in a future trust created by HUD (together with other Section 108 Notes issued by other borrowers), and participation certificates based on the trust will ultimately be sold in a future public offering by the underwriters selected by HUD. Page 16 of 222 2 In my capacity as legal counsel, I have made an examination and investigation of all such matters of fact and questions of law as I consider necessary or advisable to enable me to render the opinion hereafter set forth. Specifically, and without limiting the generality of the foregoing, I have examined: 1.Authority granted by State of Washington A.Washington State Constitution: Article 8, Section 6 – Limitations on Municipal Indebtedness. B.Washington State Statutes (Revised of Washington): RCW 35.22.280 - Specific powers enumerated (2)to provide for payment of debts; (4)To borrow money for corporate purposes on the credit of the corporation RCW 35.21.735 – Use of HUD 108 funds to secure HUD loan. RCW 39.36.020. Limitation of indebtedness prescribed. 2.City of Pasco Municipal Code: Ordinance 4073, 2012; Ordinance 3557 § 58, 2002; Ordinance 1773 § 3, 1976; Code 1970 § 3.90.030. 3.Resolution No. 3855 of the governing body of Borrower, dated August 18, 2018, authorizing Borrower to enter into this transaction, and authorizing Dave Zabell, City Manager to execute on behalf of Borrower all documents necessary or desirable to accomplish the transaction. 4.The Contract. 5.The Note. 6.The Amended and Restated Master Fiscal Agency Agreement dated as of May 17, 2000, the Trust Agreement dated as of January 1, 1995, together with Amendment No. 1 thereto, dated as of June 30, 2004, and the form of Supplement to the Trust Agreement. Based on the foregoing investigation and authorities, I am of the opinion that: Page 17 of 222 3 1. Borrower has authorized in accordance with applicable State and local law, the transaction, including issuance of the Note, the pledge of grant funds, and the execution of all documents necessary or desirable to accomplish the transaction. 2. Borrower has authorized Dave Zabell, in his capacity as City Manager, to execute the Contract, the Note and all other documents necessary or desirable to accomplish the transaction. 3. The Note and the Contract have been duly executed by the aforementioned authorized representative of the Borrower, and upon delivery thereof, due execution of the Contract and the Guarantee on behalf of HUD, and receipt of the loan proceeds on behalf of the Borrower, the Note and the Contract, including the provisions for compensation of the Fiscal Agent/Trustee from funds pledged under the Contract (as incorporated therein), shall be valid, binding and enforceable obligations of the Borrower. 4. The pledge of present and future Community Development Block Grants by the Borrower pursuant to 24 CFR 570.705(b)(2) and the Contract is valid and binding. 5. There is no outstanding, or to my knowledge threatened, action, suit, proceeding, investigation or litigation by or against the Borrower which will affect the validity of the Note or the security therefor. Sincerely, Page 18 of 222 SECTION 108 LOAN CONTRACT C. Loan Contract Page 19 of 222 VFR Contract - Entitlement 7-2-07 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT CONTRACT FOR LOAN GUARANTEE ASSISTANCE UNDER SECTION 108 OF THE HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974, AS AMENDED, 42 U.S.C. §5308 Date of Contract_______________ This Contract for Loan Guarantee Assistance ("Contract") is entered into between City of Pasco, Washington, as Borrower (the "Borrower"), and the Secretary of Housing and Urban Development ("Secretary"), as guarantor for the Guarantee made pursuant to section 108 ("Section 108") of title I of the Housing and Community Development Act of 1974, as amended (the "Act") and 24 CFR Part 570, Subpart M, of the promissory note executed contemporaneously herewith and numbered B-18-MC-53-0009 [Pasco Market Redevelopment Project], in the Maximum Commitment Amount of $3,781,000, and any amended note or note issued in substitution for such note and having the same note number (the "Note"). This is the first Contract under the Funding Approval ("Commitment") of the same number, which was approved by the Secretary on March 18, 2019. The funds paid or credited to the account of the Borrower pursuant to the Note are referred to herein as the "Guaranteed Loan Funds." The Note (including the Fiscal Agency Agreement and the Trust Agreement as defined in Section I.A. of the Note and incorporated therein) is hereby incorporated into the Contract. Terms used in the Contract with initial capital letters and not otherwise defined in the text hereof shall have the respective meanings given thereto in the Note. The Fiscal Agency Agreement and the Trust Agreement are sometimes collectively referred to herein as the "Fiscal Agency/Trust Agreements," and the Fiscal Agent and the Trustee respectively are sometimes collectively referred to as the "Fiscal Agent/Trustee." PART I A.The Note: Advances and Records. The Note provides that Advances and Conversion Date Advances shall be made thereunder upon the written request of the Borrower and the approval of the Secretary, pursuant to this Contract and the Fiscal Agency Agreement. The Commitment Schedule attached to the Note represents the principal repayment schedule for the Maximum Commitment Amount of the Note. At all times, the total amount of all Advances and Conversion Date Advances under the Note for all Principal Due Dates shall not exceed the Maximum Commitment Amount of the Note. Prior to the Conversion Date (as defined in the Note, Section I.A.), the total amount of Advances made by the Holder for each Principal Due Date under the Note shall not exceed the applicable Commitment Amount for such Principal Due Date set forth in the Commitment Schedule of the Note. Prior to the Page 20 of 222 2 Conversion Date, the Borrower agrees that the Fiscal Agent pursuant to the Fiscal Agency Agreement shall record the date and amount of each payment and Advance under the Note and shall maintain the books and records of all Advances and Conversion Date Advances for each Principal Due Date, interest rates on Advances, payments, and Principal Amounts outstanding for each Principal Due Date. On and after the Conversion Date, the Borrower agrees that the Trustee pursuant to the Trust Agreement will maintain the books and records of all payments on the Note and all Principal Amounts and interest rates on such Principal Amounts (each as to be set forth on Schedule P&I to the Note). No advances of any kind may be made on the Note after its Conversion Date. B.Borrower’s Requests for Advances. All requests for Advances or Conversion Date Advances by the Borrower under the Note shall: be in writing; specify the amount of the Advance requested; identify the Note by Borrower, number and Maximum Commitment Amount; be addressed to the Secretary at the address for notices specified in paragraph 12(f) of this Contract; be signed by an authorized official of the Borrower; and otherwise be in the form prescribed by the Secretary. Advances and Conversion Date Advances shall be requested and will only be approved and made in increments of not less than $1,000 for any Principal Due Date. A request for an initial Advance under a Note, or a request for a Conversion Date Advance, shall be received by the Secretary at least ten Business Days prior to the Borrower’s proposed Funding Date or Conversion Date, as applicable. All other requests for Advances shall be received by the Secretary not less than five Business Days prior to the proposed Funding Date. The Borrower may not deliver a Note or a request for an Advance or Conversion Date Advance to the Secretary more than two calendar months prior to the Borrower’s proposed Funding Date. At least two Business Days prior to the proposed Funding Date or Conversion Date if the Borrower’s request was timely received, or the next available Funding Date for which the request was timely received, the Secretary shall, except as otherwise provided in paragraph 11(c) or 12 hereof, deliver a corresponding Authorization Order or Advance Order (as applicable) to the Fiscal Agent in accordance with Section 2.03 or 2.04 of the Fiscal Agency Agreement for the applicable Funding Date or Conversion Date. If the Borrower requests an Advance or Conversion Date Advance of less than the outstanding Maximum Commitment Amount under the Note, the Borrower may also specify in its written request the amount of the Advance or Conversion Date Advance to be allocated to each Commitment Amount or Principal Amount per Principal Due Date under the Note. If the Borrower does not specify how the Advance or Conversion Date Advance should be allocated among Commitment Amounts/Principal Due Dates, the Borrower hereby authorizes the Secretary to direct the Fiscal Agent to allocate the Page 21 of 222 3 Advance to the respective Commitment Amounts or Principal Amounts in order of the earliest Principal Due Date(s). C.Guarantee Fee. The Borrower shall pay to the Secretary a fee equal to 2.23% of each Advance to offset the credit subsidy cost of the guaranteed loan. This fee, which was announced on October 5, 2018, 83 Fed. Reg. 50257, for Section 108 loan guarantee disbursements under loan guarantee commitments awarded in FY 2019 is due to the Secretary no later than the time of the disbursement of each Advance to the Borrower. The fee is payable from allocations or grants which have been made to Borrower under Section 106 of the Act (including program income derived therefrom) or from other sources, but is only payable from Guaranteed Loan Funds if the fee is deducted from the Advance. D.Conversion; Public Offering. On the Conversion Date (if any), trust certificates backed by the Note (and similar notes issued by other Section 108 borrowers) will be purchased for a purchase price of the full principal amount thereof by underwriters selected by the Secretary (the "Underwriters") pursuant to an Underwriting Agreement between the Underwriters and the Secretary, at a closing on such Conversion Date as determined by the Secretary and the Underwriters. The Borrower agrees that the interest rate at which the trust certificate of a specified maturity is sold to the Underwriters shall govern the interest rate inserted on the Conversion Date in Schedule P&I of the Note for the Principal Amount of corresponding maturity. E.Consents. By execution of this Contract, the Borrower ratifies and consents to the Secretary's selection of the Underwriters and authorizes the Secretary to negotiate with the Underwriters the terms of the Underwriting Agreement and of the public offering of interests in the trust certificates to investors (including the applicable interest rates). In addition, by execution hereof the Borrower ratifies and consents to the Secretary's selection of the Fiscal Agent/Trustee and agrees to the respective terms of the Fiscal Agency/Trust Agreements. If Advances have been made in the Maximum Commitment Amount of the Note not less than ten Business Days prior to the proposed Conversion Date, or if the Borrower requests a Conversion Date Advance, the Borrower authorizes the Secretary to deliver Schedule P&I to the Note completed in accordance herewith to the Fiscal Agent/Trustee on the Conversion Date in accordance with the Fiscal Agency/Trust Agreements, concurrent with delivery of the Secretary's Guarantee of the trust certificates at the closing on the Conversion Date, and thereafter the Note shall be enforceable in accordance with its terms including Schedule P&I. In addition, the Secretary reserves the right to notify the Borrower not less than one calendar month in advance of a specified Conversion Page 22 of 222 4 Date that the Note will be sold to the Underwriters on such date, if the Secretary in his sole discretion determines that market conditions or program needs require the participation in the proposed public offering of all or substantially all Borrowers with outstanding Advances. [Rest of Page Intentionally Left Blank] Page 23 of 222 5 PART II 1.Receipt, Deposit and Use of Guaranteed Loan Funds. (a) Except for funds deducted on the Conversion Date pursuant to paragraph 4(b) and fees and charges deducted by the Fiscal Agent/Trustee pursuant to paragraph 4(a), the Guaranteed Loan Funds shall be electronically transferred in accordance with the Borrower's instructions for deposit in a separate, identifiable account (the "Guaranteed Loan Funds Account") with a financial institution whose deposits or accounts are Federally insured. The Guaranteed Loan Funds Account shall be established and designated as prescribed in the attached form document entitled "Letter Agreement for Section 108 Loan Guarantee Program Deposit Account" (Attachment 1) and shall be continuously maintained for the Guaranteed Loan Funds. Such Letter Agreement must be executed when the Guaranteed Loan Funds Account is established, and an original of this Letter Agreement, signed by the Borrower and the financial institution shall be submitted by the Borrower to the Secretary with this signed Contract. The Borrower shall make withdrawals from said account only for payment of the costs of approved Section 108 activities, for transfer to the Loan Repayment Account or for the temporary investment of funds pursuant to this paragraph 1(a). Such temporary investment of funds into the Guaranteed Loan Funds Investment Account shall be required within three Business Days after the balance of deposited funds exceeds the amount of the Federal deposit insurance on the Guaranteed Loan Funds Account. At that time, any balance of funds in the Guaranteed Loan Funds Account exceeding such insurance coverage shall be fully (100%) and continuously invested in Government Obligations, as defined in paragraph 10 hereof, held in the Guaranteed Loan Funds Investment Account. All temporary investments, whether or not required as above, shall be limited to Government Obligations having maturities that are consistent with the cash requirements of the approved activities. In no event shall the investments mature on or after June 30, 2021 or have maturities which exceed one year. All such investments shall be held in trust for the benefit of the Secretary by the above financial institution in an account (the "Guaranteed Loan Funds Investment Account") established and designated as prescribed in the attached form document entitled "Letter Agreement for Section 108 Loan Guarantee Program Investment Account" (Attachment 2), which account shall be maintained for all Government Obligations purchased with funds from the Guaranteed Loan Funds Account. The Guaranteed Loan Funds Investment Account need only be established if and when the Borrower is required to invest, or otherwise invests, the Page 24 of 222 6 Guaranteed Loan Funds in Government Obligations. Such Letter Agreement must be executed when the Guaranteed Loan Funds Investment Account is established. (All proceeds and income derived from such investments shall be returned to the Guaranteed Loan Funds Account. All funds in the Guaranteed Loan Funds Account or the Guaranteed Loan Funds Investment Account must be withdrawn and disbursed by the Borrower for approved activities by June 30, 2021. Any funds remaining in either Account after this date shall be immediately transferred to the Loan Repayment Account established pursuant to paragraph 6 of this Contract. (b) The Borrower shall by the fifteenth day of each month provide the Secretary with an electronic copy of a statement showing the balance of funds in the Guaranteed Loan Funds Account and the withdrawals from such account during the preceding calendar month, and an electronic copy of a statement identifying the obligations and their assignments in the Guaranteed Loan Funds Investment Account. Borrower shall e-mail the electronic copies to 108reports@hud.gov. (c) Upon the Secretary giving notice that the Borrower is in Default under this Contract or the Note, all right, title, and interest of the Borrower in and to the Guaranteed Loan Funds and Guaranteed Loan Funds Investment Accounts shall immediately vest in the Secretary for use in making payment on the Note, purchase of Government Obligations in accordance with paragraph 10, or payment of any other obligations of the Borrower under this Contract or the Fiscal Agency/Trust Agreements. 2.Payments Due on Note; Final Payment and Discharge. The Borrower shall pay to the Fiscal Agent/Trustee, as collection agent for the Note, all amounts due pursuant to the terms of the Note. In accordance with the Note and the Fiscal Agency/Trust Agreements, payment shall be made by 3:00 P.M. (New York City time) on the seventh Business Day (the "Note Payment Date") preceding the relevant Interest Due Date or Principal Due Date (each as defined in the Note). If any Note Payment Date falls on a day that is not a Business Day, then the required payment shall be made on the next Business Day. Payment may be made by check or wire transfer. Upon final payment of all amounts due to Holders under the Note, including any payment made by the Secretary pursuant to the Guarantee, the Fiscal Agent/Trustee is required by the Fiscal Agency/Trust Agreements to return the Note to the Secretary. Upon final payment to the Secretary of any amounts due as a result of Guarantee Payments or otherwise due under this Contract, the Secretary will cancel and return the Note to the Borrower in discharge of the Page 25 of 222 7 Borrower’s obligations under the Note. 3.Selection of New Fiscal Agent or Trustee. The Secretary shall select a new Fiscal Agent or Trustee if the Fiscal Agent or Trustee resigns or is removed by the Secretary. The Borrower hereby consents in advance to any such selection and to any changes in the Fiscal Agency/Trust Agreements agreed to by any Fiscal Agent or Trustee and the Secretary, subject to paragraph 4(e) of this Contract. 4.Payments Due Fiscal Agent or Trustee; Documents to the Secretary. (a) The Borrower agrees to pay the fees of the Fiscal Agent as required by Exhibit G to the Fiscal Agency Agreement, and any additional amounts that may be due pursuant to Section 6.01 of the Fiscal Agency Agreement. If not paid by the Borrower by any other means prior thereto, the Borrower agrees that any such fees or additional amounts that have been incurred prior to an Advance or a Conversion Date Advance may be deducted by the Fiscal Agent/Trustee from the proceeds of the Advance or Conversion Date Advance, as applicable. (b) The Borrower agrees to pay the Borrower’s share, as determined by the Secretary, of the customary and usual issuance, underwriting, and other costs related to the public offering and future administration of the Note and the trust certificates, as approved by the Secretary, including the cost of reimbursement and/or compensation of the Trustee pursuant to the Trust Agreement, including Sections 3.11 and 7.01 thereof. In connection with the public offering on the Conversion Date, such payment shall either be made by wire transfer to the Trustee on the day prior to the Conversion Date or shall be deducted from the Guaranteed Loan Funds on the Conversion Date. (c) The Borrower shall submit to the Secretary not later than ten Business Days prior to the Funding Date for the initial Advance hereunder, or if not submitted earlier, prior to any Conversion Date or Public Offering Date applicable to the Note, this executed Contract, the executed Note, a request for an Advance or a Conversion Date Advance (as applicable) in proper form, and an opinion acceptable to the Secretary from the Borrower's counsel to the effect that: (i) the governing body of the Borrower has authorized by resolution or ordinance, in accordance with applicable State and local law, the issuance of the Note and the execution of this Contract; (ii) the Note and this Contract are valid, binding, and enforceable obligations of the Borrower; (iii) the pledge of funds pursuant to 24 CFR 570.705(b)(2) and paragraph 5(a) of this Contract is valid and binding; and (iv) there is no outstanding litigation that will affect the validity of the Note or this Contract. In addition, the Borrower shall submit Page 26 of 222 8 any other additional documents or opinions specifically required by this Contract (e.g., paragraph 5(c), or paragraph 15, et seq.), at the time required thereby. (d) The Borrower agrees to reimburse the Underwriters upon demand by the Secretary for the Borrower’s share, as determined by the Secretary, of all reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) incurred in connection with a proposed public offering, if the Underwriters incur such additional costs for the public offering because of any refusal, inability, or failure on the part of the Borrower timely to submit in acceptable form any document required by this Contract (including paragraph 4(c)), or because of any withdrawal by the Borrower from the public offering, after the Borrower has submitted a request for a Conversion Date Advance hereunder. By execution and delivery of this Contract to the Secretary, the Borrower hereby expressly authorizes the Secretary to pay amounts due under this paragraph from funds pledged under paragraph 5(a) of this Contract. (e) The undertakings in paragraphs 3 and 4 of this Contract are expressly subject to the requirement that the Fiscal Agency/Trust Agreements shall in no event require payment of fees or charges, reimbursement of expenses, or any indemnification by the Borrower from any source other than funds pledged pursuant to paragraphs 5 or 15 et seq. of this Contract. 5.Security. The Borrower hereby pledges as security for repayment of the Note, and such other charges as may be authorized in this Contract, the following: (a) All allocations or grants which have been made or for which the Borrower may become eligible under Section 106 of the Act, as well as any grants which are or may become available to the Borrower pursuant to Section 108(q). (b) Program income, as defined at 24 CFR 570.500(a)(or any successor regulation), directly generated from the use of the Guaranteed Loan Funds. (c) Other security as described in paragraph 15, et seq. (d) All proceeds (including insurance and condemnation proceeds) from any of the foregoing. (e) All funds or investments in the accounts established pursuant to paragraphs 1 and 6 of this Contract. 6.Loan Repayment Account. (a) All amounts pledged pursuant to paragraphs 5(b), 5(c), and 5(d) of this Contract shall be deposited immediately on Page 27 of 222 9 receipt in a separate identifiable account (the "Loan Repayment Account") with a financial institution whose deposits or accounts are Federally insured. The Loan Repayment Account shall be established and designated as prescribed in the attached form document entitled "Letter Agreement for Section 108 Loan Guarantee Program Deposit Account" (Attachment l) and shall be maintained for such pledged funds. The Loan Repayment Account need only be established if and when the Borrower receives amounts pledged pursuant to paragraph 5(b), 5(c) or 5(d). Such Letter Agreement must be executed when the Loan Repayment Account is established, and an original of this Letter Agreement, signed by the Borrower and the financial institution shall be submitted by the Borrower to the Secretary with this signed Contract. Borrower shall make withdrawals from said account only for the purpose of paying interest and principal due on the Note (including the purchase of Government Obligations in accordance with paragraph 10 hereof), for payment of any other obligation of the Borrower under this Contract or the Fiscal Agency/Trust Agreements, or for the temporary investment of funds pursuant to this paragraph, until final payment and discharge of the indebtedness evidenced by the Note, unless otherwise expressly authorized by the Secretary in writing. Such temporary investment of funds shall be required within three Business Days after the balance of deposited funds exceeds the amount of the Federal deposit insurance on the Loan Repayment Account. At that time, the balance of funds in the Loan Repayment Account exceeding such insurance coverage shall be fully (100%) and continuously invested in Government Obligations, as defined in paragraph 10 hereof. All temporary investments, whether or not required as above, shall be limited to Government Obligations having maturities that are consistent with cash requirements for payment of principal and interest as required under the Note. In no event shall the maturities of such investments exceed one year. All such investments shall be held in trust for the benefit of the Secretary by the above financial institution in an account (the "Loan Repayment Investment Account") established and designated as prescribed in the attached form document entitled "Letter Agreement for Section 108 Loan Guarantee Program Investment Account" (Attachment 2), which account shall be maintained for all Government Obligations purchased with funds from the Loan Repayment Account. Such Letter Agreement must be executed when the Loan Repayment Investment Account is established. (A fully executed copy of such Letter Agreement shall be submitted to the Secretary within thirty days of its execution.) All proceeds and income derived from such investments shall be returned to the Loan Repayment Account. (b) Borrower shall by the fifteenth day of each month, provide the Secretary with an electronic copy of a statement Page 28 of 222 10 showing the balance of funds in the Loan Repayment Account and the deposits and withdrawals of all funds in such account during the preceding calendar month and an electronic copy of a statement identifying the obligations and their assignments in the Loan Repayment Investment Account. Borrower shall e-mail the electronic copies to 108reports@hud.gov. (c) Upon the Secretary giving notice that the Borrower is in Default under this Contract or the Note, all right, title, and interest of the Borrower in and to the Loan Repayment and Loan Repayment Investment Accounts shall immediately vest in the Secretary for use in making payment on the Note, purchase of Government Obligations in accordance with paragraph 10, or payment of any other obligation of the Borrower under this Contract or the Fiscal Agency/Trust Agreements. 7.Use of CDBG, EDI or BEDI Funds for Repayment. Any funds available to the Borrower under Section 106 of the Act (including program income derived therefrom) are authorized to be used by the Borrower for payments due on the Note, Optional Redemption (as defined in the Note), payment of any other obligation of the Borrower under this Contract or the Fiscal Agency/Trust Agreements, or the purchase of Government Obligations in accordance with paragraph 10. Any funds specifically available to the Borrower for such payments or as a debt service reserve under an EDI or BEDI Grant Agreement pursuant to Section 108(q) of the Act which supports the eligible project(s) and activities financed by the Note may also be used therefor; any other use of Section 108(q) funds for such purposes shall require the prior written approval of the Secretary. Unless otherwise specifically provided herein or unless otherwise expressly authorized by the Secretary in writing, the Borrower shall substantially disburse funds available in the Loan Repayment or the Loan Repayment Investment Accounts before funds from grants under Section 106 of the Act are withdrawn from the U.S. Treasury for such purposes. 8.Secretary’s Right to Restrict Use of CDBG Funds to Repayment. Upon a determination by the Secretary that payments required by paragraph 2 and/or paragraph 4 of this Contract are unlikely to be made as specified, the Secretary may give the Borrower notice that the availability to the Borrower of funds pledged under paragraph 5(a) of this Contract for purposes other than satisfaction of the pledge is being restricted. This restriction shall be in an amount estimated by the Secretary to be sufficient to ensure that the payments referred to in paragraph 2 and/or paragraph 4 hereof are made when due. This restriction may be given effect by conditioning the restricted amounts to prohibit disbursement for purposes other than satisfaction of the pledge at the time such restricted funds are approved as grants, by limiting the Borrower's ability to Page 29 of 222 11 draw down or expend the restricted funds for other purposes, and by disapproving payment requests submitted with respect to such grants for purposes other than satisfaction of the pledge. 9.Secretary’s Right to Use Pledged Funds for Repayment. The Secretary may use funds pledged under paragraph 5(a) of this Contract or funds restricted under grants pursuant to paragraph 8 of this Contract to make any payment required of the Borrower under paragraph 2 and/or paragraph 4, if such payment has not been timely made by the Borrower. 10.Defeasance. For purposes of this Contract, after the Conversion Date the Note shall be deemed to have been paid (defeased) if there shall have been deposited with the Trustee either moneys or Government Obligations (as defined below), which in the sole determination of the Secretary, mature and bear interest at times and in amounts sufficient, together with any other moneys on deposit with the Trustee for such purpose, to pay when due the principal and interest to become due on the Note. The Aggregate Principal Amount of the Note or any unpaid Principal Amount may be so defeased, in whole or in part, as of any Interest Due Date, or any other Business Day acceptable to both HUD and the Borrower. In accordance with the Note and the Trust Agreement, the Borrower shall give timely notice and written instructions to the Secretary and the Trustee concerning any principal amounts proposed to be defeased, including any Optional Redemptions proposed, which instructions shall be approved by the Secretary. If the unpaid Aggregate Principal Amount of the Note guaranteed pursuant to this Contract shall be defeased and deemed to have been paid in full, then the Borrower shall be released from all agreements, covenants, and further obligations under the Note. "Government Obligation" means a direct obligation of, or any obligation for which the full and timely payment of principal and interest is guaranteed by, the United States of America, including but not limited to, United States Treasury Certificates of Indebtedness, Notes and Bonds - State and Local Government Series or certificates of ownership of the principal of or interest on direct obligations of, or obligations unconditionally guaranteed by, the United States of America, which obligations are held in trust by a commercial bank which is a member of the Federal Reserve System and has capital and surplus (exclusive of undivided profits) in excess of $100,000,000. 11.Default. (a) A Default under the Note and this Contract shall occur upon failure by the Borrower to: (i) pay when due an installment of principal or interest on the Note; or (ii) punctually and properly perform, observe, and comply with any covenant, agreement, or condition contained in: (A) this Contract, (B) any security agreement, deed of trust, Page 30 of 222 12 mortgage, assignment, guarantee, or other contract securing payment of indebtedness evidenced by the Note, or (C) any future amendments, modifications, restatements, renewals, or extensions of any such documents. (b) The Borrower waives notice of Default and opportunity for hearing with respect to a Default under paragraph 11(a). (c) In addition to Defaults under paragraph 11(a), the Secretary may declare the Note in Default if the Secretary makes a final decision in accordance with the provisions of section 111 of the Act and 24 CFR 570.913 (or any successor provisions), including requirements for reasonable notice and opportunity for hearing, that the Borrower has failed to comply substantially with title I of the Act. Notwithstanding any other provision, following the giving of such reasonable notice, the Secretary may, in the Secretary’s sole discretion pending the Secretary’s final decision, withhold the guarantee of any or all obligations not yet guaranteed on behalf of the Borrower under outstanding commitments, suspend approval of any further Advances or Conversion Date Advances under the Note, and/or direct the Borrower's financial institution to: refuse to honor any instruments drawn upon, or withdrawals from, the Guaranteed Loan Funds Account or the Loan Repayment Account initiated by the Borrower, and/or refuse to release obligations and assignments by the Borrower from the Guaranteed Loan Funds Investment Account or the Loan Repayment Investment Account. 12.Remedial Actions. Upon a Default or declaration of Default under this Contract, the Secretary may, in the Secretary’s sole discretion, take any or all of the following remedial actions: (a) With any funds or security pledged under this Contract, the Secretary may: (i) continue to make payments due on the Note, (ii) make a prepayment under Section I.D. of the Note or make an acceleration payment with respect to the principal amount of the Note subject to Optional Redemption as provided in Section III of the Note, (iii) purchase Government Obligations in accordance with paragraph 10 of this Contract, (iv) pay any interest due for late payment as provided in the Note, this Contract, or the Fiscal Agency/Trust Agreements, (v) pay any other obligation of the Borrower under this Contract or the Fiscal Agency/Trust Agreements, and/or (vi) pay any reasonable expenses incurred by the Secretary or the Fiscal Agent/Trustee as result of the Borrower's Default. (b) The Secretary may withhold the guarantee of any or all obligations not yet guaranteed or the disbursement of any or all grants not yet disbursed in full under outstanding guarantee commitments or grant approvals for the Borrower under Sections 108 and/or 106 of the Act. Page 31 of 222 13 (c) The Secretary may withhold approval of any or all further Advances or Conversion Date Advances under the Note (if applicable); direct the Borrower's financial institution to refuse to: honor any instruments drawn upon, or withdrawals from, the Guaranteed Loan Funds Account or the Loan Repayment Account by the Borrower, and/or to release obligations and assignments by the Borrower from the Guaranteed Loan Funds Investment Account or the Loan Repayment Investment Account; and/or direct the Borrower and/or the Borrower’s financial institution to transfer remaining balances from the Guaranteed Loan Funds Account to the Loan Repayment Account. (d) Until the Conversion Date, or with respect to amounts subject to Optional Redemption, the Secretary may accelerate the Note. (e) The Secretary may exercise any other appropriate remedies or sanctions available by law or regulation applicable to the assistance provided under this Contract, or may institute any other action available under law to recover Guaranteed Loan Funds or to reimburse the Secretary for any payment under the Secretary's Guarantee or any reasonable expenses incurred by the Secretary as a result of the Default. (f) All notices and submissions provided for hereunder shall be in writing (including by telex, telecopier or any other form of facsimile communication) and mailed or sent or delivered, as to each party hereto, at its address set forth below or at such other address as shall be designated by such party in a written notice to the other party hereto. All such notices and other communications shall be effective when received as follows: (i) if sent by hand delivery, upon delivery; (ii) if sent by mail, upon the earlier of the date of receipt or five Business Days after deposit in the mail, postage prepaid; (iii) if sent by telex, upon receipt by the sender of an answer back; and (iv) if sent by telecopier, upon receipt. The Secretary: U.S. Dept. of Housing and Urban Development Attention: Paul Webster, Director Financial Management Division 451 7th Street SW, Room 7282 Washington, DC 20410 Borrower: City of Pasco Attention: Michael Morales, Deputy Director Community & Economic Development Department 525 N. 3rd Avenue Pasco, WA 99301 Page 32 of 222 14 13.Limited Liability. Notwithstanding any other provision of this Contract, the Fiscal Agency/Trust Agreements or the Note, any recovery against the Borrower for any liability for amounts due pursuant to the Note, the Fiscal Agency/Trust Agreements or this Contract shall be limited to the sources of security pledged in paragraph 5 or any Special Conditions of this Contract. Neither the general credit nor the taxing power of the Borrower, or of the State in which the Borrower is located, is pledged for any payment due under the Note, the Contract, or the Fiscal Agency/Trust Agreements. 14.Incorporated Grant Agreement. The Contract and the Note are hereby incorporated in and made a part of the Grant Agreement authorized by the Secretary on August 7, 2018 under the Funding Approval for grant number B-18-MC-53-0009 to the Borrower. In carrying out activities with the Guaranteed Loan Funds hereunder, the Borrower agrees to comply with the Act and 24 CFR Part 570, as provided in Subpart M thereof. 15.Special Conditions and Modifications: (a) As provided for in paragraph 5(c) and (d) of this Contract, the Borrower pledges the following security (including insurance and condemnation proceeds therefrom) to secure the repayment of the Note and all other charges authorized in this Contract and in all related future contracts or amendments between Borrower and the Secretary pertaining to the Note: (i) A sole first priority lien in the name of the Secretary on the real property described in Attachment 3 hereof, including all air rights, water rights, and other real property interests (the “Property”); (ii) A collateral assignment to the Secretary of all rights, titles, and interests in and to any leases covering the Property and any rents derived from the Property; (iii) A collateral assignment to the Secretary of all rights, titles, and interests, whether now owned or hereafter acquired, in and to any fixtures located on the Property and any personal property affixed to, installed in, or attached to the Property; and (iv) A collateral assignment to the Secretary of all rights, titles, and interests in and to permits, licenses, agreements, and other intangible personal property rights covering the Property, including but not limited to utility connection rights, or insurance policies held by the Borrower with respect to the Property, whether Page 33 of 222 15 now owned or hereafter acquired, and which are used in connection with the maintenance, use, occupancy or enjoyment of the Property. The Borrower shall pledge and assign this security in one more appropriate instruments (collectively, the “Mortgage, Assignment, Security Agreement, and Fixture Filing”), which shall contain any provisions the Secretary deems necessary. The Borrower shall take all steps necessary to attach, perfect, and maintain the perfection and priority of the Secretary’s lien, assignment, and security interests, including proper recordation and filing and re-filing UCC financing statements. (b)Guaranteed Loan Funds shall be used by the Borrower to carry out the following activities in connection with the Pasco Market Redevelopment Project (the "Project"): (i)Construction of public facilities, pursuant to 24 CFR 570.703(l); (ii)Payment of issuance and other costs pursuant to 24 CFR 570.703(g); and (iii)Payment of fees charged by HUD pursuant to 24 CFR 570.712. (c)Unless otherwise agreed to by the Secretary in writing, the Borrower shall select a financial institution acceptable to the Secretary (the "Custodian") to act as custodian for the documents specified in (d) below (hereinafter referred to as the "Security Documents"). The Borrower and the Custodian shall enter into a written agreement containing such provisions as the Secretary deems necessary. An original of the agreement, signed by the Borrower and the Custodian, shall be submitted by the Borrower to the Secretary with this signed Contract. The Borrower shall consult with the Secretary before amending this agreement with the Custodian for any reason, and amendments shall contain provisions the Secretary deems necessary. The Borrower shall provide the Secretary with original signed amendments within five business days after they are signed. (d)Not later than five business days after receipt by the Borrower of the Guaranteed Loan Funds, or as otherwise agreed to by the Secretary, the Borrower shall deliver to the Custodian, the following: (i)The original recorded Mortgage, Assignment, Page 34 of 222 16 Security Agreement, and Fixture Filing signed by the Borrower as mortgagor and securing repayment of the indebtedness evidenced by the Note, and containing all assignments described in paragraph 15(a) and any other provisions the Secretary deems necessary. (ii) A mortgagee title policy, issued by a company and in a form acceptable to the Secretary, naming the Secretary as the insured party. (iii) A certified survey of the Property with a legal description conforming to the title policy and the Mortgage, Assignment, Security Agreement, and Fixture Filing. (iv) An appraisal of the fee simple ownership interest in the Property specifying an estimate of the fair market value of not less than $4,726,250 ($3,781,000 x 1.25). The appraisal shall be completed by an appraiser who is certified by the state and shall conform to the standards of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). (v) Copies of all financing statement filings made by the Borrower pursuant to the Uniform Commercial Code to maintain the Secretary’s security interest in all personal property described in paragraph 15(a). (vi) An opinion of Borrower's counsel on its letterhead, addressed and satisfactory to the Secretary, that the Mortgage, Assignment, Security Agreement, and Fixture Filing, and any financing statements covering other personal property described in paragraph 15(a), are valid and legally binding obligations, enforceable in accordance with their terms, which are properly recorded and together secure all obligations under the Note and this Contract and under any related future contracts or amendments between Borrower and the Secretary pertaining to the Note. (e) Borrower shall deliver to the Custodian all re-filings of UCC financing statements or filings of continuation statements filed to continue the effectiveness of the financing statements made by the Borrower to secure its obligations under the Note and this Contract, within five business days of such filings. (f) Paragraph 12 is amended by adding at the end thereof the following language: Page 35 of 222 17 “(g) The Secretary may exercise any appropriate remedies to enforce the lien on the Property and any collaterally assigned interests in leases, rents, licenses, permits, other agreements, fixtures and other personal property referred to in paragraph 15(a).” (g)If any one or more of the covenants, agreements, provisions, or terms of this Contract shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Contract and shall in no way affect the validity or enforceability of the other provisions of this Contract or of the Note or the rights of the Holder thereof. (h)Additional Grounds for Default. Notice of Default. Restriction of Pledged Grants. Availability of Other Remedial Actions. (i)The Borrower acknowledges and agrees that the Secretary's guarantee of the Note is made in reliance upon the availability of grants pledged pursuant to paragraph 5(a) (individually, a "Pledged Grant" and, collectively, the "Pledged Grants") in any Federal fiscal year subsequent to the Federal fiscal year ending September 30, 2019 to: (A) pay when due the payments to become due on the Note, or (B) defease (or, if permitted, prepay) the full amount outstanding on the Note. The Borrower further acknowledges and agrees that if the Secretary (in the Secretary's sole discretion) determines that Pledged Grants are unlikely to be available for either of such purposes, such determination shall be a permissible basis for any of the actions specified in paragraphs (ii) and (iii) below (without notice or hearing, which the Borrower expressly waives). (ii) Upon written notice from the Secretary to the Borrower at the address specified in paragraph 12(f) above that the Secretary (in the Secretary's sole discretion) has determined that Pledged Grants are unlikely to be available for either of the purposes specified in (A) and (B) of paragraph (i) above (such notice being hereinafter referred to as the "Notice of Impaired Security"), the Secretary may limit the availability of Pledged Grants by withholding amounts at the time a Pledged Grant is approved or by disapproving payment requests (drawdowns) Page 36 of 222 18 submitted with respect to Pledged Grants. (iv) If after 60 days from the Notice of Impaired Security the Secretary (in the Secretary's sole discretion) determines that Pledged Grants are still unlikely to be available for either of the purposes specified in (A) and (B) of paragraph (i) above, the Secretary may declare the Note in Default and exercise any and all remedies available under paragraph 12. This paragraph (iii) shall not affect the right of the Secretary to declare the Note and/or this Contract in Default pursuant to paragraph 11 and to exercise in connection therewith any and all remedies available under paragraph 12. (v) All notices and submissions provided for hereunder shall be submitted as directed in paragraph 12(f) above. [Rest of Page Intentionally Left Blank] Page 37 of 222 19 THE UNDERSIGNED, as authorized officials on behalf of the Borrower or the Secretary, have executed this Contract for Loan Guarantee Assistance, which shall be effective as of the date of execution hereof on behalf of the Secretary. City of Pasco, Washington BORROWER BY: (Signature) (Name) (Title) (Date) SECRETARY OF HOUSING AND URBAN DEVELOPMENT BY: (Signature) Virginia Sardone (Name) Acting Deputy Assistant Secretary for Grant Programs (Title) (Date) Page 38 of 222 20 Note No. B-18-MC-53-0009 Attachment 1 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT LETTER AGREEMENT FOR SECTION 108 LOAN GUARANTEE PROGRAM DEPOSIT ACCOUNT Name of Institution (and Branch) Street City, State, Zip Code ************************************************************************ [ ] This account is established for funds received by the Borrower under Note(s) guaranteed by the United States Department of Housing and Urban Development (HUD) under the Section 108 Loan Guarantee Program (Guaranteed Loan Funds Account). [ ] This account is established for repayment of the Note(s) guaranteed by HUD under the Section 108 Loan Guarantee Program (Loan Repayment Account). [ ] This account is established as a debt service reserve under the Section 108 Loan Guarantee Program (Debt Service Reserve Account). You are hereby authorized and requested to establish a deposit account to be specifically designated: "The City of Pasco, Washington ________ , as Trustee of United States Department of Housing and Urban Development." All deposits made into such account shall be subject to withdrawal therefrom by the Borrower named below, unless and until HUD provides you with a notice that it is assuming control over the account. Thereafter withdrawals may not be made by the Borrower. Within a reasonable period of time, not to exceed two business days, after your receipt of such notice from HUD, you shall so prevent such Borrower withdrawals and, if requested by HUD in writing, shall thereafter forward monthly to HUD, to an account it specifies in its notice, the collected and available balance in such account. You are further authorized, after receipt of the notice from HUD, to refuse to honor any instrument drawn upon or withdrawals from such account by parties other than HUD. In no instance shall the funds in the deposit account be used to offset funds which may have been advanced to, or on behalf of, the Borrower by you. You are permitted, however, to debit from Page 39 of 222 21 the account your customary fees and charges for maintaining the account and the amount of any deposits that are made to the account and returned unpaid for any reason. Such account shall also be subject to your standard agreement and documents relating to the opening and maintenance of bank accounts with you. In the event of any conflict between this Letter Agreement and such agreements and documents, this Letter Agreement shall control. This letter is submitted to you in duplicate. Please execute the duplicate copy of the certificate below, acknowledging the existence of such account, so that we may present the copy signed by you to HUD. Name of Borrower: City of Pasco, Washington By: Date: [Signature] Name and Title: ************************************************************************ The undersigned institution certifies to the United States Department of Housing and Urban Development (HUD) that the account identified is in existence in this institution under account number: , and agrees with the Borrower named above and HUD to promptly comply with HUD's notice in the manner provided in the above letter, but in no event to exceed two business days. The undersigned institution further agrees, after receipt of the HUD notice as set forth above, to refuse to honor any instruments drawn upon or withdrawals from such account by parties other than HUD. In no instance shall the funds in the deposit account be used to offset funds which may have been advanced to, or on behalf of, the Borrower by the institution, except as set forth above. Deposits in this institution are insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, or the National Credit Union Administration up to statutory limits. Name of Institution: By: Date: (Signature) Name and Title: 8-28-08 Page 40 of 222 22 Note No. B-18-MC-53-0009 Attachment 2 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT LETTER AGREEMENT FOR SECTION 108 LOAN GUARANTEE PROGRAM INVESTMENT ACCOUNT Name of Institution (and Branch) Street City, State, Zip Code ************************************************************************ [ ] This account is established to hold obligations and their assignments, such obligations having been purchased with funds from the Guaranteed Loan Funds Account (Guaranteed Loan Funds Investment Account). [ ] This account is established to hold obligations and their assignments, such obligations having been purchased with funds from the Loan Repayment Account (Loan Repayment Investment Account). [ ] This account is established to hold obligations and their assignments, such obligations having been purchased with funds from the Debt Service Reserve Account (Debt Service Reserve Investment Account). You are hereby authorized and requested to hold obligations and assignments of those obligations in trust for the United States Department of Housing and Urban Development (HUD) in an account specifically designated: "The City of Pasco, Washington , as Trustee of United States Department of Housing and Urban Development." All obligations and assignments shall be subject to release to the Borrower named below, unless and until HUD provides you with a notice that it is assuming control over the account. Thereafter, releases may not be made by the Borrower. Within a reasonable period of time, not to exceed two business days, after your receipt of such notice from HUD, you shall so prevent such Borrower releases and, if requested by HUD in writing, shall thereafter forward monthly to HUD, to an account it specifies in its notice, the collected and available balance in such account. Page 41 of 222 23 You are further authorized, after receipt of the notice from HUD, to refuse to honor any request for release of the obligations and assignments from such account by parties other than HUD. In no instance shall the obligations in this account be used to offset funds which may have been advanced to, or on behalf of, the Borrower by you. You are permitted, however, to debit from the account your customary fees and charges for maintaining the account and the amount of any deposits that are made to the account and returned unpaid for any reason. Such account shall also be subject to your standard agreement and documents relating to the opening and maintenance of bank accounts with you. In the event of any conflict between this Letter Agreement and such agreements and documents, this Letter Agreement shall control. This letter is submitted to you in duplicate. Please execute the duplicate copy of the certificate below, acknowledging the existence of such account, so that we may present the copy signed by you to HUD. Name of Borrower: City of Pasco, Washington ____________ By: Date: [Signature] Name and Title: ************************************************************************ The undersigned institution certifies to the United States Department of Housing and Urban Development (HUD) that the account identified is in existence in this institution under account number: , and agrees with the Borrower named above and HUD to promptly comply with HUD's notice in the manner provided in the above letter, but in no event to exceed two business days. The undersigned institution further agrees, after receipt of the HUD notice as set forth above, to refuse to honor any request for release of the obligations and assignments from such account by parties other than HUD. In no instance shall the obligations in the account be used to offset funds which may have been advanced to, or on behalf of, the Borrower by the financial institution, except as set forth above. Deposits in this institution are insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, or the National Credit Union Administration up to the statutory limits. Name of Institution: By: Date: (Signature) Name and Title: 8-28-08 Page 42 of 222 24 ATTACHMENT 3 [Description of Real Property] Page 43 of 222 SECTION 108 LOAN NOTE D. Loan Note Page 44 of 222 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT SECTION 108 LOAN GUARANTEE PROGRAM VARIABLE/FIXED RATE NOTE NOTE NUMBER: B-18-MC-53-0009 DATE OF NOTE: _____________________ BORROWER: City of Pasco, Washington [Pasco Market Redevelopment Project] PRINCIPAL DUE DATES AND PRINCIPAL AMOUNT: Before the Conversion Date, the aggregate of Advances made for each applicable Principal Due Date specified in the Commitment Schedule to this Note; on or after the Conversion Date, the Principal Amount (if any) listed for each Principal Due Date in Schedule P & I hereto. MAXIMUM COMMITMENT AMOUNT: $3,781,000 COMMITMENT AMOUNTS: See Commitment Schedule attached hereto. VARIABLE INTEREST RATE: As set forth below. REGISTERED HOLDER: Daedalus & Co As Nominee for Money Market Obligations Trust on behalf of its Government Obligations Fund I. Terms Applicable Before the Conversion Date A. Advances For value received, the undersigned, the City of Pasco (the "Borrower"), which term includes any successors and assigns, a public entity organized and existing under the laws of the State (or Commonwealth as applicable) of Washington, promises to pay to the Registered Holder (the "Holder," which term includes any successors or assigns), at the time, in the manner, and with Page 45 of 222 2 interest at the rate or rates hereinafter provided, such amounts as may be advanced under this Note from time to time by the Holder for disbursement to, or on behalf of, the Borrower (individually, an "Advance", and collectively, "Advances"). The Holder shall make Advances upon the written request of the Borrower and the approval of the Secretary of Housing and Urban Development or his designee (the "Secretary"), pursuant to the Contract for Loan Guarantee Assistance (as further defined in Section IV.A. of this Note, the "Contract"), and the Amended and Restated Master Fiscal Agency Agreement (the "Fiscal Agency Agreement") dated as of May 17, 2000, between The Bank of New York Mellon (successor to The Chase Manhattan Bank and JPMorgan Chase Bank, N.A.), as Fiscal Agent (the "Fiscal Agent"), and the Secretary. The total amount of Advances made for each Principal Due Date under this Note shall not exceed the applicable Commitment Amount for such Principal Due Date set forth on the Commitment Schedule attached hereto. The aggregate of all Advances under this Note for all Principal Due Dates shall not exceed the Maximum Commitment Amount specified on the attached Commitment Schedule. The Fiscal Agent shall record the date and amount of all payments and Advances on this Note and maintain the books and records of all such Advances and Commitment Amounts for each corresponding Principal Due Date, and all payments. No Advances shall be made on this Note after its Conversion Date. As used herein, "Conversion Date" means the date (if any) upon which this Note is (i) delivered by the Holder to the Fiscal Agent against payment therefore by the purchasers selected by the Secretary to make such payment; and (ii) assigned to Bank of New York Mellon (or any successor thereto) acting in its capacity as Trustee (the "Trustee") pursuant to a Trust Agreement between the Secretary and the Trustee, dated as of January 1, 1995, as such agreement may be amended or supplemented (the "Trust Agreement"). Upon the occurrence of both (i) and (ii) in the previous sentence, Section III of this Note applies, thereby converting this Note to a fixed rate obligation. B. Variable Rate of Interest From and including the date of each Advance to but excluding the earlier of (i) the Conversion Date, and (ii) the date of redemption or prepayment of such Advance pursuant to Section I.D. below (each such date of redemption or prepayment, a "Prepayment Date") interest shall be paid quarterly at a variable interest rate (as set forth below) on the unpaid principal balance of each Advance on the first day of each February, May, August and November (each, an "Interim Payment Date"), commencing on the first Interim Payment Date after the initial Advance is made under this Note. Interest also shall be paid on each applicable Conversion Date, Prepayment Date or Principal Due Date. The amount of interest payable on each Interim Payment Date will represent interest accrued during the three-month period ending immediately prior to such Interim Payment Date, or in the case of the first Interim Payment Date following each Advance that is not made on an Interim Payment Date, the period from and including the date of such Advance to but excluding the first Interim Payment Date following such Advance. The amount of interest payable on this Note's Conversion Date, Prepayment Date, or on any Principal Due Date that precedes such Conversion Date will represent interest accrued during the period from the last Interim Payment Date to such Conversion Date, Prepayment Date, or Principal Due Date, respectively. Page 46 of 222 3 The initial variable interest rate for each Advance will be set on the date of such Advance and will be equal to 20 basis points (0.2%) above the Applicable LIBO Rate (as hereinafter defined) and thereafter will be adjusted monthly on the first day of each month (each, a "Reset Date") to a variable interest rate equal to 20 basis points (0.2%) above the Applicable LIBO Rate (such interest rate, as reset from time to time, the "Standard Note Rate"). If the Conversion Date for this Note has not occurred by the March 1 following the initial Advance under this Note, then the terms of Appendix A shall be used to set the variable interest rate. If the Fiscal Agent does not receive notice of either a Negotiated Special Interest Rate or Holder Determined Special Interest Rate (as defined in Appendix A attached hereto) from the Secretary or Holder, respectively, by the times specified in Appendix A to this Note, then the Standard Note Rate shall apply for the period to which such Negotiated Special Interest Rate or Holder Determined Special Interest Rate would otherwise apply. The Fiscal Agent may conclusively rely on any such notice as to the correctness of any matters set forth therein. Appendix A shall be inapplicable to this Note on or after the Conversion Date. "LIBO Rate" for any given Business Day means, except in the case of manifest error, the interest rate per annum published on that day in the Eastern Edition of The Wall Street Journal or any successor publication ("WSJ"), published by Dow Jones & Company, Inc., in the section titled "Money Rates" (or any successor section) and opposite the caption "London Interbank Offered Rates (LIBOR) -- three months" (or any successor caption). If such rate does not appear in WSJ on a given Business Day, for each interest period, the LIBO Rate shall be the interest rate, converted to a bond-equivalent yield basis, for deposits in U.S. dollars for three months which appears on Telerate Page 3750 or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying such rate (together, "Telerate Page 3750") as of 11:00 a.m., London time, on the day (the "Determination Date") that is two London Banking Days preceding the relevant Reset Date or Advance. If such rate does not appear on Telerate Page 3750 on such Determination Date, such rate shall be obtained from the Reuters Screen ISDA Page as of 11:00 a.m., London time, on such Determination Date. If, in turn, such rate does not appear on the Reuters Screen ISDA Page on such Determination Date, the offered quotation from each of four reference banks (expressed as a percentage per annum) as of approximately 11:00 a.m., London time, on such Determination Date for deposits in U.S. dollars to prime banks on the London interbank market for a 3-month period, commencing on the Reset Date or date of such Advance, shall be obtained. If at least two such quotations are provided, the LIBO Rate for such Reset Date or date of such Advance will be the arithmetic mean of the quotations, rounded to five decimal places. If fewer than two such quotations are provided as requested, the LIBO Rate for that Determination Date shall be the rate for the most recent day preceding such Determination Date for which the LIBO Rate shall have been displayed on Telerate Page 3750. The LIBO Rate for any interest period shall be converted to a bond-equivalent yield basis by multiplying such rate by the actual number of days in such interest period and dividing that number by 180. "Applicable LIBO Rate" means: (1) with respect to the initial interest rate for the first Advance hereunder, the LIBO Rate two London Banking Days before the date of such first Page 47 of 222 4 Advance; (2) with respect to the initial interest rate for any subsequent Advance made before the first Reset Date, the interest rate borne by the first Advance; (3) with respect to the initial interest rate for any subsequent Advance made after the first Reset Date, the LIBO Rate two London Banking Days before the immediately preceding Reset Date; and (4) with respect to the subsequent interest rate at any Reset Date for any Advance, the LIBO Rate two London Banking Days before such Reset Date. "London Banking Day" means any day in which dealings in deposits in United States dollars are transacted in the London interbank market. Interest payable on or before the Conversion Date shall be calculated on the basis of a 360-day year and the actual number of days lapsed. C. Principal Amount Prior to the Conversion Date, the aggregate amount of Advances under this Note for each specified Principal Due Date shall be the Principal Amount paid by the Borrower on such Principal Due Date (as assigned to such Advances by the Secretary's instructions to the Fiscal Agent in accordance with the Contract and the Fiscal Agency Agreement), except to the extent such Principal Amount shall have been reduced by redemption before such Principal Due Date as provided below. D. Redemption before Conversion Date At any time on or before the Conversion Date, the Borrower, with the consent of the Secretary, may redeem this Note, in whole or in part, upon fourteen calendar days notice to the Fiscal Agent and the Secretary, at the purchase price of one hundred percent (100%) of the unpaid Principal Amount to be redeemed, plus accrued interest thereon to the date of redemption. Partial redemptions shall be credited against the applicable Principal Amount(s). The related Commitment Amounts and the Maximum Commitment Amount shall be adjusted concurrently with any such redemptions in accordance with the Secretary's instructions to the Fiscal Agent pursuant to the Contract and the Fiscal Agency Agreement. II. Conversion The following events shall occur on the Conversion Date: Page 48 of 222 5 A. Schedule P&I On the Conversion Date all Advances owed by the Borrower under this Note with the same Principal Due Date shall be aggregated into a single Principal Amount which will accrue interest at the fixed rate applicable to such Principal Due Date. Such Principal Amount may be adjusted by the Fiscal Agent in accordance with the following paragraph or paragraph IV.H, as applicable. Whether or not adjusted, each Principal Amount, the fixed rate applicable to each Principal Amount, and the applicable Principal Due Date, shall be listed by the Secretary in Schedule P&I. Schedule P&I will be provided by the Secretary to the Fiscal Agent and attached to this Note by the Fiscal Agent upon the Fiscal Agent's receipt of this Note on the Conversion Date. B. Conversion Date Advances If, on or prior to the Conversion Date, the Borrower has not utilized the entire Commitment Amount indicated on the Commitment Schedule attached hereto for a given Principal Due Date, the Borrower may, in accordance with the Fiscal Agency Agreement and the Contract, and with the approval of the Secretary, utilize such Commitment Amount on the Conversion Date to obtain a Conversion Date Advance. A "Conversion Date Advance" shall mean any amount by which the Secretary instructs the Fiscal Agent to increase a Principal Amount on Schedule P&I for a given Principal Due Date, effective as of the Conversion Date of this Note. Conversion Date Advances shall be funded by the sale of this Note to the purchaser selected by the Secretary. The proceeds of a Conversion Date Advance (net of any applicable fees) shall be distributed to or on behalf of the Borrower on the Conversion Date. The total amount of Conversion Date Advances hereunder shall not exceed the sum of any unused Commitment Amounts for all Principal Due Dates. III. Terms Applicable Upon Conversion The following terms shall apply to this Note from the Conversion Date (if any) until this Note is canceled, or matured and paid in full: Commencing on the Conversion Date, the Borrower promises to pay to the Holder on the applicable Principal Due Date each Principal Amount set forth on the attached Schedule P&I, together with interest on each such Principal Amount at the rate applicable thereto specified on the Schedule P&I. Interest shall be calculated and payments shall be made in the manner set forth below. Interest on each scheduled Principal Amount of this Note due as of a given date specified on Schedule P&I hereto shall accrue at the related per annum rate specified on Schedule P&I from (and including) the Conversion Date to (but excluding) such Principal Due Date or, if applicable, to the applicable Interest Due Date on which an Optional Redemption (as defined below) occurs. Each interest amount accrued on each unpaid Principal Amount of this Note shall be due semiannually as of February 1 and August 1 of each year (each such February 1 and August 1, an "Interest Due Date") commencing on the first such date after the Conversion Date, Page 49 of 222 6 until each Principal Amount listed on Schedule P&I to this Note is paid in full. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. Certain Principal Amounts that are indicated as being eligible for Optional Redemption on Schedule P&I may be paid, in whole or in part, at the option of the Borrower as of any Interest Due Date on or after the date specified in such schedule (an "Optional Redemption"). In order to elect an Optional Redemption of such a Principal Amount, the Borrower shall give notice of its intention to prepay a Principal Amount to the Trustee and the Secretary not less than 60 days and not more than 90 days prior to the Interest Due Date as of which the Borrower intends to prepay the Principal Amount. The Trustee shall apply any payments received in respect of Optional Redemptions in accordance with written instructions of the Borrower, as approved by the Secretary. Principal Amounts that are not indicated as being eligible for Optional Redemption on Schedule P&I may not be prepaid. IV. General Terms A.Additional Definitions For purposes of this Note, the following terms shall be defined as follows: "Business Day" shall mean a day on which banking institutions in New York City are not required or authorized to remain closed and on which the Federal Reserve Bank and the New York Stock Exchange are not closed. If any payment (including a payment by the Secretary) is required to be made on a day that is not a Business Day, then payment shall be made on the next Business Day. "Contract" shall mean the Contract for Loan Guarantee Assistance, and any amendments thereto, among the Secretary and the Borrower, the designated public entity named therein (if applicable), and the State named therein (if applicable), that refers to and incorporates this Note by the number hereof. "Principal Amount" shall mean: (i) before the Conversion Date for this Note, the aggregate amount of Advances made for each Principal Due Date specified in the Commitment Schedule attached to this Note, less the amount of any redemptions pursuant to Section I.D. hereof, and any principal repayment; and (ii) on or after the Conversion Date, the principal amount (if any) stated for each Principal Due Date in Schedule P&I attached hereto, less the amount of any principal repayment and any Optional Redemptions made pursuant to Section III hereof and the Trust Agreement. Page 50 of 222 7 B. Timely Payment to Fiscal Agent or Trustee Notwithstanding anything contained in Section I, Section II, or Section III, the Borrower, in accordance with the Contract, shall be required to make all payments of interest and principal, including any Optional Redemption payment, directly to the Fiscal Agent or the Trustee (as applicable) on the seventh Business Day prior to the appropriate Interim Payment Date, Interest Due Date, Principal Due Date, Prepayment Date, or date of Optional Redemption, as applicable. C. Interest on Late Payments If a payment of principal or interest herein provided for shall not be made by either (i) 2:30 p.m. on an Interest Due Date or Principal Due Date; or (ii) 2:30 p.m. on the second Business Day (as herein defined) next succeeding an Interim Payment Date, then interest shall accrue on the amount of such payment at the then applicable interest rate or rates payable on this Note, from the relevant due date, as the case may be, until the date such payment is made. Nothing in the immediately preceding sentence shall be construed as permitting or implying that the Borrower may, without the written consent of the Holder and the Secretary, modify, extend, alter or affect in any manner whatsoever the right of the Holder timely to receive any and all payments of principal and interest specified in this Note. D. Applicability of Fiscal Agency Agreement or Trust Agreement Prior to the Conversion Date, this Note and Advances and payments made hereunder shall be administered pursuant to the terms of the Fiscal Agency Agreement and are subject to such agreement. On or after the Conversion Date, this Note and Advances and payments made hereunder shall be administered pursuant to the Trust Agreement and are subject to such agreement. The terms and provisions of the Fiscal Agency Agreement or the Trust Agreement, insofar as they affect the rights, duties and obligations of the Holder and/or the Borrower, are hereby incorporated herein and form a part of this Note. The Borrower hereby agrees to be bound by all obligations of the Borrower to the Fiscal Agent set forth in the Fiscal Agency Agreement. Capitalized terms not defined in this Note shall have the meanings ascribed to them in the Fiscal Agency Agreement or Trust Agreement, as applicable. The Fiscal Agency Agreement provides for the Fiscal Agent to perform certain duties, including the duties of (i) paying agent and calculation agent for this Note until its Conversion Date, and (ii) registrar for this Note until this Note is canceled or a new registrar appointed, each in accordance with the Fiscal Agency Agreement. The Trust Agreement provides for the Trustee to perform certain duties, including the duties of collection agent for this Note after its Conversion Date until a new Trustee is appointed in accordance with the Trust Agreement. This Note may be surrendered to the Fiscal Agent for registration of transfer or exchange, as provided in the Fiscal Agency Agreement. The Fiscal Agent and Trustee each shall permit reasonable inspection to be made of a copy of the Fiscal Agency Agreement or Trust Agreement kept on file at its respective corporate trust office. Neither the Fiscal Agency Agreement nor the Trust Agreement shall change the Borrower's payment obligations under this Note. Page 51 of 222 8 E.Applicability of Contract and Secretary's Guarantee This Note evidences indebtedness incurred pursuant to and in accordance with the Contract and pursuant to Section 108 of Title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. § 5308) (the "HCD Act"). This Note is subject to the terms and provisions of the Contract, to which Contract reference is hereby made for a statement of said terms and provisions and for a description of the collateral security for this Note. The payment of principal on the applicable Principal Due Dates and interest on the applicable Interim Payment Dates or Interest Due Dates under this Note is unconditionally guaranteed by the Secretary to the Holder through a guarantee (the "Guarantee"). Execution of the Secretary's Guarantee is required before this Note is effective, and such Guarantee shall be issued pursuant to and in accordance with the terms of the Contract and Section 108 of the HCD Act. F.Default A default under this Note shall occur upon failure by the Borrower to pay principal or interest on this Note when due hereunder. If a Borrower defaults on the payment of any interest or Principal Amounts when due, or if the Secretary gives notice of a final decision to declare the Borrower in default pursuant to the following paragraph of this Section IV.F, the Secretary may, but is not obligated to, make on any date on or prior to the Conversion Date with fourteen calendar days prior notice to the Fiscal Agent, or on the seventh Business Day preceding any Interest Due Date on or after the first permissible Optional Redemption date with seven Business Days prior notice to the Trustee, an acceleration payment to the Fiscal Agent or the Trustee, as applicable, equal to the unpaid Aggregate Principal Amount of the Note, together with accrued and unpaid interest thereon to such acceleration payment date or Interest Due Date, as applicable. In the event that any such acceleration payment is made from sources other than funds pledged by the Borrower as security under the Contract (or other Borrower funds), the amounts paid on behalf of the Borrower shall be deemed to be immediately due and payable to the Secretary. Nothing in this paragraph shall be construed as permitting or implying that the Borrower may, without the written consent of the Holder and the Secretary, modify, extend, alter or affect in any manner whatsoever the right of the Holder timely to receive any and all payments of principal and interest specified in this Note. In addition, the Secretary may declare the Borrower in default under this Note if the Secretary makes a final decision in accordance with the provisions of 24 C.F.R. § 570.913 (or any successor regulation thereof), including requirements for reasonable notice and opportunity for hearing, that the Borrower has failed to comply substantially with Title I of the HCD Act. Following the giving of such reasonable notice, the Secretary may take the remedial actions specified as available in the relevant provisions of the Contract pending the Secretary's final decision. Page 52 of 222 9 G. Holder's Reliance on Guarantee Following a default by the Borrower under the terms of this Note, the Holder agrees to rely wholly and exclusively for repayment of this Note upon the Guarantee. The enforcement of any instruments or agreements securing or otherwise related to this Note shall be the sole responsibility of the Secretary, and the Holder shall not be responsible for the preparation, contents or administration of such instruments and agreements, or for any actions taken in connection with such instruments and agreement. The Holder, to the extent it is legally able to do so, shall bind or cause to be bound its successors and assigns to all limitations imposed upon the Holder by this Note. H. Amendment This Note may only be amended with the prior written consent of the Secretary and the Borrower. No such amendment shall reduce, without the prior written consent of the Holder of this Note, in any manner the amount of, or delay the timing of, payments required to be received on this Note by the Holder, Fiscal Agent or Trustee, including Guarantee Payments; provided that prior to the Conversion Date, the Commitment Amounts on the Commitment Schedule attached hereto, and the Principal Amounts due on the corresponding Principal Due Dates may be rescheduled pursuant to written instructions given to the Fiscal Agent by the Secretary with the written agreement of the Borrower and the Secretary absent the consent of the Holder. I. Waivers The Borrower hereby waives any requirement for presentment, protest or other demand or notice with respect to this Note. The Borrower hereby waives notice of default and opportunity for hearing for any failure to make a payment when due. J. Delivery and Effective Date This Note is deemed issued, executed, and delivered on behalf of the Borrower by its authorized official as an obligation guaranteed by the Secretary pursuant to Section 108 of the HCD Act, effective as of the date of the Secretary's Guarantee. V. Borrower-Specific Provisions [This space intentionally left blank] Page 53 of 222 10 THE UNDERSIGNED, as an authorized official of the Borrower, has executed and delivered this Note. City of Pasco, Washington BORROWER By: (Signature) (Name) (Title) Page 54 of 222 11 ASSIGNMENT AND TRANSFER For value received, the undersigned assigns and transfers this Note to __________________________________________________________________________ (Name and Address of Assignee) __________________________________________________________________________ __________________________________________________________________________ (Social Security or Other Identifying Number of Assignee) and irrevocably appoints ______________________________________________________ attorney-in-fact to transfer it on the books kept for registration of the Note, with full power of substitution. Dated: _________________________ Note: The signature to this assignment must correspond with the name as written on the face of the Note without alteration or enlargement or other change. Signature Guaranteed: _______________________________ Qualified Financial Institution By: ___________________________ Authorized Signature [This page to be completed by the Fiscal Agent for transfer of the Note by the Holder as of the Conversion Date pursuant to the last paragraph of Section I.A. of this Note.] Page 55 of 222 APPENDIX A Special Pre-Conversion Interest Rates. (a) The Holder and the Secretary contemplate that the majority of the outstanding Variable/Fixed Rate Notes will be purchased by underwriters selected by the Secretary for sale in public offerings to occur each year. If a public offering including this Note has not occurred by each March 1 following the initial Advance under this Note, the Secretary shall, upon request, advise the Holder as to when a public offering including this Note is expected to occur, and the Holder and the Secretary agree to consult with each other as to what the interest rate on this Note will be after May 1 of that year if a public offering has not occurred by such May 1. The Holder shall notify the Secretary if such consultation has not occurred by April 1 of that year. If no public offering including this Note has occurred on or before such May 1, the applicable interest rate on this Note from such May 1 shall be the rate (if any) negotiated and agreed upon by the Secretary and the Holder. Such rate may be the Standard Note Rate or some other rate agreed upon by the Holder and the Secretary at least two Business Days before such May 1 (such other rate, the "Negotiated Special Interest Rate"). The Secretary shall notify the Fiscal Agent and the Holder in writing of any Negotiated Special Interest Rate within two Business Days of the determination thereof. (b) If the Secretary and the Holder do not, by the April 15th preceding such May 1, negotiate and agree under Section (a) of this Appendix on an interest rate applicable to this Note, then the Holder may, on or before the April 20th preceding such May 1, give written notice to the Secretary of its intent to change the interest rate on this Note and, if such notice was given during such period, the Holder may, on such May 1, unilaterally determine (subject to the terms of this paragraph) the interest rate that this Note will bear (such rate, the "Holder Determined Interest Rate") from and including such May 1 to but excluding the earliest of: (i) the Conversion Date; (ii) the date that this Note is purchased by a new Holder (as described in Section (c) below) or (iii) a Monthly Special Reset Date (as defined below). Interest from and including such May 1 to but excluding the Public Offering Date shall be paid on the unpaid principal balance of all outstanding Advances under this Note at the rate(s) to be determined by the Holder which, based upon then prevailing market conditions and taking into account all the circumstances, will enable the Holder to sell this Note at one hundred percent (100%) of the aggregate amount of all Advances hereunder prior to the date of such sale. Such interest rate shall be determined as of such May 1 and shall be determined again on the foregoing basis on the first of each month thereafter (the first of each month after such May 1, a "Monthly Special Reset Date"). The Holder shall notify the Fiscal Agent and the Secretary in writing within two Business Days following such dates of the determination of the Holder Page 56 of 222 2 Determined Interest Rate and each applicable interest rate determined on a Monthly Special Reset Date. (c) If the Secretary and the Holder have failed to agree upon an interest rate pursuant to Section (a) of this Appendix A, the Secretary, upon seven calendar days notice to the Holder, may arrange for the purchase of this Note in full by another entity on the following May 1 or any Business Day thereafter. If such a purchase occurs, the Holder shall sell and assign this Note to the purchaser thereof without recourse to the Holder and deliver this Note and its Guarantee to the Fiscal Agent for registration in the name of the purchaser thereof in accordance with the Secretary's written instructions. The purchase price for this Note shall be 100% of the aggregate amount of all Advances owing hereunder plus accrued interest to the date of purchase. Payment to the Holder of the purchase price for this Note shall be made by the purchaser thereof in Federal funds at the offices of the Holder, or at such other place as shall be agreed upon by the Holder and the Secretary, at 10:00 a.m., New York time, on the date of purchase. After such purchase date this Note shall bear a rate of interest negotiated between the Secretary and the new interim Holder (the "New Purchaser Special Interest Rate"). The Secretary shall notify the Fiscal Agent and the new purchaser in writing of any New Purchaser Special Interest Rate within two Business Days following the date of determination thereof. (d) Notwithstanding Sections (a) through (c) (inclusive) of this Appendix, no Borrower is obligated to pay interest at a variable rate exceeding the maximum rate permitted by generally applicable law of the Borrower's state (such rate, the "Maximum Rate"). If the Borrower receives notice of a variable interest payment that exceeds the Maximum Rate, then the Borrower shall timely pay such amount as does not exceed the Maximum Rate, and concurrently shall notify the Secretary and the Fiscal Agent of the reason for any interest non-payment. Page 57 of 222 COMMITMENT SCHEDULE Note No. B-18-MC-53-0009 Principal Due Date Commitment Amount August 1, 2020 $190,000 August 1, 2021 190,000 August 1, 2022 190,000 August 1, 2023 190,000 August 1, 2024 190,000 August 1, 2025 190,000 August 1, 2026 190,000 August 1, 2027 190,000 August 1, 2028 190,000 August 1, 2029 190,000 August 1, 2030 190,000 August 1, 2031 190,000 August 1, 2032 190,000 August 1, 2033 190,000 August 1, 2034 190,000 August 1, 2035 190,000 August 1, 2036 190,000 August 1, 2037 190,000 August 1, 2038 190,000 August 1, 2039 171,000 Maximum Commitment Amount =$3,781,000 Page 58 of 222 SCHEDULE P&I* Note No. B-18-MC-53-0009 Principal Amount Principal Due Date Interest Rate** Optional Redemption Available YES NO August 1, 2020 X August 1, 2021 X August 1, 2022 X August 1, 2023 X August 1, 2024 X August 1, 2025 X August 1, 2026 X August 1, 2027 X August 1, 2028 X August 1, 2029 X August 1, 2030 X August 1, 2031 X August 1, 2032 X August 1, 2033 X August 1, 2034 X August 1, 2035 X August 1, 2036 X August 1, 2037 X August 1, 2038 X August 1, 2039 X $ = Aggregate Principal Amount Principal Amounts due on or after August 1, 2030, may be redeemed, subject to the terms contained herein and in the Trust Agreement, on any Interest Due Date on or after August 1, 2029. *This schedule will not be completed when initially executed and delivered by the Borrower for Guarantee for interim, variable-rate financing. It will be completed when assigned by the Holder at the request of the Borrower for conversion to Fixed Rates on the Conversion Date. The first date shown above on which Optional Redemption is available is expected to be the same when this schedule is completed, if the Borrower participates in the initial Section 108 public offering after receiving an interim financing Advance hereunder. If the Borrower participates in a later public offering, the first date on which Optional Redemption is available is expected to be correspondingly later. ** The fixed rate applicable to each Principal Amount shall be listed by the Secretary. Page 59 of 222 COLLATERAL MORTGAGE CONTRACT E. Collateral Mortgage Agreement Page 60 of 222 1 FILED FOR RECORD AT REQUEST OF: Donald A. Boyd Hummer Boyd, PLLC 6 South 2nd Street, Suite 1016 Yakima, WA 98901 MORTGAGE Grantor(s): 1.CITY OF PASCO, a Washington municipal corporation. Grantee(s): 1.U.S. Department of Housing and Urban Development, a governmental entity of the United States of America. Legal Description: 1.The SE 1/4, Sec. 11, Twn. 9 N, R. 30 E.W.M., Franklin County, WA. 2.Additional [full] legal description on page 1 of document. Assessor's Property Tax Parcel Number(s): 113160017 ***************************************************************** MORTGAGOR: CITY OF PASCO, a Washington municipal corporation. MORTGAGEE: U.S. Department of Housing and Urban Development, a governmental entity of the United States of America. MORTGAGE: Mortgagor hereby mortgages to Mortgagee, to secure the payment and performance of the secured obligation described below, the following described real property situate in the County of Yakima, State of Washington, to-wit: The SE 1/4, Section 11, Township 9 North, Range 30 East, W.M., Franklin County, WA. SECURED OBLIGATION: This Mortgage is given to secure the payment and performance of that certain Promissory Note executed contemporaneously herewith and numbered B-18-MC-53-0009 [Pasco Market Redevelopment Project], in the Page 61 of 222 2 Maximum Commitment Amount of $ 3,781,000.00, and any amended note or note issued in substitution for such note and having the same note number (the "Note"), including interest thereon. GENERAL TERMS OF MORTGAGE: 1.Mortgagor covenants that she is lawfully seized of the property in fee simple and has good right to mortgage and convey it. 2.This Mortgage not only covers the real property described above, but also all improvements and appurtenances thereto, including all water, water rights, shares of water stock or water memberships appertaining thereto. 3.Mortgagor agrees to pay before delinquency all taxes, special assessments, and other public charges levied, assessed or charged against the mortgaged. 4.Should Mortgagor default in any of the foregoing agreements or covenants, then Mortgagee may perform the same and may pay any part or all of the principal and interest of any charges against the property, and any amount so paid, with interest thereon at the highest legal rate from date of payment, shall be repayable by Mortgagor on demand, and shall also be secured by this Mortgage without waiver of any right or other remedy arising from the breach of the agreements or covenants. 5.In the event of the sale of all or any part of Mortgagor's interest in the mortgaged property, whether voluntarily or involuntarily, or by operation of law, Mortgagee may, at its option, treat such transfers a default by Mortgagor and may resort to the remedies as provided for in this Mortgage or as provided for by law. 6.In the event of default by Mortgagor with respect to any of the obligations secured hereby, Mortgagee shall have, in addition to all other remedies and rights at law or in equity, the following rights and remedies: (a) to declare any and all indebtedness secured by this Mortgage to be immediately due and payable; (b) to apply for, with or without notice to Mortgagor upon filing, a suit to enforce or preserve its rights under this Mortgage; (c) to cause the foreclosure of this Mortgage as a Mortgage under the real property or personal property laws of this state; and (d) all other rights and remedies as provided for in this Mortgage. Page 62 of 222 3 7.All rights and remedies of Mortgagee provided for in this Mortgage are intended to be cumulative and not in substitution for any other right or remedy otherwise available to Mortgagee. 8.Mortgagor agrees to pay to Mortgagee any and all costs and expenses, including attorney's fees, incurred or paid by Mortgagee in protecting or enforcing its rights under the terms of this Mortgage, whether or not a lawsuit is commenced. "Attorney's fees" shall include services rendered before trial, at trial, and on appeal, as well as services rendered subsequent to judgment and obtaining execution thereof. The award of such fees, costs, and expenses shall bear interest at the highest lawful rate until paid in full. DATED this day of , 2020. CITY OF PASCO, a Washington By: ___________________________________ Title: _________________________________ STATE OF WASHINGTON ) ) ss: County of Franklin ) I certify that I know or have satisfactory evidence that personally appeared before me and signed this instrument and acknowledged it as the of the CITY OF PASCO, a Washington, a Washington municipal corporation, to be the free and voluntary act for the uses and purposes of said company mentioned in the instrument. DATED: , 2020. NOTARY PUBLIC in and for the State of Washington Residing at: My Commission Expires: Page 63 of 222 1 FILED FOR RECORD AT REQUEST OF: Donald A. Boyd Hummer Boyd, PLLC 6 South 2nd Street, Suite 1016 Yakima, WA 98901 MORTGAGE Grantor(s): 1.CITY OF PASCO, a Washington municipal corporation. Grantee(s): 1.U.S. Department of Housing and Urban Development, a governmental entity of the United States of America. Legal Description: 1.The SE 1/4, Sec. 11, Twn. 9 N, R. 30 E.W.M., Franklin County, WA. 2.Additional [full] legal description on page 1 of document. Assessor's Property Tax Parcel Number(s): 113160017 ***************************************************************** MORTGAGOR: CITY OF PASCO, a Washington municipal corporation. MORTGAGEE: U.S. Department of Housing and Urban Development, a governmental entity of the United States of America. MORTGAGE: Mortgagor hereby mortgages to Mortgagee, to secure the payment and performance of the secured obligation described below, the following described real property situate in the County of Yakima, State of Washington, to-wit: The SE 1/4, Section 11, Township 9 North, Range 30 East, W.M., Franklin County, WA. SECURED OBLIGATION: This Mortgage is given to secure the payment and performance of that certain Promissory Note executed contemporaneously herewith and numbered B-18-MC-53-0009 [Pasco Market Redevelopment Project], in the Page 64 of 222 2 Maximum Commitment Amount of $ 3,781,000.00, and any amended note or note issued in substitution for such note and having the same note number (the "Note"), including interest thereon. GENERAL TERMS OF MORTGAGE: 1.Mortgagor covenants that she is lawfully seized of the property in fee simple and has good right to mortgage and convey it. 2.This Mortgage not only covers the real property described above, but also all improvements and appurtenances thereto, including all water, water rights, shares of water stock or water memberships appertaining thereto. 3.Mortgagor agrees to pay before delinquency all taxes, special assessments, and other public charges levied, assessed or charged against the mortgaged. 4.Should Mortgagor default in any of the foregoing agreements or covenants, then Mortgagee may perform the same and may pay any part or all of the principal and interest of any charges against the property, and any amount so paid, with interest thereon at the highest legal rate from date of payment, shall be repayable by Mortgagor on demand, and shall also be secured by this Mortgage without waiver of any right or other remedy arising from the breach of the agreements or covenants. 5.In the event of the sale of all or any part of Mortgagor's interest in the mortgaged property, whether voluntarily or involuntarily, or by operation of law, Mortgagee may, at its option, treat such transfers a default by Mortgagor and may resort to the remedies as provided for in this Mortgage or as provided for by law. 6.In the event of default by Mortgagor with respect to any of the obligations secured hereby, Mortgagee shall have, in addition to all other remedies and rights at law or in equity, the following rights and remedies: (a) to declare any and all indebtedness secured by this Mortgage to be immediately due and payable; (b) to apply for, with or without notice to Mortgagor upon filing, a suit to enforce or preserve its rights under this Mortgage; (c) to cause the foreclosure of this Mortgage as a Mortgage under the real property or personal property laws of this state; and (d) all other rights and remedies as provided for in this Mortgage. Page 65 of 222 3 7.All rights and remedies of Mortgagee provided for in this Mortgage are intended to be cumulative and not in substitution for any other right or remedy otherwise available to Mortgagee. 8.Mortgagor agrees to pay to Mortgagee any and all costs and expenses, including attorney's fees, incurred or paid by Mortgagee in protecting or enforcing its rights under the terms of this Mortgage, whether or not a lawsuit is commenced. "Attorney's fees" shall include services rendered before trial, at trial, and on appeal, as well as services rendered subsequent to judgment and obtaining execution thereof. The award of such fees, costs, and expenses shall bear interest at the highest lawful rate until paid in full. DATED this day of , 2020. CITY OF PASCO, a Washington By: ___________________________________ Title: _________________________________ STATE OF WASHINGTON ) ) ss: County of Franklin ) I certify that I know or have satisfactory evidence that personally appeared before me and signed this instrument and acknowledged it as the of the CITY OF PASCO, a Washington, a Washington municipal corporation, to be the free and voluntary act for the uses and purposes of said company mentioned in the instrument. DATED: , 2020. NOTARY PUBLIC in and for the State of Washington Residing at: My Commission Expires: Page 66 of 222 CUSTODIAL AGREEMENT F. Custodial Agreement Page 67 of 222 SECTION 108 GUARANTEED LOAN CUSTODIAL AGREEMENT THIS AGREEMENT dated as of this ___ day of , 20 , by and between the , a organized and existing under the laws of the State (or Commonwealth as applicable) of , and having an office for the conduct of business at (“Borrower”), and ______________________________, a _____________________ organized and existing under the laws of ______________________________, and having an office for the conduct of business at __________________________________________________ (“Custodian”), WITNESSETH: WHEREAS, the Borrower will enter into a Contract for Loan Guarantee Assistance Under Section 108 of the Housing and Community Development Act of 1974, as amended, 42 U.S.C. §5308 (“Section 108 Contract”) with the Secretary of Housing and Urban Development (“HUD”) under the authority of section 108 of title I of the Housing and Community Development Act of 1974, as amended (the “Act”); and WHEREAS, the Custodian is a _______________________ institution regulated by the _________________________________________________; and WHEREAS, the parties to this agreement desire to set forth the terms and conditions for the deposit and custodianship of the documents evidencing and relating to the loan to be originated under section 108 of the Act, and 24 CFR part 570, subpart M; and WHEREAS, HUD will guarantee one or more promissory notes issued by the Borrower and numbered _______________ that together do not exceed the principal amount of $_____________ (the “Section 108 Guaranteed Note”). NOW THEREFORE, in consideration of the mutual undertakings expressed in this agreement, the parties agree as follows: 1.The Borrower shall from time to time deliver for deposit with the Custodian certain Security Documents as required under the Section 108 Contract (collectively the “Security Documents”). For each such delivery, the Borrower shall furnish the Custodian with a listing of the Security Documents to be deposited, which listing shall be in the form set forth in the attached Security Document List & Custodial Receipt (the “Receipt” or “Receipt(s)”). In receiving Security Documents, and in maintaining any listing or providing any report or communication with respect to the Security Documents, the Custodian shall be required only to review the face of each document received to determine whether it appears regular on its face, appears to relate to the Section 108 Guaranteed Note, and appears to be a Security Document identified in the Receipt. The Custodian shall complete the Receipt(s) by inserting the date received next to each delivered Security Document. Once signed by the Custodian, the Receipt(s) shall document the Custodian’s receipt(s) of the Security Documents required by the Section 108 Contract to be Page 68 of 222 2 deposited with the Custodian. The Custodian shall maintain each original Receipt together with the Security Documents it identifies, in accordance with the storage requirements in paragraph 3. 2.Borrower’s delivery of the Security Documents will be acknowledged by the Custodian through execution and electronic delivery of a copy of the Receipt(s) to HUD at 108Reports@hud.gov. The Custodian shall also provide copies of Receipt(s) to the Borrower. By its delivery of the Security Documents and Receipt(s) to the Custodian, the Borrower certifies to the Custodian that each Security Document listed in that Receipt is in form and substance acceptable to HUD, as required by the Section 108 Contract. Except for Custodian’s obligations under this paragraph and paragraph 1 and 2 of this Agreement, the Custodian shall not otherwise be under any duty to review, inspect, examine or certify the Security Documents; and without limiting the foregoing, the Custodian shall be entitled to assume the genuineness of each such document and the genuineness and due authority of any signatures appearing thereon, and shall be entitled to assume that each such document is what it purports to be. The Custodian shall have no liability for or obligation with respect to, and shall not be construed or obliged to make any representation or warranty as to: (i) the validity, sufficiency, marketability, genuineness, value, contents or enforceability of any Security Document; (ii) the validity, adequacy or perfection of any lien upon or security interest purported to be evidenced or created thereby; or (iii)to determine that the contents of any Security Document are appropriate for the represented purpose or that any Security Document has actually been recorded or filed, as maybe applicable, or that any Security Document is other than what it purports on its face to be. 3.The Custodian shall segregate and maintain continuous custody and control of all Security Documents on behalf of HUD until the Section 108 Guaranteed Note is paid in full. The Custodian shall hold the Security Documents in secure and fireproof facilities in accordance with customary standards for such storage. The Custodian shall only rely on information pertaining to the payment of the Section 108 Guaranteed Note that is received from or confirmed by the Director of the Financial Management Division of HUD in Washington, DC (“FMD Director”), or another HUD official as may be authorized by HUD in writing (“Other HUD Designee”). 4.At any reasonable time, the Custodian shall make all Security Documents available for examination and audit by representative of the Borrower or HUD. 5. (A) Upon notification to the Custodian by the FMD Director or Other HUD Designee that a default has occurred under the Section 108 Contract, the Custodian shall comply with any request HUD shall make for the delivery to HUD of all Security Documents, and within five business days of any such request by HUD, shall send the Security Documents via courier service to the address identified in paragraph 6 and contemporaneously provide HUD with the tracking information for the package containing the Security Documents. (B)If, following HUD’s notification to Custodian of Borrower’s default under the Section 108 Contract, HUD elects to assume or transfer the duties and obligations of the Borrower and elects to continue the custodial relationship, the Custodian agrees to continue its obligations herein for HUD for a reasonable period, not to exceed 90 days, on the same terms and conditions as set forth in this agreement until it receives instructions for disposition of the Security Documents from the FMD Director or Other HUD Designee, provided, however, that in no event Page 69 of 222 3 shall HUD be obligated to pay compensation or a fee for the holding or release of any Security Documents during such reasonable period. If, however, HUD elects to terminate this agreement, Custodian shall comply with the provisions of this election by HUD. 6.Except for termination or cancellation of this Agreement pursuant to paragraph 5, if during the term of the Section 108 Guaranteed Note the Custodian’s duties under this Agreement are discharged or this Agreement is terminated or cancelled, Custodian may release Security Documents to Borrower or to a successor custodian designated in writing by HUD upon presentation by the Borrower of written approval of the FMD Director or Other HUD Designee for the release of Security Documents to the Borrower. Provided, however, if no written approval is presented, the Custodian shall return to all Security Documents to HUD within 5 business days at the following address: Attention: Paul Webster, Director Financial Management Division U.S. Department of Housing and Urban Development 451 7th Street SW – Room 7180 Washington, DC 20410 7.Consideration for services to be performed by the Custodian under this agreement shall be: [INSERT AMOUNT OR IF NECESSARY, INCORPORATE FEE SCHEDULE AS AN ATTACHMENT TO THIS AGREEMENT]. 8.This Agreement confers rights and remedies upon HUD, and HUD shall be an intended third-party beneficiary of this Agreement. The parties may not amend or terminate this Agreement without the prior written consent of HUD provided, however, that the Custodian may at any time resign under this Agreement by giving not less than sixty (60) days advance written notice thereof to the Borrower and HUD. Prior to the effective date of the resignation, the Borrower shall give written instruction to the Custodian designating a successor Custodian, if applicable. 9.The Custodian shall be entitled to rely on any written instructions or certifications delivered to the Custodian by the Borrower or HUD pursuant to this Agreement, in each case without any independent verification or investigation of the matters set forth therein. 10.Custodian shall not be liable to anyone for anything which it may do or refrain from doing in connection with this agreement, unless such action constitutes negligence in accordance with customary standards for document storage, gross negligence, willful misconduct, or bad faith on its part. 11.To the extent permitted by applicable law, the Borrower shall indemnify the Custodian and any director, officer, agent or employee of the Custodian from all liability, obligations, losses, claims, damages, actions, suits, proceedings, costs and expenses, including reasonable attorneys’ fees, arising out of, connected with, or resulting, directly or indirectly, from the execution, delivery and performance of this Agreement. Page 70 of 222 4 12.The Custodian shall be without liability to the Borrower for any damage or loss resulting from or caused by events or circumstances beyond the Custodian’s reasonable control including nationalization, expropriation, currency restrictions, the interruption, disruption or suspension of the normal procedures and practices of any securities market, power, mechanical, communications or other technological failures or interruptions, computer viruses or the like, fires, floods, earthquakes or other natural disasters, civil and military disturbance, acts of war or terrorism, riots, revolution, acts of God, work stoppages, strikes, national disasters of any kind, or other similar events or acts; errors by any party in its instructions to the Custodian; or changes in applicable law, regulation or orders. 13.This Agreement may be executed in any number of counterparts and all counterparts taken together shall constitute one and the same instrument. The exchange of copies of this Agreement and of signature pages by facsimile transmission or pdf shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile or pdf shall be deemed to be their original signatures for all purposes. 14.The terms of this Agreement are hereby declared to be severable, such that if any term hereof is determined to be invalid or unenforceable, such determination shall not affect the remaining terms. 15.The covenants and agreements set forth herein shall be binding upon and inure to the benefit of each of the parties and their respective successors and permitted assigns. No party shall be permitted to assign their rights under this Agreement without the written consent of the parties and the FMD Director or Other HUD Designee, except that any corporation or association into which the Custodian may be merged or converted or with which it may be consolidated, or any corporation or association resulting from any merger, conversion or consolidation to which the Custodian shall be a party, or any corporation or association to which the Custodian transfers all or substantially all of its corporate trust business, shall be the successor of the Custodian hereunder, and shall succeed to all of the rights, powers and duties of the Custodian hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto. 16.This Agreement constitutes the complete and exclusive agreement of the parties with regard to the matters addressed herein and supersedes and terminates as of the date hereof, all prior agreements, agreements or understandings, oral or written between the parties to this Agreement relating to such matters. [Remainder of Page Intentionally Left Blank – Signature Page Follows] Page 71 of 222 5 THIS AGREEMENT is hereby executed on behalf of the parties as follows: Borrower: By: (Signature) Name: Title: Date: Custodian: By: (Signature) Name: Title: Date: Page 72 of 222 Note to Borrowers: the form below is a form of Security Document List & Custodial Receipt that must be completed by the Borrower and submitted to the Custodian for use as a receipt whenever Borrower is required by the Section 108 Contract to submit additional Security Documents (identified in the Section 108 Contract as “Security Documents”). SECURITY DOCUMENT LIST & CUSTODIAL RECEIPT The following documents were delivered in accordance with the agreement dated , between the undersigned (“Custodian”), and __________________(“Borrower”), and which is known as the “Section 108 Guaranteed Loan Custodial Agreement”: This is the _________ [Borrower to insert “first,” “second,” “third,” etc. as appropriate] Security Document List & Custodial Receipt under the Section 108 Guaranteed Loan Custodial Agreement between Custodian and Borrower dated the ___ day of , 20__ . [Remainder of Page Intentionally Left Blank – Signature Page Follows] Mark with “X” if received by Custodian Name of Security Document Date Received [HUD to COPY DOCUMENTS FROM PARAGRAPH 15, insert one in each line] Page 73 of 222 The undersigned hereby acknowledges receipt of the documents indicated with an ‘X’ in the table above, on the dates acknowledged in the table: Custodian: By: (Signature) Name: Title: Date: Page 74 of 222 FISCAL AGENCY AGREEMENT G. Fiscal Agency Agreement Page 75 of 222 Page 76 of 222 Page 77 of 222 Page 78 of 222 Page 79 of 222 Page 80 of 222 Page 81 of 222 Page 82 of 222 Page 83 of 222 Page 84 of 222 Page 85 of 222 Page 86 of 222 Page 87 of 222 Page 88 of 222 Page 89 of 222 Page 90 of 222 Page 91 of 222 Page 92 of 222 Page 93 of 222 Page 94 of 222 Page 95 of 222 Page 96 of 222 Page 97 of 222 Page 98 of 222 Page 99 of 222 Page 100 of 222 Page 101 of 222 Page 102 of 222 Page 103 of 222 Page 104 of 222 Page 105 of 222 Page 106 of 222 Page 107 of 222 Page 108 of 222 Page 109 of 222 Page 110 of 222 Page 111 of 222 Page 112 of 222 Page 113 of 222 Page 114 of 222 Page 115 of 222 Page 116 of 222 Page 117 of 222 Page 118 of 222 Page 119 of 222 Page 120 of 222 Page 121 of 222 Page 122 of 222 Page 123 of 222 Page 124 of 222 Page 125 of 222 Page 126 of 222 Page 127 of 222 Page 128 of 222 Page 129 of 222 Page 130 of 222 Page 131 of 222 Page 132 of 222 Page 133 of 222 Page 134 of 222 Page 135 of 222 Page 136 of 222 Page 137 of 222 Page 138 of 222 Page 139 of 222 Page 140 of 222 Page 141 of 222 Page 142 of 222 Page 143 of 222 AGENDA REPORT FOR: City Council January 8, 2020 TO: Dave Zabell, City Manager Workshop Meeting: 1/14/20 FROM: Zach Ratkai, Director Administrative & Community Services SUBJECT: Purchase and Sale Agreement and Memorandum of Understanding - Catholic Charities I. REFERENCE(S): Letter of Intent to Purchase Purchase and Sale Agreement Memorandum of Understanding II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Review of Purchase and Sale Agreement and associated Memorandum of Understanding III. FISCAL IMPACT: Revenue of $127,413 IV. HISTORY AND FACTS BRIEF: On August 20, 2019, the City of Pasco received a letter of interest from realtors representing Catholic Charities - Eastern Washington, offering to purchase City-owned property along Heritage Blvd (Parcel No. 113900092) for $127,413 for future development. The amount represented a full price offer as market through the City contracted real estate broker. On August 27, the City accepted the offer for purchase, thus commencing a feasibility period for the buyer to conduct their due diligence for the purchase. On December 19, 2019, the City received a Purchase and Sale Agreement from the buyer (attached) in order to complete the sale. Based upon the intended development of the buyer, a Memorandum of Understand was negotiated which outlines future conditions on the use of property (attached). Page 144 of 222 V. DISCUSSION: Staff requests City Council review the attached Purchase and Sale Agreement, as well as the attached Memorandum of Understanding, in anticipation for its being considered for approval at the January 21, 2020 regular meeting. 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ONITIES ‘E-EIMOHEI9NlJ.S|'l EIZIEIOHJIIVEEXTIEISCINV EEIAFIEI(Z)GNV A_LEEldOEld EIHJ.9NLLO3:l:i\7’ SJ.HE)|Ei NEH ON!/\\‘/HSHEICII/\OHdA.L|'|lJ.n TIV :10 SEISSEIHCICIVCINVSEIWVNEIHJ.H.l_|I\/\J.NEI9V ONISOWO HO 'HEl>iOE!ElONFHEIS 'HE!)iO?:l8 E)N|J.S|'|3H_L 3C||/\OEId TIVHS HETIEIS ‘LNEIWEIBHSVSIHJ.:IO ElON‘v’J_d3OOV ‘|V?i?W :iO (NI CIEITIH_LON :l|SAVG 9)SAVCI NIHJJM (L)NEIHL‘LNEIWEIEIEIOVSIHJ. :lO ElON\7’J.dElOOV'|Vl'1l?W :IO EIWIJ.EIHLJ.V NI CIEITIHNEEIEI.LON SVH NO|_LVWHO:!N|3/\OEIV EHJ.:l| d!2 ‘SIEIS‘mo “WW (1U9LU3I\O.ldLU]|e::o|/(mun JO WEN s13!J;sgp1ueuJeAoJdLug|eao[) :(s):0!J:s!a l9!33dS dlz ‘ems ‘Ana ssmppv (CIElr'1N|J.NOO) WHCINEICICIVSEIEJHVHOAmun z ;o z 3655 |LutnoF§L;;;:§sWn 91209-vez-999 :><e:I W,mm ’L992-L99-609 ieuoud9N,m3H L0i-266v/v\eased J.83BElA‘| Ga/xaasau swam 11v 3 918 I-pmg uepma GHQ UOI EIDOSS/x?-Dsxéitdlal9:>J9“1|11°CJ©919153 I993 5"!Pl9!:l1J9Cl<M'|Page 167 of 222 MEMORANDUM OF UNDERSTANDING BETWEEN THE CITY OF PASCO AND CATHOLIC CHARITIES – EASTERN WASHINGTON OUTLINING FUTURE CONDITIONS FOR PROPERTY USAGE THIS MEMORANDUM OF UNDERSTANDING (MOU) is entered into this date by and between the City of Pasco, a Washington Municipal Corporation, (hereinafter “City”) and Catholic Charities Eastern Washington (hereinafter “Buyer”), a 501c3, non-profit . WHEREAS, the City and Buyer are agencies who wish to enter into a Memorandum of Understanding; and, WHEREAS, on August 20, 2019, Buyer submitted a letter of intent to purchase land owned by the City of Pasco; and, WHEREAS, it is the buyer’s intent to construct a 52-unit apartment building on the site to provide supportive housing to the chronically homeless and/or people possessing significant barriers to successful housing; and, WHEREAS, it is in intent of Catholic Charities to provide secure, supportive housing for the Pasco community in harmony with, and not adverse to, the functioning of the community at large. For and in consideration of the agreements contained herein, the parties agree as follows: 1. AGREEMENTS: a. Buyer will not conduct, sponsor, support, or facilitate a drug syringe exchange program associated with the development of the property. b. Buyer will promote their residents to be good neighbors in the community and agree to accountability for their residents’ conduct within two miles of the facility. c. Buyer shall secure the building and monitor the site and residents in a manner consistent with their business practices. d. Property shall be staffed to meet the security and safety needs of the residents and manage the operations of the property. Buyer shall provide a means by which staff can be summoned quickly when not on site. e. Property shall be designed and developed to incorporate safety and security. Usage of the principles of Crime Prevention Through Environmental Design (CPTED) and working with the Pasco Police Department during the design process is encouraged. f. Buyer shall provide transportation to its residents for daily needs, appointments, and other associated errands. 2. TERM. Aforementioned agreement shall bind to the property regardless of ownership or until a mutually agreed on termination by both signatories. DATED this ______ day of _______________________, 2020. CATHOLIC CHARITIES CITY OF PASCO By: ___________________________ BY: ___________________________ Page 168 of 222 AGENDA REPORT FOR: City Council January 7, 2020 TO: Dave Zabell, City Manager Workshop Meeting: 1/14/20 FROM: Dave Zabell, City Manager Executive SUBJECT: City Council Representation on Boards and Committees I. REFERENCE(S): Boards and Committees for City Council Appointments II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion III. FISCAL IMPACT: IV. HISTORY AND FACTS BRIEF: City Council representation is required and/or desired on a number of municipal and regional boards and committees. The practice of the City Council has been to make Council appointments to the various boards and committees on a biennial basis; thus, appointments generally are for a two-year period. Changes to these appointments, if necessary, can be made at any time by action of the Mayor with confirmation of the City Council. V. DISCUSSION: Following discussion on proposed board and committee assignments at the January 14 workshop meeting, a resolution and final assignment list will be presented for approval at the January 21 business meeting. Page 169 of 222 CITY COUNCIL BOARD AND COMMITTEE ASSIGNMENTS - CALENDAR YEARS 2020-2021 Mayoral Appointments to Board and Committee Membership BOARD/COMMITTEE DAY TIME LOCATION REP ALT Emergency Medical Services 1st Monday, Even-Months 1:30 pm Fire Training Center 1811 S. Ely Parks & Recreation Advisory Council * 1st Thursday 5:30 pm Parks & Rec. Classroom Old Fire Pension Board 2nd Monday, Quarterly 6:00 pm Conference Room #1 Tri-City Public Market 2nd Tuesday 3:00 pm Fuse, 723 The Parkway Ben-Franklin Transit Board 2nd Thursday 7:00 pm Ben-Franklin Transit Reserve Officers Board 3rd Monday, as needed 5:30 pm Conference Room #1 LEOFF Disability Board 3rd Monday 6:00 pm Conference Room #1 Good Roads & Transportation Association * 3rd Wednesday, Bi-Monthly 5:30 pm Clover Island Inn Greater Col. Accountable Community of Health 3rd Thursday 12:00pm CBC Tri-Cities National Park Committee 3rd Thursday 4:00 pm 7130 W. Grandridge Franklin County Emergency Management Council 3rd Thursday, Quarterly 3:30 pm EMS Office Benton Franklin Council of Governments 3rd Friday 11:30 am El Chapalla, 107 Col. Dr. Hanford Area Economic Investment Fund 4th Monday 4:00 pm Ben-Franklin Transit TRAC Advisory Board * 4th Tuesday, Quarterly 5:00 pm TRAC Facility Visit Tri-Cities Board 4th Wednesday 7:30 am 7130 W. Grandridge TRIDEC Board of Directors 4th Thursday 4:00 pm 7130 W. Grandridge Hanford Communities Governing Board (and ECA) 4th Friday, Quarterly 7:30 am Richland Council Chambers Tri-Cities Regional PFD Board As called Varies Franklin County Solid Waste Advisory Committee As called FC Public Works Franklin County Law & Justice Council As called FC Courthouse Local Housing Trust Fund Oversight Committee As called Pasco Public Facilities District 3rd Tuesday 4:00 pm Conference Room #1 Approved: _____________ *Voluntary (does not require elected official as representative) Page 170 of 222 AGENDA REPORT FOR: City Council January 8, 2020 TO: Dave Zabell, City Manager Rick White, Director Community & Economic Development Workshop Meeting: 1/14/20 FROM: Jacob Gonzalez, Senior Planner Community & Economic Development SUBJECT: House Bill 1406 (MF# INFO 2020-001) I. REFERENCE(S): Draft Resolution II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion. III. FISCAL IMPACT: Approximately $105,000 annually for 20 years for affordable housing opportunities. IV. HISTORY AND FACTS BRIEF: Background House Bill (HB) 1406 is an initiative passed during the last legislative session, which encourages cities and counties in Washington to make investments in affordable and supportive housing. HB 1406 creates a sales tax revenue sharing program that allows cities and counties to access a portion of the state sales tax revenue (one-tenth of one percent) to make local investments in affordable and supportive housing. The state has made a 20-year commitment to share over $500 million with local governments who will plan to invest in housing. For Pasco, the estimated (maximum) funds would equal about $105,000 annually or $2.1 million over the 20-year duration. The amount is calculated on the taxable retail sales and may vary each year. The funds may be used for acquiring, rehabilitating and construction of affordable housing, or, the operations and maintenance costs of new housing units. Additionally, funds could be used to provide rental assistance to tenants that are at or below 60% of the median income. For a four-person household in Pasco, that equals $46,800 based on June 2019 Page 171 of 222 estimates from the Department of Housing and Urban Development (HUD). Identifying solutions for more affordable housing has been an increasingly emphasized focus across our state and nationwide. Locally, over 11,000 households experience a housing problem in the Tri-Cities. Housing problems include those that are cost- burdened, where 30% or more of the household income is devoted to housing costs, overcrowding and lack of kitchen and plumbing facilities. The City currently provides housing assistance through an assortment of programs funded by the Community Development Block Grant (CDBG) and Home Investment Partnerships (HOME). Programs such as CDBG owner-occupied rehabilitation and Tri-Cities HOME Consortium first time home-buyer down payment assistance program are concentrated on home-ownership. HOME Community Housing Development Organization (CHDO) funds are also focused on home-ownership through Habit for Humanity sweat equity first time home buyer programs. Recording fees from House Bill 2060 and House Bill 2163 are administered by the counties through inter-local agreements with the Department of Human Services. Assistance is provided to local non-profit agencies for eligible housing and support activities such as operations, maintenance, rehabilitation and repairs. As always, the need is greater than funds available. In 2019, over $513,000 in funding requests were received, while only $119,000 was distributed, less than 25 of projects were funded. These projects ranged from rental assistance and transitional housing, to housing rehabilitation and plumbing updates. Funds from HB 1406 may be used to supplement the funding available through HB 2060 and HB 2163 and HUD Block Grant funds to aid priority populations 50% or below area median income. V. DISCUSSION: To receive funding, the Pasco City Council must pass a resolution of intent no later than January 27, 2020 that indicates the intention to impose the sales tax credit at the maximum capacity by a simple majority vote. If this deadline is missed, there are no other opportunities to access the tax. After the passing of the resolution of intent, the City Council must adopt legislation by July 27, 2020 to authorize the imposition to of the sales tax credit. This step must be completed in order to continue to access the sales tax credit whether the City decided to impose a local qualifying tax or not. The City is not required to levy a local qualifying tax, and will still be eligible to participate in the program albeit with a lower tax credit rate (0.0073%). The Municipal Research and Services Center (MRSC) developed estimates of funding potential using data from the Department of Revenue retail sales for cities and counties. The tax credit rate of .0073% would yield up to $105,000 annually. Page 172 of 222 The Franklin County Board of Commissioners passed a resolution of intent in September 2019. Staff has also been in discussion with the Benton and Franklin Counties Department of Human Services to identify the administration of the funding, including the incorporation into existing programs for disbursement. Additional staff time (amount currently unknown) is anticipated to monitor and facilitate the funding from HB 1406. Page 173 of 222 Resolution - 1 RESOLUTION NO. _____ A RESOLUTION OF THE CITY OF PASCO, WASHINGTON DECLARING THE INTENT TO ADOPT LEGISLATION TO AUTHORIZE A SALES AND USE TAX FOR AFFORDABLE AND SUPPORTIVE HOUSING IN ACCORDANCE WITH SUBSTITUTE HOUSE BILL 1406 (CHAPTER 338, LAWS OF 2019), AND OTHER MATTERS RELATED THERETO. WHEREAS, in the 2019 Regular Session, the Washington State Legislature approved, and the Governor signed, Substitute House Bill 1406 (Chapter 338, Laws of 2019) (“SHB 1406”); and WHEREAS, SHB 1406 authorizes the governing body of a city or county to im pose a local sales and use tax for the acquisition, construction or rehabilitation of affordable housing or facilities providing supportive housing, and for the operations and maintenance costs of affordable or supportive housing. The City of Pasco has a population less than 100,000, which makes rental assistance another eligible expense; and WHEREAS, the tax will be credited against state sales taxes collected within the City of Pasco, Washington and, therefore, will not result in higher sales and use taxes within the City of Pasco, Washington, and will represent an additional source of funding to address housing needs in the City of Pasco, Washington; and WHEREAS, the tax must be used to assist persons whose income is at or below sixty percent of the City of Pasco median income; and WHEREAS, the City of Pasco has a need to provide a range of affordable and supportive housing and has determined that imposing the sales and use tax to address this need will benefit its citizens; and WHEREAS, in order for a city or county to impose the tax, within six months of the effective date of SHB 1406, or January 28, 2020, the governing body must adopt a resolution of intent to authorize the maximum capacity of the tax, and within twelve months of the effective date of SHB 1406, or July 28, 2020, must adopt legislation to authorize the maximum capacity of the tax; and WHEREAS, this resolution constitutes the resolution of intent required by SHB 1406; and WHEREAS, the Pasco City Council now desires to declare its intent to impose a local sales and use tax as authorized by SHB 1406 as set forth herein; NOW, THEREFORE, Page 174 of 222 Resolution - 2 BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON: Section 1. Resolution of Intent. The City Council of the City of Pasco declares its intent to adopt legislation to authorize the maximum capacity of the sales and use tax authorized by SHB 1406 within one year of the effective date of SHB 1406, or by July 28, 2020. Section 2. Further Authority; Ratification. All City officials, their agents, and representatives are hereby authorized and directed to undertake all action necessary or desirable from time to time to carry out the terms of, and complete the actions contemplated by, this resolution. All acts taken pursuant to the authority of this resolution but prior to its effective date are hereby ratified. Section 3. Effective Date. This resolution shall take effect immediately upon its passage and adoption. PASSED by the City Council of the City of Pasco, Washington on this _____ day of __________, 2020. ____________________________ Saul Martinez Mayor ATTEST: APPROVED AS TO FORM: ____________________________ __________________________________ Debra Barham, CMC Kerr Ferguson Law, PLLC City Clerk City Attorney Page 175 of 222 AGENDA REPORT FOR: City Council January 8, 2020 TO: Dave Zabell, City Manager Workshop Meeting: 1/14/20 FROM: Steve Worley, Director Public Works SUBJECT: Water Rights Contract with Washington State Dept. of Ecology I. REFERENCE(S): Water Service Contract - Washington Department of Ecology and City of Pasco Record of Execution of Contract - Bureau of Reclamation and State of Washington Department of Ecology Report of Examination - S4-33044(A) Draft Permit - S4-33044(A) Quad City Water Rights History II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion III. FISCAL IMPACT: Water Fund 411: $175,000 annually to the Department of Ecology effective November 2020 until such time as the water rights are no longer needed. ($35 per acre-foot for 5,000 acre-feet of annual water usage). IV. HISTORY AND FACTS BRIEF: It is necessary for the City to limit its use of water from any source to an amount authorized by permit. As a growing community the demands on the municipal domestic water system have and continue to increase. It is necessary for the City to pursue authority for additional sources of supply. As previously discussed during development of the Comprehensive Water System Plan Update and subsequent source of supply discussions, an economical source is Ecology's Lake Roosevelt Incremental Storage Releases Program (Program). To that end, in November 2011, the City of Pasco submitted to the Washington State Department of Ecology (Ecology) Water Right Application S4-33044(A) requesting a Page 176 of 222 Water Right Permit for 5,000 acre-feet annual (6.9 cubic feet per second) withdrawal through the Program, from the Columbia River for Municipal Water Supply Purposes. Ecology accepted the permit, subsequently prepared the required Report of Examination documenting the need and beneficial use of the requested water rights, and is now ready to move forward with issuance of the Water Right Permit. V. DISCUSSION: From a fiscal standpoint, the 2019-2020 budget includes $550,000 for the purchase of water rights. With current commitments associated with the recently acquired Burbank water rights along with the proposed annual payment of $175,000 to Ecology, the total annual payment for water rights will be $315,000 per year for the next few years at which point the financial commitment associated with the Burbank water right purchase will be satisfied. Once Ecology receives the executed contracts, the Record Of Examination (ROE) can be finalized. The ROE contains appeal language that allows for parties to appeal the decision. Once the 30-day appeal period is over, Ecology may then issue the Water Right Permit. While within the City Manager's delegated financial approval authority, the purchase of water rights is a real estate transaction requiring Council approval. Staff recommends approval of the subject contract. Page 177 of 222 PERMIT STATE OF WASHINGTON DEPARTMENT OF ECOLOGY DRAFT PERMIT TO APPROPRIATE PUBLIC WATERS OF THE STATE OF WASHINGTON PRIORITY DATE November 28, 2011 WATER RIGHT NUMBER S4-33044(A) NAME AND ADDRESS City of Pasco POB 293 Pasco WA 99301-0293 Quantity Authorized for Diversion DIVERSION RATE UNITS ANNUAL QUANTITY (AF/YR) 6.9 CFS 5000 Purpose PURPOSE DIVERSION RATE ANNUAL QUANTITY (AF/YR) PERIOD OF USE (mm/dd) ADDITIVE NON- ADDITIVE UNITS ADDITIVE NON-ADDITIVE Municipal Water Supply Purposes 6.9 CFS 5000 1/1 – 12/31 IRRIGATED ACRES PUBLIC WATER SYSTEM INFORMATION ADDITIVE NON-ADDITIVE WATER SYSTEM ID CONNECTIONS No. 66400 Source Location COUNTY WATERBODY TRIBUTARY TO WATER RESOURCE INVENTORY AREA Franklin Columbia River Pacific Ocean 36 – Esquatzel Coulee SOURCE FACILITY PARCEL TWP RNG SEC QQ Q LATITUDE LONGITUDE SO1-BWTP 112-300-108 09 30 E. 31 SWNE 46.220278 119.102500 SO9- WPWTP 118-221-157 09 29 E. 18 SWNW 46.265951 119.240979 Datum: NAD83/WGS84 Place of Use PARCELS (NOT LISTED FOR SERVICE AREAS) N/A LEGAL DESCRIPTION OF AUTHORIZED PLACE OF USE The place of use (POU) of this water right is the service area described in the most recent Water System Plan/Small Water System Management Program approved by the Washington State Department of Health, so long as the water system is and remains in compliance with the criteria in RCW 90.03.386(2). RCW 90.03.386 may have the effect of revising the place of use of this water right. Proposed Works Two water treatment plants on the Columbia River Page 178 of 222 PERMIT Development Schedule BEGIN PROJECT COMPLETE PROJECT PUT WATER TO FULL USE February 1, 2020 February 1, 2021 February 1, 2022 Measurement of Water Use How often must water use be measured? Weekly How often must water use data be reported to Ecology? Annually (January 31) What volume should be reported? Total Annual Volume What rate should be reported? Annual Peak Rate of Withdrawal (cfs) Provisions Easement and Right-of-Way The water source and/or water transmission facilities are not wholly located upon land owned by the applicant. Issuance of a water right change authorization by this department does not convey a right of access to, or other right to use, land which the applicant does not legally possess. Obtaining such a right is a private matter between applicant and owner of that land. Department of Ecology personnel, upon presentation of proper credentials, shall have access at reasonable times, to the project location, and to inspect at reasonable times, records of water use, wells, diversions, measuring devices and associated distribution systems for compliance with water law. Department of Fish and Wildlife Requirement(s) The intake(s) must be screened in accordance with Department of Fish and Wildlife screening criteria (pursuant to RCW 77.57.010, RCW 77.57.070, and RCW 77.57.040). Contact the Department of Fish and Wildlife, 600 Capitol Way N, Olympia, WA 98501-1091. Attention: Habitat Program, Phone: (360) 902- 2534 if you have questions about screening criteria. http://www.wdfw.wa.gov/reg/regions.htm A permit from the Department of Fish and Wildlife may be needed to raise fish in any state waters: http://www.wdfw.wa.gov/reg/regions.htm. No dam or weir may be constructed in connection with this diversion. Department of Health Requirements Prior to any new construction or alterations of a public water supply system, the State Board of Health rules require public water supply owners to obtain written approval from the Office of Drinking Water of the Washington State Department of Health. Please contact the Office of Drinking Water at Southwest Drinking Water Operations, 243 Israel Road S.E., PO Box 47823, Tumwater, WA 98504-7823, (360) 236- 3030. Water Service Contract Use of water under this permit or certificate is contingent upon the applicant’s compliance with a water service contract with Ecology for recovery of costs associated with the Lake Roosevelt Incremental Storage Releases Program. Failure to comply with the terms of the water service contract will result in cancellation of the permit or revocation of the certificate. Page 179 of 222 PERMIT Measurements, Monitoring, Metering and Reporting An approved measuring device shall be installed and maintained for each of the sources identified by this water right in accordance with the rule "Requirements for Measuring and Reporting Water Use", WAC 173-173, which describes the requirements for data accuracy, device installation and operation, and information reporting. It also allows a water user to petition the Department of Ecology for modifications to some of the requirements. Recorded water use data shall be submitted via the Internet. To set up an Internet reporting account, contact the Central Regional Office. If you do not have Internet access, you can still submit hard copies by contacting the Central Regional Office for forms to submit your water use data. Water Use Efficiency The water right holder is required to maintain efficient water delivery systems and use of up‐to‐date water conservation practices consistent with RCW 90.03.005. Proof of Appropriation The water right holder must file the notice of Proof of Appropriation (PA) of water (under which the certificate of water right is issued) when the permanent distribution system has been constructed and the quantity of water required by the project has been put to full beneficial use. The certificate will reflect the extent of the project perfected within the limitations of the water right. Elements of a proof inspection may include, as appropriate, contracting with a Certified Water Right Examiner (CWRE) to confirm the source(s), system instantaneous capacity, beneficial use(s), annual quantity, place of use, and satisfaction of provisions. A list of CWREs is provided to the water right holder upon filing the PA with Ecology. The final water right document, a water right certificate, then may issue based upon the findings of the CWRE. Statutory county and state filing fees may apply prior to certificate issuance. Schedule and Inspections Department of Ecology personnel, upon presentation of proper credentials, shall have access at reasonable times, to the project location, and to inspect at reasonable times, records of water use, wells, diversions, measuring devices and associated distribution systems for compliance with water law. This Permit Subject to Cancellation This permit shall be subject to cancellation should the permittee fail to comply with the above development schedule and/or to give notice to the Department of Ecology on forms provided by the Department documenting such compliance. Dated this _______ day of ______, 2019, at Union Gap, Washington, Department of Ecology by___________________________________________________ Sam Hunn, Operations Manager Data Review______ Page 180 of 222 OCR Report Of Examination State of Washington Department of Ecology Office Of Columbia River Report of Examination for Lake Roosevelt Incremental Storage Releases Water Permit File NR S4-33044(A) WR Doc ID 6744561 PRIORITY DATE 11/28/2011 APPLICATION NUMBER S4-33044(A) MAILING ADDRESS City of Pasco 525 North Third Ave PO Box 293 Pasco WA 99301-0293 SITE ADDRESS (IF DIFFERENT) Quantity Authorized for Diversion DIVERSION RATE UNITS ANNUAL QUANTITY (AF/YR) 6.9 CFS 5000 Purpose PURPOSE DIVERSION RATE ANNUAL QUANTITY (AF/YR) PERIOD OF USE (mm/dd) ADDITIVE NON- ADDITIVE UNITS ADDITIVE NON-ADDITIVE Municipal Water Supply Purposes 6.9 CFS 5000 01/01 - 12/31 Source Location COUNTY WATERBODY TRIBUTARY TO WATER RESOURCE INVENTORY AREA FRANKLIN Columbia River 36-ESQUATZEL COULEE SOURCE FACILITY/DEVICE PARCEL WELL TAG TWP RNG SEC QQ Q LATITUDE LONGITUDE SO1-BWTP 112-300-108 09 30 E. 31 SWNE 46.220278 119.102500 S09- WPWTP 118-221-157 09 29 E. 18 SWNW 46.265951 119.240979 Datum: NAD83/WGS84 ID No. 66400 Place of Use (See Attached Map and Attached) PARCELS (NOT LISTED FOR SERVICE AREAS) N/A LEGAL DESCRIPTION OF AUTHORIZED PLACE OF USE The place of use (POU) of this water right is the service area described in the most recent Water System Plan/Small Water System Management Program approved by the Washington State Department of Health, so long as the water system is and remains in compliance with the criteria in RCW 90.03.386(2). RCW 90.03.386 may have the effect of revising the place of use of this water right. Page 181 of 222 OCR Report Of Examination 2 G3-33044(A) Proposed Works Two water treatment plants on the Columbia River Development Schedule BEGIN PROJECT COMPLETE PROJECT PUT WATER TO FULL USE February 1 2020 February 1 2021 February 1, 2022 Measurement of Water Use How often must water use be measured? Weekly How often must water use data be reported to Ecology? Annually (Jan 31) What volume should be reported? Total Annual Volume What rate should be reported? Annual Peak Rate of Withdrawal (gpm) Provisions Easement and Right-of-Way The water source and/or water transmission facilities are not wholly located upon land owned by the applicant. Issuance of a water right change authorization by this department does not convey a right of access to, or other right to use, land which the applicant does not legally possess. Obtaining such a right is a private matter between applicant and owner of that land. Department of Ecology personnel, upon presentation of proper credentials, shall have access at reasonable times, to the project location, and to inspect at reasonable times, records of water use, wells, diversions, measuring devices and associated distribution systems for compliance with water law. Department of Fish and Wildlife Requirement(s) The intake(s) must be screened in accordance with Department of Fish and Wildlife screening criteria (pursuant to RCW 77.57.010, RCW 77.57.070, and RCW 77.57.040). Contact the Department of Fish and Wildlife, 600 Capitol Way N, Olympia, WA 98501-1091. Attention: Habitat Program, Phone: (360) 902- 2534 if you have questions about screening criteria. http://www.wdfw.wa.gov/reg/regions.htm A permit from the Department of Fish and Wildlife may be needed to raise fish in any state waters: http://www.wdfw.wa.gov/reg/regions.htm. No dam or weir may be constructed in connection with this diversion. Department of Health Requirements Prior to any new construction or alterations of a public water supply system, the State Board of Health rules require public water supply owners to obtain written approval from the Office of Drinking Water of the Washington State Department of Health. Please contact the Office of Drinking Water at Southwest Drinking Water Operations, 243 Israel Road S.E., PO Box 47823, Tumwater, WA 98504-7823, (360) 236- 3030. Water Service Contract Use of water under this permit or certificate is contingent upon the applicant’s compliance with a water service contract with Ecology for recovery of costs associated with the Lake Roosevelt Incremental Page 182 of 222 OCR Report Of Examination 3 G3-33044(A) Storage Releases Program. Failure to comply with the terms of the water service contract will result in cancellation of the permit or revocation of the certificate. Measurements, Monitoring, Metering and Reporting An approved measuring device shall be installed and maintained for each of the sources identified by this water right in accordance with the rule "Requirements for Measuring and Reporting Water Use", WAC 173-173, which describes the requirements for data accuracy, device installation and operation, and information reporting. It also allows a water user to petition the Department of Ecology for modifications to some of the requirements. Recorded water use data shall be submitted via the Internet. To set up an Internet reporting account, contact the Central Regional Office. If you do not have Internet access, you can still submit hard copies by contacting the Central Regional Office for forms to submit your water use data. Water Use Efficiency The water right holder is required to maintain efficient water delivery systems and use of up‐to‐date water conservation practices consistent with RCW 90.03.005. Proof of Appropriation The water right holder must file the notice of Proof of Appropriation of water (under which the certificate of water right is issued) when the permanent distribution system has been constructed and the quantity of water required by the project has been put to full beneficial use. The certificate will reflect the extent of the project perfected within the limitations of the water right. Elements of a proof inspection may include, as appropriate, contracting with a Certified Water Right Examiner (CWRE) to confirm the source(s), system instantaneous capacity, beneficial use(s), annual quantity, place of use, and satisfaction of provisions. A list of CWREs is provided to the water right holder upon filing the PA with Ecology. The final water right document, a water right certificate, then may issue based upon the findings of the CWRE. Statutory county and state filing fees may apply prior to certificate issuance. Schedule and Inspections Department of Ecology personnel, upon presentation of proper credentials, shall have access at reasonable times, to the project location, and to inspect at reasonable times, records of water use, wells, diversions, measuring devices and associated distribution systems for compliance with water law. Your Right To Appeal You have a right to appeal this Order to the Pollution Control Hearings Board (PCHB) within 30 days of the date of receipt of this Order. The appeal process is governed by Chapter 43.21B RCW and Chapter 371-08 WAC. “Date of receipt” is defined in RCW 43.21B.001(2). To appeal you must do the following within 30 days of the date of receipt of the Order. File your appeal and a copy of this Order with the PCHB (see addresses below). Filing means actual receipt by the PCHB during regular business hours. • Serve a copy of your appeal and this Order on Ecology in paper form - by mail or in person. (See addresses below.) E-mail is not accepted. Page 183 of 222 OCR Report Of Examination 4 G3-33044(A) • You must also comply with other applicable requirements in Chapter 43.21B RCW and Chapter 371-08 WAC. Street Addresses Mailing Addresses Department of Ecology Attn: Appeals Processing Desk 300 Desmond Drive SE Lacey, WA 98503 Department of Ecology Attn: Appeals Processing Desk PO Box 47608 Olympia, WA 98504-7608 Pollution Control Hearings Board 1111 Israel RD SW Ste 301 Tumwater, WA 98501 Pollution Control Hearings Board PO Box 40903 Olympia, WA 98504-0903 Signed at Union Gap, Washington, this day of 2020. _________________________________________ Mark C. Schuppe, Operations Manager For additional information visit the Environmental Hearings Office Website: http://www.eho.wa.gov. To find laws and agency rules visit the Washington State Legislature Website: http://www1.leg.wa.gov/CodeReviser. Page 184 of 222 OCR Report Of Examination 5 G3-33044(A) INVESTIGATOR’S REPORT Application for Water Right – City of Pasco Water Right Control Number S4-33044(A) Kevin Brown, Department of Ecology BACKGROUND Description and Purpose of Proposed Application The Washington State Department of Ecology (Ecology) accepted Water Right Application S4-33044(A) submitted by the City of Pasco. Attributes of the application are presented below in Table 1. The applicant was notified of the availability of mitigation water developed by the Office of Columbia River as part of the Lake Roosevelt Incremental Storage Releases Program (Program). The applicant indicated their intent to receive water under the Program and filed this application. Lands covered by the proposed place of use are within the Area served by the City of Pasco. The lands upon which the proposed points of diversion are located are owned by the City of Pasco. The proposed water use is associated with an existing facility used for municipal water supply. The City of Pasco currently enjoys multiple rights from these diversion sites and ground water wells. This application requests water for the uses associated with the City of Pasco for municipal water supply purposes. Water cannot be used for agricultural irrigation under the Program. Table 1 Application Summary Name City of Pasco Priority Date 11/28/2011 Instantaneous Rate 6.9 cfs Annual Quantity 5000 af/yr Purpose(s) of Use Municipal Water Supply Purposes Period of Use continuous Place(s) of Use Area served by the City of Pasco Table 2 Proposed Sources of Diversion Source Name Parcel Twp Rng Sec QQ Q Latitude Longitude Butterfield WTP (SO1) 112-300-108 09 N. 30 E. 31 SWNE 46.220278 119.102500 West Pasco WTP (SO9) 118-221-157 09 N. 29 E. 18 SWNW 46.265951 119.240979 Page 185 of 222 OCR Report Of Examination 6 G3-33044(A) Legal Requirements for Approval of Appropriation of Water Chapters 90.03 and 90.44 RCW authorize the appropriation of public water for beneficial use and describe the process for obtaining water rights. Laws governing the water right permitting process are contained in RCW 90.03.250 through 90.03.340 and RCW 90.44.050. In accordance with RCW 90.03.290, determinations must be made on the following four criteria in order for an application for a water right to be approved:  Water must be available  There must be no impairment of existing rights  The water use must be beneficial  The water use must not be detrimental to the public interest Public Notice RCW 90.03.280 requires that notice of a water right application be published once a week, for two consecutive weeks, in a newspaper of general circulation in the county or counties where the water is to be stored, diverted, and used. Notice of this application was published in the Tri-City Herald during the weeks of August 13 and 20, 2017. No protests were received. Consultation with the Washington Department of Fish and Wildlife Ecology must give notice to the Washington Department of Fish and Wildlife (WDFW) of applications to divert, withdraw or store water (RCW 77.57.020). On [DATE], Ecology received a comment document from WDFW regarding this application. [Letter details] Consultation under WAC 173-563-020 Under WAC 173-563-020(4), consultation is required before issuance of new Columbia River water right permits: The instream flows established and implemented by this chapter for instream and out-of-stream uses, and the average weekly flows applied by this chapter to out-of-stream uses do not apply to any application for water from the main stem Columbia River on which a decision is made by the department of ecology on or after July 27, 1997. Any water right application considered for approval or denial after that date will be evaluated for possible impacts on fish and existing water rights. The department will consult with appropriate local, state, and federal agencies and Indian tribes in making this evaluation. Any permit which is then approved for the use of such waters will be, if deemed necessary, subjected to instream flow protection or mitigation conditions determined on a case-by-case basis through the evaluation conducted with the agencies and tribes. On December 14, 2009, Ecology contacted local, state, and federal agencies and Indian tribes requesting consultation and comments on issuing new municipal and industrial permits from the Columbia River mitigated by 13,527 acre-feet of water under the Program. On November 5, 2010, Ecology consulted with local, state, and federal agencies and Indian tribes again to update the quantity of water released, to 37,500 acre-feet for municipal/industrial uses and associated instream releases. Page 186 of 222 OCR Report Of Examination 7 G3-33044(A) From these consultations, Ecology received written responses from the WDFW, Bonneville Power Administration, U.S. Fish and Wildlife Service, Confederated Tribes of the Colville Reservation, the Confederated Tribes of the Umatilla Indian Reservation, and the United States Forest Service. Ecology also had several meetings with stakeholders, including the Columbia River Policy Advisory Group (PAG) where it received oral comments. Copies of the written comments received are available in the file and PAG meeting notes are available online at: http://www.ecy.wa.gov/programs/wr/cwp/cr_pag.html. The comments generally identified that the Program was adequate mitigation for up to 25,000 acre-feet of water for new municipal, multiple domestic, and industrial permits. State Environmental Policy Act (SEPA) Pursuant to the State Environmental Policy Act (SEPA) (Chapter 43.21C RCW) and the SEPA Rules (Chapter 197-11 WAC), the Program was addressed in the Final Programmatic Environmental Impact Statement (FPEIS) for the Columbia River Management Plan. A Final Supplemental Environmental Impact Statement (FSEIS) was released on August 29, 2008 and an Addendum to the FSEIS was released on December 29, 2009; both documents address the Program in detail. On June 12, 2009, the United States Bureau of Reclamation (Reclamation) issued an Environmental Assessment (EA) and Finding of No Significant Impact (FONSI) for the project under the National Environmental Policy Act. The above described SEPA Documents are available online: FPEIS - http://www.ecy.wa.gov/programs/wr/cwp/eis.html FSEIS & FSEIS Addendum - http://www.ecy.wa.gov/programs/wr/cwp/cr_lkroos.html EA & FONSI - http://www.ecy.wa.gov/programs/wr/cwp/cr_lkroos_envirostudies.html. Project specific SEPA compliance A water right application is subject to a SEPA threshold determination (i.e., an evaluation whether there are likely to be significant adverse environmental impacts) if any one of the following conditions are met:  It is a surface water right application for more than 1 cubic foot per second (cfs). If the project is for agricultural irrigation, the threshold is increased to 50 cfs, so long as the project will not receive public subsidies;  It is a groundwater right application for more than 2,250 gallons per minute (gpm);  It is an application combined with other water right applications for the same project and exceeds the amounts above;  It is a part of a larger proposal that is subject to SEPA for other reasons (e.g., the need to obtain other permits that are not exempt from SEPA);  It is part of a series of exempt actions that, considered together, trigger the need to do a threshold determination, as defined under WAC 197-11-305. This application does meet these conditions, it is not categorically exempt from SEPA and a threshold determination is required. The City of Pasco issued a DNS on this project on August 15, 2017. Page 187 of 222 OCR Report Of Examination 8 G3-33044(A) INVESTIGATION Water Availability For water to be available for appropriation, it must be both physically and legally available. Legal Availability The Program involves releases of water stored in Lake Roosevelt under Reclamation’s 1938 storage right (Reservoir Certificate 11793) to provide municipal, domestic, and industrial water supply; provide water to replace some groundwater in the Odessa Subarea; enhance stream flows in the Columbia River to benefit fish; and provide drought relief for interruptible water right holders. Surface Water Permit S3-30556 was issued on December 1, 2008 to the USBR, authorizing a maximum of 305 cfs, 37,500 acre-feet per year for instream purposes in Lake Roosevelt and below Grand Coulee Dam with a priority date of May 16, 1938. Surface Water Permit S3-30556 is considered the “secondary” water use permit authorizing use of water stored under Reservoir Certificate 11793. On December 21, 2010, Ecology issued Superseding Certificate of Trust Water Right S3-30556, accepting 305 cfs, 37,500 acre-feet per year to the Washington State Trust Water Right Program (TWRP) for the purpose of instream flow. Under Superseding Certificate of Trust Water Right S3-30556, water is held in the TWRP to mitigate the impacts of 25,000 acre-feet of new state water rights issued under the Program’s municipal and industrial water right permitting; the remaining 12,500 acre-feet is reserved exclusively for instream flows. In June 2011, Ecology provided notice under RCW 90.42.040(5) that it would modify Superseding Certificate of Trust Water Right S3-30556 to allow for mitigation of domestic uses as well as municipal and industrial uses. No comments from this notification were received, and Ecology issued a second Superseding Certificate of Trust Water Right S3-30556 on August 17, 2011. Physical Availability Municipal, domestic, and industrial water uses associated with the Program will divert or withdraw water from the Columbia River or tributary groundwater on a continuous, year-round basis. In the preferred Alternative 1C, identified in the FSEIS, mitigation releases from Lake Roosevelt will occur during time periods that will provide the greatest benefit to fish populations. These releases will occur during the months in which increased flow in the Columbia River will benefit fish the most, generally during April through September. The exact quantities and timing of the mitigation releases will be determined annually by the Fish Flow Releases Advisory Group (FFRAG). The membership of the FFRAG agrees that mitigation releases should be scheduled to help restore normative flows in the Columbia River. Since flows in October through March are higher than normative, mitigation for diversions and withdrawals under the Program during this time period are not seen as critical by FFRAG, leaving water available for release during the critical April through September period. This strategy was also supported in the consultations for the Program. The subject application is being investigated under the mitigation framework established under the Program. In order to mitigate the impacts of any new appropriation of water on the Columbia River, hydrologic evidence must indicate that impacts on the Columbia River associated with the proposed water use would be successfully mitigated by the Lake Roosevelt mitigation releases. Additionally, it must be possible to manage the impacts on the Columbia River of proposed pumping in a manner that avoids carry-over of impacts across mitigation cycles. Page 188 of 222 OCR Report Of Examination 9 G3-33044(A) Impairment Considerations Columbia River Water Rights An investigation of a water right application includes an analysis of whether the proposed water use will impair other existing water rights. The impairment analysis involves identifying how the proposed water use may impact the current water rights regime. In considering impacts to existing water right holders and the instream flow rule, an analysis must consider actual river operation, particularly in drought years when water availability issues are most acute. In the context of this application, there are four classes of water uses that must be considered:  Water right holders with priority dates senior to May 16, 1938. 1  Uninterruptible water rights with priority dates junior to May 16, 1938.  Interruptible water rights with priority dates junior to May 16, 1938.  The June 24, 1980 Instream Flow Rule (Chapter 173-563 WAC). A detailed analysis of the current water rights regime on the Columbia River was issued in the Report of Examination (ROE) for S3-30556. Under the Program, 37,500 acre-feet per year of mitigation water is held in the TWRP for instream purposes under Superseding Trust Water Certificate S3-30556 with a priority date of May 16, 1938, 25,000 acre-feet of which may be used for mitigation of new out-of-stream uses. Under the State’s priority system, the mitigation water is senior to all water rights issued after May 16, 1938. The mitigation water rights are specifically exempted from the Columbia River instream flow rule (WAC 173- 563-020(5)). Additionally, the mitigation water is protected under the TWRP from diversion by junior water right holders who may be curtailed during low-flow years. These junior users total approximately 379 interruptibles who are curtailed based on a forecast methodology outlined in Chapter 173-563 WAC. Although junior to the mitigation that is available for this application, no conflict is expected between the applicant’s diversions or withdrawals and interruptible water users because of the mitigation provided by the Program. Beneficial Use Beneficial use encompasses two principal elements of a water right: 1. Beneficial use refers to the purpose for which water may be used. 2. Beneficial use determines the measure of a water right. The owner of a water right is entitled to the amount of water necessary for the purpose to which it has been used. The use of water for municipal water supply purposes is defined in statute as a beneficial use (RCW 90.54.020(1)). Although the priority date of this application is November 28, 2011 based on the date of filing with Ecology, the application is backed by mitigation with a priority date of May 16, 1938, which is how it will be managed if regulation of Columbia River water rights is required. Page 189 of 222 OCR Report Of Examination 10 G3-33044(A) To determine the amount of water necessary for a beneficial use, courts have developed the principle of “reasonable use”. Reasonable use of water is determined by analysis of the factors of water duty and waste. Application S4-33044(A) requests authorization for 6.9 cubic feet per second (cfs), 5000 acre-feet per year for municipal water supply purposes. A maximum daily diversion of 6.9 cfs diverted 24 hours a day, 365 days a year can pump 4986.6 acre-feet per year. The requested 5000 acre-feet can be pumped in a leap year. The application requested 5 points of diversion. Only two points of diversion are used by the City of Pasco, SO1 and SO9. (There are multiple screens and pumps at this facility however it is considered one point of diversion). The Franklin County Irrigation District (FCID) pump station was also requested as a point of diversion. The City has confirmed they are not asking for the FCID diversion on this application. The application also requested a point of diversion in Section 13, T. 9 N., R. 29 E.W.M. This location is approximately 6 miles east of the Columbia River. It is not considered as a point of diversion from the river. It is unclear from the application as to the intent of this location. The City’s potable water system is supplied from two surface water diversions from the McNary Pool of the Columbia River. The existing sources of supply are identified as:  (SO1) Butterfield WTP 26.8 mgd - the capacity is limited by contact time, which is a result of services on the transmission main.  (SO9)West Pasco WTP (WPWTP) Initial design capacity of 6 mgd –with ability to expand to 18 mgd. This site will have multiple pump bays. The current intake consists of three barrel screens rated for a total flow of 15 mgd. The screened intake and piping to the pump columns are shared with the City’s irrigation department. A temporary structure houses the 2 raw water pump motors and necessary valves. The City is currently designing a new raw water intake structure for the WPWTP and the existing intake will be converted to supply the City’s irrigation system. The new intake will consist of 2 barrel screens with a rated capacity of 12.5 mgd each. A new structure housing two pumps initially with a capacity of 5 mgd each will be constructed. The City also owns and operates a non-potable water utility that provides irrigation water to residential customers and a limited number of commercial customers in the northwest part of the City. The irrigation system serves approximately 6,890 residential accounts and 39 commercial and public facility accounts. Providing a system for non-treated irrigation water separate from the drinking water utility allows the City’s customers to avoid using treated drinking water to irrigate. The City’s existing irrigation system is supplied by water from 11 groundwater wells and water pumped from the Columbia River from the WPWTP. Pasco Water Rights The City currently holds multiple surface water rights and ground water rights that authorize SO1 and SO9. The source of the rights is the Columbia River from two intake facilities that provide treated water for municipal water supply purposes. In addition to the municipal rights described in Table 1 below, the City holds numerous other water rights for irrigation and other purposes from various points of withdrawal. The City should evaluate each of these rights and if desired, pursue applications for change to convert the rights to municipal water supply purposes and to change the points of withdrawal to their wells serving non-potable irrigation water or the river diversions. These other rights are listed in Table 2 below. Page 190 of 222 OCR Report Of Examination 11 G3-33044(A) Pasco WTP Water Rights TABLE 1 Butterfield WTP – SO1 West Pasco WTP SO9 Certificate Qi - GPM Qa - AF SO1 SO9 Well SWC 11660 15708 (35 cfs) 7000 Y Y 7205-A(A) 375 76.2 Y Y 11092(B)P 132.8 N Y Non-additive Qi S4-30976 1122 (2.5 cfs) 1806.75 Y Y G3-20243(A) 1612* 483.6* N Y NWNW11 G3-27413(C) 573.75* 203.4* Y Y SESE3 G3-27413(D) 281.25* 112.4* Y Y SESE3 G3-27413(F) 270* 108* Y Y SESE3 G3-26081(A) 400 291.3 y y G3-26081(B) 300 190 Y Y G3-25177(A) N/a N/a Y Y Non-additive Qi/Qa G3-25177(B) N/a 158.7 Y Y Non- Additive Qi Total 20372 (45.39 cfs) 10563.15 S4-33044(A) 3096.72 (6.9 cfs) 5000 Y Y Total 23468.72 (52.3 cfs) 15563.15 2017 Qa 14424.11 Consumption S3-30976 2244 (5 cfs) 3613.5 Y Y Temporary use *These rights are issued from both the irrigation well(s) and SO1 and SO9. If the irrigation wells are pumping at these rates and volumes the 907.4 acre-feet cannot be allocated to SO1 and SO9 in the water system plan as water available for growth. The 2017 metering data from the wells indicate this water is withdrawn in the municipal irrigation system. The City needs to consider the actual operation before claiming these quantities from both the river and the wells. The Temporary use of 3613.5 acre-feet of the Quad Cities water right helps meet the current needs of Pasco, however should not be considered for growth in the City of Pasco. The use agreement is not permanent. The 2017 water system plan confirms diversions from SO1 and SO9 at 14424.11acre-feet. The addition of 5000 acre-feet under this authorization (S4-33044(A)) brings the current diversion authorization (10563.15) up to 15563.15 acre-feet (less water pumped from the wells). Although the water system plan identifies the temporary use of 3613.5 acre-feet under a use agreement with the other parties authorized in the Quad Cities water right (S3-30976) it is not considered here as it is not a permanent water right available for growth. Multiple rights are identified in the Pasco Water System Plan as owned or acquired by the City for future growth. The City needs to evaluate these rights and if they desire to use them for municipal water Page 191 of 222 OCR Report Of Examination 12 G3-33044(A) supply purposes from SO1, SO9, or the municipal irrigation system, applications for change need to be filed to change the purpose of use and points of diversion or withdrawal. The City must also re-evaluate their reporting records and submit appropriate records of the source diversion and source wells to accurately identify the volumes of water pumped from the authorized sources. Public Interest Considerations Analysis of whether this application meets the requirements of RCW 90.03.290, that the proposed use of water will not be detrimental to the public welfare, involves investigation of how the approval of the proposed use of water will affect the range of values that are encompassed by the public interest. Several sections of statute list the legislative policies that guide the consideration of the public interest during the allocation of water, including sections of the 1971 Water Resources Act (Chapter 90.54 RCW) and Columbia River Basin Water Supply Act (Chapter 90.90 RCW). An analysis of the public interest considerations for the Program is contained in the Report of Examination for S3-30556, the “secondary use” permit for the Lake Roosevelt releases. The public interests associated with the Program’s municipal, domestic, and industrial permitting are specifically cited in several sections of Chapter 90.90 RCW:  RCW 90.90.005(1) states “The legislature finds that a key priority of water resource management in the Columbia river basin is the development of new water supplies that includes storage and conservation in order to meet the economic and community development needs of people and the instream flow needs of fish”.  RCW 90.90.005(2) directs Ecology to “aggressively pursue the development of water supplies to benefit both instream and out-of-stream uses”.  RCW 90.90.020(3)(b) instructs Ecology to focus on “Sources of water supply for pending water right applications”.  RCW 90.90.020(3)(d) instructs Ecology to focus on “New municipal, domestic, industrial, and irrigation water needs within the Columbia river basin”.  RCW 90.90.060(3) states that Lake Roosevelt releases “will bolster the state economy and will meet the following critical needs” including “new water supplies for municipalities with pending water right applications”. The Program’s municipal, domestic, and industrial permitting achieves the statutorily mandated public interest requirements by allowing new state water rights to be issued while mitigating the impacts to fish. If the subject application is approved, the public welfare may be affected in several ways:  Economic activity is likely to result from the use of water for commercial/industrial purposes, as the associated construction and operation activities generate increased economic and social opportunities.  The use of water for consumptive uses associated with the existing facility is not expected to affect local cultural, recreational, or environmental resources. Page 192 of 222 OCR Report Of Examination 13 G3-33044(A)  The adaptive management strategy for mitigation releases will ensure releases occur at times that are most beneficial for Endangered Species Act-listed salmon and steelhead species in the Columbia River, thus assuring effective mitigation for this appropriation of water. Conclusions Beneficial Use The proposed use of water for municipal water supply purposes is considered to be a beneficial use. Therefore this application meets the first criterion of RCW 90.03.290 that the requested water be put to beneficial use. Water Availability The analysis provided above demonstrates that water is physically and legally available for the proposed use of water. Impairment The proposed beneficial use of water will not impair any existing water rights. Public Interest The proposed use of water would not be detrimental to the public welfare. RECOMMENDATIONS Based on the above investigation and conclusions, I recommend that this request for a water right be approved and a permit be issued in the amounts and within the limitations listed below and subject to the provisions listed above. Purpose of Use and Authorized Quantities The amount of water recommended is a maximum limit and the water user may only use that amount of water within the specified limit that is reasonable and beneficial: 6.9 cfs, 5000 acre-feet per year for municipal water supply purposes The place of use (POU) of this water right is the service area described in the most recent Water System Plan/Small Water System Management Program approved by the Washington State Department of Health, so long as the water system is and remains in compliance with the criteria in RCW 90.03.386(2). RCW 90.03.386 may have the effect of revising the place of use of this water right. Kevin Brown Date If you need this publication in an alternate format, please call Water Resources Program at (360) 407-6600. Persons with hearing loss can call 711 for Washington Relay Service. Persons with a speech disability can call 877 - 833-6341. Page 193 of 222 B-27 USBR-PN Reg Rev.5/81 UNITEDSTATES DEPARTMENT OF THE INTERIOR BUREAU OF RECLAMATION PACIFIC NORTHWEST REGIONAL OFFICE COLUMBIA BASIN PROJECT WASHINGTON RECORD OF EXECUTION OF CONTRACT Contract No:11XXl01734Contractor:State of Washington Department of Ecology Date of contract:August 2,201 1 Estimated amount involved:Up-front consideration given for State’s $10 million monetary contribution for Rec[amation’s expenditure on design and construction of the supplemental feed route to Potholes Reservoir. Annual revenue will vary.Assuming no further lump-sum payment as provided in contract.annual revenue is estimated at up to $426,800 at the water service rate that will be in effect beginning in 2012. Purpose:Long-term municipal and industrial water service contract to make available for release to the State of Washington Department of Ecology up to 37,500 acre-feet of proiect water annually from Franklin D.Roosevelt Lake created by Grand Coulee Dam pursuant to Superseding Certi?cate of Trust Water RightNo.S3-30556. Remarks:Authority granted to Regional Director to negotiate.execute,and administer the contract by memorandum from the Commissioner dated November l0,2010. Place:Boise Idaho Date:5%\\ 1.The form of contract was approved on behalf of the Boise Field Solicitor on July 27,2011. Ryan .atterson Program Manager Repayment and Acreage Limitation 2.Contract executed and transmitted to the following: ORIGINALCONTRACTTO:PN-7632 (V.R.) ORIGINALSTo:Mr.Ted Sturdevant,Director,Washington State Department of Ecology, P.O.Box 47600,Olympia,WA 98504-7600 Copy to:Mr.Derek Sandison,Washington State Department of Ecology,Wenatchee Field Office,Office of the Columbia River,303 S.Mission Street,Suite 200, Wenatchee,WA 98801 Field Solicitor,Boise,ID CCA-1000,EPH—2000,PN-1700,PN-1730,PN—l800,PN-1820,PN—3300,PN-6200 84-55000 Assistant Solicitor,Water and Power,Washington DC,Attention:1ns64l5—MlB Page 194 of 222 Article 2-10 11 12 14» 16 18 20 Contract No.11XXl01734 UNITED STATES DEPARTMENT OF THE INTERIOR BUREAU OF RECLAMATION Columbia Basin Project,Washington MUNICIPAL AND INDUSTRIAL WATER SERVICE CONTRACT BETWEENTHEUNITED STATES OF AMERICA and THE STATE OF WASHINGTON,DEPARTMENT OF ECOLOGY Table of Contents _Page E & Preamble ............................................................ ............................................. ..1 Explanatory Recitals ............................................................ ........................... ..1-3 De?nitions and Meanings ..3-4 Term of Contract ....................................................... ................................... ..4 Water to be Made Available to Ecology .............................................. ........ ..4-6 Payments for Water .................................6-8 Contract Administration Fees .......................9 Termination of Contract ................................9-10 Disclaimer ..........................10 Constraints on the Availability of Water (Water Shortages).10 Notices ...................................................11 General Provisions ..11 Signatures .................................12 Acknowledgments ...........................13 Exhibit A ............A1-A4 ExhibitB ............................................................ .......................................... B-1 Page 195 of 222 Contract No.1lXXl 01734 UNITED STATES DEPARTMENT OF THE INTERIOR BUREAU OF RECLAMATION Columbia Basin Project,Washington MUNICIPAL AND INDUSTRIAL WATER SERVICE CONTRACT BETWEEN THE UNITED STATES OF AMERICA AND THE STATE OF WASHINGTON,DEPARTMENT OF ECOLOGY THIS CONTRACT,made this L‘day of ,_2_0_Q,pursuant generally to the Act of Congress of June 17,1902 (32 Stat.388),and acts amendatory thereof or supplementary thereto, particularly,but not limited to,the Act of March 4,1921 (41 Stat.1404),the Act of August 30, 1935 (49 Stat.1028),Section 9(c)(2)ofthe Act of August 4,1939 (53 Stat.1187),the Act of March 10,1943 (57 Stat.14)and the Act of August 12,1958 (72 Stat.563),collectively known as the Federal Reclamation laws,between the UNITED STATES OF AMERICA,hereinafter referred to as the “United States,”acting through the Bureau of Reclamation,hereinafter referred to as “Reclamation,”represented by the officer executing this Contract,his duly appointed successor or his duly authorized representative,hereinafter referred to as the “Contracting Of?cer”,and the STATE OF WASHINGTON,DEPARTMENT OF ECOLOGY,hereinafter referred to as “Ecology”. A . WITNESSETH,THAT: I EXPLANATORY RECITALS 2.WHEREAS,the United States,acting through Reclamation,constructed the Columbia Basin Project,Washington,hereinafter called the Project,and has water rights thereon, including those for irrigation,municipal,industrial,and miscellaneous purposes;and Page 196 of 222 3.WHEREAS,the United States and Ecology entered into a Memorandum of Understanding dated December 17,2004 (MOU),providing among other things,to work toward the use of a portion of Reclamation’s Project water supply for Ecology’s Columbia River Water Management Program (Program);and 4.’WHEREAS,OniDecemberl,2008,Ecology issued to the United States a Permit to Appropriate Public Waters of the State of Washington,Permit No.S3-30556 for 37,500 acre feet! 305 cfs of water for instream ?ow;and 5.WHEREAS,on August 13,2009,the United States executed a Temporary Miscellaneous Purposes Water Service Contract,Contract No.09XX10l718 with Ecology for up to 10,000 acre~feet of water,of which 9,662 acre-fleetwasreleased by Reclamationforthepurpose of meeting the procedural requirement under state law to ?rst perfecttheProject water for its intended bene?cial use,as stated on Permit No.S3—30556;and 6.WHEREAS,on June 30,2010,the United States executed a Temporary Miscellaneous Purposes Water Service Contract,Contract No.10XXl0l727 with Ecology for up to 10,000 acre-feet for the purpose stated in Recital 5 above;and _7.WHEREAS,on July 16,2010,tl1eUnited States executed a Temporary MiscellaneousPurposes Water Service Contract,Contract No.l0XXl01729 witl1Ecology that replaced Contract No.10XXl0l727 in its entirety and provided in part for the release of up to above;and 8.WHEREAS,Ecology desires to obtain a water supply from the Project to be left in- stream and used by Ecology to mitigate for impacts to instream ?ow from new water right permits to be issued by it to Municipal and Industrial water users in accordance with its Program;and Page 197 of 222 9.4 WHEREAS,the United States hasdemonstratedbene?cial use of all the Project water in accordance with the provisions of Permit No.S3-3 0556 and placed this water in Ecology Trust Water Right Program for the long-term use of the water for the purposes provided in this Contract;and 10.WHEREAS,for the purpose of orderly and economical operation and maintenance of the Project the United States recognizes that entering into this Contract with Ecology for the use of thiswater for the purposes stated in this Contract will bene?t the public interest and the interests of the United States to assist in the maintenance of instream ?ow and will notinterfere with other purposes served by the Project,and the United States is agreeabletoreleasing such water to Ecology pursuant to the provisionsofSupersedingCerti?cate of Trust Water Right No.S3-30556 and the terms of this Contract;and NOW,THEREFORE,in consideration of the mutual and dependentcovenants herein contained,'it is hereby mutually agreed as follows: DEFINITIONS 11.(a)“Municipal and Industrial”as used in this Contract,means municipal, industrial,community domestic,commercial and related purposes of use,but notincluding agiicultural irrigation. (b)“Permit”means an approval by Ecologyrelating to the use of water delivered under‘its Programauthorizing the benencial use of public watersunder Chapters 90.03, 90.42,or 90.44 Revised Codeof Washington (RCW).Thepermit,whether in the form of a permit or certi?cate of state water right,may be associated or consolidated with Ecology’s approval for a change to or transfer of an existing right. I Page 198 of 222 (c)“Replacement Water”as used in this Contract means Reclamation’s Project water le?in-stream pursuant to the provisions of Superseding Certi?cate of Trust Water Right No.S3-30556 and this Contract and used by Ecology to mitigate,on an acre-foot for acre-foot basis,for impacts to instream ?ow from new water right Permits issued by Ecology to Municipal and Industrial water users in accordance with its Program. ((1)“Supplemental Water”as used in this Contract means the additional Project water made available to Ecology for instream?ow augmentation purposes in at least a 1:2 proportion to releases of ReplacementWater. (e)“Trust Water Right”means water rights assigned to Ecology in accordance with RCW 90.42. (t)“Third—Partypermittees”means water users receiving water under the‘ Program pursuant to a Pennit issued by Ecology. TERM OF CONTRACT 12.ThisContract shall remainineffecttoraperiod of forty (40)years from the date of its execution;Provided,that under the tenns and conditions mutually agreeable to the parties hereto,renewals may be made for successive periods not to exceed forty (40)years each.The terms and conditions of each renewal shall be agreed upon not later than one (1)year prior to the expiration of the then existing contract. 13.(a)Subject to the conditions,exceptions,and reservations set forth herein and the availability of water in quantities suf?cient to ful?ll the requirements of this Contract without impairing Project operations,the United States agrees to make available for release to Ecology up to 37,500 acre-feet of Project water annually,pursuant to Superseding Certificate of Trust Water Page 199 of 222 RightNo.S3-30556;Provided,that up to 25,000 acre-feet is made available to Ecology as Replacement Water for Ecology to issue up to 25,000 acre-ifeetofMunicipal and IndustrialPermits on an acre-foot for acre-foot basis,with the majority of the water being released at the foot of Grand Coulee Dam on the’Columbia River and the small remaining balance to be made available directly from Franklin D.Roosevelt Lake created by the Grand Coulee Dam;Provided further,that up to 12,500 acre-feet of Supplemental Water is made available to Ecology for instream ?ow augmentation purposes in at least a 1:2 proportion to the Replacement Water releases. (b)Subject to Ecology’swritten request for Replacement Water and accompaniedby documentation of relevant State issued Permitsas identified in (c)of this Article the water provided under this Contractwillbeavailable for release.Ecology shall receive said water at the release pointsdescribed in (a)above,and shall be wholly responsible for the protection of said water for instream ?ow purposes beyond said point. (c)Ecology Permits shall not be deemed to be subcontracts or sub-agreements to this Contract,norshallanythird party bene?ciary interests be created or implied by virtueof this Contract.Reclamation is not a bene?ciary of or party to any sub-contracts,sub-agreements,or Permits between Ecology and water users described herein. (1)Documentation of Ecology’s Permits shall be submitted to Reclamation at the following address:Bureau of Reclamation, Ephrata Field Office,Ephrata Field Of?ce Manager,P.O.Box 815, p 32 C Street N.W.,Ephrata,Washington 98823. (2)Permits shall refer to and be subject to the terms and conditions of this Contract. (d)Upon the release of Project water by Reclamationpursuant to this Contract Page 200 of 222 Ecology shall suffer all distribution and administration losses from the points of release in (a)above to the places of uses. (e)Reclamation shall not be responsible for the control,carriage,handling,use, disposal,or distribution of water taken by Ecology hereunder.Ecology and Reclamation will each be responsible and liable only for the negligent acts or omissions of their respective employees or assigns to the extent provided by law.However,nothing in this Contract will be construed to be an admission of fault or liability,andnothing will limitthe defenses and immunities legally available toeach party against the other. (i)This Contract and all water taken pursuantthereto shallbe subject to and controlled by federal and state law.No liability shall attach to Reclamation forcurtailment required by applicable law,and Ecology agrees to a reduction of water taken hereunder in an amount Reclamation determines to be necessary to comply with applicable law. (g)The SupersedingCerti?cate of Trust Water Right No.S3-30556 issued to Reclamation will maintain its elements,including priority date. PAYMENTS FOR WATER 14‘.(a)(1) ‘ Prior to execution of this Contract,Ecology has contributed a total amount of $10 Million to the United States for expenditure on the design and construction of the supplementalfeed route to Potholes Reservoir,an authorized feature of the Project,and activities incidental thereto,including the acquisition of lands and rights=of>way.In consideration of this monetary contribution,the United States hereby agrees to accept this contributionin lieu of an annual charge for any and all chargesassociated with the release to Ecologyof up to 14,330 acre- feet of ReplacementWater and up to 7,165 acre-feet of Supplemental Water annually over the term of this Contract.The total amount of ‘ReplacementWaterand Supplemental Water eligible to be Page 201 of 222 provided annually at no additional cost was determined by the ContractingOfficer by comparing the total amount of Ecology’s monetary contribution to the equivalent present value of the revenue stream resulting from the calculation found in Exhibit B and hereby made a part a part of this Contract. (2)For any amount of Replacement Water and corresponding proportion of Supplemental Water in excess of the amounts identi?ed in (a)(l)above to be made available annually for release to Ecology either of the following must be remitted to Reclamation: (i) Or Advance payment of a lump-sum amountasdetermined by the Contracting Of?cer for the additional number of acre-feet of Replacement Water using the methodology identi?edabove with then current water rate and interest rate information.Such lump-sum payment shall make Ecology eligible to receive the defined excess amount of Replacement Water and corresponding Supplemental Water at no cost from the time of such lump-sum payment through the remaining term of this Contract, Payment in advance of the annual charge for the additional Replacement Water providedasfollows:On or before March 1 of each succeeding year in advance of water release,Ecology shall remit a payment for the total amount of acre-feet of Replacement Water it requests for release in excess of the amount identified in (a)(l)above and any amounts previously paid for pursuant to (a)(2)(i)above.Replacement Water with the corresponding amount of Supplemental Water,may be made available upon payment by Ecology of the annual rate per acre-foot charge as provided in (b)of this Article;Provided,that in no event will the total amount of ReplacementWater provided under this Contract exceed 25,000 acre-feet and thatrinnoevent will the corresponding amount of Supplemental Water exceed 12,500 acre—feet. Page 202 of 222 (b)The annual payment set forth in sub-Article l4(a)(2)(ii)of this Contract is based on an initial rate of $35.00 per acre-foot.From time to time,but not less o?en than once every 5 years,the rate per acre-foot,the lump-sum payment rate,and the annual payment due the United States under Article l4(a)(2)(ii)of this Contract shall be reviewed by the Contracting Of?cer and revised if necessarybythe United States.Such review shall be in accordance with Federal Reclamation laws and the then current municipal,industrial and miscellaneous purposes ‘ratepolicy applicable to the Project. (c)In recognition of the minimal volume of Replacement Water and Supplemental Water when compared to the average volume of water that passes over Grand Coulee Dam annually,the Contracting Of?cer has detennined that no annual operation and maintenance charges shall be assessed for the release of Projectwater pursuant to this Contract. (d)Advance payment to the United States is a conditionprecedent to delivery of water under this Contract. I te)All payments from Ecology to the United States under this contract shall be by the mediumrequested by the United States on or before the date payment is due.The required methodof payment may include checks,wire transfers,or other types of payment speci?ed by the United States.Exceptwhen otherwise speci?ed bythe United States,all payments shallbe made by check. (f)Upon executionofthe contract,Ecology shall furnish the Contracting Of?cer with Ecology’s taxpayer’s identi?cation number (TIN).Thepurpose for requiring Ecology’s TIN is for collecting and reporting any delinquent amounts arising out of Ecology’s relationship with the United States. Page 203 of 222 (g)Payments required hereunder shall be made to the Bureau of Reclamation at the location described in Article 19 of this Contract. CONTRACT ADMINISTRATION FEES 15.All future contract actions,including new contracts,contract amendments, supplements,and assignments will be charged a fee to be determined prior to any future action that shall be sufficient to cover costs to the United States as determined by the Contracting Of?cer. TERMINATION OF CONTRACT 16.(a)This Contract may be terminated at the option of Reclamation at any time (1) if Ecology is delinquent in payments required under this Contract for a period of 90 days,01'(2) upon failure of Ecology to comply with other provisions herein,or (3)failure of Ecology to abide by any lawful notice,order,rule,or regulation now or herea?er established affecting water use hereunder,or (4)pursuant to Subarticle 16(b)of this Contract:Provided,that Reclamation noti?es Ecology of any delinquency or deficiency by written notice and Ecology fails to comply with said notice within 120 days. (b)The State of Washington (State)entered into water resources management agreements in supportofthe State’s Lake Roosevelt Incremental Storage Releases Program with the ConfederatedTribes of the Colville Reservation,datedDecember 17,2007,andwith the Spokane Tribe of Indians,datedFebruary4,2008,in accordance with the MOU.These ag.eements,formally recognized in RCW 90.90.060,included provisions for the State to make annual payments to the Tribes for the duration of the Lake Roosevelt Storage ReleasesProgram. Should the State in bad faith fail to provide such payments or other consideration acceptable to the Tribe(s),Reclamation may consider termination of,or non—releaseof water under,thisContract two years after non—payment occurs,to allow time for the State and the Tribe(s)to resolve issues Page 204 of 222 related to non-payment.Ecology shall notify Reclamation in writing by July 31 of any year in which non-payment occurs. (c)Ecology shall have the right to terminate this Contract for any reason: Provided,that termination under this provision shall become effective no sooner than March 1 of the next calendar year following written notice. I ((1)Termination of this Contract for any cause shall not relieve Ecology of any ?nancial obligations incurred by way of this Contract prior to termination. (e)In the event of termination,all Reclamation releases of Project water provided hereunder shall cease. DISCLAIMER 17.No provision of this Contract,nor of any renewal hereo?nor the furnishing of water hereunder will be construed to bind the United States after the expiration of this Contract as the basis of a permanent right to Project water.The United States will not be held responsible for any acts or omissions of Ecology’s agents.Further,it'is the responsibility of Ecology to comply with all applicable laws and regulations of the United States and Ecology regarding any activities involved or associated with the water released hereunder. CONSTRAINTS ON THE AVAILABILITY OF WATER [EATERSHORTAGES) 18.(a)In its operation of the Project,the Contracting Of?cer will use all reasonable means to guard against a Condition of Shortage in the quantity ofwater to be made available to Ecology pursuant to this Contrae .In the event the Contracting Officer determines that a Condition of Shortage appears probable,the Contracting Officer will notify Ecology in writing of said determination as soon as practicable.- (b)If there is a Condition of Shortage because of errors in physical operations of the Project,drought,or other physical causes beyond the control of the Contracting Of?cer or actions taken by the Contracting Of?cer to meet current and future legal obligations,then no liability shall accrue against the United States or any of its of?cers,agents,or employees for any damages,direct or indirect,arising therefrom. 10 Page 205 of 222 NOTICES 19.Any notice,demand,or request authorized or required by this Contract shall be deemedtohave been given,on behalf of Ecology,when mailed,postage prepaid,or delivered either to the Regional Director,Paci?c Northwest Region,Bureau of Reclamation,1150 N.Curtis Road,Suite 100,Boise,Idaho 83706-1234,or to the Ephrata Field Of?ce Manager,Ephrata Field Of?ce,Bureau of Reclamation,P.O.Box 815,32 C Street N.W.,Ephrata,Washington 98823,and on behalf of the United States,when mailed,postage prepaid,or delivered to the Director, Department of Ecology,P.O.Box 47600,Olympia,Washington 98504-7600,or to the Wenatchee Field Of?ce,Of?ce of the Columbia River,303 S.Mission Street,Suite 200,Wenatchee, Washington 98801.The designation of the person to be notified or the address of such person may be changed at any time by similar notice. GENERAL PROVISIONS 20.The General Provisions applicable to this Contract are listed below.The full text of these articles is attached as Exhibit A and is hereby made a part of this Contract. a.CHARGES FOR DELINQUENTPAYMENTS b.CONTINGENTONAPPROPRIATION OR ALLOTMENT OF FUNDS c.GENERAL'OBLIGATION --BENEFITSCONDITIONED UPON PAYMENT d.CONFIRMATION OF CONTRACT e.CHANGES IN CONTRACTOR’S ORGANIZATION f.PROTECTION OF WATER AND AIR QUALITY g.WATER CONSERVATION h.EQUALEMPLOYMENT OPPORTUNITY i.RULES,REGULATIONS,AND DETERMINATIONS j.ASSIGNMENT LIMITED --SUCCESSORS AND ASSIGNS OBLIGATED k.OFFICIALS NOT TO BENEFIT l.BOOKS,RECORDS,AND REPORTS m.COMPLIANCE WITH CIVIL RIGHTS LAWS AND REGULATIONS n.CONTRACT DRAFTING CONSIDERATIONS ll Page 206 of 222 IN WITNESS WHEREOF,the parties hereto have signed their names as of the day and year ?rst 7 above written. STATEOF WASHINGTON DEPARTMENT OF ECOLOGY J‘1.9By Director Department of Ecology, State of Washington UNITEDS ATE OF AMERI A Bureau of Reclamation 1150 N.Cuitis Road,Suite 100 Boise,ID 83706-1234 Page 207 of 222 STATE OF WASHINGTON ) :ss County of Grant ') On thisgl day of _,ZOLL,personally appeared beforeme,$&\)o.>(*c\',kngijntome to be the of?cial of the STATE OF WASHINGTON,DEPARTMENT OF ECOLOGY that executed the within and foregoing instrument,and acknowledged said instrument to be the free and voluntary act and deed of said STATE OF WASHINGTON,DEPARTMENT OF ECOLOGY for the uses and purposes therein mentioned,and on oath stated that they are authorized to execute said instrument. IN WITNESS WHEREOF,I have hereunto set my hand and affixed my official seal as of the day and year first above written._ My commission xpires: ****>o=>1:>2:*=1:=3: STATE OF WASHINGTON) .ss County of Grant ) On thi "okdayof , 203:,personally appeared before me,ourk ,known t e to be the of?cial of the United States of America that executed the within and foregoing instrument and acknowledged said instrument to be the free and voluntary act and deed of said United States,for the uses and purposes therein mentioned,and on oath stated that he was authorized to execute said instrument. INWITNESS WHEREOF,I have hereunto set my hand and affixed my of?cial sea!as of the day and year ?rst above written. 2’ \\\\\\lI|||lIIIIII// §‘\\éé:-"''0“‘““sS/0/1)“'.C‘o’%¢ublic i and for the _§u.u N07-AH State of Washington E EA -.V ’,'11§Residing at" g 1,‘‘Q?BLIC/"§My commission expires: ”///,WA':S?\\*\\‘ 13 Page 208 of 222 EXHIBIT A GENERAL PROVISIONS —-COLUMBIABASIN PROJECT The Contractor,as referred to in the following Standard Contract Articles,shall be The State of Washington,Department of Ecology. CHARGES FOR DELINQQUENTPAYMENTS (a)(1)The Contractor shall be subject to interest,administrative,and penalty charges on delinquent payments.If a payment is not received by the due date,the Contractor shall pay an interest charge on the delinquent payment foreachday the payment is delinquent beyond the due date.If a payment becomes 60 days delinquent,the Contractor shall pay,in addition to the interest charge,an administrative charge to cover additional costs of billing and processing the delinquent payment.If a payment is delinquent90 days or more,the Contractor shall pay,in addition to the interest and administrative charges,a penalty charge for each day the payment is delinquent beyond the due date,based on the remaining balance of the payment due at the rate of 6 percent per year.The Contractor shall also pay any fees incurred for debt collection services associated with a delinquent payment. (2)The interest rate charged shall be the greater of either the rate prescribedquarterly in the Federal Register by the Department of the Treasury for application to overduepayments,or the interest rate of 0.5 percent per month.The interest rate charged will be determined as of the due date and remain ?xed for the duration of the delinquent period. (3)When a partial paymenton a ‘delinquentaccount is received,the amount received shall be applied ?rst to the penalty charges,second to the administrative charges,third to the accrued interest,and ?nally to the overdue payment. CONTINGENT ON APPROPRIATION OR ALLOTMENT OF FUNDS b.The expenditure or advance of any money or the performanceof any obligation of the United States under this contract shall be contingent upon appropriation or allotment of funds.Absence of appropriation or allotment of funds shall not relievethe Contractor from any obligations under this contract.No liability shall accrue to the United States in case funds are not appropriated or allotted. GENERAL OBLIGATION --BENEFITS CONDITIONED UPON PAYMENT c.(1)The obligation of the Contractor to pay the United States as provided in this contract is a general obligation of the Contractor notwithstanding the manner in which the obligation may be distributed among the Contractor's water users and notwithstanding the default of individual water users in their obligation to the Contractor. (2)The payment of charges becoming due pursuant to this contract is a condition precedent to receiving bene?ts under this contract.The United States shall not make water available to the Contractor through Columbia Basin project facilities during any period in which the Contractor is in arrears in the advance payment of water rates due the United States. 'CONFIRMATION OF CONTRACT d.The Contractor,atter the execution of this contract,shall furnish to the Contracting Officer evidence that pursuant to the laws of the State ofwashington,the Contractor is a legally constituted entity and the contract is lawful,‘ valid,and binding on the Contractor.This contract shall not be bindingon the United States until such evidence has been provided to the Contracting Officer's satisfaction. CHANGES IN CONTRACTOR’S ORGANIZATION e.While this contract is in effect,no change may be made in the Contractor’s organization which may affect - the respective rights,obligations,privileges,and duties of either the United States or the Contractor under this contract including,but not limited to,dissolution,consolidation,or merger,except upon the Contracting Oft'1cer’swritten consent. A-1 Page 209 of 222 PROTECTION OF WATER AND AIR OUALITY f.'(1)Project facilities used to make available and deliver water to the Contractor shall be operated and maintained in the most practical manner to maintain the quality of the water at the highest level possible as dctennined by the Contracting Officer:Provided,That the United Statw does not warrant the quality of the water delivered to the Contractor and is under no obligation to fumish or construct water treatment facilities to maintain or improve the quality of water delivered to the Contractor. (2)The Contractor shall comply\vith all applicable water and air pollution laws and regulations of the United States and the State of Washington and shall obtain all required permits or licenses from the appropriate Federal, State,or local authorities necessary for the release of water by the Contractor;and shall be responsible for compliance with all Federal,State,and local water quality standards applicableto surface and subsurface drainage and/or discharges generated through the use of Federal or the Contractor’s facilities. (3)This article shall not affect or alter any legal obligations of the Secretary to provide drainage or other discharge servicm. WATER CONSERVATION g.Prior to release of water provided from or conveyed through federally constructedorfederally?nanced facilities pursuant to this contract,the Contractor shall develop a water conservation plan,as required by Section 210(b)of the Reclamation Reform Act of 1982 (RRA)and Part 427.1 of the Water Conservation Rules and Regulations effective January 1,1998. EgQUALEMPLOYMENTOPPORTUNITY h.During the perfonnance of this contract,the Contractor agrees as follows: (1)The Contractor will not discriminate against any employeeor applicant for employment because ‘ofrace,color,religion,sex,disability,or national origin.The Contractor will take affirmative action to ensurethat applicants are employed,and that employees are treated during employment,without regard to their race,color,religion, sex,disability,or national origin.Such action shall include,but not be limited to the following:employment,upgrading, demotion,or transfer;recruitment or recruitment advertising;layoff or termination;rates of pay or other forms of compensation;and selection for training,including apprenticeship.The Contractor agrees to post in conspicuous places, available to employees and applicantsfor employment,notices to"be providedby the Contracting Officer setting forth the provisions of this nondiscrimination clause. (2)The Contractor will,in all solicitations or advertisements for employees placed by or on behalf ' of the Contractor,state that all qualified applicantswill receive consideration for employmentwithout regard to race,color, religion,sex,disability,or national origin. (3)The Contractorwill send to each labor union or representative of workers with which it has a collective bargaining agreement or other contract or understanding,a notice,to be provided by the Contracting Of?cer, advising the labor union or workers’representative of the Contractor’s commitments under Section 202 of Executive Order 11246 of September 24,1965,and shall post copies of the notice in conspicuousplaces available to employees and applicants for employment.‘ (4)The Contractor will comply with all provisions of Executive Order No.11246 of September 24, 1965,and of the rules,regulations,and relevant orders of the Secretary of Labor..’ (5)The Contractor will furnish all information and reports required by Executive Order 11246 of September 24,1965,and by the rules,regulations,and orders of the Secretary of Labor,or pursuant thereto,and will pennit access to his books,records,and accounts by the Contracting Agency and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules,regulations,and orders. (6)In the event of the Contractor‘snoncompliance with the nondiscrimination clauses of this contract or with any of such rules,regulations,or orders,this contract may be canceled,terminated or suspended in whole or in part and the Contractor may be declared ineligible for further Government contracts in accordance with procedures authorized in Executive Order 11246 of September 24,1965,and such other sanctions may be imposed and remedies A-2 Page 210 of 222 invoked as provided in Executive Order 11246 of September 24,1965 or by rule,regulation,or order of the Secretary of Labor,or as otherwise provided by law. (7)The Contractor will include the provisions of articles (1)through (7)in every subcontract or purchase order unless exempted by the rules,regulations,or orders of the Secretary of Labor issued pursuant to Section 204 of Executive Order 11246 of September 24,1965,so that such provisions will be binding upon each subcontractor or vendor.The Contractor will take such action with respect to any subcontract or purchase order as may be directed by the Secretary of Labor as a means of enforcing such provisions,including sanctions for noncompliance:Provided however, that in the event the Contractor becomes involved in,or is threatened with,litigation with a subcontractor or vendor as a result of such direction,the Contractor may request the United States to enter into such litigation to protect the interests of the United States. RULES,REGULATIONS,AND DETERMINATIONS i.(1)The parties agree that the release of water or use of Federal facilities pursuant to this contract is subject to Federal reclamation law,as amended and supplemented,and the rules and regulations promulgated by the Secretary of the Interior under Federal reclamation law. .(2)The Contracting Of?cer shall have the right to make determinations necessary to administer this contract that are consistent with the expressed and implied provisions of this contract,the laws of the United States and the State ofwashington,and the rules and regulations promulgatedby the Secretary of the Interior.Such determinations shall be made in consultation with the Contractor. ASSIGNMENT LIMITED—-SUCCESSORS AND ASSIGNS OBLIGATED j.The provisions of this contract shall apply to and bind the successors and assigns of the parties hereto,but no assignment or transfer of this contract or any right or interest therein by either party shall be valid until approved in writing by the other party. OFFICIALS NOT TO BENEFIT k.No Member of or Delegate to the Congress,Resident Commissioner,or of?cial of the Contractor shall bene?t from this contract other than as a water user or landowner in the same manner as other water users or landowners. BOOKS RECORDS AND REPORTS _l.The Contractor shall establish and maintain accounts and other books and records pertainingto administration of the terms and conditions of this contract,including the Contractor's ?nancial transactions;water supply data;water-use data;and other matters that the Contracting Of?cer may require.Reports shall be fumished to the Contracting Of?cer in such form and on such date or dates as the Contracting Of?cer may require.Subject to applicable Federal laws and regulations,each party to this contract shall have the right during office hours to examine and make copies of the other party's books and records relating to matters covered by this contract. COMPLIANCE WITH CIVIL RIGHTS LAWS AND REGULATIONS m.(1)The Contractor shall comply with Title VI of the Civil Rights Act of 1964 (42 U.S.C.2000d), Section 504 of the Rehabilitation Act of 1973 (P.L.93-112,as amended),the Age Discrimination Act of 1975 (42 U.S.C. 6101,et seq.),Title II of the Americans with Disabilities Act of 1990 if the entity is a State or local governmententity [Title 111if the entity is a non-govemment entity],and any other applicable‘civil rights laws,as well as with their respective implementing regulations and guidelinm imposed by the U.S.Department of the Interior and/or Bureau of Reclamation. _(2)These statutes require that no person in the United States shall be excluded from participation in,be denied the bene?ts of,or be otherwise subjected to discrimination under any program or activity receiving ?nancial assistance from the Bureau of Reclamation on the grounds of race,color,national origin,disability,or age.By executing this contract,the Contractor agrees to immediately take any measures necessary to implement this obligation,including pennitting of?cials of the United States to inspect premises,programs,and documents. (3)The Contractor makes this agreement in consideration of and for the purpose of obtainingany and all Federal grants,loans,contracts,property discounts,or other Federal ?nancial assistance extended after the date hereof to the Contractor by the Bureau of Reclamation,including installment payments after such date on account of A-3 Page 211 of 222 arrangements for Federal ?nancial assistance which were approvedbefore such date.The Contractor recognizes and agrees that such Federal assistance will be extended in reliance on the representations and agreements made in this article and that the United_Statesreserves the right to seek judicial enforcement thereof. (4)Complaints of discrimination against the Contractor shall be investigated by the Contracting Oft'rcer’s Office of Civil Rights. CONTRACT DRAFFING CONSIDERATIONS n.Articles 1 through 17 of this contract have been drafted,negotiated,and reviewed by the parties hereto, each of whom is sophisticated in the matters to which this contract pertains,and no one party shall be considered to have drafted the stated articles. A-4 Page 212 of 222 EXHIBIT B The following methodology was used to establish the maximum amount of acre-feet (AF)of Replacement Water and Supplemental Water to be made available annually to Ecology at no additional cost in consideration for its $10 Million contribution to Reclamation for expenditure on design and construction of the supplemental feed route to Potholes Reservoir and activities incidental thereto as described in sub—a1ticle14(a)of this Contract. Step 1:In order to evaluate Ecology’s contribution on a commonbasis of comparison with the payment revenue stream expected from a 40-year municipal and industrial(M&I)water service contract from the Columbia Basin Project (Project),the present value of the revenue stream was calculated as follows: (—pmtx(1+rt)x (gir:TL1)>PV : (1+r)" =$697.98/AF Where: pmt =$35,which is the water service rate (per AF)applicable to this Contract at the time of execution.‘ r =4.23 %,this is the discount rate of interest:In this case,it is the June 2011 month—end average rate of interest for U.S.govemment securities with 30-year maturities. t =1,re?ecting payment due at the beginning of each period. n =40,re?ecting the 40-year term of Contract and expected payment stream to the U.S. PV =$697.98,this represents thevalue (per AF)in current dollars of a stream of water service contract revenue underthe stated parameters. Step 2:Treating Ecology’s contributionas an up—frontlump—sumpayment to be applied as a credit toward water service under this Contract,thefollowing calculation results in the maximum amount of Replacement Water to be made available annually at no additional annual cost to Ecology: $10,000,000 +$697.98 per AF =14,327.02 AF (roundedto 14,330 AF)ofReplacement Water: Step 3:Pursuant to the terms of this Contract,Supplemental Water is to be made available to Ecology at no cost for instream ?ow augmentation purposes in at least a 1:2 proportion to releases of Replacement Water.Consequently,up to of 7,165 AF of Supplemental Water will be made available to Ecology concomitant with the availability of up to 14,330 AF of Replacement Water. 'The $35 per AF water service rate is the result of deducting the $4 per AF power charge component from the current M&I water service rate for the Project in effect for 2011 ($39 per AF),as no Project pumping and reserved power is required for the release of the water supply.The resultsof a recently completed periodic rate review will be implemented beginning in 2012 and as a result the Project M&I water service rate will increase to $48 per AF. Accordingly,beginning in 2012 the water service rate applicable to this contract will be $40 per AF (re?ecting the deduction of the then $8 per AF power component from the revised rate),subject to future periodic revision pursuant to the terms of sub—article14(b). 2 The up to 14,330 AF of Replacement Water to be made available annually at no additional annual cost to Ecology will not change as a result of periodic revision(s)of the water service rate made pursuant to the tenns of sub-article 14 (b)- B —1 Page 213 of 222 Water Service Contract Ecology/City - 1 WATER SERVICE CONTRACT BETWEEN OFFICE OF THE COLUMBIA RIVER WASHINGTON DEPARTMENT OF ECOLOGY AND CITY OF PASCO WHEREAS, the following preliminary statements are made in explanation: 1. RCW 90.90.010 authorizes the Department of Ecology's Office of Columbia River (OCR) to enter into water service contracts to recover all or a portion of the cost of developing water supplies. 2. Since 2004, OCR has partnered with the United States Bureau of Reclamation (Reclamation) on releasing additional water from Lake Roosevelt for new water supplies. 3. On December 21, 2010, Ecology issued Surface Water Certificate S3-30556 authorizing Reclamation to release 37,500 acre-feet of water from Lake Roosevelt for the purpose of instream flow purposes, with 25,000 acre-feet to be used as replacement water for out-of-stream municipal and industrial uses. 4. On December 21, 2010, Ecology issued Trust Water Certificate S3-30556, accepting 37,500 acre-feet of water into the Trust Water Rights Program. 5. OCR entered into a Federal water service contract with Reclamation on August 2, 2011, Contract No. 11XX101734 (Reclamation Contract). The Reclamation Contract is attached hereto as Exhibit A. The Reclamation Contract relates to the 37,500 acre-feet of water supply released for instream flows and new municipal and industrial permits. The Reclamation Contract has a term of 40 years, expiring on August 2, 2051, unless it is renewed pursuant to its terms. The City of Pasco holds an application for a water right (Application No.____) that was filed with Ecology on _________________. 1. Contract. This Water Service Contract (Agreement) is made and entered into by and between the Washington State Department of Ecology, hereinafter referred to as "Ecology", and the City of Pasco, Washington, hereinafter referred to as "Applicant." 2 Purpose. It is the purpose of this Agreement to establish a contractual framework for the Applicant to reimburse the State of Washington through Ecology an agreed upon annual sum to utilize permitted waters of the State of Washington under Water Right Permit No. ____ (Appendix B) for beneficial use of that water. This Agreement is intended to describe the annual costs, the conditions to the Agreement and the term of service for the use of that water. This Page 214 of 222 Water Service Contract Ecology/City - 2 Agreement contains all the terms and conditions agreed upon by the parties. No other understandings, oral or otherwise, regarding the subject matter of this Agreement shall be deemed to exist or to bind any of the parties hereto. 3. Statement of Performance. Ecology has conducted a water right investigation and will issue a Report of Examination (ROE) approving the application after the Applicant signs this Agreement. In the event of an appeal, Ecology shall defend the ROE at its sole expense. After an appeal of the ROE is concluded, Ecology will issue a permit (unless the ROE is vacated upon appeal). All provisions, conditions and limitations of water use identified in Attachment B are incorporated into this Contract. The supply of water authorized in Attachment B is a permanent authorization. However, it is mitigated by a non-permanent Federal water service contract. In the future, either the Reclamation Contract will be renewed, or OCR will make best efforts to replace it with another water supply source that provides equal mitigation value. 4. Period of Performance. A. Subject to its other provisions, the period of performance of this Agreement shall commence on the date of permit issuance, and run as long as the Applicant receives water pursuant to Attachment B, unless amended or terminated sooner as provided herein. B. Pursuant to RCW 90.90.010(6), Ecology shall not impose any charge or fee greater than the amount imposed by the Bureau of Reclamation. 5. Terms of Payment. Cost recovery payments for this Agreement are based on costs incurred by Ecology as a result of the Reclamation Contract, unless otherwise amended. The Reclamation Contract and its terms and conditions are incorporated by reference into this Agreement. Annual payments due by the Applicant to Ecology are as follows: A. Applicant shall pay Ecology an annual sum of $35 per acre-foot per year based on the permitted or certificated quantity described in Exhibit B. Ecology may at its sole discretion adjust this rate if Reclamation exercises Provision 14(2)(b) of the Reclamation Contract, which provides for periodic review of payments for water service contracts under Federal Reclamation law. Ecology shall not adjust its rate unless it provides Applicant with ninety (90) days notice of said rate adjustment. 6. Billing Procedure. Payment shall be based on the full permitted quantity in Appendix B. At such time as the permit is superseded, or perfected and replaced by a certificate, then the payment shall be based upon the superseding permit or certificated quantity. Payment shall be due by November 1st each year for the subsequent year's water use. Ecology shall send a notice of payment due to the Applicant by September 15th of each year. Page 215 of 222 Water Service Contract Ecology/City - 3 7. Agreement Alterations, Amendments and Assignments. This Agreement may be amended or assigned by mutual agreement of the parties. Such amendments shall not be binding unless they are in writing and signed by personnel authorized to bind each of the parties. Exceptions to mutual agreement amendments and assignments: A. When a certificate issues for the permit in Appendix B, said certificate shall automatically replace the permit and become the basis for this Agreement in Appendix B. B. This Agreement is assignable if accompanied by an equivalent assignment of the subject permit. A superseding permit issued in such event will become the basis for this Agreement in Appendix B. C. In the event a superseding permit issues based on an approved change decision by Ecology, said superseding permit will become the basis for this Agreement in Appendix B. However, in addition to other applicable criteria and transfer statutes, a change application shall only be approved for the permit or certificate if the new use, point of withdrawal, or other proposed change is capable of being mitigated through the Reclamation Contract. D. In the event a certificate has issued and the entire property to which the certificate is appurtenant is transferred to another party, this Agreement is assignable if agreed to by the current and proposed certificate holder. 8. Termination. A. The Applicant may terminate this Agreement upon thirty (30) calendar days' prior written notification to Ecology. In that event, the subject permit shall be cancelled by Ecology if still in effect. If a certificate is in effect, such termination shall constitute the certificate holder's intent to abandon the certificate and Ecology shall promptly revoke same. B. Ecology shall not terminate this Agreement unless: 1) The Reclamation Contract is renewed and Ecology is subjected to different or additional conditions for the water releases not covered by this Ecology-Applicant Water Service Contract. 2) The Reclamation Contract is terminated and Ecology has secured alternate mitigation for the permit or certificate. Page 216 of 222 Water Service Contract Ecology/City - 4 3) The Reclamation Contract is terminated and Ecology has not secured alternate mitigation for the permit or certificate1. 4) The Applicant fails to honor the terms of this Agreement, including payment. C. Prior to terminating this Agreement as described in 1) and 2) above, Ecology shall provide to the Applicant a new water service contract for review and execution at least ninety (90) calendar days prior to such termination. The goal of such notice is to provide informed and uninterrupted mitigation throughout the life of the permit of certificate. If Ecology terminates this Agreement as described in 1) and 2) above, the Applicant may: 1) Accept the terms of the new water service contract; or 2) Abandon use of the permit or certificate and either: a) Cease beneficial use associated with said right (e.g., no longer divert or withdraw water); or b) Continue the beneficial use under another suitable water right. D. Ecology shall not terminate this Agreement as described in B.4) above, unless it has taken the following steps: 1) Ecology must provide notice to the Applicant of Applicant's failure to comply with this Agreement and provide for 30 calendar days response by the Applicant. If the Applicant corrects such noncompliance within said 30 day period, Ecology shall not terminate this Agreement. Except, however, that if such noncompliance is due to failure to promptly provide annual payments as required herein, a late penalty of 5% shall be assessed. 2) If noncompliance persists beyond the 30 day notice period, Ecology may initiate termination of the Agreement by providing a ninety (90) calendar day Notice of Intent to Terminate. However, in the event the failure to comply cannot be reasonably corrected within 90 days, such period may be extended if the Applicant has commenced actions necessary for compliance and diligently pursues compliance to completion. 1 See the Reclamation Contract termination clause. Page 217 of 222 Water Service Contract Ecology/City - 5 3) Prior to termination, Ecology shall meet with Applicant in a good faith effort to resolve any dispute regarding the enforcement, interpretation, or breach of this Agreement. In the event the dispute is not resolved by agreement of the parties, with or without the assistance of mediation, such dispute shall be resolved by binding arbitration pursuant to RCW 7.04A, as amended, with both parties waiving the right of a jury trial upon trial de novo, with venue placed in Pasco, Franklin County, Washington, The substantially prevailing party shall be entitled to its reasonable attorney fees and costs as additional award and judgment against the other. E. In the event of termination by either party, all payments paid in advance for the coming calendar year shall remain with Ecology without refund. F. Ecology and the Applicant are each responsible for their own respective costs and attorney's fees in connection with this Agreement and any dispute related to the proper interpretation or implementation of this Agreement. No damages, direct or indirect, may be awarded to the Applicant due to failure of Ecology, or Ecology's officers, agents, or employees, to perform any obligation under this Agreement. G. The Applicant is not a third party beneficiary of the Reclamation Contract. 9. Governance. This Agreement is entered into pursuant to and under the authority granted by the laws of the State of Washington, and any applicable Federal laws. The provisions of this Agreement shall be construed to conform to those laws. In the event of an inconsistency in the terms of this Agreement, or between its terms and any applicable statute or rule, the inconsistency shall be resolved by giving precedence in the following order: A. Applicable State and Federal statutes and rules. B. Any other provisions of the Agreement, including material incorporated by reference. 10. Waiver. A failure by either party to exercise its rights under this Agreement shall not preclude that party from subsequent exercise of such rights and shall not constitute a waiver of any other rights under this Agreement unless stated to be such in writing signed by an authorized representative of the party and attached to the original Agreement. 11. All Writings Contained Herein. This Agreement contains all the terms and conditions agreed upon by the parties. No other understandings, oral or otherwise, regarding the subject matter of this Agreement shall be deemed to exist or to bind any of the parties hereto. IN WITNESS WHEREOF, the parties have executed this Agreement on the ____ day of ______________________, 20 _____. Page 218 of 222 Water Service Contract Ecology/City - 6 STATE OF WASHINGTON CITY OF PASCO, WASHINGTON DEPARTMENT OF ECOLOGY ___________________________________ ___________________________________ Tom Tebb, Director Dave Zabell, City Manager Office of Columbia River Approved as to Form: Approved as to Form: ____________________________________ ___________________________________ Assistant Attorney General , City Attorney Page 219 of 222 Quad City Water Right History The City of Richland applied for a water right (S4-30976) on September 23, 1991 for 178 cubic per second from the Columbia River. The water right was to provide process water for a proposed Boeing manufacturing facility to be located in north Richland. The water right was to meet industrial, commercial and other municipal needs within the municipal boundaries of the city of Richland. The Boeing facility was never built. On April 26, 1993 Ecology issued a preliminary permit for the water right. In the latter part of 1995, the four cities commenced a process to evaluate their water rights and options to meet the needs of the region. They became known at the Quad Cities. In the spring of 1996, the Quad Cities met with Ecology to discuss regional water supply needs of the Quad Cities. Later that year Ecology determined the application had lapsed due to a lack of information from the City regarding how the water was to be used and who the proposed users would be and canceled the permit on October 30th. In January 1997, the city of Richland sent Ecology a request they reconsider the cancellation of the Preliminary Permit and rejection of the Application. In May 1997, Ecology notified West Richland that if a regional water plan was developed, Ecology would reinstate the cancelled water right permit. In June 1997, the Quad Cities sent a letter to Ecology requesting the name of the application be changed to include all four cities with the place of use the same as their water wastewater facilities. On July 8, 1997 Ecology reinstated the application and the reassignment of the application to the Quad Cities. Later that year, the Quad Cities met with Ecology twice to discuss development of the regional water plan. In February 1999, Ecology notified the Quad Cities that following the Columbia River Consultation process, they expected to complete the application process by December. In November the Quad Cities was notified by Ecology to prepare a Supplemental Environment Impact Statement (SEIS) that would address instream flow, endangered species habitat issues and address any comments received during the Columbia River Consultation process. Ecology committed to have a Record of Examination (ROE) completed by June 2000. In June 2000, the final SEIS was issued and the Regional Water Supply Plan was published to meet Ecology’s requirements for a final decision on the Quad Cities application. Three weeks later Ecology notified the Quad Cities the application had been erroneously reinstated and was no longer valid and that no further work by Ecology would be done to process the application. In March 2001, an agreement was signed between the city of Pasco, the Columbia Snake River Irrigators Association and Ecology stating Ecology would process twelve water rights applications that were filed prior to 1991. The Quad Cities application was part of the twelve and ninth in the order of filing. Ecology then hired a consultant to prepare a draft ROE for the Quad Cities application along with other applications. At this point the twelve applications has been reduced to eleven with one being withdrawn. In 2002, Ecology refused to issue the Quad Cities ROE saying WAC 173-152-030(2) would only allow them to issue decisions on application for a particular source in the order filed. Six of the applications had an earlier priority date then the Quad Cities. Ecology refused to issue the Quad Cities ROE until the cities presented Ecology with signed waivers from the applicants ahead of them. Page 220 of 222 In a parallel case against Ecology by Kennewick Public Hospital District, city of Pasco, Klickitat County and the Columbia Snake River Irrigators, a preliminary injunction was issued precluding Ecology from applying the Columbia River BiOp Flow Targets as a rule without going through the rulemaking procedures to permits issued on the Columbia River. Quad Cities chose not to be included in the injunction. In November 2002, Benton County Superior Court ordered Ecology to issue the ROE. In December the Center for Environmental Law & Policy (CELP) appealed the order to the Pollution Controls Hearing Board. To avoid additional costs, time and litigation, the Quad Cities, Ecology and CELP agreed to settle. The settlement agreement was signed in August 2003 with agreed upon changes to the ROE and the permit was issued. The Record of Examination (ROE) placed several requirements on the permit, one of which is tracking mitigation requirements. This is done by checking the April-September runoff forecast at the Dalles Dam and then tracking the discharge flow over the Bonneville, Dalles and McNary Dams. “Water may be appropriated under this Permit ONLY when the following minimum instream flow requirements are EQUALED or EXCEEDED, or when the Consumptive water use associated with appropriations under this permit are fully mitigated: 1. Between April 10 and June 30, the minimum flow measured at McNary Dam will depend on the April-September runoff forecast at the Dalles Dams, such that: a. If the forecast is 80 MAF or less, the minimum flow is 220,000 cfs; b. If the forecast is greater than 80 MAF and less than 92 MAF, the minimum flow is 220,000+((40*(forecast-80)/12)* 1,000) cfs; c. If the forecast is greater than 92 MAF, the minimum flow is 260,000 cfs. 2. Between July 1 and August 31, the minimum flow measured at McNary Dam is 200,000 cfs. 3. From September 1 and October 31, the minimum flow measured at McNary Dam is 80,000 cfs. 4. Between November 1 and April 9, the minimum flow measured at Bonneville Dam will range from 125,000 cfs to 160,000 cfs, with the flow objective to be set by the FCRPS Technical Management Team every two weeks during that period.” Other requirements in the ROE included a leak detection program, a large meter testing program, residential meter repair/replacement program, residential retrofit program, source metering replacement and improvement, development of a water audit program for large water users’ development of a joint plan with other irrigation districts to address urban area irrigation needs and the development of an integrated water shortage and drought response plan. The Quad Cities, separately, document their water production and consumption along with the other requirements in an annual Water Conservation Summary. Another condition of the ROE was for Ecology to provide mitigation for the first 10cfs permitted. The remaining water right would be permitted in 10 cfs increments with the Quad Cities procuring mitigation on a cfs per cfs basis. Ecology has difficulties procuring mitigation for the first Page 221 of 222 10 cfs and finally acquired the Buckley and Byerly water rights which provided a third of the required mitigation. Ecology also adjusted the water rights to make the majority of the mitigation available in the spring and fall months which did not match the consumptive use with irrigation and peak uses during the seasonal hot months. In 2006 the Legislature tasked Ecology to aggressively look for new water supplies that could be used for both instream and out of stream uses. The Legislature appropriated $200 million to fund and create a new office, the Office of Columbia River (OCR). OCR immediately began negotiating with the Colville Confederated Tribes to address the effects of water released in the mainstream Columbia River from Lake Roosevelt. An agreement which included 25,000 acre-feet of water rights for municipal and industrial use for existing applicants within one mile from the Columbia River was entered into. This water is mitigation free but comes with a cost of $35/acre-foot/year. The remaining mitigation for the Quad City water right was issued from the Lake Roosevelt pool of water and the mitigation requirement for the first 10 cfs was completed. In November 2011 the Quad Cities applied for 165 cfs of water out of the Lake Roosevelt water and was issued a water right number (S4-33044). In December 2011 a memorandum of agreement was approved between Ecology’s OCR and the Quad Cities to reserve 2 cfs of the original 10 cfs for mitigation on future increments of the water right. This reduced the available acre-feet of Quad City water right from 5,781 acre-feet to 4,336 acre-feet. In 2014 the city of Pasco applied for a water right split to allow them to develop 5,000 acre- feet of the Lake Roosevelt water (S4-33044). Ecology has approved the split and Pasco is moving forward to develop and put the water to beneficial use. Page 222 of 222