GARDEN GROVE SANITARY DISTRICT (2)

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with respect to the sewers within their jurisdiction and will perform the deterrisination by whatever means and methods they deem appropriate. The results of such determinations must be shared with the other Party by October 1st of each year when the results indicate that a. shared sanitary sewer is near or over capacity as defined in Section 1. (b) Construction of New Shared Sanitary Sewer If a Party determines that any shared sanitary sewers within its jurisdiction will not have sufficient capacity to provide service without limiting connections for the next calendar year, then the Parties shall meet and determine within sixty (60) days the size and estimated cost of a new, larger sanitary sewer that will provide adequate capacity for ultimate planned development within the tributary areas. The Parties anticipate that such new, larger sanitary sewers will generally be designed and constructed as replacements for the then -existing shared sanitary sewers. Unless otherwise agreed by the Parties, the Party within whose jurisdiction the new sanitary sewer will be located shall be responsible for preparation of the plans and specifications for the new sanitary sewer. The Parties shall meet to review the plans and specifications (i) upon their fifty percent (50%) completion and (ii) upon their completion, but prior to the solicitation of bids for construction of new sanitary sewer. The cost of the new sanitary sewer, including in-house and outside engineering, administrative, and construction, shall be apportioned between the parties in the proportions set forth on Exhibit "B." The construction of the new line shall be scheduled to start by the mutual agreement of the parties, but in no event shall it be undertaken prior to the next July 1st so that both parties may budget for the required funds, unless earlier construction is required due to an iminediate threat to public health and welfare or unless the parties mutually agree to earlier commencement of construction. Prior to commencing construction, the Party within whose jurisdiction the new sanitary sewer will be located shall invoice the other Party for its apportioned share of the estimated total cost. The other Party shall promptly deposit the invoiced amount with the initiating Party. The initiating Party shall keep these monies in a segregated fund and use them only for the project for which they were deposited. Upon completion of the work, and payment of all costs, the initiating Party shall submit a report setting forth all costs incurred together with either an invoice, or areftind, for the difference between the actual apportioned cost and the deposit (and any related accumulated interest). (e) Withdraw of Tributary Areas in Lieu of Contribution to Cost of New Shared Sewer. In lieu of contributing to the cost of a new, larger shared sanitary sewer, a Party may elect to withdraw the areas within its jurisdiction tributary to the shared sanitary sewer from coverage under this Agreement and construct alternative connections of the sanitary sewerage facilities in such tributary areas, provided that the Party provides notice to the other Party of its intention to withdraw such tributary areas and constrict alternative connections and/or facilities prior to the award of a contract by the other Party for design of the new shared sanitary sewer. The failure to provide such notice prior to the award of the design contract shall constitute a waiver of the right to elect to withdraw. A Party that makes such an election to withdraw shall, as of eighteen (18) months 579683.1 4