AN ORDINANCE relating to Seattle Public Utilities; authorizing the Director of Seattle Public Utilities to execute a Second Amended and Restated Declining Block Water Supply Agreement between the City of Seattle and Cascade Water Alliance.

WHEREAS, pursuant to Ordinance No. 121373, dated December 15, 2003, the City of Seattle and the Cascade Water Alliance (Cascade) signed a 50-year Declining Block Water Supply Agreement to supply Cascade's member utilities with an initial base block of water of 30.3 million gallons per day (MGD) average daily demand through the end of 2023, then incrementally decreasing by 5 MGD every five years to the end of the contract term at the end of 2053 (Base Block); and

WHEREAS, pursuant to Ordinance No. 122867, dated December 4, 2008, the City of Seattle and Cascade signed an Amended and Restated 50-year Declining Block Water Supply Agreement to supply Cascade's member utilities with an additional supplemental block of water consisting of 3.0 MGD average daily demand from 2009 through 2017 and 5.0 MGD average daily demand from 2018 through 2023 (Supplemental Block); and

WHEREAS, Cascade desires to defer the large capital investment to develop its Lake Tapps water right as its independent water supply by purchasing additional block water from the Seattle regional supply system on an interim basis and using its members' independent supplies to meet Cascade's projected demands through 2039; and

WHEREAS, Seattle has additional water supply available to sell on an interim basis in addition to meeting the projected demands of its existing retail and wholesale customers, and while still meeting the Cedar River water diversion limits set forth in Seattle's settlement agreement with the Muckleshoot Indian Tribe filed in the United States District Court for the Western District of Washington; and

WHEREAS, Seattle's sale of additional water supply to Cascade will benefit the City of Seattle and the City of Seattle's other wholesale customers by providing additional revenue to the Seattle regional water supply system; and

WHEREAS, Seattle Public Utilities and Cascade have negotiated a Second Amended and Restated Declining Block Water Supply Agreement to reduce the Supplemental Block between 2018 and 2023, supply Cascade's member utilities additional block water from 2024 through 2044, to restructure the declining blocks and extend the term through 2063; and

WHEREAS, the agreement negotiated by the parties requires Cascade to make three lump sum transition payments, scheduled to be made in 2013, 2018, and 2024, which, under applicable accounting standards, are normally recognized as revenue at the time a contract is signed unless the City Council authorizes that the payments may be recognized as revenue at the time they are received; and

WHEREAS, the City of Seattle desires to defer recognizing the revenue from the three transition payments until the years in which the payments are received to facilitate smoother rate impacts from the payments; NOW, THEREFORE,

BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:

Section 1. The Director of Seattle Public Utilities is authorized to execute a contract with Cascade Water Alliance substantially in the form of the Second Amended and Restated Declining Block Water Supply Agreement attached hereto and identified as Attachment 1.

The amended agreement: A) reduces the Supplemental Block by 2.0 MGD from 2018 through 2023; B) adds additional Base and Supplemental Block water, ranging in quantities of 8.0 MGD to 21 MGD total, from 2024 through 2044; C) restructures the declining block after 2044; D) extends the agreement through 2063; and E) clarifies a number of provisions related to the additional sale of block water, including compensation and conditions for resale.

Section 2. The Director of Seattle Public Utilities is authorized to defer the recognition of revenue from the three contract transition payments until the years in which the payments are received.

Section 3. This ordinance shall take effect and be in force 30 days after its approval by the Mayor, but if not approved and returned by the Mayor within ten days after presentation, it shall take effect as provided by Seattle Municipal Code Section 1.04.020.

Passed by the City Council the ____ day of ________________________, 2013, and signed by me in open session in authentication of its passage this

_____ day of ___________________, 2013.

_________________________________

President __________of the City Council

Approved by me this ____ day of _____________________, 2013.

_________________________________

Michael McGinn, Mayor

Filed by me this ____ day of __________________________, 2013.

____________________________________

Monica Martinez Simmons, City Clerk

(Seal)

Sheila C Strehle SPU Cascade Water ORD March 8, 2013 Version #6

Attachment 1 Second Amended and Restated Declining Block Water Supply Agreement between the City of Seattle and Cascade Water Alliance

2 ^ND AMENDED AND RESTATED

DECLINING BLOCK

WATER SUPPLY AGREEMENT BETWEEN

THE CITY OF SEATTLE

AND

THE CASCADE WATER ALLIANCE

___________________, 2013

TABLE OF CONTENTS

LIST OF SECTIONS

ARTICLE I AGREEMENT 4

ARTICLE II DEFINITIONS 4

ARTICLE III SUPPLY 6

ARTICLE IV TRANSMISSION 10

ARTICLE V WATER QUALITY 12

ARTICLE VI CONSERVATION 12

ARTICLE VII PLANNING 13

ARTICLE VIII COST RECOVERY 13

ARTICLE IX ADMINISTRATION 21

ARTICLE X TECHNICAL COMMITTEE 22

ARTICLE XI DISPUTE RESOLUTION 23

ARTICLE XII UNFORESEEN AND UNAVOIDABLE EVENTS 23

LIST OF EXHIBITS

I. Other Agreements

II. Cascade Points of Delivery

III. Block Allocations of Water by Individual Seattle Wholesale Customers

IV. Seattle Supply System Facilities

V. Seattle Transmission System Facilities

VI. Cost Centers used for Operations Cost Indexes

VII. Cascade Sub-regional System Facilities

VIII. Wholesale Sales under Section 3.6

2 ^nd AMENDED AND RESTATED

DECLINING BLOCK

WATER SUPPLY AGREEMENT BETWEEN

THE CITY OF SEATTLE

AND

THE CASCADE WATER ALLIANCE

This 2 ^nd amendment to and restatement of the Declining Block Water Supply Agreement between the City of Seattle, a municipal corporation ("Seattle"), and the Cascade Water Alliance, a joint municipal utility services authority formed under authority of Chapter 39.106 RCW ("Cascade"), is dated and effective this ___ day of ____________, 2013 ("Agreement").

Whereas, Seattle is a regional water supplier currently providing service to numerous water utilities in King County, Washington; and

Whereas, the Cascade Water Alliance was formed for the purpose of providing water supply to its Members; and

Whereas, in 2004, the Cascade Water Alliance and Seattle entered into a 50-year Declining Block Water Supply Agreement, which was amended and restated in 2008; and

Whereas, in 2012, Cascade converted from a non-profit corporation formed under the Interlocal Cooperation Act to a municipal corporation under the Joint Municipal Utility Services Act, Chapter 39.106 RCW; and

Whereas, regional municipal water supply forecasts show a demand growing more slowly than previously forecast over the next 50 years resulting in an opportunity to reconsider future supply planning by both Parties; and

Whereas, after meeting the demands of its existing retail and wholesale customers, Seattle has water supply available to sell for a defined period with minimal risk of triggering the need for new supply development prior to 2060; and

Whereas, Cascade has determined that it can defer development of its Lake Tapps water right by purchasing additional block water from Seattle for a defined period and using its members' independent supplies; and

Whereas, temporary sales of additional block water from Seattle to Cascade would bring additional revenue into the Seattle system and allow Cascade to defer substantial capital investment to develop its Lake Tapps water right into the future; and

Whereas, Cascade and Seattle desire to amend the 2008 Amended and Restated 50-year Declining Block Supply Water Supply Agreement to restructure the supplemental block of water through 2023, to extend the total block of water from 2024 through 2044 and to restructure the declining block increments, all of which are mutually beneficial to the Parties and their respective customers by maximizing existing resources and stabilizing rate paths; and

Whereas, the Parties intend that this amendment to the Agreement continue the existing structure as a declining block contract based on the expectation that Cascade will develop its own independent supply and that Seattle will have no further obligation to provide additional water to Cascade during or beyond the amended term of this Agreement;

Now therefore, Seattle and Cascade agree to the following terms and conditions for the provision and purchase of a declining block water supply.

ARTICLE I AGREEMENT

Seattle agrees to sell to Cascade and Cascade agrees to purchase from Seattle, according to the terms of this Agreement, a wholesale supply of water and the transmission capacity sufficient to deliver such water supply to Cascade.

The term of this Agreement is January 1, 2004 through December 31, 2063.

Beginning January 2020, and again each January at 5-year intervals, either Cascade or Seattle may request consideration of further extension of the supply commitment. Neither Party is obligated to agree to such discussion or any related extension or other amendment; and any extension or amendment would be subject only to terms negotiated at the time of such written amendment to this Agreement in accordance with Section 9.4.

Apart from the contract right to purchase water from Seattle under the terms of this Agreement, neither Cascade nor any Cascade Member has any right or claim to the Seattle Water System, the Cedar and Tolt Rivers and to the Seattle Well Fields, or to any other water right or claim held by Seattle. Likewise, Seattle shall have no right or claim to the Cascade Water System or to any groundwater right or claim held by any Cascade Member, or to any future source of supply developed by Cascade or by any of its Members. At the termination of this Agreement, Seattle shall have no further obligation to supply Cascade or any Cascade Member with water, with the exception of Cascade's right to purchase up to 5.3 MGD as set forth in Section 3.5.

ARTICLE II -DEFINITIONS

8 MGD Wholesale Water Supply. All or any portion of the 8 MGD Wholesale Water Supply as that term is defined in the Amended and Restated Agreement for the Sale of Wholesale Water between Cascade and the City of Tacoma, dated December 31, 2012. The Parties understand and agree that the 4 MGD and 6 MGD Wholesale Water Supplies under that same agreement are not covered by this Agreement as they would be wholesale sales by the City of Tacoma, not Cascade.

Average Daily Demand ("ADD"). The amount of water supplied by the Seattle Water System to Cascade in a calendar year divided by the number of days in that calendar year.

Base Block. The amount of water Seattle commits to supply Cascade beginning on January 1, 2004 through the termination date of this Agreement, as specifically scheduled in Section 3.4 A.

Cascade Block. The total amount of water Seattle commits to supply Cascade under this Agreement, composed of the Base Block and the Supplemental Block, as more fully expressed in Article III.

Cascade Member. A Member of Cascade as that term is defined in the Cascade Water Alliance Joint Municipal Utility Services Agreement, dated March 28, 2012, as it may be amended from time to time.

Cascade Points of Delivery. Seattle owned and operated specific metered delivery locations serving Cascade Members as listed in Exhibit II, at which Seattle provides a defined level of service, beginning from the outlet from the supply pipeline to the end of the Seattle meter vault, including the water meter and associated appurtenances.

Cascade Sub-regional System. Seattle owned and operated Transmission System assets serving Cascade Members as listed in Exhibit VII.

Cascade Water System. Tangible and intangible assets owned or operated by Cascade useable in connection with the provision of water supply.

Existing Supply System Facilities. Seattle owned and operated Supply System assets as listed in Exhibit IV.

Existing Transmission System Facilities. Seattle owned and operated Transmission System assets as listed in Exhibit V.

Firm Yield. The estimated amount of water that Seattle's Supply System can provide according to Seattle's supply reliability standard and expressed in annual average MGD. For purposes of this Agreement, Seattle's Firm Yield is 171 MGD, unless modified pursuant to Section 3.2.

Full or Partial Requirements Customer Commodity Charge . The rate charged per 100 cubic feet (ccf) to wholesale customers served under Full or Partial Requirements Contracts in accordance with Seattle Municipal Code (SMC) 21.04.440.E.2, as it may be amended from time to time.

Management Agreement. A written agreement, pertaining to subjects authorized by this Agreement, between the Director, Seattle Public Utilities, and the Chief Executive Officer ("CEO"), Cascade Water Alliance.

MGD. Million gallons per day.

Party (ies). Seattle and/or Cascade, as well as their respective successors and assigns.

Peak Month. The consecutive thirty(30) day period during a calendar year in which Cascade puts its maximum demand upon the Seattle Water System.

Peak Month Factor. Average Daily Demand multiplied by 1.69

Peak Season. June 1 through September 30.

Peak Season Factor. Average Daily Demand multiplied by 1.35

Rate of Return on Investment. The average cost of debt of the Seattle water system plus 1.5 percent.

Seattle Water System . All Seattle owned and operated water rights and claims and all Seattle owned and operated facilities, including the Seattle Supply System Facilities as listed in Exhibit IV, the Seattle Transmission System Facilities as listed in Exhibit V, Cascade and other Subregional Facilities and Points of Delivery, together comprise the Seattle Water System.

Sub-regional Facilities. Any facilities owned and operated by Seattle that are not identified as Existing Supply System (Exhibit IV), Existing Transmission System (Exhibit V), or Cascade Sub-regional System (Exhibit VII).

Supplemental Block. The amount of water Seattle commits to supply Cascade beginning on January 1, 2009 through December 31, 2044, as specifically scheduled in Section 3.4 B.

White River -Lake Tapps Reservoir Project. Cascade's project to develop a new municipal drinking water supply in the future from the White River and Lake Tapps under water rights issued in 2010 under Permit Nos. S2-29920(A) and (B), S2-29934, R2-29935, and Claim No. 160822, as more particularly defined in Cascade's 2012 Transmission and Supply Plan.

ARTICLE III SUPPLY

3.1 A. Each calendar year from the effective date of this Agreement, Seattle shall make available to Cascade the Base Block, according to the schedule set forth in Section 3.4 A.

B. Each calendar year commencing January 1, 2009 and terminating on December 31, 2044, Seattle shall make available to Cascade the Supplemental Block, according to the schedule set forth in Section 3.4 B.

3.2 In the event the Firm Yield of the Seattle Supply System is reduced, the Cascade Block will be reduced in proportion to such reduction in Firm Yield only if the Firm Yield is reduced by order of a State or Federal regulatory agency with appropriate jurisdiction or as the result of updated climatic data utilized in the hydraulic model used to calculate Firm Yield, unless the Parties mutually agree by Management Agreement to a different reduction or no reduction to the Cascade Block if it is in each their best interests at the time. In the event of any reduction to the Cascade Block, the Base and Supplemental Blocks will be reduced in the same proportion, as appropriate. Cascade shall be notified of any potential change in Firm Yield as far in advance as possible, but in no event less than 180 days prior to the effective date of an adjustment to Firm Yield that affects the Cascade Block.

3.3 Seattle will supply the Cascade Block during the Peak Season and Peak Month as follows below and will be adjusted proportionately in relation to the decreases identified in Section 3.4:

A. During the Peak Season, Seattle shall make available the Cascade Block multiplied by the Peak Season Factor.

B. During the Peak Month, Seattle shall make available the Cascade Block multiplied by the Peak Month Factor.

3.4

A. The Base Block shall be supplied in accordance with the following schedule:

1. Beginning January 1, 2004 through December 31, 2023, Seattle shall make available to Cascade 30.3 MGD Average Daily Demand;

2. Beginning January 1, 2024 through December 31, 2029, Seattle shall make available to Cascade 29.3 MGD Average Daily Demand;

3. Beginning January 1, 2030 through December 31, 2034, Seattle shall make available to Cascade 26.8 MGD Average Daily Demand;

4. Beginning January 1, 2035 through December 31, 2045, Seattle shall make available to Cascade 24.3 MGD Average Daily Demand;

5. Beginning January 1, 2046, Seattle shall make available to Cascade 23.3 MGD Average Daily Demand, and on each January 1 thereafter through December 31, 2063, the amount will decline by 1 MGD Average Daily Demand until it reaches5.3 MGD Average Daily Demand.

6. Beginning January 1, 2064, Seattle shall make available to Cascade up to 5.3 MGD Average Daily Demand in accordance with Section 3.5.

B. The Supplemental Block shall be supplied in accordance with the following schedule:

1. Beginning January 1, 2009 through December 31, 2023, Seattle shall make available to Cascade 3.0 MGD Average Daily Demand;

2. Beginning January 1, 2024 through December 31, 2029, Seattle shall make available to Cascade 4.0 MGD Average Daily Demand.

3. Beginning January 1, 2030 through December 31, 2034, Seattle shall make available to Cascade 6.5 MGD Average Daily Demand.

4. Beginning January 1, 2035 through December 31, 2039 Seattle shall make available to Cascade 9.0 MGD Average Daily Demand.

5. Beginning January 1, 2040 through December 31, 2040 Seattle shall make available to Cascade 7.0 MGD Average Daily Demand.

6. Beginning January 1, 2041 through December 31, 2041 Seattle shall make available to Cascade 5.0 MGD Average Daily Demand.

7. Beginning January 1, 2042 through December 31, 2042 Seattle shall make available to Cascade 3.0 MGD Average Daily Demand.

8. Beginning January 1, 2043 through December 31, 2043 Seattle shall make available to Cascade 2.0 MGD Average Daily Demand.

9. Beginning January 1, 2044 through December 31, 2044 Seattle shall make available to Cascade 1.0 MGD Average Daily Demand.

3.5 Beginning January 1, 2064, Cascade shall have the right to purchase up to 5.3 MGD for the sole purpose of serving Cascade Members that cannot be economically served by any other means than the Seattle Transmission System. The right to purchase up to 5.3 MGD shall be exercised by Cascade by providing written notice to Seattle by December 31, 2062, specifying the Block of water from zero to 5.3 MGD and the Cascade Members to be served by that Block. If Cascade exercises this right, the parties shall enter into a separate agreement.

3.6

A. All water supplied to Cascade under this Agreement is provided with the intent to serve Cascade Members' retail customers without limitation.

B. Cascade or Cascade Members may sell water supplied under this Agreement, or water from their respective independent supplies offset by water supplied under this Agreement, for wholesale purposes to non-Cascade Members only as follows:

1. For temporary emergency purposes under those specific emergency intertie agreements identified in Exhibit I.

2. To wholesale customers of Cascade or a Cascade Member as of January 31, 2013 . The parties will amend Exhibit I by Management Agreement by June 1, 2013 to reflect all of the non-Cascade Members being served under this provision.

3. Within the boundaries reflected on the map attached as Exhibit VIII provided that: (a) Cascade provides advance written notice to Seattle in a form mutually agreed by the Parties by Management Agreement; and (b) if water sales under this subsection cumulatively exceed 0.5 MGD, an amount equivalent to any amounts exceeding the 0.5 MGD will be converted from Base Block to Supplemental Block and charged in accordance with Section 8.8 from the effective date of the sale. Cumulative water sales under this subsection of 0.5 MGD and below will not trigger a conversion from Base Block to Supplemental Block ("0.5 MGD Allowance").

4. Outside the boundaries reflected on the map attached as Exhibit VIII , except for then-current Seattle Wholesale Customers, provided that: (a) Cascade obtains Seattle's prior written consent; and (b) an equivalent amount of the Base Block will be converted to Supplemental Block and charged in accordance with Section 8.8 from the effective date of the sale. Seattle's consent may be subject to conditions Seattle deems reasonably necessary to protect the Seattle Regional Water Supply System. This provision does not apply to sales described in Section 3.6 B.5 below.

5. From the 8 MGD Wholesale Water Supply from the City of Tacoma or water supplies from Cascade's White River Lake Tapps Reservoir Project , except for then-current Seattle Wholesale Customers, provided that: (a) Cascade provides advance written notice to Seattle in a form mutually agreed by the Parties by Management Agreement; and (b) an equivalent amount of the Base Block will be converted to Supplemental Block and charged in accordance with Section 8.8 from the effective date of the sale, unless the sale is part of the 0.5 MGD Allowance under Section 3.6 B.3 above.

6. To then-current Seattle Wholesale Customers provided that: (a) Cascade obtains Seattle's prior written consent; and (b) the full amount of the Base Block will be converted to Supplemental Block and charged in accordance with Section 8.8 from the effective date of the sale. Seattle's consent may be subject to conditions Seattle deems reasonably necessary to protect the Seattle Regional Water Supply System.

For the purposes of this Section 3.6 B, the Parties understand and agree that any wholesale sales made by Cascade or a Cascade Member prior to the full implementation and delivery of water supplies from Phase 2 of Cascade's White River -Lake Tapps Reservoir Project are made with water supplied under this Agreement or water from Cascade or Cascade Member's respective independent supplies offset by water supplied under this Agreement and that the applicable provisions of this Section 3.6 B apply to such wholesale sales. After the full implementation and delivery of water supplies from Phase 2 of Cascade's White River -Lake Tapps Reservoir Project, the Parties understand and agree that the applicable provisions of this Section 3.6 B will apply unless Cascade demonstrates and Seattle agrees that a particular wholesale sale by Cascade or a Cascade Member is from surplus independent supplies without offset by water supplied under this Agreement.

C. All water supplied under this Agreement must be used within the designated place of use of Seattle's water system plan, water certificates, permits, or claims.

3.7 During the term of this Agreement, if a Seattle Wholesale Customer identified in Exhibit III becomes a Cascade Member, Seattle will release that customer from its obligations under its existing water supply contract with Seattle in accordance with the provisions of such contract and the Supplemental Block will be increased by the allocated block of water identified in Exhibit III for that customer, with a corresponding proportional increase to any adjustments or limitations to the Cascade Block under Sections 3.3, 3.4 and 3.13. If that entity takes delivery of all or a portion of its water through a Subregional Facility, Cascade and Seattle shall enter into a Management Agreement to include the costs of such facility under this Agreement prior to increasing the Supplemental Block.

3.8 For the purpose of determining the consecutive 30-day period, which constitutes the Peak Month, a daily average delivery may be calculated so long as meter readings occur no fewer than 26 days apart. In such cases, daily average delivery shall be calculated by dividing the total deliveries by the actual number of days between meter readings. Periods less than 26 days shall not be applicable for determining the Peak Month.

3.9 Daily average delivery during the Peak Season may be calculated using meter readings taken closest to June 1 and September 30 each year and dividing the total delivery during such time by the actual number of days between meter readings. Periods less than 110 days shall not be applicable for determining the Peak Season.

3.10 Average Daily Demand for a calendar year may be calculated by using the monthly meter readings around the 20 ^th of each month from February through December of that calendar year plus a prorated amount for the number of days in January from the January meter read in that calendar year plus a prorated amount for the number of days in December from the January meter read in the following calendar year and dividing the total deliveries during such time by the actual number of days in that calendar year. The year-end prorations used to calculate ADD may be adjusted by Management Agreement based on changed meter reading procedures.

3.11 Seattle shall endeavor to read the meters at all Cascade Points of Delivery on the same day. In the event that meters at any Cascade Point of Delivery cannot be read on the same day, all meter reads for that metering period shall be considered to occur on the day on which the meters measuring the majority of the Cascade volume for that metering period were read.

3.12 Normal operation of the water system includes the periodic shutdown of various facilities for routine maintenance, rehabilitation and replacement. Seattle and Cascade shall cooperate in the timing of such activities. Cascade shall not use such activities as evidence of the unavailability of supply or transmission services provided by Seattle under this Agreement so long as Seattle proceeds in good faith to restore such facilities to service.

3.13 Nothing in this Agreement, including, but not limited to, any penalties for exceedance of the Cascade Block, shall be construed to require Seattle to sell or deliver water in excess of the following amounts:

A. Total deliveries during a calendar year in the amount of the Cascade Block multiplied by 365 days (366 in leap years);

B. Total deliveries during the Peak Season in the amount of the Cascade Block multiplied by 165 days;

C. Total deliveries during the Peak Month in the amount of the Cascade Block multiplied by 51 days;

D. Total deliveries during any consecutive 30-day period from October 1 to May 30 in the amount of the Cascade Block multiplied by 30 days;

E. Total deliveries during any consecutive 7-day period in the amount the Cascade Block multiplied by 13 days;

F. Total deliveries within any one-day period in the amount of the Cascade Block multiplied by 2 days.

Upon notice by Seattle of exceedance of these limits, Cascade must immediately reduce its deliveries of Seattle water. Upon the failure of Cascade to reduce its demand, Seattle may install and operate devices that limit deliveries to Cascade to these amounts, all at Cascade's expense.

ARTICLE IV TRANSMISSION

4.1 Each calendar year during the term of this Agreement, Seattle shall sell to Cascade and Cascade shall purchase from Seattle capacity in the Seattle Transmission System according to the following terms and conditions:

A. Seattle shall provide capacity sufficient to supply the Cascade Block to Cascade at Cascade Points of Delivery. Adjustments in the Cascade Block shall result in an equivalent adjustment in Seattle's Transmission capacity commitment. The specific Cascade Points of Delivery that are to be adjusted and the adjustment for each Cascade Point of Delivery shall be determined by Management Agreement so long as a determination is made that there is no adverse impact on the overall Seattle Water System.

B. Cascade Points of Delivery are specifically identified in Exhibit II. The location, hydraulic gradient and instantaneous flows at each Cascade Point of Delivery may be changed by Management Agreement.

C. Seattle shall supply water at the inlet side of each Cascade Point of Delivery meter at a hydraulic gradient no less than the minimum identified in Exhibit II provided that the instantaneous flow does not to exceed that set forth in the same exhibit. Seattle may change the minimum hydraulic gradient at any Cascade Point of Delivery once during any fifteen-year period, provided that four years prior notice is given to Cascade. Under emergency conditions or other unusual short-term operating situations Seattle shall not be obligated to meet minimum hydraulic gradients.

D. Cascade may request changes to existing or additional Cascade Points of Delivery from the Seattle Transmission System, which Seattle may approve or reject at its sole discretion. Seattle shall establish the minimum hydraulic gradient for any new Cascade Point of Delivery at its sole discretion, after consultation with Cascade. Changes in or additional Cascade Points of Delivery shall be determined by Management Agreement.

E. No provision of this Agreement shall be construed to require Seattle to provide flows greater than those identified in Exhibit II. Upon notice by Seattle, Cascade shall immediately reduce Cascade deliveries at a Cascade Point of Delivery to not more than those identified in Exhibit II. In the event that Cascade is unwilling or unable to reduce deliveries as required under this provision, Seattle may install and operate flow restricting devices at non-compliant Cascade Points of Delivery, all at Cascade expense.

4.2 Cascade is served, in part, by transmission facilities referred to as the Cascade Sub-regional System listed in Exhibit VII. The costs of operating, maintaining, repairing and replacing these facilities shall be the responsibility of Cascade as outlined in Sections 8.6 and 8.7 below.

4.3 Nothing herein shall restrict Cascade's authority to construct an independent water transmission system for its own water supply.

4.4 Cascade Members have interties, listed in Exhibit I, with adjacent water utilities that are non-Cascade members. Exhibit I may be updated by Management Agreement. Any existing agreements related to the billing and meter reading arrangements for these interties are assumed as a part of this Agreement. If new interconnections between Cascade or Cascade Members and non-Cascade members require similar billing and meter reading arrangements, such arrangements shall be defined in an agreement to be entered into by Cascade, Seattle and the non-Cascade member.

4.5 A. Transmission Wheeling. Seattle, at its discretion, may make excess transmission capacity available for a fee and under conditions it deems reasonable, for purposes of wheeling other water supply between points within the Seattle Water System to Cascade or others.

B. Interconnection/Intertie.

1. In the event Cascade requests an interconnection to the Seattle Water System to take delivery of any other water supplied to Cascade under separate water supply contracts or arrangements, Cascade shall, at its expense, be responsible for the design, engineering, permitting and construction of any and all infrastructure necessary to interconnect to the Seattle Water System. Any interconnection to the Seattle Water System or intertie between the Seattle Water System and another water supply system will be subject to Seattle's review, approval and such conditions and requirements as Seattle and the other water supply system owner may determine to be reasonably necessary in order to provide and maintain the safe and efficient design, function, capacity, water quality, integrity and reliability of their respective water supply systems.

2. Seattle may request that the interconnection allow for joint use for Seattle's purposes subject to mutually agreed upon terms.

ARTICLE V WATER QUALITY

Seattle shall be responsible for water quality within the Seattle Water System, and it shall supply water to Cascade, that meets or exceeds federal and state drinking water quality standards, as those standards may change from time to time.

ARTICLE VI CONSERVATION

Each Party is committed to the principles of water conservation and each intends to achieve its anticipated savings by implementing water conservation programs either unilaterally or in partnership with other agencies. Cascade understands and agrees that as an existing wholesale customer of Seattle, this commitment includes good faith efforts in meeting the intent of Part 1, Section B.1.5 of the Settlement Agreement between the Muckleshoot Indian Tribe and the National Marine Fisheries Services and the City of Seattle (Civ. No. 03-3775JLR), by implementing, through its own water conservation program(s), conservation measures that provide comparable savings to those implemented by Seattle within the Seattle Retail Distribution System.

ARTICLE VII PLANNING AND SHORTAGE MANAGEMENT

7.1 Each Party recognizes its obligation to plan for water supply and distribution in compliance with the State Department of Health water system planning regulations. Each Party shall develop a water system plan for its service area and the Parties shall coordinate those elements of overlapping responsibilities.

7.2 Cascade and Seattle shall coordinate the development, adoption and implementation of their respective Water Shortage Management Plans. Before invoking its Water Shortage Management Plan, the Parties shall communicate with each other concerning current and projected water supply conditions.

7.3 Seattle has negotiated agreements with federal agencies, state agencies and tribes for the long term preservation and enhancement of watersheds and in-stream beneficial uses and habitat. Such agreements have direct bearing on decisions to curtail the amount of water available for municipal and industrial water supply in any given season. Any water use restrictions imposed under the terms of such agreements shall be borne proportionately by Seattle, its other wholesale customers, and Cascade with respect only to the size of the Cascade Block at the time curtailment is required. In that event, the Base and Supplemental Blocks will be reduced or restricted in the same proportion, as appropriate.

ARTICLE VIII COST RECOVERY

8.1 The provisions of this Article shall apply to the establishment of fees and charges for water supply and related services. The parties understand and agree that the cost allocation and recovery provisions were specifically negotiated and based on specific consideration of the circumstances of this extended and restructured declining block contract, including but not limited to the limitations and restrictions applied in this Agreement, recognition of protection against stranded costs in the Seattle Water System, and recognition of the anticipated savings from Cascade's deferred capital project expenditures.

8.2 For the purposes of allocating costs of water supply, there shall be two water supply cost pools consisting of an existing Seattle water supply assets cost pool ("Existing Supply Cost Pool") and a new Seattle water supply assets cost pool (the "New Supply Cost Pool").

A. Existing Supply Cost Pool. The costs of infrastructure, including operation, maintenance, repair and replacement of Seattle Supply System Facilities listed in Exhibit IV shall be included in the Existing Supply Cost Pool

B. New Supply Cost Pool . The costs of water supply resources developed in the future ("New Supply Resources") that expand the capacity of the Seattle Supply System, including the costs of the Regional Conservation Program shall be included in the New Supply Cost Pool. If any portion of a New Supply Resource project enhances reliability of Existing Supply Resources, the costs thereof may be allocated to the Existing Supply Cost Pool by Management Agreement.

8.3 For purposes of determining the cost of the transmission of water to the Wholesale Customers there shall be three transmission cost pools consisting of an existing transmission cost pool ("Existing Transmission Cost Pool"), a new transmission cost pool ("New Transmission Cost Pool"), and a Cascade transmission cost pool ("Cascade Sub-regional System Cost Pool").

A. Existing Transmission Cost Pool. Costs to be allocated to the Existing Transmission Cost Pool shall consist of the following: operation, maintenance, repairs and replacements to the Seattle Transmission System Facilities listed in Exhibit V and may include costs related to Cascade Points of Delivery in accordance with this Agreement or as mutually agreed by Management Agreement to address third party claims arising from a Cascade Point of Delivery. Costs incurred for purposes of transmission reliability may be included in the Existing Transmission Cost Pool by Management Agreement.

B. New Transmission Cost Pool. The cost of new transmission facilities shall be included in the New Transmission Cost Pool. A portion of the renewal, replacement or modification of existing transmission facilities which create an expansion of transmission capacity may be allocated to the New Transmission Cost Pool.

C. Cascade Sub-regional System Cost Pool. The costs of operating, maintaining, repairing and replacing the Cascade Sub-Regional System Facilities owned by Seattle and listed in Exhibit VII shall be included in the Cascade Sub-regional System Cost Pool, in an amount proportionate to the use of the facilities by Cascade, together with any other costs Cascade and Seattle agree to include by Management Agreement. In the event that Cascade ceases to receive water through one or more of the facilities in the Cascade Subregional System, these facilities may be decommissioned at Seattle's sole discretion, and Cascade shall pay Seattle for the remaining Net Book Value of the decommissioned facilities in an amount proportionate to the use of the facilities by Cascade together with any decommissioning costs.

8.4 A. If Seattle determines that changing the location of a Cascade Point of Delivery is required for the improved operation of the Seattle Transmission System then such costs shall be included in the Existing Transmission Cost Pool. Seattle shall notify Cascade of any proposed changes to a Cascade Point of Delivery and consult with Cascade to ensure minimal impact on the affected Cascade Member's distribution system and appropriate coordination of operation and construction activities.

B. The costs of operating, maintaining, repairing, replacing, relocating, adding or improving Cascade Points of Delivery for any reason other than Section 8.4.A shall be borne by Cascade, except to the extent that such costs are due to the negligence of Seattle. Costs will be invoiced and due in 30 days upon receipt or as otherwise provided for by Management Agreement as provided in Article X. Seattle shall notify Cascade of any proposed improvements to a Cascade Point of Delivery and consult with Cascade to ensure minimal impact on the affected Cascade Member's distribution system and appropriate coordination of operation and construction activities. Allocation of costs related to third party claims arising from Cascade Points of Delivery may be handled pursuant to a Management Agreement.

8.5 Seattle shall maintain a cost accounting system consistent with the provisions of this Agreement and generally accepted accounting principles consistently applied in developing the financial information for determining the costs of construction, replacement, maintenance and operation of the facilities in each cost pool.

A. Asset Accounts . An asset account shall be maintained for each facility and within that account Seattle shall record the original cost of that facility plus betterments and less retirements.

B. Depreciation . Facilities shall be depreciated according to Standard Water System Asset Lives and a record of life-to-date depreciation shall be maintained for each facility. No depreciation shall be recorded in the first calendar year of operation of a facility. A full year's depreciation shall be recorded in every subsequent year.

C. Net Book Value . The net book value of any facility shall be its original cost plus betterments and less retirements as recorded in its facility asset account, less life-to-date depreciation.

8.6 Costs in each cost pool shall be calculated as follows:

A. Infrastructure Costs . Each cost pool shall include the infrastructure costs for its respective facilities, calculated on a utility, cash or other basis depending upon the facility and the cost pool as set forth below.

1. Utility Basis . The utility basis shall be used to calculate the infrastructure costs for all Existing Supply Facilities, all Existing Transmission Facilities, and all Cascade Sub-Regional System facilities, as well as their replacements and betterments. Under the utility basis, the infrastructure cost for a facility in any year shall be the sum of (i) the annual depreciation expense recorded for that facility and (ii) the product of the net book value of that facility and the Rate Of Return On Investment. At Seattle's discretion, interest costs may be considered current infrastructure costs during the construction of a facility. However, any such interest costs must then be considered contributions in aid of construction, and not included in the Net Book Value of the facility for purposes of calculating Utility Basis costs in future years.

B. Operations Costs . The costs of operating the assets assigned to a cost pool shall be included in the cost pool. The annual operations costs of a cost pool shall be the labor, materials, equipment and other direct costs required for the operation and maintenance of the facilities in that cost pool, together with any net profit or expense from the disposition of facilities in that pool. Operations costs shall include the cost of general and administrative overhead applied in a manner consistent with its application to facilities construction projects.

1. Existing Supply Operations Costs. The Parties agree that an efficient way of handling operations costs for the Existing Supply Cost Pool shall be as follows: The Operations Cost base in the Existing Supply Cost Pool for the year 2001 shall be $17,780,262.00. In each succeeding year, the amount from the previous year shall be adjusted by the percentage change in the total cost of all the supply cost centers identified in Exhibit VI, as it may be updated from time to time, except that the increase in treatment operations costs caused by the first full year start-up of the Cedar Treatment Plant at Lake Youngs in or around 2005 shall not be included in the percentage adjustment. Any increase in Cedar Treatment operations costs for the first full year of operation of the plant shall instead be added directly to the Operations Cost total from the prior year as adjusted by the index. For each year after the first full year of operation, increases in Cedar Treatment operations costs shall be included in the adjustment index.

2. Existing Transmission Operations Costs. The Parties agree that an efficient way of handling operations costs for the Existing Transmission Cost Pool shall be as follows: the Operations Costs base in the Existing Transmission Cost Pool for the year 2001 shall be $4,531,931.00. In each succeeding year, the amount of these costs from the previous year shall be adjusted by the percentage change in the total cost of all the transmission cost centers identified in Exhibit VI, as it may be updated from time to time.

3. Cascade Sub-regional System Cost Pool Operating Costs . Cascade Sub-regional System Cost Pool Operating Costs shall include: (i) the actual costs of operating the facilities listed in Exhibit VII in proportion to the actual use of such facilities by Cascade; (ii) the electricity costs paid by Seattle after the effective date of this Agreement, in accordance with certain contracts effective on or before January 1, 2002 identified in Exhibit I, for pump stations owned and operated by Cascade Members and connected to the Tolt East Side Supply Line; and, (iii) any other costs approved by Management Agreement shall be Cascade Sub-regional System Cost Pool Operating Costs.

C. Disposition Costs. The costs of disposing of assets within a cost pool shall be included in the cost pool. Net disposition costs shall be calculated as follows:

1. Disposition under the Utility Basis . The net book value of the facility, less any sales, salvage, or other revenues derived from the disposition of that facility.

8.7 For the Base Block, the costs in cost pools shall be allocated to Cascade as follows:

A. Allocation of Existing Supply Cost Pool . Cascade shall pay one hundred two percent (102%) of the product of the Base Block and the costs in the Existing Supply Cost Pool divided by the Firm Yield. In the event the 171 MGD Firm Yield is modified downward in accordance with Section 3.2 , this allocation formula will use the Base Block, whether reduced or not, and the modified Firm Yield. In the event the 171 MGD Firm Yield is modified upward (with no change in the Base Block), this allocation formula will continue to use the existing 171 MGD Firm Yield. The Parties understand and agree the intent of this provision is that Cascade will pay a consistent percentage of system costs regardless of modifications of Firm Yield unless the parties subsequently mutually agree to an alternative reduction to the Cascade Block pursuant to Section 3.2.

B. Allocation of New Supply Cost Pool . Cascade shall pay none of the costs in the New Supply Cost Pool.

C. Allocation of Existing Transmission Cost Pool . Cascade shall pay one hundred two percent (102%) of the product of the Base Block and the costs in the Existing Transmission Cost Pool divided by the Firm Yield. In the event the 171 MGD Firm Yield is modified downward in accordance with Section 3.2, this allocation formula will use the Base Block, whether reduced or not, and the modified Firm Yield. In the event the 171 MGD Firm Yield is modified upward (with no change in the Base Block), this allocation formula will continue to use the existing 171 MGD Firm Yield. The Parties understand and agree the intent of this provision is that Cascade will pay a consistent percentage of system costs regardless of modifications of Firm Yield unless the parties subsequently mutually agree to an alternative reduction to the Cascade Block pursuant to Section 3.2.

D. Allocation of New Transmission Cost Pool . Cascade shall pay none of the costs in the New Transmission Cost Pool.

E. Allocation of the Cascade Sub-regional System Cost Pool . Cascade shall pay costs in the Cascade Sub-regional System Cost Pool as follows:

1. 100% of the costs associated with all facilities listed in Exhibit VII.A.

2. A proportionate share of those facilities listed in Exhibit VII.B. based on flows of Cascade Members. Costs will be allocated based on Peak 7 Day flows through each segment. In the event that Peak 7 Day flow data is not available, Peak Month flows may be substituted.

8.8 For the Supplemental Block, Cascade shall pay the then current Full or Partial Requirements Customer Commodity Charge. The Full or Partial Requirements Customer Commodity Charge shall be applied to the annual volume of the Supplemental Block allocated by month in accordance with the schedule in Section 8.10 C. Seattle will provide Cascade 30 days' advance notice of any proposed changes to the Full or Partial Requirements Customer Commodity Charges. For months that include a rate change, the charge shall be prorated in accordance with the effective date of the rate change.

8.9 Cascade shall pay the costs of penalties for exceeding the Cascade Block, as defined in Section 8.11 and any other costs requiring invoice by Seattle within 30 days of invoice by Seattle. Overdue balances shall bear interest at the rate of 1% per month.

8.10 Cascade shall pay the annual costs allocated to Cascade in accordance with Section 8.7 for the Base Block and 8.8 for the Supplemental Block as follows:

A. Prospective Cost Estimate for the Base Block . Seattle may conduct a cost estimating study to revise estimates of the annual costs allocable to Cascade for the Base Block upon 120 days notice to Cascade. Cascade shall pay Seattle for the Base Block according to the estimated annual costs in such study, provided that not more than five years has elapsed from the time a study is conducted to the year in which the estimates from that study are used. Each study shall estimate the annual costs for the Base Block not less than the five following years.

B. Statement of Annual Costs . On or before October 1 ^st of each year, Seattle shall provide Cascade with its best, non-binding estimate of the annual costs for the Base and Supplemental Blocks for the next year. On or before December 1 ^st of each year, Seattle shall notify Cascade of Cascade's annual costs for the Base and Supplemental Blocks for the next year. For the Base Block, such annual cost shall be the sum of the prospective cost estimate determined in accordance with Section 8.10 A and the amount of excess or deficit identified in the most recent cost audit performed in accordance with Section 8.10 D. For the Supplemental Block, such annual cost shall be in accordance with Section 8.8. In the event the Full or Partial Requirements Customer Commodity Charges change during the year, Seattle will provide Cascade with an updated cost estimate for the Supplemental Block for the remainder of that year.

C. Payment Distribution . On or before the last day of each month, Cascade shall pay Seattle that portion of Cascade's annual cost for that year, calculated pursuant to Section 8.10 B for the Base Block and Section 8.8 for the Supplemental Block, according to the following schedule:

January 5%

February 5%

March 6%

April 6%

May 6%

June 12%

July 13%

August 15%

September 13%

October 7%

November 6%

December 6%

Overdue balances shall bear interest at the rate of 1% per month. In no event shall Cascade be required to pay Seattle a monthly payment during a year until at least 30 days after Seattle provides Cascade with a statement of annual costs for that year, and such payments shall not be considered overdue, until 30 days after such statement is provided to Cascade.

D. Cost Audit for the Base Block . No later than August 1 of each year, Seattle shall provide a statement of actual costs for the Base Block allocated to each cost pool and other costs and revenues received during the prior year, which statement shall be examined by an external auditor in an "agreed-procedures" engagement. In addition, Cascade may have the statement audited by an external auditor of its choice, solely at Cascade's expense. This statement shall clearly identify the amount by which payments for the Base Block made by Cascade during the prior year were in excess of, or insufficient to meet the actual costs allocable to Cascade for the Base Block for the prior year. This surplus or deficit shall earn interest at the Rate of Return on Investment, and shall be reduced in accordance with Section 8.10 B. No later than December 31 of the year following the termination of the contract, any remaining surplus or deficit balance shall be paid in cash by the Party owing the balance to the party to whom the balance is owed.

E. Payment from Gross Revenues . Cascade shall pay the Base Block and Supplemental Block charges out of its gross revenues. Except for the Transition Payments in Section 8.10 G below, Cascade's payments to Seattle pursuant to this Agreement and payments otherwise required or provided for by this Agreement shall be maintenance and operation expenses of Cascade, payable prior to and superior to any charge or lien of any revenue bond issued by Cascade that are payable from the revenues of Cascade. Cascade shall establish rates and collect fees and charges for wholesale water service sufficient to pay for the maintenance and operation of its Water Supply System, including payments to Seattle, and the principal and interest on any and all Cascade revenue obligations that constitute a charge against the revenue of Cascade.

F. Emergency Surcharge. In the event of a catastrophe or other extraordinary condition that requires emergency expenditures to maintain a sufficient water supply, Seattle may impose an emergency surcharge proportionately on all of its retail and wholesale customers, including Cascade in order to pay for such expenditures. Any such emergency surcharge shall be presented to Cascade prior to adoption by Seattle. Seattle shall consider Cascade's comments but shall nevertheless have the full authority to adopt the charge.

G. Transition Payments. In consideration for entering into this 2 ^nd Amended and Restated Declining Block Water Supply Agreement, Cascade will pay to Seattle, three transition payments of the following amounts and on the following schedule:

1. Payment of $5 million due on or before June 30, 2013

2. Payment of $12 million due on or before December 31, 2018

3. Payment of $5 million due on or before December 31, 2024

Seattle will consider these transition payments as revenue to offset costs in the Existing Supply Cost Pool allocated to the Full and Partial Requirements customer class under the provisions of those contracts.

8.11 A. Charges will be imposed for exceeding the Cascade Block for Annual Average Daily Demand, Peak Month Factor and Peak Season Factor limitations, based on daily averages measured according to Sections 3.83.10. These charges will be determined by multiplying the appropriate multiplier(s) from the following tables times the then current Full or Partial Requirements Customer Commodity Charge(s) for the period(s) in which the exceedance occurred, the result multiplied by the full amount of the exceedance over the applicable limit (in MGD) and then multiplied by the actual number of days in the calendar year, 30 days for Peak Month or 122 days for Peak Season, whichever is applicable.

For the first instance in any five-year period, the following multipliers will apply:

The multipliers for the first 2 MGD in the table above reflect a buffer before penalty charges begin. Cascade agrees not to plan or rely on this buffer as available firm supply.

B. For any additional instances of water in excess of the average annual and peak supply limitations in any five-year period, the following multipliers will apply.

C. In the event of a charge for exceeding the block occurs in more than one category in either a single year or in multiple years during any consecutive five-year period, only the category that results in the highest charge will be assessed.

8.12 Except in the case of an emergency, the provisions of Section 8.11 shall be applied reciprocally to Seattle to calculate credits to Cascade, should Seattle fail to deliver the Cascade Block as required by this Agreement.

ARTICLE IX ADMINISTRATION

9.1 Seattle shall own and maintain appropriate metering devices to measure the water flowing from the Seattle Water System to each Point of Delivery. At Cascade's request and sole expense, Seattle will install and maintain equipment selected by Cascade and approved by Seattle to transmit signals to recording equipment of Cascade or its Members (located elsewhere) of the amount of water delivered, as measured by Seattle's meters.

9.2 Seattle shall keep full and complete books of accounts for the Seattle Water Supply System and Seattle's retail distribution system in compliance with current standards required by the State Auditor. Cascade, at its own expense, may at any time audit Seattle's book of accounts using the services of a public accounting firm and Seattle shall make the books and records of the Seattle Water System and Seattle's retail distribution system available to such auditors during reasonable business hours upon reasonable notice at the place where such records are normally kept. Seattle shall provide adequate facilities; i.e., room and workspace, so the audit can be performed. Seattle shall have reciprocal rights to audit Cascade books and accounts.

9.3 This Agreement shall be interpreted according to the laws of the State of Washington and the venue for any litigation between the Parties concerning its terms shall be in the Superior Court of King County at Seattle. The Parties shall be entitled to specific performance of the terms of this Agreement.

9.4 This Agreement shall inure to the benefit of and be binding upon successors of interest and assigns of the Parties. Neither this Agreement nor obligations to perform hereunder may be voluntarily assigned by either Party without the other Party's written consent, which shall not be unreasonably withheld; provided however, that a change in Cascade's corporate form to another form of organization authorized by Washington law, shall not be considered an assignment. Seattle may not convey the Seattle Water System in its entirety or any of its component parts used to meet the obligations of this Agreement without providing for an assumption of this Agreement and the obligations contained herein by the conveyee. The Parties do not intend to confer rights or benefits upon any third party. Only a writing executed by the Parties may modify this Agreement.

9.5 All notices relating to this Agreement shall be sent to the following addresses, certified mail, return receipt requested, unless the other Party is previously notified in writing of a change in recipient or address:

To Seattle: To Cascade:

Director Chief Executive Officer

Seattle Public Utilities Cascade Water Alliance

700 Fifth Avenue, 49 ^th Fl. 520 112th Avenue NE, Suite 400

Seattle, WA 98104 Bellevue, WA 98004

9.6 If any provision of this Agreement or its application is determined by a court of law to be illegal, invalid, or void without rendering performance of this Agreement impossible or infeasible, then the Parties intend that the validity of the remaining provisions of this Agreement or their application shall not be affected and shall continue in full force and effect.

9.7 This Agreement is a contract for the purchase and sale of water and transmission services related to that water and no provision hereof shall be construed to make the Parties partners or joint ventures. Neither Party is the agent of the other nor shall either Party be held liable for the acts of the other on a theory of agency or any other representative capacity.

9.8 In the event of default of any provision of this Agreement, the non-defaulting Party shall issue written notice to the other Party setting forth the nature of the default. If the default is for a monetary payment due hereunder, the defaulting Party shall have thirty (30) days to cure the default. In the event of other defaults, the defaulting Party shall use its best efforts to cure the default within ninety (90) days. If such default cannot be reasonably cured within such ninety (90) day period, the defaulting party shall, upon written request prior to the expiration of the ninety (90) day period be granted an additional sixty (60) days to cure the default.

9.9 In the event of a default in payment by Cascade, Seattle shall have the right to compensation from the constituent Cascade Members up to the proportionate share of each Member's use of the Cascade Block which shall be established by the most recent annual report of Cascade Member's proportionate use of the Cascade Block, which proportionate use shall total 100 percent of the Cascade Block. Cascade's annual proportionate use report shall be completed and delivered to Seattle no later than March 31 of each year. Each Cascade Member must acknowledge and accept this individual, contingent liability to Seattle in writing at the time that Cascade enters into this Agreement. Cascade shall require those agencies that later join Cascade as a Cascade Member to convey such written acknowledgment and acceptance to Seattle within one month of joining Cascade. Without waiving any other remedies available under this Agreement or applicable law, should any Cascade Member required to do so fail to convey such written acknowledgement and acceptance, Seattle shall have the unilateral right, upon written notice to Cascade, to reduce the Cascade Block by the amount allocated to such Cascade Member as set by Cascade's most recent annual proportionate use report, until such written acknowledgement and acceptance is provided to Seattle.

ARTICLE X TECHNICAL COMMITTEE

Technical Committees comprising of Seattle staff and other affected parties will address day to day operational issues related to the Seattle Water System. Finance cost and rate issues will be addressed independently between the Director of Seattle Public Utilities and the CEO of Cascade Water Alliance, or their respective designees as provided for in written notice to the other. It is recognized that daily operation of the Seattle Water System and implementation of this Agreement may require direct communication and coordination between Seattle staff and the staff of Cascade or Cascade Members and accommodation of Cascade's insurers with respect to claims. The Parties may establish any desired communication or coordination and claim protocols by Management Agreement.

ARTICLE XI DISPUTE RESOLUTION

11.1 Cascade and Seattle shall make good faith efforts to resolve by informal discussion any dispute arising under or in connection with this Agreement. If at any time a Party to a dispute determines that such informal discussions will not result in a resolution, such Party may initiate non-binding mediation of any dispute arising under or in connection with this Agreement. Within ten (10) days of receiving written notice of initiation of non-binding mediation by one or both Parties, each Party shall designate in writing not more than five (5) candidates it proposes to act as a non-binding mediator. The Parties shall within an additional five (5) days select one of the mediators from either list to serve as mediator. Should the Parties be unable to agree upon a mediator, a mediator shall be chosen from one of the two lists by the presiding judge of the King County Superior Court at Seattle. Upon selection of the mediator, the Parties shall use reasonable efforts to resolve the dispute within thirty (30) days with the assistance of the mediator. The cost of mediation shall be shared by Cascade and Seattle equally.

11.2 If mediation fails to resolve the dispute within thirty (30) days of selection of the mediator, the Parties may thereafter seek redress in court.

11.3 Pending the decision in any mediation or litigation process pursuant to this section, the Parties to such process shall continue to fulfill their respective duties under this Agreement.

ARTICLE XII EMERGENCY EVENTS

12.1 The Parties recognize that unforeseen and unavoidable events may occur which would require Seattle to act unilaterally for what it deems to be in the best interest of the general public served by the Seattle Water System; including water shortages resulting from drought circumstances and temporary reduction in water supply associated with turbidity events. Upon the occurrence of an unforeseen or unavoidable event, Seattle shall, to the extent practicable, treat its wholesale and retail customers equally and any curtailment of supply shall be imposed proportionately among those customers. This authority to act unilaterally carries with it a unilateral responsibility of Seattle to restore, expeditiously, the Seattle Water System to its pre-emergency capability to supply the region.

12.2 Upon occurrence of an unforeseen or unavoidable event that adversely impacts the Cascade Water System, Cascade may request Seattle to temporarily modify or suspend operational or supply provisions of this Agreement and Seattle shall make reasonable efforts to grant such request. Cascade will act expeditiously to restore the Cascade Water System to its pre-emergency capability.

12.3 The time periods for Seattle's performance under any provisions of this Agreement shall be extended for a reasonable period of time during which Seattle's performance is prevented, in good faith, due to fire, flood, drought, turbidity events, earthquake, lockouts, strikes, embargoes, acts of God, war and civil disobedience. If this provision is invoked, Seattle agrees to immediately take all reasonable steps to alleviate, cure, minimize or avoid the cause preventing such performance.

ARTICLE XIII EXHIBITS

Exhibits I through VIII are attached hereto and are hereby incorporated by reference into the Agreement as if set forth in full herein.

ARTICLE XIV COMPLETE AGREEMENT

This Agreement, as amended and restated, represents the entire agreement between the Parties concerning the subject matter hereof. Except as modified by this 2 ^nd Amended and Restated Agreement, all other provisions from the Agreement remain in full force and effect. This Agreement may not be amended except as provided in Section 9.4.

THE CITY OF SEATTLE, a municipal corporation:

By: ____________________________________________ DATE: ___________

DIRECTOR, SEATTLE PUBLIC UTILITIES

THE CASCADE WATER ALLIANCE, a joint municipal utility services authority:

BY: ____________________________________________ DATE:___________

CHAIR, BOARD OF DIRECTORS

EXHIBIT I

Other Agreements

A. List of documents, commitments, adjustments, reductions, agreements, and/or written approvals by Seattle regarding the supply, purchase and/or resale of water according to Section 4.4 of this Agreement:

1. Interties and associated agreements with other agencies as referenced in Section 4.4:

a) Redmond/Union Hill Water Association Water Service Agreement

b) Redmond/Union Hill Water Association Agreement for Water System Interties

c) Redmond/Woodinville Water District Interlocal Agreement

d) Redmond/Woodinville Water District Agreement for Water System Interties

e) Redmond/Northeast Sammamish Water & Sewer District Agreement for Water System Interties

f) Skyway / WD 125

g) Bellevue/Coal Creek

2. Other pertinent Agreements :

a. List of electric contracts for pump stations owned and operated by Cascade Members and connected to the Tolt Eastside Supply Line according to Section 8.6.B.3 of this Agreement:

1. Between the City of Bellevue and the City of Seattle, effective August 1983, pursuant to Ordinance #111276 for SE 28 ^th pumping station (50% / 50%) and N.E. 8 ^th pumping station (Bellevue 60% / Seattle 40%)

EXHIBIT II

CASCADE POINTS OF DELIVERY, MINIMUM HYDRAULIC GRADIENTS, AND MAXIMUM FLOW RATES OF WATER SUPPLIED

Notes:

(1) Station and Pipeline Segment Numbers pertain to the Demand Metering program.

(2) Assumes existing 16-inch sonic meter is replaced with a 10-inch Protectus meter as planned.

(3) These stations to be fully transferred from Coal Creek Utility District to Bellevue.

(4) This station supplies to Coal Creek Utility District directly. Assumes Coal Creek sub-meters 40 percent of total flow (average, peak) through this station to Bellevue.

(5) Maximum combined flow of primary and backup stations shall not exceed the flow for the primary station as shown on this Exhibit.

(6) Assumes a new 10-inch Protectus meter is installed as planned.

(7) If another supply source of equal or higher capacity is provided into the Issaquah Sammamish Plateau area by any party other than Seattle to serve Cascade members, Seattle's supply obligation at this station will terminate. Seattle's delivery obligation at this station is not transferable to any other station.

EXHIBIT IV

Seattle Supply System Facilities

1. Cedar Source

* All roads, buildings, structures, water supply facilities, recreational and educational facilities, and fisheries enhancement and mitigation facilities located within or close to the Cedar River Hydrographic Watershed boundary as defined by Seattle land ownership, including the land itself, and any capitalized studies related to the above. Excepted are facilities solely owned by Seattle City Light for the purpose of power generation. Facilities shared by Seattle City Light and Seattle Public Utilities shall be part of the Seattle Supply System only to the extent of SPU share or responsibility.

* All facilities located within the Lake Youngs Reservation as defined by Seattle ownership of the land except for conveyance facilities used to transport finished water during non-emergency operation

* All facilities located within the Lake Youngs Aqueduct, the Landsburg Tunnel, and the Lake Youngs Supply Lines right-of-way, including the right-of-way itself

* Existing Morse Lake Floating Pump Stations

2. Tolt Source

* All roads, buildings, structures, water supply facilities, recreational and educational facilities, and fisheries enhancement and mitigation facilities located within or close to the South Fork Tolt River Hydrographic Watershed boundary as defined by Seattle land ownership, including the land itself, and any capitalized studies related to the above. Excepted are facilities solely owned by Seattle City Light for the purpose of power generation. Facilities shared by Seattle City Light and Seattle Public Utilities shall be part of the Seattle Supply System only to the extent of SPU share or responsibility.

* Tolt Treatment Facility

3. Seattle Wellfields

* Riverton Wells, including all pumping and treatment equipment, original yard piping, to the connection to CRPL4, and the low flow piping to Riverton Reservoir

* Boulevard Well, including all pumping and treatment equipment, and all piping up to the connection to CRPL4

4. Other

* One Percent Conservation Program through December 31, 2003

* Commercial Incentive Program through December 31, 2003

* Commercial Toilet Retrofit Program through December 31, 2003

* Showerhead retrofit Program through December 31, 2003

* The Seattle Forecasting Model (SEAFM Model)

* GIS Projects related to facilities identified herein as part of the Seattle Supply System

EXHIBIT V

Seattle Transmission System Facilities

1. Pipelines

* Tolt Pipeline No. 1 from the outlet of the Tolt Treatment Facility (TTF) to Lake Forest Reservoir, including any transfer and ancillary small diameter parallel pipes (Note: Includes TPL1 and TPL2 between the Reg. Basin and TTF in Supply!)

* Tolt Pipeline No. 2 (where constructed), including any transfer and ancillary small diameter parallel pipes

* Tolt Tieline

* Tolt Eastside Supply Line (from TESS Junction to the intersection of SE 16 ^th ST and 145 ^th Place SE)

* Tolt Eastside Line Extension (from the intersection of SE 16 ^th ST and 145 ^th Place SE to Eastside Reservoir)

* The 540 head Pipeline from Maple Leaf Reservoir to Lake Forest Reservoir

* Lake Youngs Bypass No. 4 from the outlet of each of the Cedar Treatment Facility clearwells to Control Works

* Lake Youngs Bypass No. 5 from the outlet of each of the Cedar Treatment Facility clearwells to the Lake Youngs Tunnel

* The Lake Youngs Tunnel (from the original lake outlet to Control Works)

* The Maple Leaf Pipeline (from the intersection of 18th Avenue E. and E. Prospect Street to Maple Leaf Reservoir)

* Cedar River Pipeline No. 1 from Control Works to the intersection of 18 ^th Avenue E. and E. Prospect Street

* Cedar River Pipeline No. 2 from Control Works to the intersection of 12 ^th Avenue E. and E. Olive Street

* Cedar River Pipeline No. 3 from Control Works to the intersection of 18 ^th Avenue E. and E. Prospect Street

* 30" intertie between Cedar River Pipelines 2 and 3 in east Olive Street

* Cedar River Pipeline No. 4 from Control Works to the West Seattle Pipeline

* Cedar Eastside Supply Line (from the Cedar Wye to the intersection of SE 16 ^th St and 145 ^th Place SE)

* West Seattle Pipeline from Augusta Gatehouse to Cedar River Pipeline 4

* The 8 ^th Avenue S. Pipeline between S. 146 ^th Street and S. 160 ^th Street

* The Bow Lake Pipeline (between 8 ^th Avenue S. and CRPL 4, and as relocated outside runways at Seatac Airport)

* The Burien Feeder (in S. 146 ^th Street between 8 ^th Avenue S. and CRPL 4)

* The Fairwood Line (between Fairwood Pump Station and Soos Reservoirs)

* The 24-inch discharge pipeline of Lake Youngs Pump Station up to Soos Reservoirs

* The 12-inch discharge pipeline of Lake Youngs Pump Station up to Soos Reservoirs

* The 630 head pipeline between Lake Youngs Pump Station and the Cedar River WSD pump station at the eastern boundary of the Lake Youngs Reservation

2. Reservoirs, Tanks, and Standpipes, including overflow pipes, all valves, appurtenances, and disinfection facility located on the premises of each storage facility, unless otherwise noted

* Lake Forest Reservoir

* Eastside Reservoir

* Riverton Reservoir

* Maple Leaf Reservoir (excluding Roosevelt Way Pump Station and its suction and discharge piping, Maple Leaf Tank and 520 zone piping, except where solely serving the disinfection facility)

* Soos Reservoirs

3. Pump Stations, Major Valve Structures, and other Facilities

* TESS Junction Pump Station

* Lake Hills Pump Station

* Maplewood Pump Station

* Maple Leaf Pump Station

* Bothell Way Pump Station

* Fairwood Pump Station

* Lake Youngs Pump Station

* The Control Works

* Augusta Gatehouse

* Eastgate Pump Station

4. Certain costs related to Cascade Points of Delivery

Cascade Points of Delivery are generally not considered part of the Existing Transmission System Facilities, however, certain costs may be included in the Existing Transmission Cost Pool as follows:

* The costs of existing meters, vaults and related equipment at all Cascade Points of Delivery installed prior to 2004 to the extent those costs were unamortized as of December 31, 2003.

* Any costs related to Cascade Points of Delivery that are included in the Existing Transmission Cost Pool in accordance with the Agreement.

The facilities include the appurtenances to the transmission lines including but not limited to rights of way, line valves, system meters and remote automation devices.

EXHIBIT VI

Cost Centers Used for Operations Cost Indices

The following costs centers or successor cost centers that capture the direct costs of operation of Existing Supply Facilities, Existing Transmission Facilities and the Regional Conservation Program shall be used as the indices for operations cost in the Existing Supply Cost Pool, Existing Transmission Cost Pool and for the Regional Conservation Program in the New Supply Cost Pool.

Supply

Transmission

1% Program

EXHIBIT VII

Cascade Sub-regional System

The facilities included in this Exhibit incorporate all appurtenances including but not limited to rights of way, line valves, system meters, and remote automation devices.

A. Facilities used by Cascade:

* The NE 8 ^th Street Feeder, from the Cedar Eastside Supply Line to the Bellevue pump station near the intersection of 151 ^st PL NE and NE 8 ^th Street

* The Bel-Red Road Feeder, from the Cedar Eastside Supply Line to the Cascade Point of Delivery in Bellevue at the intersection of Bel-Red Road and 132 ^nd Ave NE

* The NE 24 ^th Street Feeder, from the Cedar Eastside Supply Line to the Cascade Point of Delivery in Bellevue near the intersection of NE 24 ^th Street and 132 ^nd Ave NE

B. Other Sub-regional Transmission Facilities used in part by Cascade:

* SEGMENT 1 -Includes use by Bellevue, Coal Creek, Mercer Island, and Seattle and consists of:

1. The portion of the of the original Mercer Island Pipeline from the tee off the Cedar Eastside Supply Line in Factoria Boulevard SE to the west flange of the main line tee at the east end of the 16-inch Mercer Slough Bridge Pipeline (30-inch).

* SEGMENT 2 -Includes use by Bellevue, Mercer Island, and Seattle and consists of:

1. The portion of the of the original Mercer Island Pipeline from the west flange of the main line tee at the east end of the 16-inch Mercer Slough Bridge Pipeline to the west flange of the 20-inch valve west of the Enatai service to Bellevue (30-inch).

2. The entire 16-inch Mercer Slough Bridge Pipeline (16inch).

* SEGMENT 3 -Includes use by Tukwila and Seattle and consists of:

1. The 20-inch pipeline in West Marginal Way from the West Seattle Pipeline to South Director Street.

Seattle may from time to time eliminate facilities from this list provided that it secures the written consent of Cascade in the event that Cascade is served by a tap or meter installation on the facility being eliminated. Seattle shall provide Cascade with 180 days prior written notice of any proposed change.

EXHIBIT VIII

(to be created by SPU once shape files for current members' service areas from Cascade's TSP service area map (figure 1.1 on page 1-4) are provided to SPU)

Sheila Strehle SPU Cascade Contract ATT 1 March 19, 2013 Version #1 ATTACHMENT 1