APPENDIX A

AGREEMENT TERM SHEET

Contract Operation and Management Services

WASTEWATER TREATMENT FACILITY

This Agreement Term Sheet, set forth in this Appendix A, has been developed to provide a
summary of the major terms and conditions for the operation, maintenance, and management of
the City of La Center's Wastewater Treatment Facilities to include the treatment plant, pump
stations, and collection system (the "Facility"). This Agreement Term Sheet shall be used by
Proposers to assess the risks and corresponding costs associated with providing the Services
sought by the City of La Center.

This Agreement Term Sheet, along with the referenced Schedules (Appendix B) shall constitute
the Services required. It is anticipated that this Agreement Term Sheet will be replaced with a
detailed Agreement that will incorporate the terms and conditions of this Agreement Term Sheet.
Proposers are advised that the proposed form of the Agreement is anticipated to be issued
approximately three (3) to four (4) weeks after issuance of this RFP.

The Proposer shall not submit either the Agreement Term Sheet (Appendix A) or the
Schedules (Appendix B) as part of their Proposal. The City will complete the Schedules in
Appendix B for the selected Proposer using the information provided in the Proposal and
Proposal Forms.

Appendix A
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 LA CENTER WASTEWATER

SERVICE AGREEMENT TERM SHEET

1.0 DEFINITIONS
The definitions for the project are set forth in Appendix D of this RFP.

2.0 CONDITIONS PRECEDENT AND NOTICE TO PROCEED

The Company shall commence work on the Commencement Date. Prior to commencing
operations, the Company shall:
 Obtain the required insurance and bonds
 Develop an emergency response plan
 Retain the necessary staff (certified operators meeting Washington State
Environmental Department requirements)
 Obtain all necessary governmental, regulatory, and any union approvals required for
commencement of operations
 Sign the Agreement and deliver the Guarantee
 Deliver a legal opinion from counsel to the Company and Project Guarantor as to
corporate status, no conflict, no material litigation, and the valid, binding, and
enforceable nature of the Agreement

3.0 WASTEWATER TREATMENT PLANT OPERATIONS, MAINTENANCE,

AND MANAGEMENT
3.1 Overall Responsibilities

3.1.1. Company Responsibilities

The Company will be responsible for all operations and maintenance duties
required to ensure efficient and effective operation of the Facility. These duties
include, but are not limited to: a) day to day operations and monitoring, b)
performing scheduled maintenance to ensure the long-term efficient operation of
facility infrastructure, c) performing maintenance, repairs, and replacements as
needed on infrastructure components, d) maintaining operations and maintenance
records for all infrastructure components, e) maintaining the inventory and
inventory records for the consumable supplies needed for system operations and
maintenance. The operations will be performed to comply with all federal, State,
and local laws and regulations. The Company shall also be responsible for
operating, maintaining the Facility pursuant to the requirements in this Agreement
and all applicable Schedules.

The Company shall also have the responsibility for grounds maintenance, bio-
solids dewatering & dryer facilities, bio-solids disposal, solid waste removal and
disposal, grit and screenings disposal, collection system operation and
maintenance, and pump stations.

Appendix A
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 3.1.2. City Responsibilities

The City shall be responsible for activities required to operate and perform meter
reading and maintenance, enforce the regulatory requirements for residential and
commercial discharge to the collection system, provide new sewer connections,
provide pump station upgrades per the established schedule, and perform long
term system and area-wide planning.

The City will provide public financing for Capital Improvements, and, at its
discretion, may consider private sector financing.

3.2 Wastewater Sludge and Bio-Solids Disposal

The Company shall be responsible for bio-solids disposal in a manner that minimizes
disposal costs, meets all regulatory requirements, and achieves odor control / minimization
objectives. The Company shall use the bio-solids dewatering and dryer facilities located at the
treatment plant as part of the overall workscope and the effective operation of facilities by the
Company so as to achieve odor control / minimization objectives.

The City’s odor control objectives are to control odor issues so as to not create significant odor
issues or nuisances based upon the severity or frequency of any such events.

The Company shall be responsible for identification of an authorized disposal facility and pay all
transportation and disposal costs for the disposal of Facility Residuals. The terms and conditions
of such disposal shall be approved in writing in advance by the City.

3.3 Equipment and Chemical Inventories

The Company's responsibilities with respect to Equipment and chemical inventories are
summarized in Schedules 2 and 11.

3.4 Capital Improvements

Should Washington State Department of Ecology Environmental Department or other
applicable regulatory authority establish Future Effluent Limits, the City and the Company shall
work together to modify the Facility needs, address the issue of revision to capital and operation
and maintenance costs, and adjust the annual Service Fee accordingly. The City will remain
responsible for financing the costs of Capital Improvements. If the parties cannot agree, an
independent third party shall make a determination. If the parties cannot agree, the City shall
have the right to make the final determination.

The City also anticipates the development, installation, and operation of a Computerized
Maintenance Management System (CMMS) by the Company during the first year of the
contract. Upon acceptance by the City of the CMMS system proposed by the Company, the City
will fund the costs identified in Proposal Form 8.

Appendix A
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 3.5 Performance Standards and Regulatory and Reporting Requirements
The Company's responsibilities for performance, regulatory compliance, and reporting
requirements are set forth in Schedules 1, 2, 3, and 8.

3.6 Emergency Plans and Safety Provisions

The Company's responsibilities for emergency plans and safety provisions are set forth in
Schedule 3.

3.7 Personnel
Consistent with the provisions of the RFP, the Company shall provide all staffing
necessary for the operation and maintenance of the wastewater facilities (treatment plant, bio-
solids, pump stations, and collection system) so as to comply with all contract provisions and
regulatory requirements. The Company’s staffing plan shall comply with the criteria set forth in
Section 2.7 Prevailing Wages, Section 4.1.2 Staffing Plan, and Section 6.2.6 Proposal Form 6
Key Project Staff.

3.8 Maintenance
The Company shall perform all maintenance as specified by the equipment manufacturer,
consistent with industry standards and the standards provided in the Schedules. The Company
will cause such maintenance to conform with equipment warranty provisions so that
requirements for continued warranty coverages are maintained.

The Company shall perform all routine, preventative, predictive and ongoing maintenance of the
Facility such that the facilities and structures be maintained at a level adequate for the efficient,
long-term reliability and preservation of the capital investment, including maintaining the
buildings in an aesthetically attractive and clean condition. The Company shall maintain all
transport, delivery and meter systems at the Facility in a serviceable condition maximizing their
life and functional purpose.

The Company shall be responsible for providing all maintenance of the machinery, equipment,
systems, structures and improvements constituting the Facility during the Term of the Agreement
in compliance with the operations and maintenance plan. The City shall have the right to
conduct inspections of the Plant at the City's sole expense and risk at any time in order to assure
that the Plant is being properly maintained in accordance with the Agreement.

After the development and implementation of the computerized maintenance management

system (CMMS) during the first year of the contract, the Company shall utilize the CMMS so as
to document all activities to be performed. The Company shall also maintain records of
performance of maintenance items, and maintenance backlog (items, skills and hours) for the
Facility. The Company shall develop and provide to the City a quarterly summary of
maintenance activities and metrics that allows assessment of performance, including without
limitation as to performance of scheduled and unscheduled work, equipment failure and work
backlogs.

Appendix A
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The Company shall maintain the Facility and sites in good working order and repair in a neat and
orderly condition. The Company shall provide or make provisions for all labor, materials, and
equipment necessary for the normal operation and maintenance of the Facility, including the
required predictive and preventive maintenance requirements of the operation and maintenance
plan.

If the Company fails to perform the required predictive and preventive maintenance as specified
herein, the City may withhold that portion of the Service Fee for such activities.

3.9 Repair and Replacement

The Company shall fund (without City reimbursement) repair and replacement
expenditures up to $2,000 per event and/or activity. The City shall provide a repair and
replacement fund to provide for the necessary funding for major repair and replacement and
other non-repetitive and non-routine activities, in excess of $2,000 dollars per event and/or
activity, required for the continued operation of the Facility. Provided the Company documents
that all preventive maintenance was performed for the equipment or system and that any
omission of such was not related to the cause of failure, the CITY shall use the repair and
replacement fund to pay for the costs for such major repair or replacement. Should the Company
not document and submit to the CITY the comprehensive maintenance requirements (industry
standards and manufacturer’s required maintenance) and their completion, then the Company
shall be financially responsible for the costs of the major repair or replacement. Funding of
replacements by the Company shall be done using a depreciated value for the equipment or
structure. The repair and replacement fund shall not cover regular and routine preventive and
predictive maintenance items, including those more than $2,000 dollars, which are to be
undertaken by the Company at its expense.

The repair and replacement fund shall be in the amount set forth below, with expenditures
beginning in the City's fiscal year 2017
FY 2017 $ 25,000 (escalated by CPI starting January 1, 2018)

No funds shall be disbursed from the repair and replacement fund without the prior written
consent of the City. At no time will the City threaten the successful operation and maintenance
of the Facility by withholding funds for projects which may endanger the Facility effluent or the
safety of equipment and/or employees.

The Company on a monthly basis shall submit to the City a report on expenses that should be
reimbursed.

To the extent that the Company determines that it is necessary to make repair and replacement
expenditures in excess of $ 2,000 on a one-time basis or $ 25,000 in any Calendar Year (amounts
in excess of such limit shall be "Major Expenditures"), the Company shall submit a written
proposal to the City, which proposal shall be approved by the City and the Company prior to the
Company making such expenditure. These expenditures shall be funded by the City.

Appendix A
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During the Contract Term, the Company shall recommend and perform repair and replacement
activities as follows:
(a) The Company shall determine the necessity for performing any repair and
replacement activities constituting Major Expenditures.
(b) The Company shall prepare written recommendations for all Major Expenditures that
the Company determines may be required to keep the Facility in a state of good
operating order, which recommendations shall include the approximate cost of
completing such activities.
(c) The City, within fifteen (15) days of the receipt of such written recommendations,
shall either approve or deny the Company's recommendation in writing, provided that
if the City fails to notify the Company, in writing, within such fifteen (15) day period
of its decision, such recommendation shall be deemed denied.
(d) In the event that the City does not approve a major repair or replacement item
recommended by the Company, the City shall indemnify and hold the Company
harmless from any direct damages suffered by the Company as a result of the City's
denial.

4.0 FINANCIAL REQUIREMENTS

4.1. Service Fee

Commencing with the first Billing Period, and for each Billing Period thereafter during
the Term of the Agreement, the City shall pay the Company a Service Fee for the services
provided by the Company.

The annual Service Fee shall be paid in 1/12th increments during each month of a Contract Year
as identified in Proposal Form 3. The Service Fee includes all compensation to the Company for
managing, operating, and maintaining the Facility. Except for additionally authorized work,
including repair and replacement fund expenditures, any adjustment for changes in flows or
loadings as set forth in Proposal Form 7, and cost saving incentive payments, the Company shall
not be entitled to any additional compensation.

4.2. Pass Through Costs

Schedule 12 lists the Pass Through Costs. Such costs shall be actual costs paid to third
parties without additional mark-up by the Company. Electricity Pass Through Costs shall be
reimbursed up to the maximum usage amount set forth in Schedule 12.

4.3. Adjustments Due to IRS Revenue Procedure 97-13

The City shall be under no obligation to, and shall not, pay compensation for services to
the Company for any Contract Year to the extent that such payment would result in less than
80% of the Company's compensation for services for such Contract Year being based on a
periodic fixed fee or would result in any portion of the Company's compensation being based on
net profit, as such terms are defined in Internal Revenue Service Rev. Proc. 97-13. The City and

Appendix A
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the Company further agree that any payment or portion thereof that is not made by virtue of the
first sentence of this paragraph shall be paid to the Company, without interest, during the next
annual period in which such payment will not result in less than 80% of the Company's
compensation being based on a periodic fixed fee and in which such payment will not be based
on net profit or, if in the last Contract Year, in the year immediately thereafter. The payment by
the City of any reimbursable costs to the Company shall not constitute “compensation for
services”.

Adjustments shall be made if necessary to comply with the limitation contained in Rev. Proc. 97-
13 that the term of the Agreement, including all renewal options, may not exceed 80% of the
reasonably expected useful life of the financed property. It is the intent of the City and the
Company that the Agreement shall be construed and applied so as to constitute a management
contract that does not result in private business use of property financed by the City within the
meaning and intent of Rev. Proc. 97-13, and no payments shall be made to the Company that
would result in such private business use under Rev. Proc. 97-13.

If, at any time or from time to time, during the Term of the Contract the scope of the Services is
increased or reduced pursuant to the terms of the Agreement and there is an adjustment to the
Service Fee due to such increase or reduction in the Services, the parties shall retest, as of the
date of such adjustment, the Service Fee for compliance with Rev. Proc. 97-13 and the
requirements of this Section. Any such adjustment of the Service Fee shall, at the City's cost, be
subject to the review and approval of the City's Law Department or legal counsel with expertise
in public finance tax matters for confirmation that such adjustment will not adversely affect the
tax-exempt status of any obligations issued by the City with respect to the Project.

4.4. Range of Operations and Compensation

The Company's Service Fee shall be based on treating all wastewater within the ranges
set forth in Schedule 2 for flow and loadings. Should the average ranges fall +10% outside of
the specified annual ranges, the Company and the City shall negotiate in good faith to adjust
upward or downward the Service Fee per the adjustment methodology developed from Proposal
Form 7.

5.0 LEGAL AND BUSINESS REQUIREMENTS

5.1. Term
The term of the Agreement shall be for seven (7) years with two – three year renewal
options, subject to the provisions of this Agreement and the CITY’s ability to enact cancellation
for convenience as specified below.

5.2. Indemnification
Notwithstanding all of the arrangements to provide for the duties and obligations of each
of the Company and the City, the Company will assume responsibility for, and shall indemnify
and hold the City and its officers, agents and employees harmless, against liabilities loss, suits,
claims, judgments, costs and expenses (including legal fees, court costs and other expenses of

Appendix A
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litigation or judicial or administrative proceedings) that may arise out of any act of omission or
for any reason whatsoever relating to the Facility, and all other related matters. Such liabilities
may include claims for environmental liability, personal injury, property damage, or assessments
and fines resulting from failure to comply with regulatory requirements.

5.3. Dispute Resolution

To the extent the parties cannot, after good faith attempts, resolve any controversy or
dispute that may have arisen under the Agreement, either party to the extent its interests are
adversely impacted, may refer the matter to mediation. To the extent that the mediation fails to
resolve any dispute between the parties, either party may request binding arbitration as allowed
by State of Washington law. The parties shall continue to perform services under the Agreement,
without interruption or slowdown, pending resolution of any dispute(s), unless the matter at issue
precludes such continued activity until resolved. This section shall survive termination of the
Agreement.

5.4 Company Default and Termination

In addition to pursuing any other rights or remedies available to it, the City may terminate
the Agreement upon the occurrence of an Event of Default including, without limitation, the
following:
Events of Default by Company

(a) failure or refusal of the Company to perform timely any obligation under the
Agreement, unless such failure or refusal is clearly recognized, justified and excused
by the terms and conditions of the Agreement.
(b) failure of the Company to pay amounts owed to the City under the Agreement, as
and when they become due and owing.
(c) (i) the Company's or the Project Guarantor's being or becoming insolvent or
bankrupt or ceasing to pay its debts, as and when due, or (ii) a bankruptcy, winding
up, reorganization, insolvency, arrangement, or results of a similar proceeding
instituted by or against the Company, or Project Guarantor and/or (iii) Company's or
Project Guarantor's conviction for fraud, or similar crime.
(d) the default of the Project Guarantor under the provisions of the Guarantee or
termination of the Guarantee.
(e) failure to operate or the abandonment of the Facility for one or more days in any
contract year.
(f) failure to otherwise comply with Applicable Law for 10 cumulative days in any
contract year.

Appendix A
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Termination Due to Unappropriated Funds
Payment and performance obligations shall depend upon the availability and appropriation of
funds. The City, therefore, must reserve the right to cancel the Agreement if funds are not
appropriated or otherwise made available in any fiscal year succeeding the remaining portion of
the first fiscal year. Such termination shall be treated as a termination for convenience.

Termination for Labor Unrest

If personnel employed by the Company and performing services pursuant to the Company's
obligations under the Agreement shall go on a labor strike or slowdown, or if a work stoppage,
walkout or secondary boycott shall occur, for any reason or cause whatsoever, and such act or
event effectively prevents the Company from performing its material obligations under the
Agreement, the City may, in its sole discretion, by notice to the Company, terminate the
Agreement forthwith.

Termination for Uncontrollable Circumstances

If an Uncontrollable Circumstance shall occur relative to a material obligation of the Company
under the Agreement and such Uncontrollable Circumstance or the effect thereof preventing
performance of such material obligation shall continue for a period of thirty (30) days, the City,
upon notice to the Company, may, at its sole discretion, terminate the Agreement forthwith,
notwithstanding that such Uncontrollable Circumstance may only be cured by the City's
procurement or implementation of a capital improvement, repair or construction which the City
determines, in its sole discretion, not to procure or implement. Such termination will be treated
as a termination for convenience, except that the notice period will be 15 days.

Termination for Convenience

The City shall have the right to terminate the Agreement at its sole discretion, for its convenience
and without cause at any time upon 90 days' prior written notice to the Company. If the City
exercises its right to terminate the Agreement for convenience, the City shall reimburse the
Company for its authorized, substantiated, actual, direct costs incurred and any authorized
expenses paid or incurred to third parties from the Contract Date until the date on which the
Agreement is terminated by the City, less any amounts already paid to the Company. Regardless
of the actual amount of the Costs and Expenses, the Costs and Expenses payment hereunder shall
in no event exceed unpaid and documented capital costs expended by the Company, unpaid and
documented operating costs, and documented demobilization costs of $ 100,000 . If the City
exercises its right to terminate the Agreement for convenience during the first two (2) years of
the Agreement, the City shall pay the Company, as additional documented costs in addition to
the Costs and Expenses, the sum of $250,000. Beginning in the third (3rd) year of the term, the
maximum amount for termination for convenience shall be $ 250,000 which amount shall
decline by 1/7th each year during the remaining term of this Agreement, plus the Costs and
Expenses.

Consequential or Punitive Damages

No consequential or punitive damages shall be payable on any claims arising out of the
performance of non-performance of obligations under the Agreement, either by the City or
Company.

Appendix A
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 5.5 Project Guarantor and Performance Bonds
The Company shall provide a Project Guarantor that executes the Guarantee as set forth
in Schedule 5. This Guarantee must be executed concurrently with the Agreement.

The Company shall provide an operations performance bond in the amount of $100,000. Costs
the bond shall be treated as Pass Through Costs. The Company shall secure and maintain the
bond as required in the Agreement.

6.0 INSURANCE
The Company shall provide insurance for the coverage amounts set forth in Schedule 6.
Costs for this insurance shall be treated as a Pass Through Cost. Prior to the Company
commencing Services, the Company's insurance company shall send to the City a
certificate indicating that the required insurance is in force and stating that the policies
will not be materially changed or canceled without sixty (60) days advanced notice by
registered mail. The Company shall secure and maintain the insurance as required in the
Agreement.

The representative signing the certificate shall furnish evidence that he is authorized to
sign as well as his address and the agency or agencies through which the insurance was
obtained.

7.0 NONCOMPLIANCE ASSESSMENTS

This section addresses treated effluent from the Facility which fails to meet the
Performance Standards and Guarantees specified in Schedule 1 or failure to follow the
operations and maintenance protocol established in Schedule 2. The Company is
responsible for meeting the applicable regulatory requirements first, followed by the
requirements specified in this Agreement. These requirements explicitly include
Washington State regulatory requirements for land application of bio-solids. The
following sequence outlines the procedures if the Company fails to meet Effluent Limits:
1. The Company shall immediately take the appropriate and all reasonable action to
satisfy all regulatory requirements.
2. Within 24 hours of noncompliance, the Company shall provide a plan to the City
explaining the cause of such failure and outlining corrective actions for preventing
similar or related failures in the future.
3. The City will review and approve the plan within 48 hours upon receipt.
4. The Company shall immediately implement the plan, which incorporates the City's
comments. The Company shall be responsible for performing any and all operational
modifications, as specified by the plan, to meet the effluent limits and / or
satisfactorily achieve the bio-solids requirement.

Appendix A
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Failure to implement any of the above corrective actions will result in Noncompliance
Assessments in the amount of $1,000 per day, per violation for substantial and
continuous violations that threaten public health and/or safety and/or the environment
from the date of violation. The Noncompliance Assessments shall be in addition to, and
not a substitute for, other losses, fines, claims, damages or other expenses incurred by the
City.

Failure to meet Effluent Limit requirements shall result in Noncompliance Assessments

described herein plus additional damages imposed by regulatory agencies, including any
subsequent environmental impact studies or other operational changes required.

Appendix A
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