WASTEWATER SERVICE AGREEMENT
between
PURE CYCLE CORPORATION
and
RANGEVIEW METROPOLITAN DISTRICT,
ACTING BY AND THROUGH ITS WATER ACTIVITY ENTERPRISE
WASTEWATER SERVICE AGREEMENT
THIS WASTEWATER SERVICE AGREEMENT (the "Agreement") is entered
into as of the 22 day of January, 1997, by and between PURE CYCLE
CORPORATION, a Delaware corporation ("Pure Cycle"), and RANGEVIEW
METROPOLITAN DISTRICT, a quasi-municipal corporation and political
subdivision of the State of Colorado, acting by and through its
water activity enterprise.
RECITALS
A. Rangeview is a special district organized pursuant to
Title 32 of the Colorado Revised Statutes with the power, among
others, to supply water for domestic and other public and private
purposes and to provide a complete sanitary sewage collection,
transmission, treatment and disposal system to its Service Area (as
defined in Section 1.1). Rangeview's water activity enterprise was
established by resolution of Rangeview adopted at a public meeting
of its board of directors on September 11, 1995, and is effective
as of the date of its adoption.
B. Pure Cycle is a corporation involved in the acquisition
and development of water and wastewater facilities and systems.
C. Rangeview's provision of water and wastewater services
with respect to the Service Area is governed in part by the terms
of the Amended and Restated Lease between Rangeview and the State
of Colorado, acting through the State Board of Land Commissioners
(the "Land Board") denominated Lease Number S-37280 dated April 11,
1996 (the "Lease").
D. Properties within Rangeview's Service Area are ready to
begin development and Rangeview desires to arrange for wastewater
service to be provided to such properties and the other properties
within its Service Area.
E. Rangeview has determined that it is in its best interests
to engage Pure Cycle to finance and manage the construction of
wastewater facilities to serve its Service Area for a number of
reasons, including the following:
(1) As part of the settlement of major litigation in
which bonds and notes in the principal amount of $24,914,058
previously issued by Rangeview have been acquired by Pure Cycle and
surrendered to Rangeview for cancellation, Pure Cycle in exchange
for the Rangeview bonds and notes received a right to divert and
sell the use of up to a total gross volume of 1,165,000 acre feet
of Export Water (as defined in Section 1.1) together with a
contract to provide water service (the "Water Service Agreement")
for and on behalf of Rangeview within the ▇▇▇▇▇ Range (as defined
in Section 1.1).
(2) Pure Cycle has expertise in the area of wastewater
treatment, and has the capability to finance the development of a
wastewater system.
(3) Pure Cycle has a long-term relationship with
Rangeview and is familiar with the development needs and
opportunities in the Service Area.
(4) There are substantial economies of scale inherent in
having one entity provide both water and wastewater services to the
Service Area.
F. Rangeview has authority, pursuant to Section 32-1-1001,
C.R.S., to enter into contracts and agreements affecting the
affairs of the district and to appoint, hire, and retain agents.
G. At an election duly called by the Board and held November
5, 1996, the electors of the district approved the district
entering a Finance/Construction Management Agreement and an
Operation, Maintenance and Administration Agreement as a multiple-
fiscal year obligation.
H. The provisions of the two agreements described in G.
above, which were being negotiated at the time the District was
required to certify the ballot content for said election, have been
merged into this Agreement, with amendments.
COVENANTS AND AGREEMENTS
In consideration of the foregoing, the covenants and
agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
Definitions
1.1 Definitions. As used herein unless the context clearly
indicates otherwise, the words defined below and capitalized
throughout the text of this Agreement shall have the respective
meanings set forth below:
Applicant. "Applicant" shall mean a potential Wastewater User
who is submitting a request for wastewater service to Rangeview.
Board. "Board" shall mean the Board of Directors of
Rangeview.
Construction Security. "Construction Security" shall
have the meaning set forth in Section 3.2(e) herein.
Export Water. "Export Water" shall have the meaning set
forth in the Lease.
Lease. "Lease" shall have the meaning set forth in
Recital ▇.
▇▇▇▇▇ Range. "▇▇▇▇▇ Range" shall have the meaning set
forth in the Lease.
Master Plan. "Master Plan" shall mean a written master
plan for the construction of the Wastewater System
prepared by Rangeview and Pure Cycle pursuant to Section
3.1 herein.
NARUC. "NARUC" shall mean the National Association of
Regulatory Utilities Commissioners.
Non-Export Water. "Non-Export Water" shall have the
meaning set forth in the Lease.
Performance Standards. "Performance Standards" shall
have the meaning set forth in Section 5.1 herein as more
specifically defined on Exhibit A attached hereto and
incorporated herein by this reference.
Plan Review Budget. "Plan Review Budget" shall mean a
budget prepared by Rangeview which includes its
anticipated costs to undertake the review anticipated by
Subsection 3.2(d).
Project Costs. "Project Costs" shall mean the
anticipated construction costs of the Project
Improvements pursuant to Section 3.2(b)(iii) herein.
Project Financial Plan. "Project Financial Plan" shall
mean a financial plan prepared by Pure Cycle and
submitted to Rangeview for the Rangeview Facilities
pursuant to Section 3.2 herein.
Project Improvements. "Project Improvements" shall mean
the wastewater improvements necessary to serve an
Applicant based upon the information provided by such
Applicant pursuant to Section 3.2(b)(i) herein.
Project Plan. "Project Plan" shall mean a plan
established jointly by Rangeview and Pure Cycle for the
provision of wastewater service to the properties
identified in the service request of an Applicant
pursuant to Section 3.2(b) herein.
Project Schedule. "Project Schedule" shall mean the
construction schedule required by 3.2(e) below.
Project Timeline. "Project Timeline" shall mean the
anticipated timing for design and construction of the
Project Improvements pursuant to Section 3.2(b)(ii)
herein.
Rangeview Facilities. "Rangeview Facilities" shall mean
those improvements identified on the Master Plan as
Rangeview's responsibility pursuant to Section 3.2(b)(iv)
herein.
Rate Consultant. "Rate Consultant" shall mean the
qualified consultant in the area of wastewater rate
structures engaged and utilized as provided in Section
2.2 and elsewhere herein.
Rate Structure. "Rate Structure" shall mean the rate
structure for wastewater service (which shall include but
not be limited to tap fees, usage charges and service
charges) established by Rangeview with the concurrence of
Pure Cycle pursuant to Section 2.2 herein.
Rules and Regulations. "Rules and Regulations" shall
mean the Rules and Regulations of Rangeview adopted by
the Board pursuant to Colorado law.
Service Agreement. "Service Agreement" shall mean the
written agreement or agreements for water and sewer
service between Rangeview and the Wastewater Users which,
inter alia, describe the public improvements to be
acquired and constructed by Rangeview to provide water
and wastewater service in the Service Area.
Service Area. "Service Area" shall mean the
approximately 24,567.21 acres, more or less, according to
U.S. Government survey, in Arapahoe County, Colorado more
particularly described as follows:
Township 5 South, Range 64 West, Sections 7 through 10: all;
Sections 15 through 22: all; Sections 27 through 34: all.
Township 4 South, Range 65 West, Sections 33: all; and 34:
all.
Township 5 South, Range 65 West, Section 3: all; Sections 10
through 15: all, less certain surface rights granted for (but
including the water under) the Aurora Reservoir) in
Section 15; Sections 22 through 27: all, less certain surface
rights granted for (but including the water under) the Aurora
Reservoir in Section 22; Sections 35 and 36: all; Section 34:
north 2,183.19 feet.
Township 5 South, Range 66 West, Section 36: all.
All other property included within Rangeview's
Service Area with Pure Cycle's prior written consent
and agreement to provide such properties with
wastewater service.
Wastewater System. "Wastewater System" shall mean the
wastewater transmission, treatment and disposal
facilities, including re-use and land application
facilities, and all easements, rights of way and other
property interests necessary to accommodate such
facilities, which Rangeview or Wastewater Users are or
may become obligated to acquire and construct pursuant to
written Service Agreements with the Wastewater Users.
Wastewater Users. "Wastewater Users" shall mean the
persons and entities who own the real property in the
Service Area.
Water Service Agreement. "Water Service Agreement" shall
have the meaning set forth in Recital E.
1.2 Intent of This Agreement. This Agreement is intended to
provide the terms and conditions under which Pure Cycle will act as
Rangeview's agent to provide wastewater service to Wastewater
Users.
ARTICLE II
APPOINTMENT OF AGENT AND ESTABLISHMENT OF RATE STRUCTURE
2.1 Appointment of Agent. During the term of this Agreement,
Rangeview hereby grants to Pure Cycle the sole and exclusive right
to provide wastewater service to the Wastewater Users as its agent.
2.2. Establishment of Rate Structure. A rate structure for
wastewater service (which shall include but not be limited to tap
fees, usage charges and service charges) shall be established by
Rangeview with the concurrence of Pure Cycle ("Rate Structure").
The Rate Structure shall be based upon cost of service principles
with the advice of a qualified consultant in the area of wastewater
rate structures ("Rate Consultant"). On or before November 15,
2001, and every five (5) years thereafter, or upon the request of
either party if new laws, regulations, or other circumstances arise
which affect the cost of service hereunder, Rangeview and Pure
Cycle shall contract with a Rate Consultant for a review of the
then existing Rate Structure. Based upon the recommendation of the
Rate Consultant, the parties shall negotiate in good faith to reach
agreement on an amended Rate Structure. The costs of the Rate
Consultant will be treated as an annual operating cost of the
Wastewater System.
If the parties are unable to reach an agreement on an
amended Rate Structure, the issue shall be determined by
arbitration pursuant to Section 11.17 of this Agreement.
ARTICLE III
Construction of Facilities
3.1 Master Plan. Within One Hundred Twenty (120) days of
execution of this Agreement, the parties shall cooperate in
establishing a written master plan for the construction of the
Wastewater System ("Master Plan"). The Master Plan shall identify
the anticipated improvements to be constructed, the projected
timing of construction of such improvements, the projected cost of
such improvements, the anticipated location of the improvements and
the allocation of responsibility for construction between Rangeview
and the Wastewater User(s). The Master Plan shall be jointly
revised by the parties not less frequently than every three (3)
years after its establishment.
3.2 Project Implementation.
(a) Scoping. Rangeview shall establish a policy
governing requests for wastewater service which shall require that
a potential Wastewater User ("Applicant") submit a service request
which shall include sufficient information to enable Rangeview and
Pure Cycle to determine the facilities necessary to serve such
property. Rangeview's policy shall require the Applicant to deposit
funds sufficient to cover all of Rangeview's costs in reviewing the
application and preparing a Service Agreement, which costs shall
include, but not be limited to, legal fees, management fees and
engineering fees incurred by Rangeview in implementing the
requirements of Subsection 3.2(a)-(c).
(b) Project Plan and Financial Plan. Upon receipt of a
complete service request from an Applicant, Rangeview shall submit
written notice to Pure Cycle. Within thirty (30) days of receipt
of such notice, Rangeview and Pure Cycle shall jointly establish a
plan for providing wastewater service to the properties identified
in the service request ("Project Plan") consistent with the Master
Plan, which identifies the following:
(i) the improvements necessary to serve the
Applicant based upon the information provided ("Project
Improvements"); and
(ii) the anticipated timing for design and
construction of the Project Improvements ("Project Timeline"); and
(iii) the anticipated construction costs of the
Project Improvements ("Project Costs"); and
(iv) the appropriate allocation of responsibility
for construction between Rangeview and the Applicant, consistent
with Rangeview's Rules and Regulations and the Master Plan (the
improvements defined as Rangeview's responsibility shall be defined
as the "Rangeview Facilities") ; and
(v) the anticipated revenues to be received by
providing the service to the Applicant, consistent with the Rate
Structure.
Within thirty (30) days of completion of the Project Plan, Pure
Cycle shall submit to Rangeview a financial plan for the Rangeview
Facilities ("Project Financial Plan") which illustrates that the
projected revenues to be received from the provision of service to
the Applicant justify construction of the Rangeview Facilities to
provide wastewater service to the Applicant.
(c) Service Agreement. Upon completion of the Project
Plan and Project Financial Plan, Rangeview shall negotiate Service
Agreements with the Applicant which comply with the Master Plan,
Project Plan, the Project Financial Plan and the Rate Structure and
which are consistent with Pure Cycle's obligations hereunder.
Rangeview shall consult with Pure Cycle in the negotiation process
to ensure that Pure Cycle agrees that the Service Agreements
satisfy the conditions set forth above.
(d) Design. Once the Service Agreement for a Project is
executed by all parties, Pure Cycle shall be responsible for
preparing the preliminary design documents for the Rangeview
Facilities and for providing an engineer's estimate of all costs
associated therewith. Prior to the submittal of the Preliminary
Design documents to Rangeview, Pure Cycle shall request an
estimated Project review budget from Rangeview which budget shall
include Rangeview's anticipated costs to undertake the review
anticipated by this Subsection (d) and Subsection (e) below ("Plan
Review Budget"). Pure Cycle shall submit the preliminary design
documents for the Rangeview Facilities and a deposit of the costs
identified in the Plan Review Budget to Rangeview. On or before
December 31st of each year, Rangeview shall conduct an accounting
of all costs and expenses incurred in undertaking its review
pursuant to this Subsection and Subsection (e). In the event the
funds deposited hereunder exceed such costs and expenses, Rangeview
shall refund such amounts to Pure Cycle unless the parties agree
that such remaining amounts should be retained by Rangeview and
utilized for the next Rangeview Facilities' expenses. If
Rangeview's costs exceed the amounts deposited, Pure Cycle shall
deposit the additional amounts following receipt of a written
request for additional funding with documentation evidencing how
the previously deposited funds were utilized. Pure Cycle's
obligation to pay additional amounts under this Section shall not
exceed twenty five percent (25%) of the amounts previously
deposited unless the additional costs above 25% are necessitated by
changes, or by deficiencies or omissions in the Plan submitted by
Pure Cycle. Within ninety (90) days of submittal of the preliminary
design and deposit, Rangeview shall provide to Pure
Cycle its approval, disapproval or conditional approval of the
preliminary design documents. Approvals will not be unreasonably
withheld. Disputes, if any, as to matters under this Section will
be submitted to arbitration pursuant to Section 11.17 hereunder.
(e) Construction and final design documentation. Once
the preliminary design documents have been approved by Rangeview,
Pure Cycle shall submit the following to Rangeview: (1) the final
design documents for the Rangeview Facilities substantially
consistent with the approved Preliminary Design; (2) an engineer's
estimate of the construction costs for the Rangeview Facilities;
(3) an irrevocable Letter of Credit, cash, or other security
acceptable to Rangeview in an amount equal to the estimated cost of
the Rangeview Facilities, including construction contractor
payments, and other costs payable by Rangeview reasonably likely to
be incurred during construction ("Construction Security") pursuant
to the terms set forth in Subsection (h) below; (4) draft bid and
contract documents for the Rangeview Facilities which: (i) name
Rangeview as the Owner, (ii) name Pure Cycle as the Construction
Manager and indicate that Pure Cycle will have the authority to
award the contract, monitor the construction and make payments to
the Contractor, and (iii) comply with the requirements of Colorado
law governing the public bidding of construction contracts for
special districts; and (5) a construction schedule for the
Rangeview Facilities ("Project Schedule"). Within thirty (30) days
of submittal of the aforementioned documents, Rangeview shall
provide to Pure Cycle its approval, disapproval or conditional
approval of the bidding of the Rangeview Facilities. Approvals
will not be unreasonably withheld or delayed. Once approval has
been obtained from Rangeview, Pure Cycle shall proceed with bidding
the Rangeview Facilities. When bids have been received and
tabulated, all information received during the bidding process
shall be submitted to Pure Cycle with a recommendation from
Rangeview as to which bidder should be awarded the contract for the
Rangeview Facilities. Pure Cycle shall be authorized to proceed
with the award of the contract without the prior written consent of
Rangeview provided the bid selected is not for an amount in excess
of the Construction Security. A copy of the executed contract
shall be provided to Rangeview within ten (10) days of execution.
If the contract is a financing or construction contract related to
effluent, sewage or sewerage which derives from Non Export Water or
water used to recharge Non Export Water under the Lease and which
is to be disposed of outside the boundaries of the ▇▇▇▇▇ Range,
then Pure Cycle shall provide the Land Board with a courtesy copy
of such contract (a draft being acceptable if a final is not yet
available) ten (10) days prior to execution. Pure Cycle shall be
solely responsible for all payments due under the construction
contract and any and all other costs related to the construction of
the Rangeview Facilities, including, but not limited to engineering
fees, legal fees, inspection fees and management fees. Pure Cycle
shall provide Rangeview with copies of all pay requests received
and shall provide Rangeview with a written Project status report on
a monthly basis. Pure Cycle shall be authorized to approve change
orders to construction contracts for Rangeview Facilities provided
that any change orders requiring a change in the design of the
Rangeview Facilities shall be approved in advance by Rangeview.
(f) Timing and Standards of Construction. Pure Cycle
shall cause construction of the Rangeview Facilities to be
completed in accordance with the design documents and the time
frame set forth in the Project Schedule approved by Rangeview.
Rangeview shall have a continuing right to inspect the construction
of the Wastewater System. Once construction is completed, Pure
Cycle will provide Rangeview with the plans for the improvements as
built.
(g) Dispute Resolution. Disputes between Rangeview and
Pure Cycle, if any, as to matters under this Section 3.2 will be
submitted to arbitration pursuant to Section 11.17, and a hearing
shall be held as expeditiously as reasonably possible.
(h) Construction Security. Upon deposit of the
Construction Security, Pure Cycle shall deposit an itemization of
the improvements being constructed and their estimated costs. The
District agrees that upon receipt of an engineer's certification
that a portion of the Project is complete, it shall release the
associated dollar amount as shown on the itemization. Upon receipt
of an engineer's certification that the Project is complete and
operational, the District shall release the entire Construction
Security or any remaining portion thereof to Pure Cycle.
Notwithstanding any of the foregoing, however, the remaining
balance of the Construction Security shall be maintained by Pure
Cycle at a level sufficient to secure all estimated costs of
completing the Rangeview Facilities under construction. The
District shall allow Pure Cycle to pledge the revenues from the
Service Agreement for Rangeview Facilities and any security related
thereto to enable Pure Cycle to obtain the Construction Security.
3.3 Rules and Regulations of Rangeview. All construction,
operation, and maintenance of the Wastewater System shall be
performed in accordance with the Rangeview Metropolitan District
Rules and Regulations, as adopted from time to time (the "Rules and
Regulations").
3.4 Rangeview Ownership of Work. All contracts for the
construction of, and purchase of equipment for the Rangeview
Facilities shall be in the name of Rangeview, and all facilities
constructed and equipment purchased pursuant to such contracts will
be the sole and exclusive property of Rangeview.
ARTICLE IV
Ownership, Operation, and Maintenance of Facilities
4.1 Ownership Prior to Termination. Rangeview shall own the
Wastewater System. Pursuant to the terms of this Agreement, Pure
Cycle shall manage the construction, operate, maintain, repair,
replace and administer the Wastewater System.
4.2 Effluent attributable to water derived from Non-Export
Water or water used to recharge Non-Export Water under the Lease
("Lease Effluent") shall be used, disposed of and accounted for as
required by the Lease. Pure Cycle shall ensure that it does not
cause Rangeview to breach such terms. Pure Cycle shall prepare and
maintain adequate documentation to enable Rangeview (i) to
determine the appropriate amounts to be paid by it to the Land
Board pursuant to 6.3 and 7.3 of the Lease, and (ii) clearly to
distinguish between Lease Effluent and other effluent from the
Wastewater System. Pure Cycle may dispose effluent other than
Lease Effluent in any lawful manner it deems reasonable.
ARTICLE V
Wastewater Service
5.1 Wastewater Service. At its cost, Pure Cycle shall
provide wastewater service to the Wastewater Users in a
commercially reasonable manner consistent with generally accepted
standards of performance for public wastewater systems in the
metropolitan Denver area. Such services include without limitation
the following:
(a) Operate, maintain, repair, replace, test, certify,
remove, and change the size of all facilities and other assets and
resources comprising the Wastewater System, expressly including
wastewater treatment facilities and facilities for re-use or land
application effluent, if any; and
(b) Develop and continuously monitor and recommend to
the Board modifications and additions to effective emergency
preparedness measures to respond to emergencies, including, but not
limited to main line breaks, obstructions, and backups, mechanical
failures, violation of effluent standards, and the interruption of
service from other causes; and
(c) Coordinate and cooperate with Rangeview in the
administration of plan review and approval, construction
observation, and conveyance and acceptance procedures for developer
Main Extensions; and
(d) Develop and continuously monitor and recommend to
the Board modifications and additions to the Rules and Regulations,
design standards and the Master Plan and coordinate and cooperate
with Rangeview in the administration and enforcement thereof and of
easements, service and main extension agreements; and
(e) Prepare, maintain and deliver to Rangeview
sufficient, appropriate and accurate records of all operations
undertaken by Pure Cycle on behalf of Rangeview pursuant to this
Agreement. This function shall include preparing and maintaining
accurate files of all contracts concerning the Wastewater System
and all other records necessary to the orderly administration and
operation thereof, and which are required to be kept by local,
state and federal statutes, ordinances and regulations, and by good
business practice, including records and accounts of sales and
dispositions of effluent subject to Section 6.3 of the Lease and
Gross Revenues (as defined in the Lease) derived therefrom; and
(f) Consult with and advise the Board on all matters
relating to the operations of the Wastewater System and to the
performance of Pure Cycle's obligations under this Agreement.
5.2 Qualified Competent Personnel. Pure Cycle shall employ
or contract with engineers, operators, and administrative and other
personnel who are fully qualified to perform the duties of
operating and administrating the Wastewater System. All plant
operators must possess an A or B certification and meet minimum
Colorado Department of Health and Environmental Services standards
for licensing applicable to the plant which they operate.
5.3 Permits and Licenses. Pure Cycle shall, at its own
expense, apply for and obtain all necessary permits and licenses
which may be required by any governmental entity which has
jurisdiction over the operations to be performed by Pure Cycle
pursuant to this Agreement.
5.4 Financing. Pure Cycle shall be responsible for financing
its obligations hereunder with the funds it receives pursuant to
this Agreement or from such other sources as it deems desirable.
Pure Cycle shall not claim or demand any payments or things of
value from Rangeview or the Wastewater Users except as provided by
this Agreement.
5.5 Rangeview Administrative Functions. Rangeview shall be
responsible for performing at its sole expense all functions and
reporting obligations imposed upon it as a local government entity
and political subdivision of the State of Colorado. Such functions
include without limitation, compliance with budget, audit,
election, open meetings, public records, conflict of interest
disclosure and management laws, and Article X, Section 20 of the
Colorado Constitution. Rangeview shall further be solely
responsible for performing customer relations functions, billing
and collecting rates, fees, tolls and charges imposed by it upon
Wastewater Users, and administering and supervising tap sales.
Rangeview shall have primary responsibility for the administration
and enforcement of Rangeview Rules and Regulations, design
standards, easements and Service and Main Extension Agreements but
shall coordinate with Pure Cycle in the performance of these
functions.
5.6 Cost Accounting. Pure Cycle shall prepare and maintain
records reflecting or recording costs of service, both for capital
development and for operations and administration expenses, in
accordance with the National Association of Regulatory Utilities
Commissioners ("NARUC") System of Accounts for Wastewater Utilities-
-Class A, as now or hereafter constituted, or, if the NARUC System
of Accounts is no longer available or appropriate in the judgement
of the Rate Consultant, in accordance with other generally accepted
wastewater utility cost accounting standards designated by the Rate
Consultant. Such records shall at all times be available during
normal business hours for inspection and copying by Rangeview or
the Rate Consultant. Pure Cycle shall ensure that any contract or
other arrangement it makes with a third person to perform capital
development or operations and administration functions assumed by
Pure Cycle hereunder expressly imposes this same requirement upon
such person for the benefit of Rangeview and the Rate Consultant.
5.7 Rangeview Cooperation. Rangeview shall cooperate with
Pure Cycle and provide Pure Cycle with such assistance as Pure
Cycle may reasonably request in performing Pure Cycle's duties
hereunder.
ARTICLE VI
Billing and Distribution of Revenues
6.1 Rates. Subject to limitations imposed by the laws of the
State of Colorado, Rangeview will continuously implement and
enforce the Rate Structure, including amendments thereto,
determined pursuant to section 2.2 above.
6.2 System Development Fees Distribution. The Parties
acknowledge that revenue derived from the imposition of System
Development Fees pursuant to the Rules and Regulations and Service
Agreements shall be utilized for costs related to the construction
of the Wastewater System. Pursuant to the terms of this Agreement,
Pure Cycle is solely responsible for the costs to finance the
construction of the Rangeview Facilities. Based upon this
allocation of responsibility and the fact that Rangeview's
anticipated costs to comply with the terms of Article III herein
are paid by Pure Cycle, the Parties agree that 100% of the System
Development Fee revenue shall be allocated to Pure Cycle.
Rangeview will remit Pure Cycle's 100% of System Development Fee
revenue monthly, as it receives the same, without interest. Along
with each such remittance, Rangeview will send a written report
stating the service address or other description of the licensed
premises for which such fees were paid, the number of equivalent
taps licensed for each premises, and the amount of the System
Development Fees collected for each license.
6.3 Operating Revenue Distribution. Pursuant to Section 5.5
above, the Parties have acknowledged the administrative functions
to be undertaken by Rangeview. Based upon the allocation of
responsibilities between the parties, they have determined to
allocate the revenues derived from sewer rates imposed pursuant to
Article 17 of the Rules and Regulations, as follows: 90% to Pure
Cycle and 10% to Rangeview. Rangeview will remit Pure Cycle's
proportionate share of said rates monthly, as it receives the same,
without interest. The parties acknowledge that due to the fact that
the parties have limited financial history, the administrative
costs of Rangeview and Pure Cycle with respect to the wastewater
service to be provided hereunder are unknown. Therefore,
notwithstanding the provisions of this Section, if the applicable
percentage of said rates applicable to each party pursuant to this
Section are insufficient to cover the respective parties
administrative costs relating to the provision of wastewater
service as described herein, Pure Cycle and Rangeview shall
negotiate in good faith within ninety (90) days, after the
insufficiency is reasonably claimed by either party, an amendment
to this Section which provides each party with sufficient revenues
from this Agreement to cover its administrative costs or amend the
Rate Structure so that additional rate revenues are generated.
During any period of renegotiation, each party shall continue to
perform its obligations under this Agreement. Disputes as to an
appropriate amendment to provide either party with sufficient rate
revenues under this Section or to amend the Rate Structure will be
settled by arbitration pursuant to Section 11.17 of this Agreement.
6.4 Revenue Obligation Only. Rangeview's obligation to remit
funds to Pure Cycle hereunder shall be payable solely and
exclusively from its collections of System Development Charges and
sewer rates or other charges similar in purpose or function
thereto, and shall not be a general obligation of Rangeview.
Rangeview will establish and maintain policies and procedures
encouraging prompt and vigorous collection of delinquent accounts.
6.5 Reports and Audits.
(a) Rangeview may, upon no less than fourteen (14) days
prior written notice to Pure Cycle, cause a partial or complete
audit to be made at Rangeview's expense, by an auditor selected by
Rangeview, of the entire records and operations of Pure Cycle for a
five (5) year period preceding the date of the audit relating to
the provision of wastewater service pursuant to this Agreement.
Within fourteen (14) days following receipt of such a notice, Pure
Cycle shall make available to the auditor the books and records the
auditor reasonably deems necessary or desirable for the purpose of
making the audit. If the results of the audit reveal a deficiency
in any amounts paid by Pure Cycle to the Land Board or to Rangeview
for payment to the Land Board under Section 6.3 of the Lease, then
Pure Cycle shall pay such deficiency to the Land Board or
Rangeview, as applicable, together with interest thereon at the
rate of two percent (2%) per month from the date or dates such
amounts should have been paid to the Land Board. If such
inaccuracies resulted in a deficiency to the Land Board in excess
of two percent (2%) of the royalties previously paid by Rangeview
or on Rangeview's behalf for the period covered by the audit, then
Pure Cycle shall also pay the cost of the audit.
(b) Rangeview shall prepare and keep full, complete, and
proper books, records and accounts of all collections with respect
to wastewater service. Said books, records, and accounts of
Rangeview shall be open at all reasonable times to the inspection
of Pure Cycle and its representatives who may also, at Pure Cycle's
expense, audit, copy or extract all or a portion of said books,
records, and accounts for a period of five (5) years after the date
such books, records and accounts are made. Pure Cycle may, upon
fourteen (14) days prior written notice to Rangeview, cause a
partial or complete audit to be made at Pure Cycle's expense, by an
auditor selected by Pure Cycle, of the entire records and
operations of Rangeview relating to the Wastewater System pursuant
to this Agreement. Within fourteen (14) days following receipt of
such a notice, Rangeview shall make available to the auditor the
books and records the auditor deems necessary or desirable for the
purpose of making the audit. Any deficiency in the payment of
amounts due Pure Cycle pursuant to Section 6.2 determined by such
audit shall be immediately due and payable by Rangeview together
with interest thereon at the rate of twelve percent (12%) per annum
from the date or dates such amounts should have been paid. If such
deficiency is in excess of two percent (2%) of the amounts
previously computed by Rangeview for the period covered by the
audit, then Rangeview shall pay the actual cost of the audit, at
the time the deficiency is paid.
6.6 Appropriation. The amounts necessary to make payments to
Pure Cycle for amounts due under this Article VI are hereby
appropriated for said purpose; and such amounts as appropriated for
each year shall be included in the annual budget and appropriation
resolution to be adopted and passed by the Board in each year,
until this contract is terminated.
6.7 Right of Set-Off. Notwithstanding the provisions of 6.2
and 6.3 above, Rangeview is entitled to deduct from the amounts due
to Pure Cycle hereunder any amounts expended by Rangeview and not
advanced by Pure Cycle to cure any deficiency in the performance of
Pure Cycle hereunder, or to perform or to aid or assist in the
performance of any of Pure Cycle's duties or obligations hereunder.
ARTICLE VII
Rights-of-Way
7.1 Rights-of-Way. Pure Cycle shall at its expense acquire
in the name of Rangeview all easements and rights-of-way necessary
to accommodate Rangeview Facilities. Notwithstanding the foregoing,
Rangeview shall assist Pure Cycle in obtaining such rights-of- way
in the manners provided in this Article and in such other manners
as Pure Cycle may reasonably request. Pure Cycle shall have a
license to use all Rangeview easements and rights- of-way for the
purpose of constructing, installing, replacing, operating and
maintaining the Wastewater System.
7.2 ▇▇▇▇▇ Range Rights-of-Way. As set forth in Exhibit D to
the Lease, a master plan of rights-of-way has been agreed upon with
respect to the ▇▇▇▇▇ Range, subject to certain rights of the Land
Board to amend such master plan. When a right-of-way on or under
the ▇▇▇▇▇ Range is reasonably necessary to enable Pure Cycle to
perform the services contemplated by this Agreement, Pure Cycle
shall notify Rangeview. Rangeview shall file a request for the
right-of-way with the Land Board in accordance with the Lease.
Upon grant of a right-of-way by the Land Board, Rangeview shall
promptly notify Pure Cycle.
7.3 Condemnation of Land. Upon Pure Cycle's request,
Rangeview agrees to use its governmental powers of condemnation if
condemnation is reasonably necessary to enable Pure Cycle to
perform the services contemplated by this Agreement. Pure Cycle
shall be responsible for the costs associated with Rangeview's
condemnation of such land.
ARTICLE VIII
Indemnification
8.1 Mutual Indemnity. Pure Cycle and Rangeview shall each
indemnify and hold harmless the other, to the extent permitted by
law, against and from all claims, demands, and expenses of any and
all kinds (including attorney fees) for death, personal injury or
property damage arising out of, of caused by, any act or omission
of such indemnifying party, its contractors, agents or employees.
Nothing in this Section shall be construed as a waiver of or an
intent by Rangeview to waive any rights, privileges, immunities,
monetary limits or other protections or requirements set forth in
the Colorado Governmental Immunity Act, Section 24- 10-101, et
seq., C.R.S.
8.2 Service Indemnity. Additionally, Pure Cycle shall at its
sole cost and expense defend, indemnify and hold Rangeview harmless
against and from all claims and demands asserted against Rangeview
by any Wastewater User, by any party to or beneficiary of a Service
Agreement, or by any regulatory government or agency, based upon,
arising out of, or relating to the performance or non-performance
of Pure Cycle's obligations hereunder.
ARTICLE IX
Insurance and Bonds
9.1 Insurance. Pure Cycle shall and shall cause its
contractors to maintain with carriers acceptable to Rangeview
liability insurance,workers' compensation coverage fully covering
all persons engaged in the performance of this Agreement, in
accordance with Colorado law, and for public liability insurance
covering death and bodily injury with limits no less than required
by the Colorado Governmental Immunity Act, Section ▇▇-▇▇-▇▇▇, et
seq., C.R.S. , which insurance shall name Rangeview as additional
insured.
9.2 Bonds. No operations are to be commenced on any portion
of the Service Area which is within the ▇▇▇▇▇ Range and owned by
the Land Board until Pure Cycle has filed good and sufficient
bonds, consistent with the requirements of C.R.S. ▇▇-▇▇-▇▇▇, with
the Land Board to secure the payment for damages, losses or
expenses caused by Pure Cycle as a result of operations on or under
the ▇▇▇▇▇ Range. Pure Cycle acknowledges that, pursuant to the
Lease, the Land Board may require that the bonds be held in full
force and effect for one year after cessation of the operations for
which the bonds were intended. In addition, Pure Cycle shall
comply with the Rules and Regulations with respect to bonds
required by Rangeview.
9.3 Bond of Contractors. If activities are to be conducted
on land owned by the Land Board within the ▇▇▇▇▇ Range bonds
provided by contractors for construction activities shall list the
Land Board as a coinsured and shall otherwise comply with Section
9.2.
ARTICLE X
Term, Default and Termination
10.1 Term. This Agreement shall commence on the date of
execution and, unless sooner terminated pursuant to this Article,
shall expire at 12:00 noon on May 1, 2081.
10.2 Default and Termination.
(a) The following events shall constitute Events of
Default under this Agreement:
(i) The filing by a party of a petition in bankruptcy,
insolvency or for reorganization under the bankruptcy laws of he
United States or under any insolvency act of any state, the
dissolution of a party, or a party making an assignment for the
benefit of creditors;
(ii) The institution against a party of involuntary
proceedings under any such bankruptcy law or insolvency act or for
dissolution, or the appointment of a receiver or trustee for all or
substantially all of the property of a party, which proceeding is
not dismissed or receivership or trusteeship is not vacated within
sixty (60) days after such institution or appointment; or
(iii) The material default in the performance of any
material term, covenant or condition in this Agreement which
default shall continue and not be cured for a period of thirty
(30) days after written notice specifically setting forth the
nature of the default has been given by the non-defaulting party to
the defaulting party, or if more than thirty (30) days is
reasonably required to cure such matter complained of, if the
defaulting party shall fail to commence to correct the same within
said thirty (30) day period or shall thereafter fail to prosecute
the same to completion with reasonable diligence.
(iv) For the purposes of this subsection
10.2(a), it shall be a material default in a material
term or condition of this Agreement if Pure Cycle's
performance of any of its obligations hereunder fails
consistently, after written notice specifically
identifying the performance deficiency and a reasonable
opportunity to cure, to meet generally accepted standards
of performance for public wastewater systems in the
metropolitan Denver area. Such failure may consist, by
way of illustration and not by way of limitation, of
consistent and repeated instances of the following: lack
of or unreasonably delayed response to requests for
service; inaccurate, incomplete or late reporting or
record keeping; failure to furnish competent,
professional, trained personnel; failure to remove
violent or insubordinate personnel; negligent or
intentional damage to or loss or destruction of Rangeview
property or other impairment of Rangeview assets;
substandard operation of the Wastewater System as
demonstrated by backups, accumulation of grease or other
obstructions in Mains, lack of routine facility
inspections, observations, repairs and maintenance, main
breaks, spills, unusual regulatory agency involvement
with or attention to system, unusual level of customer
complaints and the like. It is the intent of this
provision to enable Rangeview to terminate for default if
the cumulative effect of deficiencies such as those
listed above is such that, taken as a whole and measured
over a reasonable period of time not to exceed 24 months,
Pure Cycle's performance does not meet generally accepted
standards for the operations of a public wastewater
system in the metropolitan Denver area.
(b) If an Event of Default shall occur, then the non-
defaulting party may, at its option, without any prejudice to any
other remedies it may have, (i) terminate this Agreement upon
giving written notice of termination to the defaulting or breaching
party, and, if Rangeview is the non-defaulting party, at its
option, exercise its rights under Section 10.3, and/or
(ii) commence an action for specific performance of the obligations
of the defaulting party and/or damages proximately caused by the
default or breach and its costs and reasonable attorneys' fees
(including costs incurred to cure such default pursuant to
Section 10.2(c)).
(c) If either party shall act or fail to act in a manner
which would constitute an Event of Default under this Agreement or
an Event of Default (as that term is defined in the Lease) under
the Lease, immediately, with the passage of time, with notice, or
any of the foregoing, the non-defaulting party may, at its option,
without prejudice to any other remedies it may have, cure such
Event of Default and seek reimbursement from the defaulting party
for any costs and damages associated therewith or offset such costs
and damages from any amounts owed to the defaulting party under
this Agreement or otherwise without waiting for the thirty-day
period provided for in Section 10(a)(iii) to run.
10.3 Declaration of Forfeiture. If an Event of Default
occurs and Rangeview terminates this Agreement or in the event of a
termination pursuant to Section 10.4, Rangeview shall have the
right, in connection with such termination, to expel Pure Cycle
from the Service Area and those claiming through or under Pure
Cycle pursuant to this Agreement, and remove the effects of both or
either, without being deemed guilty of any manner of trespass and
without prejudice to any other remedies. In the event of such
termination, Pure Cycle shall surrender and peacefully deliver to
Rangeview all property of Rangeview of whatever kind, that was in
Pure Cycle's possession or control. Such property shall be
returned to Rangeview in good condition (subject to any existing
licenses related to the delivery of water), plus any interest of
Pure Cycle in the Wastewater System. Subject to the following
sentence, title to such assets will be conveyed to Rangeview free
and clear of all security interests, liens and encumbrances
existing at the time of delivery to Rangeview. Notwithstanding the
foregoing, Pure Cycle shall have the right to encumber the revenues
it receives pursuant to this Agreement in connection with the
construction and development of the Wastewater System but only to
the extent necessary for financings obtained for construction and
development of the Wastewater System prior to termination. Upon
such termination, if Pure Cycle shall remain in possession of any
part of property described above, Pure Cycle shall be guilty of an
unlawful detainer and shall be subject to eviction or removal,
forcibly or otherwise, to the extent provided by law.
10.4 Pure Cycle Right of Termination. Pure Cycle may
terminate this Agreement at any time without cause upon giving one
year's prior written notice to Rangeview. During the one-year
period, Pure Cycle shall continue to discharge all of its
obligations under this Agreement and shall be entitled to the
benefits of this Agreement, unless Rangeview, at its option,
requires Pure Cycle to discontinue providing services hereunder
prior to the expiration of the one-year notice period.
Notwithstanding the foregoing, however, Pure Cycle may not
terminate this Agreement without Rangeview's consent unless all
Rangeview Facilities required to be built in order for Rangeview to
meet its obligations under a Service Agreement which has been
signed are fully completed and finally accepted by Rangeview.
10.5 Rangeview Buy-out Right. The parties acknowledge that
at some point during the term of this Agreement Rangeview may
determine that it desires to take over the operation of the
Wastewater System or otherwise make a change with regard to the
service provider. The parties also acknowledge that Pure Cycle has
and will continue to make substantial investments consisting of
initial and early phase development, corollary investments in its
water and other interests in Rangeview's Service Area and carrying
costs of capital consisting of the depreciation of investments
and any opportunity costs of its investment in the Wastewater
System. The parties agree that Rangeview may terminate this
Agreement upon one (1) year written notice without cause, provided
it makes payment at the end of the one (1) year period of a buy-out
amount based on the following methodology: 1) The value of Pure
Cycle's investment will be obtained from the annual audited reports
of Pure Cycle's wastewater books following NARUC standards. 2)
Corollary investments will be based upon the present value of the
foregone income stream and will be considered if such investments
have been approved in advance by Rangeview. 3) The carrying cost
of capital will consist of two components: a) the interest costs
of funds borrowed or invested by Pure Cycle for the Wastewater
System, which will be determined by the actual interest cost
incurred by Pure Cycle and all related prepayment penalties; and b)
the opportunity cost of investment capital to generate future
earnings, which will be calculated as the present value of the net
earnings over the remaining duration of the Agreement. Disputes as
to an appropriate buy out amount under this Section will be settled
by arbitration pursuant to Section 11.17 of this Agreement with a
requirement that the arbitrator(s) have an expertise in the area of
utility rate structures.
ARTICLE XI
General Provisions
11.1 Records. In addition to complying with section 5.6
above, Pure Cycle shall prepare and maintain complete and accurate
records necessary to the orderly development, administration,
operation and maintenance of the Wastewater System, and which are
required to be kept by local, state, or federal statutes,
ordinances, or regulations in connection with the functions
performed by Pure Cycle hereunder. Such records include all design
and construction contract documents for Rangeview Facilities,
including record or as-built drawings. All such records shall be
the sole and exclusive property of Rangeview, but Pure Cycle may at
its sole expense copy all of such records as it may desire. All
such records shall be kept and maintained at such location and in
the official custody of such person as Rangeview shall from time to
time direct in writing. Pure Cycle shall follow District
instructions and guidelines concerning any and all requests for
public records made pursuant to Article 72 of Title 24, C.R.S., as
to any records within its possession or control.
11.2 Compliance with Laws. Pure Cycle shall perform its
obligations under this Agreement in such a manner that the
Wastewater System and all actions taken by Pure Cycle pursuant to
this Agreement comply fully with all applicable federal, state and
local statutes, regulations, ordinances, permits and orders,
including without limitation the federal Clean Water Act, and the
Rules and Regulations and Design Standards of Rangeview.
11.3 Taxes, Fees and Assessments. Pure Cycle shall ensure
that all construction contractors avail themselves of Rangeview's
exemption from state and local sales and use taxes whenever
possible. If tax liabilities are incurred in connection with the
work or the materials to be utilized in accomplishing the functions
of Pure Cycle pursuant to this Agreement, Pure Cycle shall be
solely responsible for and shall pay all such liabilities. Pure
Cycle shall pay all fees, charges and assessments incurred in the
performance of its obligations hereunder.
11.4 Assignment. Pure Cycle may assign its interest in this
Agreement, but only upon terms expressly approved in writing by
Rangeview, in its sole discretion. Any attempted assignment in
contravention of this Section shall be null and void.
Notwithstanding the foregoing, Pure Cycle may contract with third
parties to perform portions of its obligations under this Agreement
and such action on Pure Cycle's part shall not be deemed an
assignment of its interest in this Agreement.
11.5 Notice. All notices required by this Agreement shall be
in writing and shall be delivered to the person to whom the notice
is directed, in person, by courier service or by United States mail
as a certified item, return receipt requested, addressed to the
address stated below. Notices delivered in person or by courier
service shall be deemed given when delivered to the person to whom
the notice is directed. Notices delivered by mail shall be deemed
given on the date of delivery as indicated on the return receipt.
The parties may change the stated address by giving ten (10) days'
written notice of such change pursuant to this Section.
If to Rangeview:
Rangeview Metropolitan District
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
and
If to Pure Cycle:
Pure Cycle Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
11.6 Construction. Where required for proper interpretation,
words in the singular shall include the plural, and the masculine
gender shall include the neuter and the feminine, and vice versa,
as is appropriate. The article and section headings are for
convenience and are not a substantive portion of the Agreement.
The Agreement shall be construed as if it were equally drafted in
all aspects by all parties.
11.7 Entire Agreement. This Agreement, including the items
referenced herein or to be attached in accordance with the
provisions of this Agreement, constitutes the entire agreement
among the parties pertaining to the subject matter of this
Agreement and supersedes all prior and contemporaneous agreements
and understandings of the parties as to the subject matter of this
Agreement. No representation, warranty, covenant, agreement or
condition not expressed in this Agreement shall be binding upon the
parties or shall change or restrict the provisions of this
Agreement.
11.8 Authority. Each of the parties represents and warrants
that it has all requisite power, corporate and otherwise, to
execute, deliver and perform its obligations pursuant to this
Agreement, that the execution, delivery and performance of this
Agreement and the documents to be executed and delivered pursuant
to this Agreement have been duly authorized by it, and that upon
execution and delivery, this Agreement and all documents to be
executed and delivered pursuant to this Agreement will constitute
its legal, valid and binding obligation, enforceable against it in
accordance with their terms.
11.9 Counterparts. This Agreement may be executed in one or
more counterparts, all of which together shall constitute one and
the same instrument.
11.10 Amendment. This Agreement shall not be amended except
by a writing executed by both parties.
11.11 Binding Effect. The benefits and terms and obligations
of this Agreement shall extend to and be binding upon the
successors or permitted assigns of the respective parties hereto.
11.12 Severability. If any clause or provision of this
Agreement is illegal, invalid or unenforceable under present or
future laws effective during the term of this Agreement, then, and
in that event, it is the intention of the parties hereto that the
remainder of this Agreement shall not be affected thereby. It is
also agreed that in lieu of each clause or provision of this
Agreement that is illegal, invalid or unenforceable, there shall be
added as a part of this Agreement a clause or provision as similar
in terms to such illegal, invalid or unenforceable clause or
provision as may be possible and be legal, valid and enforceable.
11.13 Duty of Good Faith and Fair Dealing; Regular
Consultation. The parties acknowledge and agree that each party
has a duty of good faith and fair dealing in its performance of
this Agreement.
11.14 Further Assurance. Each of the parties hereto, at any
time and from time to time, will execute and deliver such further
instruments and take such further action as may reasonably be
requested by the other party hereto, in order to cure any defects
in the execution and delivery of, or to comply with or accomplish
the covenants and agreements contained in this Agreement and/or any
other agreements or documents related thereto.
11.15 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado and
applicable federal law.
11.16 Arbitration. Any controversy or claim arising out of
or relating to the computation of amounts due pursuant to
Section 6.1 under this Agreement and all other controversies or
claims which the parties have expressly agreed herein shall be
submitted to arbitration shall be settled by arbitration
administered by the American Arbitration Association in accordance
with its commercial rules, and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction
thereof.
11.17 Litigation and Attorneys' Fees. Except as provided in
Section 11.17 above, in the event of claims, disputes or other
disagreements between the parties which the parties are not able to
resolve amicably, either party may bring suit in a court of
competent jurisdiction seeking resolution of the matter. The
prevailing party in any arbitration or suit shall be entitled to
recover its reasonable attorneys' fees and costs from the other
party.
11.18 Force Majeure. Should either party be unable to
perform any obligation required of it under this Agreement, other
than the payment of money, because of any cause beyond its control
(including, but not limited to war, insurrection, riot, civil
commotion, shortages, strikes, lockout, fire, earthquake, calamity,
windstorm, flood, material shortages, failure of any suppliers,
freight handlers, transportation vendors or like activities, or any
other force majeure), then such party's performance of any such
obligation shall be suspended for such period as the party is
unable to perform such obligation.
11.19 Conflicts of Interest. The parties hereto acknowledge
that certain members of the board of directors of Rangeview are
either officers, directors or employees of Pure Cycle and may have
conflicts of interest with regard to this transaction. Rangeview
represents and warrants that such board members have, pursuant to
▇▇-▇▇-▇▇▇, C.R.S., filed all necessary disclosure statements with
Rangeview and the Colorado Secretary of State. Pure Cycle
represents and warrants that the members of Pure Cycle's board of
directors who also serve on the Rangeview board of directors have
fully disclosed such interests to the disinterested board members
of Pure Cycle prior to obtaining board approval of this Agreement
and that those members with potential conflicts have abstained from
voting on this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Service Agreement on the date first written above.
ATTEST: RANGEVIEW METROPOLITAN DISTRICT,
ACTING BY AND THROUGH ITS
WASTEWATER ACTIVITY ENTERPRISE
By: By:
Title: Title:
ATTEST: PURE CYCLE CORPORATION
By: By:
Title: Title: