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12 AGREEMENT CONCERNING CREATION AND OPERATION OF SAN MARCOS MUNICIPAL UTILITY DI STRICT NO.1 STATE OF TEXAS § § KNOW ALL MEN BY THESE PRESENTS: OF HAYS § THIS AGREEMENT is made and entered into by and among the City of San Marcos, Texas (hereinafter referred to as the "City"), a municipal corporation situated in Hays County, Texas, acting herein by and through its undersigned duly authorized City manager, as authorized by specific action of its City Counc i 1 ¡ San Marcos Municipal Utility District No. 1 (hereinafter the "Di strict" ), a municipal utility district to be created by order of the Texas Water Commission and operating pursuant to Chapter 54 of the Texas Water Code¡ and Storm Development, Inc., a Texas corporation and Clear River Joint Venture, a Texas joint venture (hereinafter collectively "Storm Development"), the holder of legal title to all of 634.95 contiguous acres situated wholly in Hays County, Texas, and lying wholly within the extraterritorial jurisdiction of the City, which land is more particularly described in Exhibit "A", attached hereto and incorporated herein by reference. For and in consideration of the premises and the mutual agreements, covenants, and conditions hereinafter set forth, the parties hereto hereby contract and agree as follows, to wi t: ARTICLE I COMPLIANCE WITH CITY'S UTILITY DISTRICT ORDINANCE A. Except as otherwise provided herein, the consent to the creation of the District hereby granted by the City is subject to, and the creation and operation of the District shall be in accordance with, the Utility District Ordinance adopted by the City Council of the City of San Marcos on December 3, 1984, by Ordinance Number 1984-107, ("Utility District Ordinance"). The terms and conditions of the Utility District Ordinance are made a part of this Agreement for all purposes to the extent permitted by law. B. Anything herein and in the Utility District Ordinance to the contrary notwithstanding, the City has granted the District an exception to the Utility District Ordinance, granting the District the bonding authority percentages allowed by the rules and regulations of the Texas Water Commission. ARTICLE I I ISSUANCE OF BONDS BY THE DISTRICT A. The District agrees that it shall only issue bonds and notes, including bond anticipation notes, for the purposes and in the manner provided by the rules and requirements of the Texas Water Commission. All bonds and notes of the District (the "District bonds") and the terms and provisions thereof shall be subject to approval by the City Council of the City prior to the issuance L:!lereof, except as set forth below in this paragraph, which approval shall not be unreasonably withheld¡ provided, however, that any authorization which may be granted hereunder by the City of a principal amount of District bonds proposed to be issued by the District shall be deemed to include the approval of bond anticipation notes in a principal amount not to exceed the amount of principal of the District bonds so authorized. Without the prior written consent of the City Council of the City, the City will not be bound upon annexation of the District to the City by any debts or obligations incurred by the District other than those arising by the issuance of bonds or notes authorized or approvl'",d by the City and open accounts incurred in good faith