Ord 2014-070/Approving a petition submitted by Metcalfe, Wolfe, Stuart & Williams, LLP on behalf of Walton Texas, LP granting the consent of the City of San Marcos, Texas, to the creation of Cotton Center Municipal Utility District No. 1

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boundaries without the prior written consent of the City as required by Section 54.0165 of the Texas Water Code. The City may not place any conditions or other restrictions on the expansion of the District other than those expressly permitted by Section 54.016(e) of the Texas Water Code. Any land annexed into the District must comply with Chapter 70 of the City Code and this Agreement. c. It is agreed that the annexation of the Additional Land or any land into the District or a Sub - District will comply with acreage limits, subject to administrative approval provisions detailed in Section 2.02(a). d. With respect to the Industrial and Regional Commercial Land, the City and Owner agree to the following: i. The Industrial and Regional Commercial Land shall be included in the boundaries of the District pursuant to the Enabling Act; ii. The Owner agrees that no election authorizing the issuance of debt will be held that includes a portion of the Industrial and Regional Commercial Land unless and until a revised Concept Land Plan is approved pursuant to the Development Agreement that identifies the lands as residential, or final plat is approved by the City which provides for residential use of such portion of the Industrial and Regional Commercial Land; and ill. If any Industrial and Regional Commercial Land is platted or otherwise issued a permit for a commercial or industrial use, the District shall take action to remove such land from the District, in accordance with Chapter 70 of the City Code and the procedures of Chapters 49 and 54 of the Texas Water Code, prior to final plat approval by the City. The District and Owner, on behalf of itself and respective successors and assignees, covenant and agree that, except upon written consent of the City, neither the District nor Owner will: (1) seek or support any effort to incorporate the Land or any part thereof; or (2) sign, join in, associate with, or direct to be signed any petition seeking to incorporate the Land or seeking to include the Land within the boundaries of any other special district, assessment jurisdiction, other municipality, or any other incorporated entity other than the City. Section 2.05 Strategic Partnership Agreement. a. The Board of Directors of the District (the "Board") or a Sub - District created by the division of the District shall authorize the negotiation and execution of a Strategic Partnership Agreement, substantially in the form attached here as Exhibit "D ", which will set forth the terms and conditions for the City's annexation of commercial areas of the Land for limited purposes in accordance with Section 43.0751 Texas Local Government Code and Section 2.04 of the City Charter. b. The Strategic Partnership Agreement shall permit the City to impose a sales and use tax on all eligible commercial and retail activities in areas annexed for limited purposes at the same rate it is imposed by the City, and that the City shall pay the District or Sub - District an amount equal to forty percent (40 %) of the Sales and Use Tax revenues collected and paid to the City as reflected in sales tax reports provided by the Comptroller to the City and the City will retain the remainder sixty percent (60 %).