The URL can be used to link to this page

Home My WebLink AboutDERR-2024-007724PROJECf AGREEMENT BETWEEN KENNECOTr UTAH COPPER CORPORADON AND JORDAN VALLEY WATER CONSERVANCY DISTRICt , Table of Contents Table of Contents ..............................................................................................................................i Recitals ............................................................................................................................................1 Agreement .......................................................................................................................................2 1. Definitions ..............................................................................................................................2 1.1. 1995 Dollars ....................................................................................................................2 1.2. Affected Area ..................................................................................................................2 1.3. Affected Municipalities ...................................................................................................2 1.4. Alternative Disposal System...........................................................................................2 1.5. Bingham Canyon Plant ...................................................................................................2 1.6. CERCLA .........................................................................................................................2 1.7. Complete and Operational ..............................................................................................2 1.8. Consent Decree ...............................................................................................................2 1.9. Deep Wells ......................................................................................................................2 1.10. Deep Well Concentrates ................................................................................................2 1.11. Environmental Claim ....................................................................................................2 1.12. Environmental Laws .....................................................................................................3 1.13. ENR Index.....................................................................................................................3 1.14. EPA ...............................................................................................................................3 1.15. Escrow Agreement ........................................................................................................3 1.16. Hazardous Materials .....................................................................................................3 1.17. Integrated Design ..........................................................................................................4 1.18. Jordan Valley Membrane Plant .....................................................................................4 1.19. JVWCD Zone A Pipeline ..............................................................................................4 1.20. Kennecott/JVWCD Settlement Agreement ..................................................................4 1.21. Kennecott Reconciliation Payment ...............................................................................4 1.22. Lost Use Capital Costs ..................................................................................................4 1.23. Lost Use Facilities .........................................................................................................4 1.24. Lost Use Water Rights ..................................................................................................4 1.25. Municipal Quality Water ..............................................................................................4 1.26. Operational Period ........................................................................................................4 1.27. Pressure Zone C Reservoir ............................................................................................5 1.28. Process Enhancement Costs..........................................................................................5 1.29. Process Enhancement Construction Costs ....................................................................5 1.30. Process Enhancement Operating, Maintenance and Replacement Costs .....................5 1.31. Project ...........................................................................................................................5 1.32. Project Facilities ............................................................................................................5 1.33. Proposal.........................................................................................................................5 1.34. PTIF Rate ......................................................................................................................5 -ii- 1.35. Reconciliation Date.......................................................................................................5 1.36. Separate Design.............................................................................................................5 1.37. State Agree ment ............................................................................................................5 1.38. Tailings Impoundment ..................................................................................................6 1.39. Treated Water ................................................................................................................6 1.40. Trustee ...........................................................................................................................6 1.41. Trust Fund .....................................................................................................................6 1.42. Zone A Collection Facilities .........................................................................................6 1.43. Zone A Concentrates .....................................................................................................6 1.44. Zone A Meter ................................................................................................................6 1.45. Zone A Permeate Facilities ...........................................................................................6 1.46. Zone A Plant .................................................................................................................6 1.47. Zone A Pretreatment Facilities .....................................................................................6 1.48. Zone B Adjustment Factor ............................................................................................6 1.49. Zone B Avoided Capital Costs .....................................................................................7 1.50. Zone B Concentrates .....................................................................................................7 1.51. Zone B Construction Commencement Date .................................................................7 1.52. Zone B Facilities ...........................................................................................................7 1.53. Zone B Funds ................................................................................................................7 1.54. Zone B ILC ...................................................................................................................7 1.55. Zone B Water Rights ....................................................................................................7 2. Representations and Warranties; Relationship of the Parties .................................................7 2.1. Representations and Warranties......................................................................................7 2.2. No Partnership .................................................................................................................8 2.3. Authority to Act ..............................................................................................................8 2.4. No Joint Liability ............................................................................................................8 2.5. Other Business Opportunities .........................................................................................8 2.6. Implied Covenants ..........................................................................................................8 3. Overs ight Committee ..............................................................................................................9 3.1. Establishment ..................................................................................................................9 3.2. Members ..........................................................................................................................9 3.3. Meetings ..........................................................................................................................9 3.4. Minutes ............................................................................................................................9 3.5. Costs ................................................................................................................................9 4. Bingham Canyon Plant .........................................................................................................10 4.1. Construction of Bingham Canyon Plant .......................................................................10 4.2. Zone A Contingencies ...................................................................................................10 4.3. Zone A Meter ................................................................................................................10 4.4. JVWCD Zone A Pipeline .............................................................................................10 4.5. Operation of Plant .........................................................................................................10 4.6. Termination of Process Enhancement ..........................................................................11 4.7. Zone A Water Rights ....................................................................................................11 4.8. Limitation on Obligations to Accept and Produce Water .............................................12 4.9. Cooperation...................................................................................................................12 -iii- 4.10. Shutdowns affecting the Bingham Canyon Plant .......................................................12 4.11. Expansion....................................................................................................................13 5. Zone B Facilities ...................................................................................................................13 5.1. Construction of Zone B Facilities .................................................................................13 5.2. Obligations During Operational Period ........................................................................13 5.3. Zone B Contingencies ...................................................................................................14 5.4. Cooperation; Limited Role of Kennecott......................................................................14 5.5. Expansion of Jordan Valley Membrane Plant ..............................................................14 5.6. Transfer of Tateoka Well Site .......................................................................................14 6. Lost Use Facilities ................................................................................................................14 6.1. Basic Design of Lost Use Facilities ..............................................................................14 6.2. Construction of Lost Use Facilities ...............................................................................15 6.3. Obligations During Operational Period ........................................................................15 6.4. Lost Use Contingencies ................................................................................................16 6.5. Cooperation; Limited Role of Kennecott......................................................................16 7. Water Sales to Affected Municipalities ................................................................................16 7.1. Obligation to Offer Water .............................................................................................16 7.2. Contracts and Rates .......................................................................................................17 7.3. Allocation Among Affected Municipalities ..................................................................17 7.4. Additional Terms ..........................................................................................................18 7.5. JVWCD’s Continuing Ob ligation.................................................................................18 7.6. Commingling of Water .................................................................................................18 7.7. Uncommitted Water ......................................................................................................18 7.8. JVWCD’s Other Obligations Unaffected .....................................................................18 8. Disposal of Concentra tes ......................................................................................................18 8.1. Zone A Concentrates .....................................................................................................18 8.2. Deep Well Concentrates ................................................................................................18 8.3. Lost Use Facilities – Separate Design ..........................................................................20 8.4. Disposal Facilities and Permitting ................................................................................21 8.5. JVWCD Election to Participate in Alternative Disposal System .................................21 8.6. Planning and Funding of Alternative Disposal System ................................................22 8.7. Potential Vio lations of Laws/Permits Affecting Disposal Facilities ............................22 8.8. Shutdowns Affecting Concentrate Disposal Facilities .................................................23 8.9. Ownership of Disposal Facilities ..................................................................................23 8.10. Disposal Pipeline Easements ......................................................................................24 9. Financial Obligations for Project Facilities ..........................................................................24 9.1. Bingham Canyon Plant .................................................................................................24 9.2. Zone B Facilities ...........................................................................................................25 9.3. Lost Use Facilities .........................................................................................................28 9.4. No Other Trust Fund Contribution ...............................................................................28 9.5. Treated Water ................................................................................................................28 9.6. Other Monies .................................................................................................................28 -iv- 10. Reconciliation of Costs .......................................................................................................28 10.1. Reconciliation and Final Payment ..............................................................................28 10.2. Suspension of Payments .............................................................................................29 11. Impact of Termination on Funding Matters ........................................................................29 11.1. Expenditures for Own Account ..................................................................................29 11.2. Termination as to Zone B Facilities – Zone B Adjustment Factor Less than 50%....29 11.3. Termination as to Zone B Facilities – Zone B Adjustment Factor Equal to or Greater than 50%...............................................................................................................................30 11.4. Termination as to the Lost Use Facilities ...................................................................30 11.5. Termination as to the Zone A Plant ............................................................................31 11.6. No Other Refunds or Payments ..................................................................................31 12. General Rights and Duties of the Parties ............................................................................31 12.1. Inspection Rights ........................................................................................................31 12.2. Compliance with Laws ...............................................................................................31 12.3. Insurance .....................................................................................................................31 12.4. Standard of Care ..........................................................................................................32 12.5. Governmental Approvals ............................................................................................32 12.6. Environmental Indemnity ...........................................................................................32 12.7. State Agreement ..........................................................................................................33 12.8. Sovereign Immunity....................................................................................................33 12.9. Kennecott’s Other Rights Unaffected .........................................................................33 13. Termination of Agreement .................................................................................................33 13.1. General ........................................................................................................................33 13.2. Automatic Termination for Failure of Certain Conditions .........................................34 13.3. Termination for Inability to Obtain Permits ...............................................................34 13.4. Termination for Inability to Dispose of Concentrates ................................................34 13.5. Election to Terminate..................................................................................................34 13.6. Certain Rights of Parties on Termination ...................................................................34 14. Events of Default and Remedies .........................................................................................34 14.1. Events of Default ........................................................................................................34 14.2. Remedies .....................................................................................................................35 14.3. Attorneys’ Fees ...........................................................................................................35 15. Force Majeure .....................................................................................................................35 16. Proprietary Information; Confidentiality............................................................................35 16.1. Kennecott’s Intellectual Property................................................................................35 16.2. JVWCD’s Intellectual Property ..................................................................................36 16.3. Jointly Developed Intellectual Property......................................................................36 16.4. Access to Intellectual Property ...................................................................................36 17. Miscellaneous .....................................................................................................................37 17.1. Entire Agreement ........................................................................................................37 -v- 17.2. Satisfaction of Settlement Agreement and Release ....................................................37 17.3. Successors and Assigns ...............................................................................................37 17.4. Conflict ........................................................................................................................37 17.5. No Third Party Beneficiaries ......................................................................................37 17.6. No Waiver ...................................................................................................................37 17.7. Severability .................................................................................................................37 17.8. Governing Law ...........................................................................................................38 17.9. Transfers of Interest ....................................................................................................38 17.10. Continued Viability of the Parties .............................................................................38 17.11. Notices ......................................................................................................................38 17.12. Further Assurances ....................................................................................................39 17.13. Recording Memorandum ..........................................................................................39 17.14. Survival .....................................................................................................................39 Appendices: Appendix 1 - Schedule of Water Rights for Zone B and Lost Use Appendix 2 – Proposal Appendix 3 – Water Taste and Odor Testing Methodology Appendix 4 – Water Rate Determination Methodology Appendix 5 – Deep Well Concentrate Specifications Appendix 6 – Insurance Schedule Appendix 7 – Deep Well Concentrate Delivery Point and Disposal Pipeline Corridors Appendix 8 – Form of Concentrate Disposal Pipeline Easement Agreement PROJECT AGREEMENT BETWEEN KENNECOTT UTAH COPPER CORPORADON AND JORDAN V..4 , J ,EY W AUK CONSERVANCY DISTRICt TInS PROJECT AGREEMENT (the "Project Agreement"), dated this.~j~y of()n.tIJ.tk 2004, is made between Kennecott Utah Copper Corporation ("Kennecott") and Jordan~~ y Water Conservancy District ("JVWCDj. RECITALS A. Kennecott and NWCD jointly developed a proposal to construct a ~undwater extraction and treatment project with grotmdwater remedial functions (the "Project"), which, among other purposes, will provide treated, municipal quality water to municipalities in: the af- fected area of the southwestern Jordan Valley (the "Affected Area") as defined in: the Consent Decree dated Au8ust21, 1995 entered in Civil Action No. 86-C-O9020 in: the United StatesDis- trict Court for the District of Utah and Supporting Document (the "Consent Decreej. The Pro- ject is more fully described in the Proposal (defined in: Section 1.33 below). B. The Project provides a number of benefits to the public in the Affected Area and each of the parties. The public benefits because municipalities in the Aff~ Area will receive a certain quantity of municipal quality water at a discount for a 40-year period. The Project benefits Kennecott because, among other reasons, it will assist Kennecott in satisfying various termS oftbe Consent Decree, certain CERCLA (defined in Section 1.6 below) requirements and the KennecottlJVWCD Settlement Agreement (defined in Section 1.20 below). The Project benefits- NWCD because, among other reasons, JVWCD will receive new water production and treatment facilities at a substantial cost savings. C. The Proposal has been submitted for approval to the State of Utah Trustee (de- fined in Section 1.40 below). The Proposal also was provided to the Utah State Engineer and the United States Environmental Protection Agency, Region vm. D. As part of the funds needed to implement the Project, Kennecott and JVWCD seek to utilize the Trust Fund (defined in Section 1.41 below) set up under the Consent Decree. in a manJ1ef consistent with the terms of the Consent Decree and to restore the equivalent injured resource as described in the Consent Decree. The parties will also enter into an agreement with the TnJStee that clarifies the use of the Trust Fund, among other things. E. The parties desire to enter into this Project Agreement to set forth their respective rights and obligations regarding, and to govern their relationship in the further development and construction of, the Project. -2- AGREEMENT In consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Definitions . 1.1. “1995 dollars” or “October 2002 dollars” means a cost or expenditure that is esca- lated or extended to a later year than 1995 or 2002 as applicable, by means of the PTIF Rate or the ENR Index from September, 1995 or October, 2002, as applicable. 1.2. “Affected Area” has the meaning set forth in the Consent Decree. 1.3. “Affected Municipalities” means the City of Herriman, Riverton City, the City of South Jordan and the City of West Jordan, which are situated in the Affected Area. 1.4. “Alternative Disposal System” means the facilities for disposal of Zone A Con- centrates and Deep Well Concentrates d escribed in Sections 8.5 and 8.6. 1.5. “Bingham Canyon Plant” means collec tively the Zone A Collection Facilities, the Zone A Plant and the Zone A Permeate Facil ities. 1.6. “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Re authorization Act 42 U.S.C. § 9601 et seq., as either act may be amended. 1.7. “Complete and Operational” with re gard to each of the Zone A Plant, the Zone B Facilities and the Lost Use Facilities means that the operator of the plant or facilit ies has received an operating permit from the Utah Department of Environmental Quality, Division of Drinking Water under its normal rules and regulations, and that the Trustee has provided notice that the plant or facilities are Complete and Operational under the State Agree ment. 1.8. “Consent Decree” has the meaning set forth in Recital A above. 1.9. “Deep Wells” means wells producing gro undwater from the Principal Aquifer as defined in USGS/Utah Department of Natural Resources Technical Pub lication No. 31 and bounded on the north by 7800 South, on the south by 11800 South, on the east by the Jordan River and on the west by 3600 West. 1.10. “Deep Well Concentrates” means re verse osmosis concentrates from the Jordan Valley Membrane Plant that are generated exclusively by the treatment of water from Deep Wells by the Zone B Facilities and, if the Lost Use Facilities are constructed and operated based on the Integrated Design, by the Lost Use Facilities. 1.11. “Environmental Claim” means any and all claims, ac tions, damages, judgments, fines, penalties, demands, liabilities, costs, expenses (including reasonable attorneys’ and other profe ssional fees), clean-up costs, remediation, removal or other response costs, legal expenses -3- (including reasonable attorneys’ fees), investigation costs (including reasonable fees of consult- ants, counsel and other experts in connection with enviro nmental investigation or testing), and any other losses, liabilities, obligations, fines, penalties (civil or criminal), damages (including co mpensatory, punitive and natural resource damages), or payments, sought or claimed by any person, governmental agency or other entity which are based upon the violation or alleged viola- tion of any Environmental Law or the release of any Hazardous Materials. 1.12. “Environmental Laws” means the following statutes and their implementing regu- lations: the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., CERCLA, the Clean Water Act, 33 U.S.C. § 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., and any other federal, state or local statute or regulations deal- ing with similar matters. 1.13. “ENR Index” means the monthly index to be used for escalating a cost or expe n- diture as set forth in the Engineering and News Record “20 Cities” construction cost index. If the date for a payment, deposit or other amount to be determined based on the ENR Index occurs on a date other than the first day of a month, the escalation dur ing the month in which the date occurs shall be pro rated to the date in question based on the ENR Index for the preced ing month. 1.14. “EPA” means the United States Environmental Protection Agency and/or its suc- cessors. 1.15. “Escrow Agreement” means that certain Agreement for Wellsite Identification and Purchase between Kennecott and JVWCD dated December 20, 2001, together with that cer- tain Escrow Agreement among Kennecott, JVWCD and Landmark Title Company dated De- cember 20, 2001. 1.16. “Hazardous Materials” means: a. hazardous materials, pollutants, contaminants, dangerous substances, co n- stituents, toxic substances, hazardo us or toxic chemicals, hazardous wastes and hazardous substances as those terms are defined in any Environmental Law; b. petroleum, including crude oil and fractions thereof; c. natural gas, synthetic gas and any mixtures thereof; d. asbestos and/or asbestos-containing materials; e. PCBs, or PCB-containing materials or fluids; f. any other substance, including sewage sludge, with respect to which any federal, state or local agency or other governmental entity may require either an enviro n- mental investiga tion or an environmental remediation; and g. any other hazardous or noxious substance, material, pollutant or solid waste that is regulated by, or forms the basis of liability under, any Environmental Law. -4- 1.17. “Integr ated Design” means the alternate design for the Lost Use Facilities de- scribed in Section 6.1.a. 1.18. “Jordan Valley Membrane Plant” means the Zo ne B Facilities and the Lost Use Facilities, collectively. 1.19. “JVWCD Zone A Pipeline” means the pipeline described in Section 4.4. 1.20. “Kennecott/JVWCD Settlement Agreement” means the Settlement Agreement and Release dated September 21, 1995 between Kennecott and JVWCD. 1.21. “Kennecott Reconciliation Payment” means $4,153,196 (October 2002 dollars at the PTIF Rate). 1.22. “Lost Use Capital Costs” means the costs advanced by Kennecott to JVWCD pur- suant to Section 9.3.b. 1.23. “Lost Use Facilities” means the Lost Use water treatment facilities as detailed in the Proposal, to be used to replace lost concentrate water from the Bingham Canyon Plant and Zone B Facilities, as such system may be modified during the Operational Period for the Lost Use Facilities, provided that (i) any such modification shall not increase or modify the obliga- tions of Kennecott under this Project Agreement, and (ii) JVWCD continues to fulfill its water delivery commitments under Se ction I.C.3 of the State Agreement. If the Lost Use Facilities are constructed and operated based on the Integr ated Design, then the Lost Use Facilities will in- clude a twenty-six (26%) interest in the wells, pipelines and other facilities to collect feed water for the Zone B water treatment facilities and the Lost Use water treatment facilities, in the land, building and other assets comprising the Jo rdan Valley Membrane Plant and in the pipelines and other facilities used to transport treated water and concentrates from the Jordan Valley Mem- brane Plant. If the Lost Use Facilities are constructed and operated based on the Separate De- sign, then the Lost Use Facilities will include the Lost Use water treatment facilities within the Jordan Valley Membrane Plant and all wells, pipelines and other facilities to collect feed water for the Lost use water treatment facilities, together with a forty percent (40%) interest in the land, build ing and other shared assets supporting the Zone B water treatment facilities and the Lost Use wa ter treatment facilities and in the pipelines and other facilities used to transport treated water from the Zone B water treatment facilities and the Lost Use water treatment facil ities. 1.24. “Lost Use Water Rights” means water rights owned by JVWCD and designated for use in providing water to the Lost Use Facilities as described in Appendix 1 attached hereto. 1.25. “Municipal Quality Water” means wa ter with chemical concentrations at or below 250 mg/L sulfate and 500 mg/L total dissolved so lids for water extracted from the area west of the Welby Canal, or 250 mg/L sulfate and 800 mg/L total dissolved solids for water extracted from the area east of the Welby Canal, and which otherwise meets primary drinking water sta n- dards for other contaminants. 1.26. “Operational Period” means the period commencing on the date that the applica- ble Project Facility is Complete and Operational, and continuing for 40 years thereafter. -5- 1.27. “Pressure Zone C Reservoir” means the JVWCD water storage tank located at 6980 West 10200 South in Salt Lake County. 1.28. “Process Enhancement Costs” includes Process Enhancement Construction Costs and Process Enhancement Operating, Maintenance and Replacement Costs. 1.29. “Process Enhanc e ment Construction Costs” means the incremental increase in the capital costs of the Zone A wa ter treatment facilities and the Zone B water treatment facilities that are necessary in order to reduce the total dissolved solids in the treated water from 500 mg/L to 250 mg/L in the case of the Zone A water treatment facilities, and from 800 mg/L to 250 mg/L in the case of the Zone B water treatment facilities. 1.30. “Process Enhancement Operating, Maintenance and Replacement Costs” means the incremental increase in the annual operating, maintenance and replacement costs of the Zone A water treatment facilities and the Zone B water treatment facilities that are necessary in order to reduce the total dissolved solids in the treated water from 500 mg/L to 250 mg/L in the case of the Zone A water treatment facilities, and from 800 mg/L to 250 mg/L in the case of the Zone B water treatment facilities. 1.31. “Project” has the meaning set forth in Recital A above. 1.32. “Project Facilities” means the Zone A Plant, the Zone B Facilities and the Lost Use Facilities. 1.33. “Proposal” means the Kennecott and JVWCD “Proposal to the Utah State NRD Trustee and the USEPA CERCLA Remedial Project Manager for Groundwater Extraction and Treatment Remedial Project in the Southwest Jordan Valley” dated June 11, 2004, which in- cludes any amendments that may be agreed to by the parties in writing from time to time. A copy of the Proposal is attached hereto as Appendix 2. 1.34. “Public Treasurers Investment Fund Rate” or “PTIF Rate” means the monthly rate of return received by the State of Utah Treasurer on State funds invested by the Treasurer. If the date for a payment, deposit or other amount to be deter mined at the PTIF Rate occurs on a date other than the first day of a month, the escalation during the month in which the date occurs shall be prorated to the date in question based on the PTIF Rate for the preceding month. 1.35. “Reconciliation Date” means a mutually acceptable dat e within 60 days following the date on which the Zone B Facilities are Complete and Operational or January 31, 2010, whic hever is earlier. 1.36. “Separate Design” means the alternate design for the Lo st Use Facilities described in Section 6.1.b. 1.37. “State Agreement” means the agreement among the Trustee, Kennecott and JVWCD which provides for, among other things, the Trus tee’s approval of the Project and the use of the Trust Fund in co nnection with the Project, as such agreement may be amended from time to time. -6- 1.38. “Tailings Impoundment” means the tailings impoundment existing and operating as of the date of this Project Agreement used in co nnection with Kennecott’s mining operations located in Salt Lake County between approximately 2100 South and U.S. Interstate 80 and west of 8400 West. 1.39. “Treated Water” means water which, at the Zone A Meter Station, (i) has chemi- cal concentrations at or below 250 mg/L sulfate and 250 mg/L to tal dissolved solids, (ii) whic h otherwise meets primary drinking water standards for other contaminants, and (iii) is free of ob- jectionable tastes and odors (as determined and administered in accordance with the methodo l- ogy described in Appendix 3, attached hereto and made a part hereo f); provided, however, that if at any time JVWCD is no longer taking water produced from the Bingham Canyon Plant purs u- ant to the terms of this Project Agreement, the term “Treated Water” as applied to such plant shall have the same meaning as “Municipal Q uality Water”. 1.40. “Trustee” means the Executive Director of the Utah State Department of Envi- ronmental Quality as the State-appointed Trustee for the State’s natural resources as provided in Section 107 of CERCLA, 42 U.S.C. 9607, and/or its successors. 1.41. “Trust Fund” means the natural resource damage claim trust fund administered by the Trustee under the Consent Decree. 1.42. “Zone A Collection Facilities” means the wells and pipelines used for de livery of feed water to the Zone A Plant as detailed in the Proposal. 1.43. “Zone A Concentrates” means the reverse osmosis concentrates produced by the Zone A Plant. 1.44. “Zone A Meter Station” means the water meter station described in Section 4.3, including the meter. 1.45. “Zone A Permeate Facilities” means the pipelines and other facilities used to de- liver Treated Water from the Zone A Plant to the Zone A Meter Station. 1.46. “Zone A Plant” means the Zone A reverse osmosis water treatment system as de- tailed in the Proposal, as such system may be modified dur ing the Operational Period for the Zone A Plant, provided that (i) any such modification shall not increase or modify the obliga- tions of JVWCD under this Project Agreement, and (ii) Kennecott continues to fulfill its water delivery commitments under Sec tion I.C.1 of the State Agreement. 1.47. “Zone A Pretreatment Facilities means the facilities, if any, as now exist ing or hereafter utilized to pre-treat feed water to the Zone A Plant. 1.48. “Zone B Adjustment Factor” means, as of any given date, the cumulative total of all amounts released to JVWCD by Kennecott under Sections 9.2.d, 9.2.e and 9.2.f through the date of the determination, divided by the total amount of Zone B Funds as of the date of the de- termination. -7- 1.49. “Zone B Avoided Capital Costs” means Zone B avoided capital costs payable un- der Section 10.1.b. 1.50. “Zone B Concentrates” means reverse os mosis concentrates generated by the Zone B Facilities. 1.51. “Zone B Construction Commencement Date” means the date when JVWCD in- tends to commence construction of the Zone B Facilities and all necessary approvals have bee n obtained. 1.52. “Zone B Facilities” means the Zone B water treatment facilities as detailed in the Proposal, as such system may be modified during the Operational Period for the Zone B Facili- ties, provided that (i) any such modification shall not increase or modify the obligations of Ken- necott under this Project Agree ment, and (ii) JVWCD continues to fulfill its water delivery commitments under Section I.C.2 of the State Agreement. If the Lost Use Facilities are co n- structed and operated based on the Integrated Design, then the Zone B Facilities will include a seventy-four percent (74%) interest in the wells, pipelines and other facilities to collect feed wa- ter for the Zone B water treatment facilities and the Lost Use water treatment facilities, in the land, building and other assets comprising the Jordan Valley Membrane Plant and in the pip e- lines and other facilities used to transport treated water and co ncentrates from the Jordan Valley Membrane Plant. If the Lost Use Facilities are constructed and operated based on the Separate Design, then the Zone B Facilities will include the Zone B water treatment facilities within the Jordan Valley Membrane Plant and all wells, pipelines and other facilities to collect feed water for the Zone B water treatment facilities, together with a sixty percent (60%) interest in the land, building and other shared assets suppor t ing the Zone B water treatment facilities and the Lost Use water treatment fac ilities and in the pipelines and other facilities used to transport treated water from the Zone B water treatment facilities and the Lost Use water treatment facil ities. 1.53. “Zone B Funds” means the total amount of the Zone B Design, Construc tion and Construction Retainage Funds fixed under Section 9.2.b as of the date of the determination. 1.54. “Zone B ILC” means the Zone B replacement irrevocable letter of credit de- scribed in Section II.A of the State Agreement. 1.55. “Zone B Water Rights” means water rights owned by JVWCD and designated for use in providing water to the Zone B Facilities and Lost Use Facilities in Appendix 1 attached hereto. 2. Representations and Warranties; Relationship of the Parties. 2.1. Representations and Warranties. Each party represents and warrants as of the date of this Project Agreement that: a. It is a validly existing entity with full capacity to execute, deliver and per- form this Project Agreement and all corporate or similar approvals to do so have been ob- tained; -8- b. All other approvals necessary for the party to carry out the terms of this Project Agreement have been obtained other than governmental approvals and permits for the Project and the matters de scribed in Section 13.2 ; c. This Project Agreement constitutes a valid and binding agreement of the party enforceable against it in accordance with its terms, subject to applicable laws of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws affecting creditors rights and remedies ge nerally; d. The execution, delivery and performance of this Project Agreement does not and will not (i) violate the party’s articles of incorporation, bylaws or other constating documents, (ii) violate, conflict with, or constitute a default under any statute, rule, regu- lation, permit, order, judgment, decree or award of any governmental agency or court to which the party is subject, (iii) result in the breach of, or constitute a default under, any material agreement or other material instrument by which the party is bound, or (iv) co n- stitute an event which with notice or lapse of time or both would result in any such viola- tion, breach or default; and e. With regard to any of its lands and easements being used for the Project (other than easements to be provided pursuant to Section 8.10), such lands and easements are free of liens, encumbrances and environmental contamination that could interfere with the Project. 2.2. No Partnership . Nothing contained in this Project Agreeme nt shall be deemed to constitute either party as the partner, agent or legal representative of the other, nor to create any fiduciary relationship between them. It is not the intention of the parties to create, nor shall this Project Agreement be construe d to create, any commercial or other partnership. 2.3. Authority to Act. Neither party shall have any authority to act for or assume any obligation or responsibility on behalf of the other except as expressly set forth in this Project Agreement. 2.4. No Joint Liability. The rights, duties, obligations and liabilities of the parties shall be several and not joint or collective. Each party shall be responsible only for its obliga- tions as set forth herein and shall be liable only for its share of the costs and expenses as pro- vided herein. 2.5. Other Business Opportunities. Each party shall have the right to independently engage in and receive full benefits from existing or future business activities, whether or not competitive with the Project, without consulting the other. The Project is not intended to inter- fere with existing operations of the parties. 2.6. Implied Covenants. There are no implied covenants contained in this Project Agreement other than those of good faith and fair dealing. -9- 3. Oversight Committee. 3.1. Establishment. The parties hereby establish an Ove rsight Committee to assure coordination in the implementation of this Project Agreement. The Oversight Committee shall be the vehicle by which the parties will consult with one another on issues regarding the Project that may arise so long as this Project Agreement remains in effect. The Oversight Committee shall review in advance of finalization or filing all designs, permits and plans for the impleme n- tation of the Project, and shall evaluate construction progress and coordinate on any other aspects of t he Project of mutual interest. The Oversight Committee may vote on day-to-day matters that arise which do not materially change the nature of the Project and which do not require either party to make expenditures beyond those already budgeted for as of the date of this Project Agreement or subsequently authorized by a party, it being understood that the decisions of the Oversight Committee shall not otherwise be binding on the parties. The Oversight Committee shall not have authority to modify this Project Agreement; when this Project Agreement states that the parties may otherwise agree to provisions not contained herein, the Oversight Committee may make recommendations regarding such additional provisions or modifications but cannot bind either party to them. 3.2. Members. Each party shall appoint two members to serve on the committee. Each party may appoint one or more alternates to act in the absence of a regular member. Any alternate so acting will be deemed a member. A fifth member of the committee shall be ap- pointed by one of the parties to serve a one-calendar year term as chairman of the committee. The party to appoint the first chairman shall be determined by coin toss. The next chairman shall be selected by the party that lost the coin toss, and subsequent chairmen shall continue to be se- lected by the parties alternating each calendar year. The chairman shall be a non-voting member of the committee unless his vote is necessary to break any tie vote. Appointments shall be made or changed by notice to the other party. A sixth member shall be a non-voting member ap- pointed by the Trustee. 3.3. Meetings. The Oversight Committee shall hold regular meetings at JVWCD’s o f- fice or such other location as may be mutually agreed at least quarterly until the Zone A Plant and the Zone B Facilities are Complete and Operational, and annually or at such other interval as may be deter mined by the Oversight Committee thereafter. The chair man shall send out notices to all members of the committee of all regular meetings. Additio nally, either party may call a special meeting upon five (5) business days’ notice. In the case of an emerge ncy, reasonable no- tice of a special meeting shall suffice. Each notice of a meeting shall include an itemized agenda prepared by the party sending the notice, but any matters may be considered with the consent of all parties. 3.4. Minutes. The chairman shall prepare minutes of all meetings and shall distribute copies of such minutes to the parties within 15 business days after the meeting. 3.5. Costs. All costs incurred by the parties in attending the meetings shall be paid by the parties individually. -10- 4. Bingham Canyon Plant . 4.1. Construction of Bingham Canyo n Plant . Kennecott shall design, permit and co n- struct the Bingham Canyon Plant, as more fully described in the Proposal. Following construc- tion of the Bingham Canyon Plant, Kennecott shall operate the Zone A Plant and use all reaso n- able efforts in order to cause the Zone A Plant to become Complete and Operational. At such time as the Zone A Plant is Co mplete and Operational, the Operational Period for the Zone A Plant shall begin. 4.2. Zone A Contingencies. a. If, notwithstanding all reasonable efforts by Kennecott, the Zone A Plant is not Complete and Operational by January 31, 2009, either party may terminate this Project Agreement as to the Zone A Plant prior to January 31, 2010, provided that the Zone A Plant has not become Complete and Operational prior to the date of the notice. b. In the event of a termination as to the Zone A Plant under this Section 4.2 or a termination as to the Zone A Plant under Section 13.3 or 13.4, all of the parties’ rights and obligations with respect to the Zone A Plant shall terminate except as provided in Sections 11 and 17.14, but all terms of this Project Agreement relating to the Zone B Facilities and the Lost Use Facilities shall remain in full force and effect. 4.3. Zone A Meter Station. JVWCD, at its expense, shall install and own a meter sta- tion in the public right-of-way reasonably close to a point 1800 feet west of the northwest corner of Section 16, Township 3 South, Range 2 West, S.L.M., no later than December 31, 2005, or within six months following notice from Kennecott that it intends to commence deliveries, whichever is earlier (the “Zone A Meter Station”). Kennecott shall construct, as part of the Zone A Permeate Facilities, a pipeline to convey Treated Water from the Zone A Plant to the Zone A Meter Station. 4.4. JVWCD Zone A Pipeline. JVWCD shall design, construct and own a pipeline with diameter of at least 12 inches from the Zone A Meter Station to the Pressure Zone C Reser- voir no later than December 31, 2005, or within 12 months following notice from Kennecott that it intends to commence deliveries, whichever is earlier (the “JVWCD Zone A Pipeline”). JVWCD, in its discretion, may construct a pipeline size larger than 12 inches in diameter for the JVWCD Zone A Pipeline; provided that Kennecott shall not be required to reimburse JVWCD for the incremental cost of the enlargement. Kennecott shall pay $316,100 (October 2002 dollars at the PTIF Rate) to JVWCD, upon receipt of a copy of a notice of award of the JVWCD Zone A Pipeline construction contract from JVWCD, as the agreed-upon cost of des igning and construct- ing the pipeline, and JVWCD shall thereafter complete construction of the JVWCD Zone A Pipeline. JVWCD shall operate, maintain and replace the JVWCD Zone A Pipeline and Zone A Meter Station so long as JVWCD is receiving treated water from the Zone A Plant. 4.5. Operation of Plant . a. If the Zone A Plant has become Complete and Operational, Kennecott shall operate, maintain and replace the Zone A Plant for the Opera tional Period as neces- sary so as to produce at least 3500 acre feet/year of Treated Water, determined on a roll- -11- ing average basis in accordance with Section 4.5.b, and, provided that JVWCD is not in breach of any of its material obligations under this Project Agreement relating to the Zone A Plant, Kennecott shall deliver such water to JVWCD at the Zone A Meter Station at a hydraulic gradeline elevation of 5370 feet or higher. JVWCD shall purchase such water at a price equal to the Zone A avoided operating, maintenance and replacement costs determined and payable under Section 9.1.e, plus Process Enhancement Costs de- termined and payable under Section 9.1.b, plus the Zone A Avoided Capital Costs deter- mined and payable under Section 9.1.d; provided, however, if the Zone A Plant produces more than 3500 acre feet per year of water (on a rolling average basis in accordance with Section 4.5.b ) and Kennecott elects to sell such water to JVWCD, the price to be paid for water in excess of such 3500 acre feet/year, and any other terms, shall be subject to nego- tiation between the parties. At any time during the Operational Period for the Zone A Plant, Kennecott may elect (but shall have no obligation) to transfer the plant to JVWCD upon mutually acceptable terms and conditions. Upon completion of the Operational Pe- riod for the Zone A Plant, a continuing relationship may be established between the par- ties with regard to the Bingham Canyon Plant, subject to mutually acceptable terms and conditions. b. Notwithstanding anything to the contrary in this Project Agreement, after the fifth anniversary of the Zone A Completion Date (as defined in the State Agreement), the 3500 acre feet/year of Treated Water for the Zone A Plant shall be calculated on each anniversary of the Zone A Completion Date on a rolling average basis over a five -year period by adding the actual annual production for each of the previous five years in which the Zone A Plant was operating and dividing such sum by 5; provided that (i) the actual annual production shall not be less than 3150 acre feet, and (ii) no more than 3850 acre feet may be included in the annual production. Prior to the fifth anniversary of the Zone A Completion Date, annual production from the Zone A Plant shall not be less than 3150 acre feet/year. If an event of a force majeure occurs affecting the Zone A Plant, the anniversary date for calculating the 3500 acre feet shall become the date the period of force majeure ends, the rolling average calculation shall be based on the actual annual production for the five-year period before the event of force majeure, and the period of force majeure shall not be included in the five-year pe riod. 4.6. Termination of Process Enhancement . If at any time during the Operational Pe- riod for the Zone A Plant JVWCD is not taking Treated Water from the Bingham Canyon Plant pursuant to the terms of this Project Agreement, Kennecott shall have no obligation to operate, maintain or repair the process enhancement component of the Zone A Plant, and all obligations of Kennecott to produce water from the Zone A Plant under this Project Agreement or any other agreement shall be based on a Municipal Quality Water sta ndard. 4.7. Zone A Water Rights. During the Opera tional Period for the Zone A Plant, at any time that JVWCD is distributing water from the Zone A Plant pursuant to this Project Agree- ment, Kennecott shall provide all water rights necessary for the operation of the Zone A Plant and shall obtain all required permits and approvals from the Utah State Engineer for the use of water in connection with the Zone A Plant as contemplated by this Project Agree ment. -12- 4.8. Limitation on Ob ligations to Accept and Produce Water. JVWCD shall have no obligation to accept Treated Water from the Zone A Plant in quantities in excess of 3850 acre feet per year. Kennecott shall have no obligation to produce Treated Water from the Zone A Plant in quantities in excess of 3500 acre feet per year on a rolling average basis as determined pursuant to Section 4.5.b, or to deliver such excess quantities to JVWCD. Water produced from the Zone A Plant that is not delivered to JVWCD pursuant to the terms of this Project Agreement may be used, sold or disposed of by Kennecott in any manner it shall determine in its sole discre- tion. 4.9. Cooperation. JVWCD agrees to cooperate with Kennecott in any permitting or land/easement acquisitions relating to the Bingham Canyon Plant. 4.10. Shutdowns Affecting the Bingham Canyon Plant . a. Planned Shutdowns – Zone A Plant . Kennecott may temporarily shut- down the Bingham Canyon Plant for maintenance, repairs and replacements; provided, unless otherwise agreed by the parties, (i) that Kennecott provides at least 30 days’ notice (or longer, if feasible) to JVWCD, (ii) that Kennecott coordinates such planned, tempo- rary shutdowns to allow JVWCD to provide for alternative sources of water within its system during such shutdowns and to coordinate planned shutdowns of the Zone A Meter Station and JVWCD Zone A Pipeline, (iii) that the actual annual production of Treated Water from the Zone A Plant shall not be reduced below 3150 acre feet as a result of such planned, temporary shutdowns, (iv) Kennecott shall use all reasonable efforts to avoid planned shutdowns between June and September, and (v) planned shutdowns shall not exceed a total of 35 days in any calendar year. Any such shutdown shall not be deemed to be a breach of this Project Agreement and shall not create any liability on the part of Kennecott. b. Planned Shutdowns – Zone A Meter Station and JVWCD Zone A Pip e- line. JVWCD may temporarily shut-down the Zone A Meter Station and JVWCD Zone A Pipeline for maintenance, repairs and replacements; provided, unless otherwise agreed by the parties, (i) that JVWCD provides at least 30 days’ notice (or longer, if feasible) to Kennecott, (ii) that JVWCD coordinates such planned, temporary shutdowns with Ken- necott to allow coordination for planned shutdowns of the Zone A Plant, (iii) that the ac- tual annual production of Treated Water from the Zone A Plant shall not be reduced be- low 3150 acre feet as a result of such planned, temporary shutdowns, (iv) JVWCD shall use all reasonable efforts to avoid planned shutdowns between June and September, and (v) planned shutdowns shall not exceed a total of 35 days in any calendar year. Any such shutdown shall not be deemed to be a breach of this Project Agreement and shall not cre- ate any liability on the part of JVWCD. c. Emergency Shutdowns – Zone A Plant . In the event of an emergency shutdown of the Bingham Canyon Plant, Kennecott shall provide JVWCD with as much notice of the shutdown as is possible by the best practicable means under the circum- stances, and shall have the right to cease operating such plant or facilities during the shutdown. Any such shutdown shall not be deemed to be a breach of this Project Agree- -13- ment and shall not create any liability on the par t of Kennecott; provided that Kennecott shall use all reasonable efforts to perform the repair work as quickly as poss ible. d. Emergency Shutdowns – Zone A Meter Station and JVWCD Zone A Pip e line. In the event of an emergency shutdown of the Zone A Meter Sta tion or the JVWCD Zone A Pipeline, JVWCD shall provide Kennecott with as much notice of the shutdown as is possible by the best practicable means under the circumstances, and shall have the right to cease operating such facilities during the shutdown. Any such shutdown shall not be deemed to be a breach of this Project Agreement and shall not create any li- ability on the part of JVWCD; provided that JVWCD shall use all reasonable efforts to perform the repair work as quickly as possible. 4.11. Expansion. Nothing contained in this Project Agreement shall limit Kennecott’s right, in its sole discretion, to modify or expand the Bingham Canyon Plant; provided, however that in no event shall any such modification or expansion increase or modify any obligation of JVWCD under this Project Agreement. Any such modification or expansion shall not be sub ject to the terms of this Project Agreement. 5. Zone B Facilities. 5.1. Construction of Zone B Facilities. JVWCD shall design, permit and construct the Zone B Facilities, as more fully described in the Proposal. Following construction of the Zone B Facilities, JVWCD shall operate the Zone B Facilities and use all reasonable efforts to address any matters raised by the Utah Division of Drinking Water pursuant to Section IV of the State Agreement and to otherwise cause such facilities to become Complete and Operational by Janu- ary 31, 2010. At such time as the Zone B Facilities are Complete and Operational, the Opera- tional Period for the Zone B Facilities shall begin. 5.2. Obligations During Operational Period. a. Operation of Zone B Facilities. During the Operational Period for the Zone B Facilities, JVWCD shall provide feed water from the Zone B Water Rights, and/or from other sources available to JVWCD, meeting the water quality and quantity parameters set forth in the Proposal and shall obtain all required permits and approvals from the Utah State Engineer for the use of water in connection with the Zone B Facili- ties as contemplated by this Project Agreement. During the Operational Period for the Zone B Facilities, or, if the Zone B Facilities are not Complete and Operational by Janu- ary 31, 2010, for a period of 40 years from and after February 1, 2010, JVWCD shall ei- ther (i) operate, maintain and replace the Zone B Facilities, as necessary to produce 3500 acre feet/year of Municipal Quality Water, or (ii) otherwise make up to 3500 acre feet of water available to the Affected Municipalities in accordance wit h Section 7. b. Limitation on Obligations to Produce Water. JVWCD shall have no obli- gation to produce or distribute water from the Zone B Facilities or otherwise make water available to Affected Municipalities in lieu of water produced by the Zone B Facilities in quantities in excess of the amount determined under Section 7.1.b or in excess of the quality specified by the State Agreement. -14- 5.3. Zone B Contingencies. Notwithstanding any other provision of this Project Agreement: a. If, notwithstanding all reasonable efforts by JVWCD, the Zone B Facili- ties are not Complete and Operational by January 31, 2010, either party may terminate this Project Agreement as to the Zone B Facilities prior to January 31, 2011, provided that the Zone B Facilities have not become Complete and Operational prior to the date of the notice. b. In the event of a termination as to the Zone B Facilities under this Sec- tion 5.3 or a termination as to the Zone B Facilities under Section 13.3 or 13.4, all of the parties’ rights and obligations with respect to the Zone B Facilities shall terminate except as provided in Sections 7, 8.10, 11 and 17.14, but all terms of this Project Agreeme nt re- lating to the Zone A Plant and the Lost Use Facilities shall remain in full force and effect. 5.4. Cooperation; Limited Role of Kennecott. Kennecott agrees to cooperate with JVWCD in any permitting or land/easement acquisitions relating to the Zone B Facilities. In ad- dition, Kennecott shall fund the cost of the Zone B Facilities as and to the extent provided in Section 9.2. If JVWCD elects to deliver Deep Well Concentrates to Kennecott pursuant to Sec- tion 8.2, then Kennecott shall also accept and dispose of Zone B Concentrates as and to the ex- tent provided in Section 8.2. Except as stated in this Section 5.4, Kennecott shall have no other role or obligation relating to the Zone B Facilities or the provision or distribution of water pro- duced by the Zone B Facilities to the Affected Municipalities or the disposal of concentrates from the Zone B Facilities, and JVWCD shall be solely responsible for such facilities and the provision and distribution of water and disposal of concentrates from such facil ities. 5.5. Expansion of Jordan Valley Membrane Plant. Nothing contained in this Project Agreement shall limit JVWCD’s right, in its discretion, to expand the Jordan Valley Membrane Plant to include facilities in addition to the Zone B Facilities and the Lost Use Facilities; pro- vided, however that in no event shall any such expansion increase or modify any obligation of Kennecott under this Project Agreement, including, without limitation, its obligation under Sec- tion 8.2 to dispose of Deep Well Concentrates produced from the Zone B Facilities and, if appli- cable, the Lost Use Facilities. Any such additional facilities shall not be subject to the terms of this Project Agre e ment. 5.6. Transfer of Tateoka Well Site. As soon as may be reasonably practicable after the execution of this Agreement, JVWCD agrees to pay to Kennecott the sum of $33,215.00, and Kennecott agrees to convey to JVWCD by special warranty deed the well site sometimes re- ferred to as the “Tateoka” well site located at approximately 10150 South 3200 West in Salt Lake County. 6. Lost Use Facilities. 6.1. Basic Design of Lost Use Facilities. As more particularly described in the Pro- posal, JVWCD will design and construct the Lo st Use Facilities and the Zone B Facilities either as a combined, integrated treatment facility (the “Integrated Design”) or as separate reverse os- mosis circuits within the Jordan Valley Membrane Plant (the “Separate Design”). -15- a. Integrated Design. If JVWCD adopts the Integrated Design for the Lost Use Facilities, then the feed water to the combined Zone B/Lost Use reverse osmosis me m- branes in the Jordan Valley Membrane Plant will be produced exclusively from the Deep Wells utilizing the Zone B Water Rights a nd other water rights that JVWCD may transfer into the Deep Wells as necessary. The bypass water that is blended with the permeate from the shared reverse osmosis membranes to achieve acceptable levels of total dis- solved solids in the treated drinking water stream will be provided from the Deep Wells and/or other feed water sources available to JVWCD. The plant will produce a single, combined stream of treated drinking water attributable to the Zone B Facilities (the first 3,500 acre feet of annual capacity) and the Lost Use Facilities (the next 1,235 acre feet of annual capacity), and a single stream of reverse osmosis co ncentrates in this case. b. Separate Design. If JVWCD adopts the Separate Design for the Lost Use Fa- cilities, then the Jordan Valley Membrane Plant will include separate Zone B and Lost Use reverse osmosis treatment circuits. Reverse osmosis feed water and bypass water for the Zone B Facilities will come exclusively from the Deep Wells utilizing the Zone B Water Rights. Reverse osmosis feed water and bypass water for the Lost Use Facilities will come from the Lost Use Water Rights and/or other sources available to JVWCD. The Zone B Facilities and the Lost Use Facilities will each produce a separate reverse osmosis conce ntrate stream in this case. c. Notice of Design Selection. JVWCD shall give notice to Kennecott when the design of the Lost Use Facilities has been completed, including a description of the de- sign selected for the facilities and the Lost Use Design Capacity (as defined in Sec- tion VI.D of the State Agree ment). 6.2. Construction of Lost Use Facilities. JVWCD shall design, permit and construct the Lost Use Facilities as more fully described in the Proposal. Following construc tion of the Lost Use Facilities, JVWCD shall operate the same and use all reasonable efforts in order to cause the Lost Use Facilities to become Co mplete and Operational by January 31, 2010. At such time as the Lost Use Facilities are Complete and Operational, the Operational Period for the Lost Use Facilities shall begin. 6.3. Obligations During Operational Period. a. Operation of Lost Use Facilities. During the Operational Period for the Lost Use Facilities, JVWCD shall provide feed water from the Lost Use Water Rights, meeting the water quality and quantity parameters set forth in the Proposal and shall ob- tain all required permits and approva ls from the Utah State Engineer for the use of water in connection with the Lost Use Facilities as contemplated by this Project Agreement, and shall either (i) operate, maintain and replace the Lost Use Facilities, as necessary to produce 1235 acre feet pe r year of treated water, or (ii) ot herwise make 1235 acre feet of water available to the Affected Municipalities in accordance with Section 7. b. Limitation on Obligations to Produce Water. JVWCD shall have no obli- gation to produce or distribute water from the Lost Use Facilities or otherwise make wa- ter available to Affected Municipalities in lieu of water produced by the Lost Use Facili- -16- ties in quantities in excess of those contained herein or in qualities in excess of the re- quirements of the State Agreement. 6.4. Lost Use Contingencies. Notwithstanding any other provision of this Pro ject Agreement: a. If, notwithstanding all reasonable efforts by JVWCD, the Lo st Use Facili- ties are not Complete and Operational by January 31, 2010, either party may te r minate this Project Agreement as to the Lost Use Facilities prior to January 31, 2011, provided that the Lost Use Facilities have not become Complete and Operationa l prior to the date of the notice. b. In the event of a termination as to the Lost Use Facilities under this Sec- tion 6.4, all of the parties’ rights and obligations with respect to the Lost Use Facilities shall terminate except as provided in Sections 8.10, 11 and 17.14, but all terms of this Project Agreement relating to the Zone A Plant and Zone B Facilities shall remain in full force and effect. c. In the event of a termination of this Project Agreement as to the Lost Use Facilities under this Section 6.4, JVWCD shall nevertheless continue to be obligated to provide Lost Use Water (as defined in the State Agreement) to the Affected Municipali- ties in accordance with Section I.C.3 of the State Agreement. 6.5. Cooperation; Limited Role of Kennecott. Kennecot t agrees to cooperate with JVWCD in any permitting or land/easement acquisitions relating to the Lost Use Facilities. In addition, Kennecott agrees to advance to JVWCD the Lost Use Capital Costs as de scribed in Section 9.3.b for the construction of the Lost Use Facilities. If the Lost Use Facilities are co n- structed and operated based on the Integrated Design, then Kennecott shall also accept and dis- pose of Deep Well Concentrates generated by the Lost Use Facilities as and to the extent pro- vided in Section 8.2. Except as stated in this Section 6.5, Kennecott shall have no other role or obligation relating to the Lost Use Facilities, the provision or distrib ution of water produced by the Lost Use Facilities to the Affected Municipalities or the disposal of co ncentrates from the Lost Use Facilities, and JVWCD shall be solely responsible for such facilities, the provision and distribution of water and the disposal of concentrates from such facil ities. 7. Water Sales to Affected Municipalities. 7.1. Obligation to Offer Water. JVWCD shall offer water for sale to the Affected Municipalities as follows: a. In the case of the Zone A Plant, from and after the date on which the Zone A Plant is Complete and Operational and for the duration of the Operational Period for the Zone A Plant, a total volume of water equal to the Treated Water produced annu- ally from the plant and delivered to JVWCD up to 3500 acre feet per year, determined on a rolling average basis in accordance with Section 4.5.b. b. For the duration of the Operational Period for the Zone B Facilities if such facilities are Complete and Operational by January 31, 2010, or for 40 years from and a f- -17- ter February 1, 2010 if the Zone B Facilities are not Complete and Operational by Janu- ary 31, 2010, an amount up to 3500 acre feet of water per year from the Zone B Facilities or from other sources available to JVWCD in lieu of water produced by the Zone B Fa- cilities determined as fo llows: i. JVWCD shall have no obligation to make water available to Af- fected Municipalities from the Zone B Facilities or from other sources in lieu of water produced by the Zone B Facilities until the Zone B Adjustment Factor reaches 50%. ii. When the Zone B Adjustment Factor reaches 50%, JVWCD shall have a firm obligation to make 1750 acre feet of treated water per year available to Affected Municipalities in accordance with this Section 7. iii. With each increase of 10% of the Zone B Adjustment Factor over 50%, JVWCD’s firm obligation to make treated water available to Affected Mu- nicipalities in accordance with this Section 7 shall increase by 10% of 3500 acre feet per year until JVWCD’s total commitment reaches 3500 acre feet per year. c. From the Lost Use Facilities or from other sources available to JVWCD for the duration of the Operational Period for the Lost Use Facilities if such facilities are Complete and Operational by January 31, 2010, or for 40 years from and after Febr u- ary 1, 2010 if the Lost Use Facil ities are not Complete and Operational by January 31, 2010, 1235 acre-feet per year. 7.2. Contracts and Rates. To purchase the water, an Affected Municipality shall enter into one or more written agreements with JVWCD to purchase water at a unit price which is cal- culated each year in accordance with the methodology specified in attached Appendix 4. Each agreement shall include such terms, conditions and representations as are then customarily used by JVWCD in similar, wholesale water agreements, and such additional terms, conditions and representations as JVWCD may, in its discretion, deem necessary or appropriate. All such agreements shall be subject to the Utah Water Conservancy Act, to the policies and procedures of JVWCD as they may be adopted, amended or rescinded periodically, and to other existing and future contractual obligations and representations of JVWCD, including those associated with its bonded indebtedness and those applicable to reductions in deliveries during times of drought or water or infrastruc ture capacity shortages. 7.3. Allocation Among Affected Municipalities. During the initial five years follo w- ing written notice from JVWCD that water will be available from each Project Facility, each Af- fected Municipality may enter into a contract with JVWCD for up to the maximum amount of water annually at up to the maximum flow rates specified in Appendix 4 from such Project Facil- ity or, in the case of the Zone B Facilities and the Lost Use Facilities, from other sources avail- able to JVWCD. Thereafter, any re maining water from the Project Facility that is not committed to a contract with an Affected Municipality from time to time shall be available for sale by co n- tract to any Affected Municipality on a first come, first served basis throughout the Operational Period in the case of the Zone B Facilities and the Lost Use Facilit ies, and so long as JVWCD is receiving Treated Water from the Zone A Plant in the case of the Zone A Plant. -18- 7.4. Additional Terms . a. Each Affected Municipality shall be obligated to pay for the volume of water committed to it in its contract with JVWCD whether or not that municipality actu- ally takes delivery of all or any portion of the water, provided the water is available for delivery. b. If, in any year, the Zone A Plant does not produce an amount of Treated Water sufficient to satisfy completely the commitments made by JVWCD in its purchase agreements with the Affected Municipalities for water from the Zone A Plant, the avail- able Treated Water, if any, shall be allocated among the Affected Municipalities in pro- portion to the respective amounts of Treated Water from the Zone A Plant for which the Affected Municipalities have co ntracted. 7.5. JVWCD’s Continuing Obligation. As between Kennecott and JVWCD, JVWCD shall be responsible for fulfilling all obligations to the Affected Municipalities as set forth in this Section 7, and Kennecott shall have no liability for JVWCD’s failure to perform. JVWCD shall be responsible for the distribution of any water from the Zone A Plant to the Affected Munic i- palities so long as JVWCD continues to receive water from the Zone A Plant pursuant to the terms of the Project Agreement, and Kenne cott shall have no responsibility for the distribution of any such water to the Affected Munic ipalities. 7.6. Commingling of Water. JVWCD may commingle water produced by each Pro- ject Facility (provided, in the case of the Zone A Plant, that JVWCD is receiving Treated Water from the Zone A Plant pursuant to the terms of this Project Agreement) with other water within its system, and, for that reason, JVWCD may at its discret ion deliver to the Affected Municipali- ties in satisfaction of JVWCD’s contracts with the municipalities any water which meets appli- cable drinking water standards. 7.7. Uncommitted Water. Water produced from each Project Facility (provided, in the case of the Zone A Plant, that JVWCD is receiving Treated Water from the Zone A Plant purs u- ant to the terms of this Project Agreement) and not sold pursuant to contracts with the Affected Municipalities under this Section 7 may be used by JVWCD in any part of its water system. 7.8. JVWCD’s Other Obligations Unaffected. The ability or inability of JVWCD to obtain contracts with one or more Affected Municipalities and the terms of any such contracts shall not affect JVWCD’s other obligations under this Project Agreement. 8. Disposal of Concentrates. 8.1. Zone A Concentrates. Kennecott shall take and dispose of all concentrates pro- duced by the Zone A Plant. 8.2. Deep Well Concentrates. JVWCD shall be responsible for all Deep Well Conce n- trates until such concentrates are delivered to Kennecott pursuant to and in compliance with this Section 8.2. -19- a. Election and Point of Delivery. At any time prior to the end of the Opera- tional Period of the Zone B Facilities, and upon not less than 180 days’ advance written notice to Kennecott, JVWCD may elect to deliver Deep Well Concentrates up to a maxi- mum amount of 1,000 acre feet per calendar year determined on a rolling average basis (as described in Section 8.2.c.iii), to Kennecott at the East Cyclone Station designated on Appendix 7, in which event Kennecott shall (subject to the other terms of this Project Agreement) take and dispose of such concentrates for the remainder of the Operational Period for the Zone B Facilities, or such shorter period of time if JVWCD otherwise elects to terminate Deep Well Concentrate deliveries to Kennecott. If JVWCD elects to deliver Deep Well Concentrates to Kennecott under this Section 8.2, JVWCD shall bear the risk and cost of constructing, operating, maintaining and replacing one or more pip e- lines to transport such concentrates to the delivery point and the connection at the deliv- ery point. JVWCD also shall bear all costs to deliver such concentrates to the delivery point and all treatment costs required to satisfy the parameters described in Appendix 5, as such parameters may change from time to time (which treatment costs are in addition to JVWCD’s funding obligation under Section 8.6). The connection shall be designed to avoid interference with Kennecott’s current or planned future operations. Kennecott shall have the right to approve the design of the connection and the pipelines located within or adjacent to Kennecott’s operations in advance of construction, which approval shall not be unreasonably withheld. The schedule for construction of the pipe lines and connection into the Tailings Impoundment shall be established after consultation with Kennecott, with the timing of the connection being subject to Kennecott’s approval, which approval shall not be unreasonably withheld. In no event shall the co nstruction of the pipelines or connection disrupt Kennecott’s operations. b. Limited Right To Elect after Disposal by Other Means . If, at any time during the Operational Period of the Zone B Facilities, JVWCD disposes of Deep Well Concentrates by means other than delivery of such concentrates to Kennecott under Sec- tion 8.2, JVWCD shall continue to have the right to elect to deliver Deep Well Conce n- trates to Kenne cott under Section 8.2; provided, however, that if JVWCD has previously made an election not to participate in the Alternative Disposal System under Section 8.5, then JVWCD shall not have a right thereafter to elect to deliver Deep Well Concentrates to Kennecott under Section 8.2 unless Kennecott otherwise agrees. c. Limitations on Disposal Right. So long as the Tailings Impoundment or any other facilities of Kennecott’s (including the Alternative Disposal System) are being used for disposal of Deep Well Concentrates under this Section 8.2 : i. JVWCD shall assure that such concentrates do not contain pollut- ants or contaminants in excess of specifications set forth in Appendix 5 attached hereto, including all amendments or additions to said specifications, unless Ken- necott otherwise agrees. ii. Kennecott shall not be obligated to accept concentrates other than Deep Well Concentrates, nor shall Kennecott be obligated to accept any conce n- trates that violate Appendix 5. -20- iii. Kennecott shall not be obligated to accept Deep Well Concentrates in excess of 1,000 acre feet per year, determined on a rolling ave rage basis over a five-year period by adding the actual annual Deep Well Conce ntrate deliveries for each calendar year of the previous five years and dividing such sum by 5; pro- vided that in no event shall Kennecott be required to accept more than 1100 acre feet of Deep Well Concentrates during any calendar year. If Deep Well Conce n- trates are first delivered on a date other than January 1, then deliveries for the first partial year shall not be included in the five-year rolling average, and shall not be more than the number of days of delivery during such year divided by 365 and multiplied by 1100. If an event of a force majeure occurs affecting the Zone B Facilities (or the Lost Use Facilities, if the Lost Use Facilities are constructed and operated based on the Integrated Design), the anniversary date for calculating the 1000 acre feet shall become the date the period of force majeure ends, the rolling ave rage calculation shall be based on the actual annual production for the five- year period before the event of force majeure, and the period of force majeure shall not be included in the five-year period. iv. Notwithstanding Section 8.2.c.ii, untreated feed water from Deep Wells that is used to clean Zone B reverse osmosis membranes (or Lost Use membranes, if the Lost Use Facilities are constructed and operated based on the Integrated Design) or to maintain flow levels in the Deep Well Concentrate dis- posal pipeline, and water from Deep Wells or other sources that is used to flush the Deep Well Concentrate disposal pipeline in the event of a plant shutdown, shall be deemed to be Deep Well Concentrates for purposes of this Project Agreement, and shall be accepted by Kennecott in accordance with this Sec- tion 8.2; provided such water meets the parameters of Appendix 5. Such water shall be included in the calculations under Sec tion 8.2.c.iii. v. Kennecott’s obligation to take Deep Well Concentrates shall ter- minate upon termination of this Project Agreement as to the Zone B Facil ities. vi. JVWCD shall perform and pay for quarterly sampling and laboratory analyses of the Deep Well Concentrates for the parameters listed in Kennecott’s UPDES permit described in Appendix 5, including all amendments or additions to said parameters. Such sampling and analyses shall be conducted in compliance with the requirements of applicable laws and regulations. JVWCD shall provide Kennecott with the laboratory analyses within ten days of receipt. Without limiting JVWCD’s sampling and analysis obligation, Kennecott, at its sole expense, may perform or have JVWCD perform additional sampling. vii. JVWCD shall install a flow meter on the concentrate disposal pipeline and report the flow volumes to Kennecott monthly. 8.3. Lost Use Facilities – Separate Design. If the Lost Use Facilities are constructed and operated based on the Separate Design, JVWCD shall be responsible for disposal of conce n- trates from the Lost Use Facilities, and, in that event, Kennecott shall not be required under any circumstances to take or dispose of concent rates from the Lost Use Facilities. -21- 8.4. Disposal Facilities and Permitting. The parties contemplate that Zone A Conce n- trates and Deep Well Concentrates delivered to Kennecott in accordance with Section 8.2 will initially be disposed of in the Tailings Impoundment. However, Kennecott, in its discretion, may elect to use any other legal method of disposal of such concentrates, and Kennecott shall be free to terminate use of the Tailings I mpoundment, or to use the Tailings Impoundment for any other purposes, provided that Kennecott continues to take and dispose of Deep Well Co ncentrates in accordance with Section 8.2. After Kennecott’s operation of the Tailings Impoundment for tail- ings disposal ceases, or if at any time disposal of Deep Well Concentrates to the Tailings Im- poundment is no longer permitted, the parties anticipate that Zone A Concentrates and, if appli- cable, Deep We ll Concentrates, will be disposed of in the Great Salt Lake. Accordingly, (i) Kennecott shall proceed with all permitting necessary for the disposal of Zone A Concentrates and Deep Well Concentrates in the Tailings Impoundment as appropriate, and (ii) the parties may proceed with development of a permit package for the discharge of Zone A Concentrates and Deep Well Concentrates directly to the Great Salt Lake. JVWCD shall be responsible for obtaining any permits required for disposal of Deep Well Concentrates and/or Lost Use Conce n- trates directly to the Great Salt Lake in the event that JVWCD elects to dispose of such conce n- trates d irectly to the Great Salt Lake. 8.5. JVWCD Election to Participate in Alternative Disposal System. a. If (i) Kennecott cannot obtain or renew on reasonable terms and cond i- tions the necessary permits to dispose of Zone A Concentrates and Deep Well Conce n- trates delivered to Kennecott pursuant to Section 8.2 in the Tailings Impoundment or (ii) Kennecott determines at any time that continued disposal of such concentrates in the Tailings Impoundment is reasonably likely to cause a violation of any law, regulation or water discharge or other permit associated with the Tailings Impoundment which cannot be remedied on reasonable terms and conditions unless the concentrates are no longer de- posited in the impoundment, Kennecott shall give written notice to JVWCD that an Al- ternative Disposal System will be required. b. Within 90 days following receipt of notice from Kennecott under Sec- tion 8.5.a, JVWCD shall notify Kennecott in writing whether JVWCD elects to partic i- pate in the planning and contribute to the construction of the Alternative Disposal Sys- tem. c. If JVWCD elects to participate in the planning and funding of the Alterna- tive Disposal System, then the parties shall proceed to plan and implement the system in accordance with Section 8.6. d. If JVWCD does not elect to participate in the planning and funding of the Alternative Disposal System, then: i. Kennecott shall be free to dispose of concentrates from the Zone A Plant in any legal manner Kennecott may choose. ii. If JVWCD has previously elected to deliver Deep Well Conce n- trates to Kennecott for disposal in accordance with Section 8.2, JVWCD’s right to -22- deliver such concentrates to Kennecott shall terminate 270 days following the date on which Kennecott gave notice to JVWCD of the need for the Alternative Disposal System under Section 8.5.a, and, whether or not JVWCD has previously elected to deliver Deep Well Concentrates to Kennecott for disposal, Kennecott shall thereafter have no further obligation to take or dispose of Deep Well Co n- centrates. The foregoing shall not alter or interfere with Kennecott’s right to cease taking concentrates pursuant to Sec tion 8.7 or 8.8. iii. If JVWCD has not previously elected to deliver Deep Well Co n- centrates to Kennecott for disposal in accordance with Section 8.2, JVWCD’s right to elect to deliver such concentrates to Kennecott shall terminate effective 90 days following JVWCD’s receipt of the notice from Kennecott under Sec- tion 8.5.a, and Kennecott shall thereafter have no further obligation to take or dis- pose of Deep Well Concentrates. 8.6. Planning and Funding of Alternative Disposal System. If JVWCD elects to par- ticipate in the planning and funding of the Alternative Disposal System in accordance with Sec- tion 8.5, then the parties shall proceed to plan, fund and construct the system as follows: a. JVWCD shall pay a pro rata share of costs (including, without limita tion, design, permitting, construction, operating, maintenance and replacement costs) associ- ated with design, construction and operation of the Alternative Disposal System up to a maximum contribution by JVWCD of $2,098,000 (October 2002 dollars based on the ENR Index) based on JVWCD’s proportionate share of the total annual volume of Deep Well Concentrates to be delivered into the Alternative Disposal System by JVWCD and the total annual volume of tailings, concentrates and other fluids or materials to be deliv- ered by Kennecott into the Alternative Disposal System. The balance of the costs associ- ated with design, construction and operation of the Alternative Disposal System shall be paid by Kennecott. b. The Alternative Disposal System shall be constructed, owned and operated by Kennecott. 8.7. Potential Violations of Laws/Permits Affecting Disposal Facilities. If the Tailings Impoundment and/or any other facility of Kennecott’s (including the Alternative Disposal Sys- tem) are being used for the disposal of Deep Well Concentrates, and Kennecott reasonably be- lieves a vio lation of any law, regulation or water discharge or other permits associated with the Tailings Impound ment or other facility is likely to occur, Kennecott shall have the right to cease taking such concentrates for a period not to exceed 90 days, or such additional time as may be necessary to address the cause of the violation or potential violation; provided that if the viola- tion or potential violation does not relate to the Deep Well Concentrates and requires only a par- tial reduction in the amount of inflows to the Tailings Impoundment or other facility, JVWCD shall only be required to reduce the amount of Deep Well Concentrates that JVWCD delivers to Kennecott in the same proportion that Kennecott reduces the amount of the Zone A Concentrates Kennecott continues to delivers to the Tailings Impoundment or other facility. Any such action shall not be deemed a breach of this Project Agreement and shall not create any liability on the part of Kennecott; provided that Kennecott shall use all reasonable efforts to co rrect the violation -23- or potential violation as quickly as possible or to implement the Alternative Disposal System un- der Section 8.5. The parties agree to work together to resolve any problems with the conce n- trates which may be the basis for the violation or potential violation or to seek other solutions for disposal of Deep Well Concentrates, including the potential use of Kennecott’s pipelines around the Tailings Impoundment or other facility. 8.8. Shutdowns Affecting Concentrate Disposal Facilities. So long as the Tailings Impoundment or other facilities of Kennecott’s (including the Alternative Disposal System) are being used to dispose of Deep Well Concentrates, the parties recognize that both planned and eme r gency shutdowns of the Tailings Impoundment and/or other facilities may be necessary for planned maintenance, r epairs and replacements as well as for emergency shutdowns or repairs of the Tailings Impound ment and/or other facilities. So long as the Tailings Impoundment is also being used in Kennecott’s operations, the parties also recognize that emergency shutdowns of the Tailings Impoundment and/or other facilities used by Kennecott in its opera tions that discharge into them may be necessary for planned maintenance, repairs and replacements as well as for emergency shutdowns or repairs associated with such operations. a. Planned Shutdowns . Kennecott may temporarily shut-down the Tailings Impoundment and/or other facilities for maintenance, repairs and replacements; provided, that if the shutdown will adversely affect JVWCD’s ability to deliver Deep Well Conce n- trates to Kennecott pursuant to Section 8.2, Kennecott shall, unless otherwise agreed by the parties, (i) provide at least 30 days’ notice (or longer, if feasible) to JVWCD, (ii) co- ordinate such planned, temp orary shutdowns with JVWCD, (iii) use all reasonable efforts to avoid planned shutdowns between June and September, and (iv) use all reasonable ef- forts to limit such shutdowns to a total of 20 days or less in any calendar year. Any such shutdown shall not be deemed to be a breach of this P roject Agreement and shall not cre- ate any liability on the part of Kennecott. b. Emergency Shutdowns . In the event of an emergency shutdown of the Tailings Impoundment and/or other facilities that will adversely affect JVWCD’s ability to deliver Deep Well Co ncentrates to Kennecott under Section 8.2, Kennecott shall pro- vide JVWCD with as much notice of the shutdown as is possible by the best practicable means under the circumstances, and shall have the right to cease operating such facilities during the shutdown. Any such shutdown shall not be deemed to be a breach of this Pro- ject Agreement and shall not create any liability on the part of Kennecott; provided that Kennecott shall use all reasonable efforts to perform the repair work as quickly as possi- ble. c. Suspension of Concentrate Disposal. Kennecott shall have the right to cease taking Deep Well Concentrates dur ing the foregoing shutdowns. 8.9. Ownership of Disposal Facilities. So long as any part of the Tailings Impound- ment and/or any other facility of Kennecott’s (including the Alternative Disposal System) is be- ing used for the disposal of Deep Well Concentrates, (i) except as otherwise provided in Sec- tion 8.6, Kennecott shall be responsible for and shall pay all costs associated with operation and maintenance of the Tailings Impoundment and/or other facility, and (ii) ownership of the Tail- ings Impoundment and/or othe r facility shall remain with Kennecott, and JVWCD shall have no -24- claim of ownership in such pipelines, impoundment or other facility unless the parties othe r wise agree. 8.10. Disposal Pipeline Easements. a. As soon as may be reasonably practicable following Kennecott’s approval of specific legal descriptions under Section 8.10.b, Kennecott shall grant and deliver to JVWCD easements to install, operate, maintain, replace and repair pipelines for the transportation and disposal of water treatment plant concentrates upon, across and under the lands included within the pipeline corridors shown in Appendix 7, attached hereto and made a part hereof (the “Disposal Pipeline Easements”). Each Disposal Pipeline Ease- ment shall include a permanent easement 30 feet in width, plus an additional temporary construction easement 20 feet in width along one side of the 30-foot perma nent easement. b. Within one year following the execution of this Project Agreement, JVWCD, at its expense, shall survey the pipeline routes within the corridors shown in Appendix 7, and shall prepare and submit to Kennecott for Kennecott’s review and ap- proval (which approval shall not be unreasonably withheld, conditioned or delayed) le gal descriptions of the Disposal Pipeline Easements. Without limiting the circumstances un- der which Kennecott may withhold approval as to a specific location, Kennecott’s ap- proval may be withheld, which shall be deemed reasonable, if the proposed route inter- feres with existing or planned future uses or Kennecott does not have title to the proposed route. c. The instruments granting the Disposal Pipeline Easements shall be sub- stantially in the form of the co nveyances attached hereto as Appendix 8 and made a part hereof. The Disposal Pipeline Easements shall survive the termination of this Pro ject Agreement in whole or part. 9. Financial Obligations for Project Facilities. 9.1. Bingham Canyon Plant . a. General. Subject to JVWCD’s obligations under Sections 9.1.b, 9.1.c, 9.1.d and 9.1.e, Kennecott shall pay all costs associated with the design, permitting, co n- struction, operation, maintenance and replacement of the Bingham Canyon Plant (includ- ing Process Enhancement Construction Costs) and the acquisition of any lands and ease- ments necessary to fulfill its obligations under Section 4. b. Process Enhancement Costs. i. All Process Enhancement Costs are being incurred for the benefit of JVWCD and are to be paid or reimbursed by JVWCD as provided herein, and Kennecott shall have no obligation to incur costs for process enhancement in ex- cess of the amounts described in this Section 9.1.b. ii. JVWCD shall reimburse Kennecott for Process Enhancement Co n- struction Costs for the Zone A Plant by paying to Kennecott the fixed sum of -25- $8.36 per acre foot for the first 70,000 acre feet of Treated Water delivered to JVWCD from the Zone A Plant, payable annually on a calendar year basis on or before January 30 of each year for water delivered during the previous year. iii. Commencing when the Zone A Plant is Complete and Operational, at any time that JVWCD is receiving water from the Zone A Plant, JVWCD shall reimburse Kennecott for Process Enhancement Operating, Maintenance and Re- placement Costs for the Zone A Plant in the annual amount of $12.30 (October 2002 dollars based on the ENR Index) for each acre foot of Treated Water pro- duced by the Zone A Plant and delivered to JVWCD as described in Sec- tion 4.5.b. The payment shall be due on or before January 30 of the following year. c. Taste and Odor Elimination Costs. Kennecott shall be responsible for all costs ne cessary to eliminate objectionable tastes and odors from water treated by the Zone A Plant due to causes above the Zone A Meter Station in order to meet the taste and odor standards for Zone A Treated Water established under Section 1.39 and Appendix 3. JVWCD shall be responsible for all taste and odor objections from such wa ter due to causes below the Zone A Meter Station. d. Avoided Capital Costs. JVWCD shall reimburse Kennecott for avoided water supply capital costs for the Zone A Plant by paying to Kennecott the fixed sum of $56.32 per acre foot for the first 70,000 acre feet of Treated Water delivered to JVWCD from the Zone A Plant, payable annually on a calendar year basis on or before January 30 of each year for water delivered during the previous year. e. Avoided Operating and Maintenance Costs. Commencing when the Zone A Plant is Complete and Operational, at any time that JVWCD is receiving water from the Zone A Plant, JVWCD shall pay to Kennecott $49 (1995 dollars based on the ENR Index) for each acre foot of Treated Water produced by the Zone A Plant and delivered to JVWCD for avoided water supply operating, maintenance and replacement costs. Such payments shall be payable annually on a calendar year basis on or before January 30 of each year for water delivered during the previous year. f. Deferral in Event of Breach. Notwithstanding the foregoing, if Kennecott is in breach of any material provision of this Project Agreement relating to the Bingham Canyon Plant at the time any payment to Kennecott would otherwise be due under this Section 9.1, the due date for such payment shall be deferred until such time, if ever, as the breach is cured. 9.2. Zone B Facilities. a. General. Subject to payment of the Kennecott Reconciliation Payment pursuant to Section 10.1, JVWCD shall pay the costs of the design, permitting, construc- tion, operating, maintenance and replacement of the Zone B Facilities (including Process Enhancement Costs) and the acquisition of any lands and easements necessary to fulfill JVWCD’s obligations under Section 5. -26- b. Designation of Funds. Provided that no termination of the Project Agree- ment as to the Zone B Facilities has occurred, Kennecott shall pay to JVWCD for the de- sign and construction of the Zone B Facilities pursuant to the terms of this Section 9.2 the sum of $24,691,400, plus interest from January 20, 2004 at the PTIF Rate on the out- standing balance. Such amount shall be divided into the following funds: i. Design Fund: $2,200,000 (October 2002 dollars at the PTIF Rate). ii. Construction Fund: 90% of the remaining balance. iii. Construction Retainage Fund: 10% of the remaining balance. c. Contract Forms . All contracts entered into by JVWCD in connection with the design and construction of the Zone B Facilities shall include the general conditions consistent with JVWCD’s existing form of General Conditions for construction contracts, including (i) requirements for lien waivers or similar documentation to accompany in- terim and final applications for payment, and (ii) insurance providing coverage and terms appropriate in accordance with JVWCD’s reasonable risk management practices for the services, materials or work to be supplied or performed. JVWCD shall notify Kennecott of any material deviation to the foregoing requirements prior to execution of the applica- ble co ntract. d. Disbursements from Design Fund . The Design Fund shall be released to JVWCD in 12 equal monthly installments commencing 60 days after the date of exec u- tion of the State Agreement. JVWCD shall give notice to Kennecott of the Zone B Con- struction Commencement Date, including the name of a proposed engineering firm which will certify the progress of construction (the “Project Engineer”). Kennecott shall advise JVWCD within ten working days of receipt of such notice whether the proposed engi- neering firm is acceptable, and if not JVWCD and Kennecott shall select another mut u- ally acceptable engineering firm to serve as the Project Engineer for purposes of this Sec- tion 9.2. e. Disbursements from Construction Fund . i. Subject to the terms of this Section 9.2.e, and provided that no termination of this Project Agreement as to the Zone B Facilities has occurred, the Construction Fund shall be released to JVWCD after the Zone B Construction Commencement Date in monthly installments during co nstruction. ii. JVWCD shall prepare and submit to Kennecott monthly disburse- ment requests, includ ing the following: A. An Application and Certificate for Payment (AIA Doc u- ment G702 or similar JVWCD form) executed by JVWCD and the Project Engineer showing the percentages of work completed during the construc- tion period and stating that all portions of the construction of the Zone B Facilities for which disbursement is requested have been completed and that all labor, materials and other items for which disbursement is re- -27- quested have been paid in full with the exception of labor and materials supplied subsequent to the period covered by the last Application and Cer- tificate for Payment; and B. The general contractor’s affidavit of lien releases from the contractors, materialmen or subcontractors who provided labor, services or materials in connection with the construction of the Zone B Facilities dur- ing the period for which disbursement is requested, together with uncond i- tional lien releases for all prior periods. iii. Kennecott shall pay to JVWCD the amount covered by each prop- erly completed monthly disbursement request within 30 days following receipt by Kennecott. iv. On the date of execution of this Project Agreement, Kennecott shall notify Landmark Title Company to release all funds held by it under the Es- crow Agreement to JVWCD, which funds shall be credited as releases to J VWCD from the Construction Fund under this Section 9.2.e. Upon release of the funds, JVWCD and Kennecott shall terminate the Escrow Agreement. v. The remaining balance, if any, in the Construction Fund shall be disbursed to JVWCD upon delivery to Kennecott of a certificate from the Project Engineer that construction of the Zone B Facilities has been completed and the Utah Division of Drinking Water has issued an operating permit for the facilities. f. Disbursement of Construction Retainage Fund . At such time as the Zone B Facilities are Complete and Operational, Kennecott shall release the Construction Retainage Fund to JVWCD. g. Default in Payment by Kennecott. If, at any time when the Zone B Ad- justment Factor is between 50% and 100%, (i) Kennecott defaults in its obligation to re- lease funds to JVWCD under Section 9.2d, 9.2e, or 9.2 f, and (ii) JVWCD elects to in- crease its firm commitment to make water available under Section 7.1.b to 3500 acre feet in accordance with Section VIII.C.2 of the State Agreement, then Kennecott’s obligation to release funds to JVWCD pursuant to Section 9.2d, 9.2 e, or 9.2 f shall be reduced by the amounts disbursed to JVWCD by the Trustee under Section VIII.C.2 of the State Agree- ment. If the amount so disbursed to JVWCD by the Trustee equals or exceeds the re- maining amount of Kennecott’s remaining obligation to release funds pursuant to Sec- tions 9.2d, 9.2e and 9.2 f, then Kennecott’s obligation to release funds pursuant to Sec- tion 9.2d, 9.2e or 9.2 f shall terminate. h. Deferral in Event of Breach by JVWCD. Notwithstanding the foregoing, if JVWCD is in breach of any material provision of this Project Agreement relating to the Zone B Facilities at the time any payment to JVWCD would otherwise be due under this Section 9.2, the due date for such payment shall be deferred until such time, if ever, as the breach is cured. -28- i. Cost Overruns . Any and all costs to design, permit, construct, operate, maintain or replace the Zone B Facilities in excess of the amount described in Sec- tion 9.2.b shall be borne by JVWCD. 9.3. Lost Use Facilities. a. Design and Construction Costs. Subject to advances by Kennecott as set forth in Section 9.3.b and reimbursement from the Trust Fund as set forth in Section VI of the State Agreement, JVWCD shall pay all costs associated with the design, permit- ting, construction, operation, maintenance and replacement of the Lost Use Facilities and the acquisition of any lands and easements necessary to fulfill its obligations under Sec- tion 6. b. Lost Use Capital Costs. Upon the Construction Commencement Date of the Lost Use Facilities (as defined in Section VI.D of the State Agreement), Kennecott shall advance to JVWCD the sum of $2,093,400 (October 2002 dollars at the PTIF Rate) for capital costs for the Lost Use Facilities. Notwithstanding the foregoing, if the Lost Use Design Capacity (as de fined in Section VI.D of the State Agreement) is less than 1,235 acre feet per year of treated water, then the Lost Use Capital Costs shall be reduced to an amount which bears the same proportion to the amount determined in accordance with the preceding sentence as the Lost Use Design Capacity bears to 1,235 acre feet per year. c. Deferral in Event of Breach. Notwithstanding the foregoing, if JVWCD is in breach of any material provision of this Project Agr eement relating to the Lost Use Fa- cilities at the time payment to JVWCD would otherwise be due under this Section 9.3, the due date for such payment shall be deferred until such time, if ever, as the breach is cured. 9.4. No Other Trust Fund Contribution. Except as expressly set forth in this Project Agreement and the State Agreement, JVWCD shall not seek disbursement or reimbursement from the Trust Fund for any other costs, including any Process Enhance ment Costs. 9.5. Treated Water. All costs associated with storing and distributing Treated Water produced from the Bingham Canyon Plant (so long as JVWCD is receiving Treated Water from the Bingham Canyon Plant) and water from the Jordan Valley Membrane Plant shall be borne by JVWCD. 9.6. Other Monies. Each party may receive disburse ment of funds or reimbursement of costs from sources other than the Trust Fund or the other party, and except as provided in sub- paragraphs 6.6.c, 6.6.d and 6.6.e of Appendix 6, the other party shall have no claim to such mo n- ies. 10. Reconciliation of Costs. 10.1. Reconciliation and Final Payments. Except as provided in Section 5.3.b and Sec- tion 11, on the Reco nciliation Date: -29- a. Kennecott Reconciliation Payment . Kennecott shall pay the Kennecott Reconcilia tion Payment to JVWCD. b. Zone B Avoided Capital Costs. JVWCD shall pay to Kennecott on the Reconciliation Date the sum of $756,500 (October 2002 dollars at the ENR Rate) for avoided water supply cap ital costs for the Zone B Facilities. c. Lost Use Capital Costs. JVWCD shall repay to Kennecott the Lost Use Capital Costs previously advanced to JVWCD pursuant to Section 9.3.b, plus interest on such Lost Use Capital Costs at the PTIF Rate from the date of the advance through the Reconcilia tion Date. 10.2. Suspension of Payments. Notwit hstanding anything contained in Section 10.1 : a. Kennecott Reconciliation Payment . If JVWCD is in breach of any mate- rial provision of this Project Agreement relating to the Zone B Facilities at the time pa y- ment of the Kennecott Reconciliation Payment to JVWCD would otherwise be due under Section 10.1.a, the due date for such payment shall be deferred until such time, if ever, as the breach is cured. b. Zone B Avoided Capital Costs. If Kennecott is in breach of any material provision of this Project Agreement relating to the Zone B Facilities at the time payment to Kennecott of the Zone B Avoided Capital Costs under Section 10.1.b would otherwise be due under Section 10.1.b, the due date for such payment shall be deferred until such time, if ever, as the breach is cured. c. Lost Use Capital Costs. If Kennecott is in breach of any material provi- sion of this Project Agreement relating to the Lost Use Facilities at the time payment to Kennecott of the Lost Use Capital Costs would otherwise be due under Section 10.1.c, the due date for such payment shall be deferred until such time, if ever, as the breach is cured. 11. Impact of Termination on Funding Matters. 11.1. Expenditures for Own Account. On termination (in whole or in part) of this Pro- ject Agreement, any funds expended by a party in furtherance of the Project related to the facili- ties affected by the termination shall be for that party’s account without right of further credit against other funds or reimbursement from the other party except as provided in Section 5.3.b and this Section 11. 11.2. Termination as to Zone B Fac ilities – Zone B Adjustment Factor Less than 50%. If this Project Agreement terminates as to the Zone B Facilities prior to the time the Zone B Ad- justment Factor reaches 50% for any reason other than a breach by Kennecott of any of its mate- rial obligations hereunder relating to the Zone B Facilities, then: a. Kennecott shall not be obligated to pay to JVWCD the Kennecott Reco n- ciliation Payment or advance or pay any other costs under Sec tion 9.2. -30- b. JVWCD shall retain the Jordan Valley Membrane Plant building and, at its option, may elect within ninety (90) days following termination to retain all or par t of any other items of Zone B equipment and personal property which have been paid for with funds provided by Kennecott as Zone B construction costs pursuant to Section 9.2. c. Within ninety (90) days following termination, JVWCD shall reimburse Kennecott for the funds provided by Kennecott under the Escrow Agre e ment as described in Section 9.2.e.iv, plus interest at the P TIF Rate from the date of JVWCD’s receipt to the date of payment, and for all other Zone B construction costs provided by Kennecott pur- suant to Section 9.2 allocable to the Jordan Valley Membrane Plant build ing and to any other items retained by JVWCD. d. At Kennecott’s option, within ninety (90) days following termination, JVWCD shall transfer to Kennecott those items of Zone B equipment and personal prop- erty which have been paid for with funds provided by Kennecott pursuant to Section 9.2, which JVWCD does not elect to retain; provided, however, that Kennecott shall promptly repair and restore any damage caused by the removal of any such items. 11.3. Termination as to Zone B Facilities – Zone B Adjustment Factor Equal to or Greater than 50%. If this Project Agreement terminates as to the Zone B Facil ities after the time the Zone B Adjustment Factor reaches 50% but prior to the Reconciliation Date for any reason other than a breach by Kennecott of any of its material obligations hereunder relating to the Zone B Facilities, then: a. Kennecott shall release to JVWCD all amounts accrued but not previously paid under Sections 9.2.d, 9.2.e and 9.2.f through the date of termination, and the Zone B Adjustment Factor shall be increased a ccordingly. b. Kennecott shall pay to JVWCD an amount equal to the Adjustment Factor times the Kennecott Reconciliation Payment . c. Kennecott shall not be obligated to advance or pay any further costs under Sections 9.2.d, 9.2.e and 9.2.f accruing after the date of termination. d. JVWCD shall retain the Jordan Valley Membrane Plant building and all associated well sites, easements, equipment and personal property. e. Provided that JVWCD is not in material breach of the provisions of this Project Agreement relating to the Zone B Facilities, JVWCD shall have the right to elect to increase its commitment to deliver water to Affected Municipalities under Section 7.1.b to 3500 acre feet per year and receive payments from the Trustee in accordance with Se ctio n VIII.C.2 of the State Agreement. 11.4. Termination as to the Lost Use Facilities. If this Project Agreement terminates as to the Lost Use Facilities before the Reconciliation Date, then within ninety (90) days following such termination JVWCD shall re imburse Kennecott for Lost Use Capital Costs advanced by Kennecott under Sec tion 9.3.b. -31- 11.5. Termination as to the Zone A Plant . In the event of any termination of this Pro- ject Agreement as to the Zone A Plant, JVWCD shall pay to Kennecott for Zone A Process En- hancement Operating, Maintenance and Replacement Costs, Zone A Avoided Capital Costs and Zone A Avoided Operating, Maintenance and Replacements Costs the amounts due under Sec- tions 9.1.b.iii, 9.1.d and 9.1.e for water delivered prior to the date of termination, payable within 90 days following termination. In add ition, if the termination occurs after the Zone A Plant is Complete and Operational, JVWCD shall pay to Kennecott for Zone A Process Enhancement Construction Costs an amount equal to $364,780 times a fraction, the numerator of which is the number of years left in the Zone A Operational Period and the denominator of which is 40, pay- able within 180 days following termina tion. 11.6. No Othe r Refunds or Payments. Except for (i) the payment obligations as pro- vided in Section 10.1, (ii) the full or partial refunds as provided in Section 11, or (iii) the pa y- ment to Kennecott of insurance proceeds under subparagraphs 6.6.c, 6.6.d and 6.6.e of Appendix 6, JVWCD shall have no other ob ligation to pay or refund any portion of any funds advanced or paid by Kennecott hereunder. 12. General Rights and Duties of the Parties. 12.1. Inspection Rights. Upon reasonable advance notice and during normal business hours, either party, at its sole expense, shall have access to and the right to inspect the Project Facilities and operating and maintenance records of the other party. The right to access and in- spect the construction sites and operations shall be at the party’s sole risk, shall not interfere with construction and/or operations, and shall be subject to safety regulations imposed by the other party. The right to access and inspect operating and mainte nance records shall be subject to any confidentiality restrictions that may be applicable. 12.2. Compliance with Laws. Each party, in the performance of its obligations under this Project Agreement, shall (i) comply with all applicable federal, state and local laws, rules, regulations, orders and permits, including laws pertaining to health, safety and the environment (herein, “Laws”), (ii) pay all taxes, assessments and similar charges affecting the assets used in the Project to the extent owed by such party, (iii) keep its assets used in the Project free from mechanic’s and other liens or encumbrances, and (iv) notify the other party of claims, or allega- tions of violations of laws, by any governmental agency or third party that relate to the Project or assets used in the Project, and, subject to the provisions of Section 12.6, if applicable, take all such steps as it deems appropriate to defend against such claims or allegations. 12.3. Insurance. a. General. Each party shall maintain comprehensive general liability insur- ance, all-risk property damage insurance, automobile liability insurance, worker’s co m- pensation insurance and such other insurance as is usually carried by persons operating similar plants or facilities, in such amounts and against such insurable hazards as may be reasonable; provided, however, that the parties acknowledge that (i) as of the date of this Project Agreement, JVWCD does not carry business interruption insurance or earth- quake, flood or property damage insurance on any pipelines or wells, (ii) any financial re- serves or insurance maintained by JVWCD (other than the builder’s risk policy described -32- in Paragraph 1.a of Appendix 6) is applicable to all operations of JVWCD in JVWCD’s discretion (and not just assets subject to this Project Agreement). b. Zone B Facilities. In addition to the provisions of Section 12.3.a, during the construction of the Zone B Facilities and until the full reduction and release of the Zone B ILC, JVWCD shall maintain the type of insurance and shall comply with the other covenants and obligations set forth in the insurance schedule attached to this Project Agreement as Appendix 6. 12.4. Standard of Care. Each party agrees to perform its obligations in a good, work- manlike and efficient manner and in accordance with the terms of any ancillary agreements. Such performance shall be subject to normal operational mat ters. 12.5. Governmental Approvals. Each party agrees to use all reasonable efforts to ob- tain and maintain the permits, approvals and agreements required from the Trustee, the State En- gineer, other State authorities and the EPA in order to implement the Pro ject. 12.6. Environmental Indemnity. a. Kennecott agrees to defend and indemnify JVWCD and JVWCD’s trus- tees, officers, employees and agents (each a “JVWCD indemnified party”) and to hold each JVWCD indemnified party harmless from and against any and all Environmental Claims arising directly or indirectly from or out of or relating to (i) the contamination and environmental conditions which are described in the Consent Decree or the Remedial In- vestigation/Feasibility Study prepared by Kennecott in connection with the CERCLA re- medial response to the contaminated groundwater plume in the Affected Area, (ii) the groundwater extracted by and collected and transported in the Zone A Collection Facili- ties, (iii) the permeate or concentrates produced from the Zone A Pretreatment Facilities, (iv) the concentrates produced from the Zone A Plant and the transportation or disposal thereof, or (v) Zone B Concentrates from and after delivery to Kennecott under Sec- tion 8.2, provided that such Zone B Concentrates meet the requirements of Appendix 5. b. The foregoing indemnity shall not apply to any Environmental Claims to the extent such claims arise from the gross negligence or intentional wrongful acts of JVWCD, or to the extent such claims arise from the transportation, storage, use, delivery, sale, release or disposal of (i) permeate, concentrates or treated water from the Lost Use Facilities, (ii) permeate or treated water from the Zone B Facilities, (iii) Zone B Conce n- trates prior to delivery to Kennecott under Sec tion 8.2, or (iv) Treated Water produced from the Zone A Plant after delivery to JVWCD at the Zone A Meter Station. c. JVWCD shall pro mptly notify Kennecott of any Environmental Claim covered by the foregoing indemnity when JVWCD becomes aware of such claim, and JVWCD shall reasonably cooperate with Kennecott in the defense of any such claim. At such time as Kennecott has assumed the de fense of any Environmental Claim covered by the foregoing indemnity, it shall have exclusive control over, and shall be solely respo n- sible for the cost of, selection of counsel and experts and management of the case, and it shall have no obligation to pay for fees of any consultants, counsel or other experts that -33- JVWCD may incur. The foregoing indemnity shall not apply to any Environmental Claims to the extent such claims are incrementally increased, or Kennecott’s ability to de- fend against any claim is impaired, by JVWCD’s failure to give prompt notice or to rea- sonably cooperate with Kennecott in the defense of such claim. Kennecott shall keep JVWCD informed of the progress and status of any matter with respect to which Kenne- cott defends JVWCD under this Section 12.6. The foregoing indemnity shall survive any termination of this Pr oject Agreement. 12.7. State Agreement. If Kennecott elects to pursue administrative remedies or litiga- tion with regard to the determination under the State Agreement that the Zone B Facilities are not Complete and Operational, JVWCD shall cooperate with Kennecott in such proceedings. In ad- dition, each party agrees to assure that the Trustee timely re ceives all notices, reports or other communications required by such party under the State Agreement. 12.8. Sovereign Immunity. Nothing conta ined herein shall adversely affect any immu- nity from suit, or any right, privilege, claim or defense, which JVWCD or its employees, officers or trustees may assert under state or federal law, including but not limited to the Utah Gover n- mental Immunity Act, Utah Code Ann. §§ 63-30d-101, et seq., (the “Act”). All claims against JVWCD or its employees, officers and trustees are subject to the provisions of the Act, which Act shall control all procedures and limitations in connection with any claim of liabilit y against JVWCD. 12.9. Kennecott’s Other Rights Unaffected. Subject to appropriate approvals and water rights, Kennecott shall have the right to continue to extract water from and inject water into the Affected Area for operations, containment or any other lawful purposes. 13. Termination of Agreement. 13.1. General. This Project Agreement shall terminate in whole or part as expressly provided in the following Sections, unless earlier terminated by agreement of the parties: Section Basis 4.2.a Zone A Plant not Complete and Operational 5.3.a Zone B Facilities not Complete and Operational 6.4.a Lost Use Facilities not Complete and Operational 13.2 Failure of Conditions 13.3 Inability to Obtain Permits 13.4 Inability to Dispose of Concentrates Section 6 of Ap- pendix 6 Material Loss to Zone B Facilities In addition, this Project Agreement shall terminate as to the relevant Project Facility at the end of that facility’s Operational Period. In no case shall this Project Agreement continue beyond the last to expire of t he Operational Period of the Zone A Plant, the Operational Period of the Zone B Facilities or the Operational Period of the Lost Use Facilities, unless the parties ot h- erwise agree. Nothing in the preceding sentence shall be construed to permit provisions pertain- ing to a plant or facility that is at the end of its Operational Period to sur vive. -34- 13.2. Automatic Termination for Failure of Certain Conditions . The validity and en- forceability of this Project Agreement are subject to the Trustee’s execution of the State Agree- ment. If this condition fails to occur by August 31, 2004, this Project Agreement shall automati- cally terminate and the provisio ns of Section 11 shall apply. 13.3. Termination for Inability to Obtain Permits. Either party may elect to terminate this Proj ect Agree ment by giving notice of termination to the other party if it is unable to obtain on reasonable terms governmental approvals, permits and permit renewals required to fulfill its obligations under this Project Agreement; provided, however that the termination shall only ex- tend to the facility or facilities affected by the approvals, permits or renewals that are not ob- tained. 13.4. Termination for Inability to Dispose of Concentrates. Either party may elect to terminate this Project Agreement by giving notice of termination to the other party if within a two year period following a determination that the Tailings Impoundment will not be used or will no longer be used, there is failure to obtain, or an inability to obtain on reasonable terms, the parties’ agree ment or governmental approvals to dispose of concentrates in the Great Salt Lake or some other facility; provided, however, that the ter mination shall only extend to the facility or facilities whose co ncentrates are affected. 13.5. Election to Terminate. Except as othe rwise specifically provided elsewhere in this Project Agreement (e.g., Section 5.3.a), any election that may be made to terminate this Pro- ject Agreement in whole or in part must be made by the applicable party within 60 days after the deadline (if applicable) for the required approval or ac tion. The right to terminate shall be lost if a party fails to make a timely election. 13.6. Certain Rights of Parties on Termination. In the event of a full or partial termina- tion of this Project Agreement, (i) each party shall remain liable for its obligations under this Project Agreement which have accrued prior to the date of termination or which, by their express terms, survive the full or partial termination; (ii) neither party shall have any liability to the other party for any costs or losses caused by the full or partial termination of this Project Agreement; provided, however, that any claim for damages arising from any breach by the other party of its representations, covenants or obligations occurring prior to the full or partial termination shall survive; (iii) unless the parties otherwise agree, any approved or unapproved change applications affecting water rights, permit applications, permit modification applications or similar actions related to the facilities affected by the termination may be withdrawn or further changed by the party originally submitting the application; and (iv) any termination as to the Bingham Canyon Plant shall not preclude Kennecott from proceeding with the Zone A Plant as outlined in the Pro- posal and contemplated by the State Agreement or on any other basis. 14. Events of Default and Remedies. 14.1. Events of Default. The breach or default by a party of any material representa- tion, covenant, agreement or performance required under this Project Agreement which contin- ues for thirty (30) days after notice by the non-defaulting party shall constitute an Event of De- fault under this Project Agreement; provided, however, that if the breach or default requires more than thirty (30) days to cure and the defaulting party has initiated such cure within the thirty (30) -35- days and diligently pursues the same, the defaulting party shall have such additional time as may be necessary to effect the cure, but in no event may such add itional time exceed ninety (90) days unless the parties otherwise agree. 14.2. Remedies. If an Event of Default has occurred and is continuing, the non- defaulting party shall have all remedies available to it at la w and in equity, including, without limitation, the right to seek termination of all or part of this Project Agree ment, the right to seek damages and the right to injunctive relief, except (i) where expressly lim ited in this Project Agreement, and (ii) neither party shall in any event, or under any circumstances, be liable for any consequential damages or damages for lost profits. 14.3. Attorneys’ Fees. The prevailing party shall be ent itled to recover from the other party or parties its attorneys’ fees and other costs and expenses incurred in enforcing this Project Agreement. 15. Force Majeure. Except as provided in this Section 15, the performance of or compliance with any of the covenants, conditions or obligations contained in this Project Agreement, either expressed or implied, on the part of either party shall be excused, and failure to perform or co m- ply with such covenant, condition or obligation shall not be deemed to be a breach of this Project Agreement and shall not create any liability on the part of the a ffected party, during any period in which performance is prevented, in whole or part, by causes herein termed “force majeure”. For purposes of this Project Agreement, the term “force majeure” shall mean events beyond the co n- trol of a party that cannot be avoided through reasonable actions by the party, including extreme weather conditions; earthquakes or cave -ins; unavailability of labor, transportation, materials, machinery, equipment, supplies, utilities, or services; ser ious accidents; breakdown of major equipment, machinery, or facilities; injunctions issued by any court; changes in laws, regulations or permit conditions or requirements; inability to obtain licenses, permits or other authorizations or renewals on reasonable terms in spite of reasonable efforts to do so; groundwater contamina- tion caused by a third party that affects the water quality of the feed water; curtailment or sus- pension of activities to remedy or avoid violation of Environmental Laws; acts of war or cond i- tions arising out of or attributable to war; riot; civil strife; fire; explosion; or any similar cause beyond the reasonable control of the party declaring force majeure. If either party desires to in- voke the provisions of this Section 15, the invoking party shall give prompt written notice to the other party of the commencement of the circumstances giving rise to such force majeure. The time for discharging the party’s obligations with respect to the prevented performance shall be extended for the period of force majeure, provided that the party invoking force majeure uses reasonable ef- forts to eliminate the condition of force majeure as soon as reasonably practicable. If a condition of force majeure delays JVWCD’s construction or operation of the Zone B Facilities or the Lost Use Facilities, Kennecott also shall be excused from making the Kennecott Reconciliation Payment or further funding under Section 9.2 or 9.3, as applicable, until the condition of force majeure is elimi- nated. The existence of any event of force majeure shall not relieve Kennecott of its indemnity ob- ligations under Section 12.6. 16. Proprietary Information; Confidentiality. 16.1. Kennecott’s Intellectual Property. Kennecott shall own all rights, title and interest in all intellectual property, including patentable inventions, technology and copyrights, co n- -36- ceived or reduced to practice solely by its personnel, consultants, agents or contractors, and, at its election and cost, may file patent applica tions and copyright registrations relating thereto. If JVWCD desires to utilize any such intellectual property relating to the Zone A Plant, JVWCD shall receive an irrevocable, nonexclusive, royalty-free license to use such intellectual property only with respect to the Jordan Valley Membrane Plant. Such license shall be subject to such reasonable confidentiality provisions as Kennecott deems appropriate. Such license shall termi- nate as to the Jordan Valley Membrane Plant at such time as JVWCD permanently ceases opera- tion of the Jordan Valley Membrane Plant. If Kennecott has a license for intellectual property that is being used in connection with the Project but that is owned by a third party and JVWCD desires to use such intellectual property, Kennecott shall have no obligation to provide JVWCD with a right in such license and JVWCD shall be required to separately obtain any rights it de- sires from the third party 16.2. JVWCD’s Intellectual Property. JVWCD shall own all rights, title and interest in all intellectual property conceived or reduced to practice solely by its personnel, consultants, agents or contractors and, at its election and cost, may file patent applications and copyright re g- istrations relating thereto. If Kennecott desires to utilize any such intellectual property relating to the Jordan Valley Membrane Plant, Kennecott shall receive an irrevocable, nonexclusive, ro y- alty-free license to use such intellectual property only with respect to the Bingham Canyon Plant. Such right shall be subject to such reasonable confidentiality provisions as JVWCD deems ap- propriate. If JVWCD has a license for intellectual property that is being used in connection with the Project but that is owned by a third party and Kennecott desires to use such intellectual prop- erty, JVWCD shall have no obligation to pro vide Kennecott with a right in such license and Kennecott shall be required to separately obtain any rights it desires from the third party. 16.3. Jointly Develop ed Intellectual Property. Any intellectual property, including pa t- entable inventions, technology and copyrights, conceived or reduced to practice by the parties collectively (including, for example, any intellectual property developed by JVWCD’s engineer as described in paragraph 6 of the “Agreement for Funding for a Reverse Osmosis Pilot Plant Testing Program for a Southwest Salt Lake Valley Groundwater Extraction and Treatment Sys- tem” between the parties and pertaining to the Project – the “Pilot Testing Agreement”) shall be the joint property of the parties, and if either party so elects, the parties shall file patent applica- tions and copyright registrations relating thereto. Each party shall have the right to use such in- tellectual property with respect to the Bingham Canyon Plant or Jordan Valley Membrane Plant, or with respect to other operations owned by the party (but not part of the Project) if the other party consents, which consent shall not be unreasonably withheld. Such right shall be irrevoca- ble, nonexclusive and royalty-free and subject to such confidentiality provisions as the parties deem appropriate. The licensing of such jointly owned inte llectual property to a third party may only occur with the consent of both pa rties and upon such reasonable terms and conditions as the parties may determine. 16.4. Access to Intellectual Property. A party shall have the right to review the intellec- tual property of the other party only to the extent necessary to carry out the Project, and the re- viewing party shall be subject to all applicable confidentiality and licensing restrictions under agreements with third parties, and reasonable confidentiality restric tions as between the parties. -37- 17. Miscellaneous . 17.1. Entire Agreement. This Project Agreement, together with all appendices hereto, the Escrow Agree ment (until terminated pursuant to Section 9.2.e.iv), the Kennecott/JVWCD Settlement Agreement, the Consent Decree, the State Agre e ment, the Agreement for Funding for a Reverse Osmosis Pilot Testing Program for the Southwest Salt Lake Valley Groundwater Ex- traction and Treatment System dated January 23, 2001 and the Confidentiality, Non-use and Ac- cess Agreement dated August 21, 2001 contain the entire understanding of the parties and super- sede all other prior agreements and understandings (other than the Escrow Agreement, the Ken- necott/JVWCD Settlement Agreement, the Co nsent Decree, the State Agreement, the Agreement for Funding for a Reverse Osmosis Pilot Testing Program for the Sout hwest Salt Lake Valley Groundwater Extraction and Treatment System dated January 23, 2001 and the Confidentiality, Non-use and Access Agreement dated August 21, 2001) among the parties with regard to the subject matter hereof, including the May 18, 1999 agreement between the parties. While the Consent Decree is not superseded by this Project Agreement, the parties acknowledge that this Project Agreement is intended to satisfy aspects of the Consent Decree. This Project Agreement cannot be amended without the written agreement of both parties. 17.2. Satisfaction of Settlement Agreement and Release. When the Zone A Plant is Complete and Operational, this Project Agreement shall be deemed to satisfy any obligation of Kennecott to JVWCD under Paragraph 4 of the Kennecott/JVWCD Settlement Agreement, and Paragraph 4 of the Kennecott/JVWCD Settlement Agreement shall be superseded by this Project Agreement. 17.3. Successors and Assigns. This Project Agreement shall be binding on and inure to the benefit of the respective successors and assigns of the par ties. 17.4. Conflict. In the event of a conflict between this Project Agreement and any ap- pendix attached hereto, the terms of this Project Agreement shall be co ntrolling. 17.5. No Third Party Beneficiaries. Nothing in this Project Agreement shall confer any rights on any person or entity other than the parties hereto, and their respective successors and assigns. 17.6. No Waiver. The failure of a party to insist on the strict performance of any provi- sion of this Project Agreement or to exercise any right, power or remedy upon breach hereof shall not constitute a waiver of any other provision of this Project Agreement or limit a party’s right thereafter to enforce any provision or exercise any remedy. 17.7. Severability. In the event any provision of the Project Agreement or any applica- tion thereof is finally determined by a court having jurisdiction over the matter to be invalid or unenforceable, the remainder of this Project Agreement shall remain in effect and any other ap- plication of such provision shall not be affected thereby; provided that the material purposes of this Project Agreement and intent of the parties may still be acco mplished under the remaining provisions, and provided further that neither party is materially and adversely affected by such invalidity. -38- 17.8. Governing Law. This Project Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah. 17.9. Transfers of Interest. Neither party may assign any right, interest or obligation in or under this Project Agreement without the prior written consent of the other party, which co n- sent shall not be unreasonably withheld. 17.10. Continued Viability of the Parties. Each party agrees that it will not dispose of any assets to an extent or in any manner which would materially impair the party’s continued financial viability or materially impair its ability to perform all of its remaining obligations here- under unless (i) all of the party’s remaining obligations und er this Project Agreement are as- sumed in writing by another entity approved by the other party, which approval shall not be un- reasonably withheld or (ii) the party provides the other party with a bond or other guaranty of, or surety for, the full performance of all of the party’s obligations hereunder, which is accepted by the other party, which acceptance shall not be unreasonably withheld. 17.11. Notices. a. All notices, payments and other requir ed communications under this Pro- ject Agreement (“notices”) shall be in writing and shall be addressed as fo llows: In the case of JVWCD: Jordan Valley Water Conservancy District Attention: General Manager P. O. Box 70 8215 South 1300 West West Jordan, Utah 84088-0070 Fax: 801-565-4399 In the case of Kennecott: Kennecott Utah Copper Corporation Attention: Director, Environmental Affairs For personal delivery: 8362 West 10200 South Bingham Canyon, UT 84006 For mail: 8315 West 3595 South P. O. Box 6001 Magna, Utah 84044 Fax: 801-569-7192 -39- With copies to : Kennecott Utah Copper Corporation Attentio n: Director, Sustainable Development For personal delivery: 8362 West 10200 South Bingham Canyon, UT 84006 For mail: 8315 West 3595 South P. O. Box 6001 Magna, Ut ah 84044 Fax: 801-569-7179 Kennecott Utah Copper Corporation Attention: General Counsel For personal delivery: 8362 West 10200 South Bingham Canyon, UT 84006 For mail: 8315 West 3595 South P. O. Box 6001 Magna, Utah 84044 Fax: 801-569-6807 b. All notices shall be given by personal delivery, facsimile or registered mail, return receipt requested. The notices shall be effective and shall be deemed deliv- ered (i) in the case of personal delivery, on the date of delivery if delivered during normal business hours, and if not delivered during normal business hours, on the next business day following delivery, (ii) in the case of facsimile, on the next business day following receipt of the facsimile, and (iii) in the case of registered mail, on the next business day after actual receipt. A party may change its address by notice to the other party. 17.12. Further Assurances. Each party agrees to take from time to time such actions and execute such additional instruments as may be reasonably necessary or convenient to implement the Project and carry out the intent and purpose of this Project Agree ment. 17.13. Recording Memorandum. At the request of either party, a memorandum of this Project Agreement shall be executed and recorded in the Salt Lake County records. 17.14. Survival. The following sections shall survive the termination of this Project Agreement to the full extent necessary for their enforcement and the protection of the party in whose favor they run: Section 8.10, Section 11, Section 12.6 and Sec tion 13.6. KENNECO.Tr UTAH COPPER CORPORA nON ~ ~ JORDAN VALLEY WATER CONSERVANCY DISTRICT 0--- By: Its: -40- Appendix 1 Schedule of Water Rights for Zone B and Lost Use Project Component Water Right Number Flow Rate (cfs) Minimum Annual Withdrawal (AF) Zone B (and Lost Use Integrated Design) 59-1210 (a24623) 3.55 850.00 Zone B (and Lost Use Integrated Design) 59-1536 (a24622) 5.0 3613.50 Lost Use 59-5513 (a23590) 11.76 5000.00 Appendix 2 Proposal Appendix 3 Water Taste and Odor Testing Methodology 1. An advisory technical water quality committee (Water Quality Committee), consisting of technical staff members, will be selected. Two representatives will be chosen by Kenne- cott and two representatives chosen by JVWCD. The committee members should be qualified in areas of water treatment processes and water chemistry. 2. In the event that Zone A Plant permeate water is generating taste or odor complaints from consumers, the Water Quality Committee may be convened at the request of Kennecott or JVWCD. 3. The Water Quality Committee shall employ analyses such as Threshold Odor Number tests, Flavor Profile Analysis, or other methods to determine the severity of the taste or odor and its likely source. 4. The Water Quality Committee shall attempt to analyze the origin of the taste or odor and reach consensus on the cause. The Water Quality Committee shall proceed with analyz- ing treatment solutions and make recommendations to Kennecott or JVWCD as to how to remedy the taste or odor problem through the use of existing facilities and on-site tec h- nology. The responsible party shall implement the recommendations, which shall be paid for in accordance with Section 9.1.c. This process shall continue until the problem is remedied. 5. If existing facilities and on-site technology are insufficient to resolve the taste or odor problem, the Water Quality Committee may recommend treatment process capital im- prove ments to resolve the prob lem. Appendix 4 Water Rate Determination Methodology The availability, allocations, terms and price methodologies for Treated Water or other water to be provided by JVWCD to Af- fected Municipalities are as set forth on the following tables: 4-2 APPENDIX 4 TABLE 1 Zone Maximum Annual Volume of Water to be Made Available by JVWCD (Acre-Feet) Maximum Flow Rate (mgd)(c) Term of Water Availability JVWCD Water Rate Methodology Allocation Among Affected Munici- palities (a) Period of Reserved Allo- cations for Affected Mu- nicipalities (a) A Actual Treated Water produced by Zone A Plant, up to 3850 acre - feet. 3.46 40 years following “Complete and Opera- tional” status date. Discounted wholesale rate, per formula in Table 4 of Appendix 4 Per Table 2 of Ap- pendix 4 Through the fifth anniver- sary of the date of the Pro- ject Agreement(b). Thereaf- ter, any Affected Munic i- pality can contract for any re maining amount. B 3500 At least 3.46 40 years following “Complete and Opera- tional” s tatus date. JVWCD wholesale rates calculated by its then current methodol- ogy. The methodology for rates in 2002 is generally described in Table 3 of Appendix 4. None - any Af- fected Municipality can contract for any amount, beginning on the date of the Project Agre e- ment(b). Reserved for the Affected Municipalities for 40 years following Complete and Operational status date. Lost Use 1235 At least 1.10 40 years following “Complete and Opera- tional” status date. JVWCD wholesale rates calculated by it s then current methodol- ogy. The methodology for rates in 2002 is generally described in Table 3 of Appendix 4. None - any Affected Municipality can contract for any amount, beginning on the date of the Project Agre e- ment(b). Reserved for the Affected Municipalities for 40 years following Complete and Operational status date. Notes: (a) The Affected Municipalities are: West Jordan City, South Jordan City, Riverton City and the City of Herriman. (b)This assumes that JVWCD will give written notice to the Af fected Municipalities as of the date of the execution of the Project Agreement, that the quantity of water shown in Table 1 will become available by the date specified in the notice. If the notice is not sent out until after the date of execution of the P roject Agreement, then the date of the notice will be substituted for the date of the Project Agreement. Any Affected Municipality may thereafter contract with JVWCD for delivery of that water, within the allocations shown in Table 1. (c) Million gallons per day. 4-3 APPENDIX 4 TABLE 2 Allocation of Zone A Treated Water Among Affected Municipalities(a) Affected Municipality Allocation (%) Maximum Annual Volume (b) (acre -feet) Maximum Flow Rate (c) (MGD)(d) West Jordan City 35 1225 1.21 South Jorda n City 30 1050 1.04 Riverton City 20 700 0.69 Herriman City 15 525 0.52 Notes: (a) These allocations will be held for the Affected Municipalities through the fifth anniversary of the date of the Project Agreement (see Table 1). Thereafter, throughout the Operational Period, any Af- fected Municipality will be able to contract for any Zone A water amount not previously contracted for within the allocations. (b) Each Affected Municipality may purchase up to its allocated percent of the actual T reated Water Annual Volume produced by the Zone A Plant, which may not exceed the volumes of water shown in this column. These quantities are based on 3500 acre feet Zone A water on a rolling five -year average. This Project Agreement allows Kennecott to produce up to 10% above or below 3500 acre feet in any given year. Therefore, these quantities may be greater by as much as 10% in any given year. (c) Each Affected Municipality may purchase up to its allocated percent of the actual Treated Water flow rates produced by the Zone A Plant, which may not exceed the flow rates of water shown in this column. (d) Million gallons per day. 4-4 APPENDIX 4 TABLE 3 Jordan Valley Water Conservancy District Wholesale Rate Methodology JVWCD annually establishes its who lesale water rates by using a rate methodology. JVWCD may choose periodically to change methodologies and/or to change its interpre- tation and implementation of any methodology it selects. The methodology for calculating rates in 2002 is the “Base-Extra Capacity method” of the American Water Works Association, as interpreted and implemented by JVWCD as follows: The costs of providing the average daily and total annual service, together with the costs associated with meeting the peak daily and peak hourly de mands, are allocated propor- tionately to each water purchaser. In addition, those costs directly attributable to provid- ing specialized, rather than system-wide, service to a specific purchaser, such as the cost incurred in delivering water to various pumping or pressure zones, shall be borne directly by the purchaser who causes those costs to be incurred. If two or more purchasers are within a single pressure zone, then the cost of delivering water to the pressure zone shall be proportionately allocated between them. System amortization and other fixed costs including, but not limited to, meter reading, administration, and overhead are allocated among all purchasers on a proportionate basis. In addition, a customer-related charge to pay the fixed overhead costs of JVWCD, includ- ing meter reading and customer billing, and some related overhead costs which are in- curred regardless of the amount of water used by any purchaser, is charged proportio n- ately to a purchaser. This flat fee, based on each purchaser’s water meter capacity in re- lation to the total water meter capacity of the JVWCD system, is computed in meter equivalent units of 1,000 gallons per minute of meter capacity of each purchaser’s distri- bution system. 4-5 APPENDIX 4 TABLE 4 Illustration of Discounted Wholesale Water Rate Methodology for Zone A Treated Water(2002) Water Rate Components Unit Cost for 2002 (per AF)(a) • JVWCD wholesale rate (without pumping or peaking surcharges)(b) $289.11 • Less JVWCD average water source unit cost ($128.65) • Less JVWCD weighted average surface water treatment/wells O&M unit cost(c) ($31.53) • Plus JVWCD “avoided operating cost”(d) $58.31 • Plus JVWCD additional O M&R cost to reduce TDS to 250 mg/L (Zones A and B average)(e) $31.08 • Plus J VWCD’s amortized capital contribution to the proposal(f) $83.92 Net Discounted Water Rate: $302.24 Notes: (a) The illustration uses actual figures from 2002. (b) The wholesale rate is determined annually by JVWCD using its then current rate methodology. The methodology for calculating rates in 2002 is the “Base-Extra Capacity Method” of the American Water Works Association, as interpreted and implemented by JVWCD . (c) Includes personnel, electricity, chemical, and equipment, calculated from the p revious year. (d) As described in the Consent Decree, this is $49 per acre -foot, in 1995 dollars, escalated at the ENR “20 cities” cost index. (e) See CDM Report and Proposal. (f) $8,952,000 (estimated) amortized at 6%, 20 years, and divided by 9300 AF. Thereafter, this will become a re- placement sinking fund contribution, at the amortized base, indexed to future years. (g) Comparisons are highest elevation wholesale rates for South Jordan City and West Jordan City (Pressure Zone C) during July 1, 2002 t hrough June 30, 2003: · South Jordan zone 3 - $324.79 per AF · West Jordan zone 4 - $329.45 per AF Estimated Pressure Zone D wholesale rate in 2002 would be $355 per AF. 4-6 APPENDIX 4 TABLE 5 Conditions to Sale of Zone A Treated Water by JVWCD to Selected Affected Municipalities Affected Municipality Condition of Selling Zone A Treated Water West Jordan City West Jordan City will not develop its water right #59-1572 at any point(s) of diversion closer than 2000 feet from the Affected Area, during the Op- erational Period. Riverton City Riverton City will apply to the State Engineer to move “point of diversion #1" of its water right #59-1533 to the current location of its “Gara- mandi Well” at 4000 West 12600 South. Therea f- ter, Riverton City will not move any point of di- version under its water right #59-1533 to a loca- tion closer than 2000 feet from the Affected Area during the Operational Period. Appendix 5 Deep Well Concentrate Specifications The Deep Well Concentrates generated by the Zone B Facilities and, if applicable, the Lost Use Facilities, and delivered to Kennecott pursuant to Section 8.2 : 1. Shall not contain sulfate in concentrations exceeding 5,000 mg/L. 2. Shall not contain or constitute a hazardous waste as regulated under the Resource Conservation and Recovery Act (RCRA) 42 U.S.C. §6901 et seq., or the Utah Solid and Hazardous Waste Act, (USHWA) UCA §19-6-101 et seq., and as that term is defined by 40 C.F.R. §261.3, as such laws may be ame nded. 3. Shall not exhibit a characteristic of a hazardous waste as provided in 40 C.F.R. §§261.21 (ignitability), 261.22 (corrosivity), or 261.23 (reactivity), or 262.24 (toxicity), as such regulations may be amended. 4. Shall not contain any constituents above discharge limits set forth in KUCC’s UPDES Permit (UTD0000051) for Outfall 012, as such limits may be amended in accordance with the applicable law. Current discharge limits are shown below: KUCC UPDES Permit (UTD0000051), May 2000 Discharge Limits for Outfall 012 Analyte Concentration Limit Units Arsenic 0.250 mg/L Cadmium 0.050 mg/L Copper 0.150 mg/L Lead 0.300 mg/L Selenium 0.027 mg/L Zinc 0.224 mg/L TSS 20.0 mg/L pH 6.5 – 9.0 s.u Notes: a) All limits are total numbers, not dissolved. 5-2 5. Shall not contain nutrients (e.g. Nitrate, Ortho -phosphate, etc.) at levels that ex- ceed the following limits: a. Nitrate plus Nitrogen 15 mg/L, Ortho -phosphate 0.25 mg/L b. However, even if the nutrients in the Deep Well Concentrate do not ex- ceed the foregoing limits in 5(a), if nutrients are determined to be the cause or partial cause of elevated TSS concentrations in KUCC discharge (i.e. algal blooms), KUCC and JVWCD will meet to determine mitigation and/or a lternative disposal strategies. 6. Shall not contain orga nic hazardous constituents listed in 40 C.F.R. part 261, Ap- pendix VIII, as amended. 7. Shall not contain detectable herbicides or pesticides or mixtures thereof in co n- centrations greater than KUCC discharge permit limits or one half primary drink- ing water sta ndards, whichever is greater. 8. Shall not contain petroleum, including crude oil and fractions thereof. 9. Shall not contain natural gas, synthetic gas and any mixtures thereof in concentra- tions greater than KUCC discharge permit limits or one half primary drinking wa- ter standards, whichever is greater. 10. Shall not contain asbestos and/or asbestos-containing materials in concentrations greater than KUCC discharge permit limits or one half primary drinking water standards, whichever is greater. 11. Shall not contain PC Bs, or PCB-containing materials or fluids in concentrations greater than KUCC discharge permit limits or one half primary drinking water standards, whichever is greater. Any reference to any statutory or regulatory provision in the above items includes suc h laws and regulations as such may be amended from time to time. Any constituent not currently regulated, that may become regulated in the future, will be required to meet fu- ture permitted discharge limits and/or other future regulations. Any constituent not meeting the requirements listed above shall not be delivered to Ken- necott unless Kennecott and JVWCD have met and agreed in writing to mitigation and/or alternative disposal strategies. Appendix 6 Insurance Schedule 1. During the construction of the Zone B Facilities and until the full reduction and release of the Zone B ILC, JVWCD, at its expense, shall maintain with an insurer or insurers that has or have a financial rating of at least A-VII as defined by A.M. Best Company, insurance on the Zone B Facilities (excluding pipelines and wells) as follows: a. Builders risk or construction all-risk coverage during the period of co n- struction of the Zone B Facilities (excluding pipelines and wells) in an amount equal to the project value thereof, which covera ge shall be specific to the Zone B Facilities and Lost Use Facilities and shall not cover other facilities or assets of JVWCD; and b. All-risk full replacement cost property insurance for the Zone B Facilities (excluding pipelines and wells) for the period following construction prior to the full reduction and release of the Zone B ILC, which coverage may be provided in whole or part by including the Zone B Facilities in a policy covering other assets of JVWCD. 2. Notwithstanding the foregoing, the parties ack nowledge that (i) as of the date of this Project Agreement, JVWCD does not carry business interruption insurance or earthquake, flood or property damage insurance on any pipelines or wells, and (ii) any financial reserves or insurance maintained by JVWCD (other than the builder’s risk policy described in subparagraph 1.a above) is applicable to all op- erations of JVWCD in JVWCD’s discretion (and not just assets subject to this Project Agreement). 3. The insurance maintained by JVWCD pursuant to Paragraph 1 above shall pro- vide: a. That Kennecott is an additional insured as to the Zone B Facilities; b. That such insurance is primary to similar insurance, if any, that may be carried by Kennecott or its affiliates; c. Effective waivers by the insurer of all rights of subrogation against Ken- necott, its agents, subsidiaries and parent companies, and its and their em- ployees, officers, and directors; d. That each party identified as an insured shall be construed as a separate and distinct insured party and the words “the Insured” (or similar term) 6-2 shall be construed as applying to each party as if a separate policy has been issued to each of them, so that a breach of the policy conditions or failure to disc lose material information by any party identified as an in- sured shall not affect the rights or coverage under the policy of any other party identified as an insured; e. That no cancellation, reduction in amount or material change in coverage shall be effective until at least thirty (30) days after receipt by Kennecott of written notice thereof; and f. That the insurer shall be required to interplead proceeds payable under the policy if the insurer has been notified (prior to payment of such proceeds) by any party identified as an insured that an action for breach has been ini- tiated against the other party and such breach relates to the loss event. 4. Upon execution of the Project Agreement, and any time thereafter upon request, JVWCD shall deliver to Kennecott an additional insured endorsement and a cer- tificate of insurance in a form reasonably satisfactory to Kennecott, evidencing satisfaction of all requirements set forth in this Appendix 6 and Section 12.3 of the Project Agreement relating to the Zone B Facilities, and such other informa- tion as Kennecott may reasonably request. 5. JVWCD shall deliver to Kennecott the applicable endorsements and certificates of insurance described in Paragraph 4 above for any new policy which is a replace- ment for any expiring policy at least thirty (30) days prior to the date of such exp i- ration. 6. In the event of a material loss to the Zone B Facilities prior to the full reduction and release of the Zone B ILC, JVWCD may, at its option, elect (i) to repair the damage at its own expense, in which event this Project Agreement shall remain in full force and effect as to the Zone B Facilities, or (ii) to terminate this Project Agreement as to the Zone B Facilities, in which event: a. If the termination is due to an uninsured loss to the Zone B Facilities prior to the time the Zone B Adjustment Factor reaches 50%, the provisions of Section 11.2 shall apply; or b. If the termination is due to an uninsured loss to the Zone B Facilities after the time the Zone B Adjustment Factor reaches 50%, the provisions of Section 11.3 shall apply; or c. If the termination is due to an insured loss to the Zone B Facilities prior to the time the Zone B Adjustment Factor reaches 50%, the insurance pro- ceeds shall be delivered to Kennecott up to the amount advanced by Ken- necott under Section 9.2 through the date of termination, and the provi- sions of Section 11.2 shall apply; provided, however, that any insurance 6-3 proceeds paid to Kennecott shall be credited against any amounts due to Kennecott under Section 11.2.c ; or d. If the termination is due to an insured loss to the Zone B Facilities after the time the Zone B Adjustment Factor reaches 50%, and JVWCD does not elect to increase its commitment to deliver water to the Affected Mu- nicipalities to 3500 acre feet per year and receive payments from the Trus- tee in accordance with Section 11.3.e, the insurance proceeds shall be de- livered to Kennecott up to the amount, if any, advanced by Kennecott un- der Section 9.2 through the date of termination but for which Kennecott does not receive a corresponding reduction in the amount of the Zone B ILC under Section IV.F of the State Agreement, and the provisions of Sec- tion 11.3 shall apply. e. If the termination is due to an insured loss to the Zone B Facilities after the time the Zone B Adjustment Factor reaches 50%, and JVWCD does elect to increase its commitment to deliver water to the Affected Munic i- palities to 3500 acre feet per year and receive payments from the Trustee in accordanc e with Section 11.3.e, the insurance proceeds shall be deliv- ered to Kennecott up to (i) the amount, if any, advanced by Kennecott un- der Section 9.2 through the date of termination but for which Kennecott does not receive a corresponding reduction in the amount of the Zone B ILC under Section IV.F of the State Agreement, plus (ii) the amount re- ceived by JVWCD from the Trustee under Section VIII.C.2 of the State Agreement, less (iii) an amount equal to the balance of the Reconciliation Payment not paid to JVWCD under Section 11.3.b, and the provisions of Section 11.3 shall apply. f. JVWCD shall retain all insurance proceeds in excess of the amount, if any, paid to Kennecott under subparagraphs 6.c, 6.d and 6.e of this Appendix 6. 7. JVWCD, after consultation with Kennecott, shall initiate all negotiations and/or litigation regarding coverage and liability and manage all efforts to resolve all disputes with any insurer providing (or believed to be providing) coverage under the policies required by Section 12.3.b of the Project Agreement, but shall not ac- cept any settlement of less than the full amount of the coverage claim without the prior written consent of Kennecott, which consent shall not be unreasonably wit h- held. All expenses (including fees and expenses of consultants and attorneys) in- curred by JVWCD hereunder shall be borne by JVWCD. Appendix 7 Deep Well Concentrate Delivery Point and Disposal Pipeline Corridors Appendix 8 Form o f Disposal Pipeline Easement Agreement [Easement to Great Salt Lake] PIPELINE EASEMENT AGREEMENT This Pipeline Easement Agreement is entered into as of the ____ day of _____________, 2004, by and between Kennecott Utah Copper Corporation, a Delaware corporation, of 8315 West 3595 South, P.O. Box 6001, Magna, Utah 84044 (“Kennecott”), and Jordan Valley Water Conservancy Dis trict, a Utah water conservancy district, of 8215 South 1300 West, P.O. Box 70, West Jordan, Utah 84088-0070 (“Jordan Valley”). Recitals A. Kennecott owns the real property located in Salt Lake County, Utah, designated and described as the “Pipeline Easement” and the “Construction Easement” in Exhibit A, at- tached hereto and made a part hereof (collectively, the “Easements”). B. Pursuant to that certain Project Agreement dated as of ____________, 2004 be- tween Kennecott and Jordan Valley (as amended from time to time, the “Project Agreement”), Kennecott has agreed to grant to Jordan Valley easements for the purpose of constructing, oper- ating, maintaining, repairing and replacing underground pipelines for the conveyance of water treatment plant concentrates upon and across the Easements upon the terms and conditions co n- tained herein. C. This Agreement is entered into by the parties to implement the pertinent provi- sions of the Project Agreement. Agreement Now, therefore, in consideration of the mutual promises and benefits contained in the Project Agreement and herein, and other good and valuable consideration, the receipt and suffi- ciency of which are hereby a cknowledged, Kennecott and Jordan Valley agree as follows: 1. Definitions . As used in this Agreement, capitalized terms shall be defined as fo l- lows: a. Easements, Pipeline Easement and Construction Easement shall have the meanings set forth in Recital A, above. 8-2 b. Easement Corridor shall mean the easement corridor shown in Exhibit B, attached hereto and made a part hereof. c. Environmental Claims shall mean any and all claims, actions, damages, judgments, fines, penalties, demands, liabilities, costs, expenses (including reasonable at- torneys’ and other professional fees), clean-up costs, remediation, removal or other re- sponse costs, legal expenses (including reasonable attorneys’ fees), investigation costs (including reasonable fees of co nsultants, counsel and other experts in connection with enviro nmental investigation or testing), and any other losses, liabilities, obligations, fines, penalties (civil or criminal), damages (including compensatory, punitive and natural re- source damages), or payments, sought or claimed by any person, governmental agency or other entity which are based upon the violation or alleged violation of any Environmental Law or the release of any Hazardous Materials. d. Environmental Laws shall mean the following statut es and their imple- menting regulations: the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., CERCLA, the Clean Water Act, 33 U.S.C. § 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., and any other fe d- eral, state or local statute or regulations dea ling with similar matters. e. Hazardous Materials shall mean i. hazardous materials, pollutants, contaminants, dangerous substances, co n- stituents, toxic substances, hazardous or toxic chemicals, hazardous wastes and hazardous substances as those terms are defined in any Environmental Law; ii. petroleum, including crude oil and fractions thereof; iii. natural gas, synthetic gas and any mixtures thereof; iv. asbestos and/or asbestos-containing materials; v. PCBs, or PCB-containing materials or fluids; vi. any other substance, including sewage sludge, with respect to which any federal, state or local agency or other governmental entity may require ei- ther an environmental investiga tion or an environmental remediation; and vii. any other hazardous or noxious substance, material, pollutant or solid waste that is regulated by, or forms the basis of liability under, any Envi- ronmental Law. f. Jordan Valley Membrane Plant shall mean the water treatment plant co n- structed by Jordan Valley pursuant to the Project Agreement, located at approximately 8400 South, 1000 West in South Jordan, Utah. 8-3 g. Project Agreement shall have the meaning set forth in Recital B, above. h. Tailings Area shall mean those portions of the Pipeline Easement and Easement Corridor that traverse over or are in the immediate vicinity of the Tailings Im- poundment. i. Tailings Impoundment shall mean the tailings disposal facility and all re- lated improvements, structures and equipment, which facility is situated on property owned by Kennecott. 2. Grant of Easements. Kennecott hereby grants and conveys to Jordan Valley, sub- ject to existing easements, restrictions, limitations, covenants and conditions of record and to all of the terms and conditions hereof: a. A perpetual, non-exclusive easement in, under, upon and across the Pipe- line Easement for the construction, operation, maintenance, repair and replacement of up to two underground pipelines, each up to 16 inches in diameter, for the conveyance of water treatment plant concentrates, together with appurtenant power, telemetry and co m- munications lines and related facilities. b. A perpetual, non-exclusive easement upon and across the Construction Easement for construction activities during the periods of construction, removal and re- placement of pipelines in the Pipeline Easement. c. A perpetual, non-exclusive easement upon and across the Pipeline Ease- ment for vehicular and pedestrian access for the purpose of operating, maintaining, re- pairing, inspecting and monitoring pipelines and related facilities located on and under the Pip e line Easement. 3. Construction and Maintenance. Jordan Valley shall perform all construction work within the Easements and operate and maintain the pipelines and related facilities located in the Pipeline Easement at its sole risk and expense, in a good and workmanlike manner, in full co m- pliance with all applicable laws and regulations and in a manner so as to avoid to the extent prac- ticable any interference with Kennecott’s operation and maintenance of the Tailings Impound- ment . Jordan Valley shall reclaim and restore areas disturbed by its construction activities within the Easements as soon as reasonably practicable following completion of the work in the affected area. 4. Restrictions on Use. a. All activities by Jordan Valley on the Easements shall be subject to Ken- necott’s safety, security and environmental policies, procedures and permits as then in e f- fect and to such reasonable restrictions on access that Kennecott deems appropriate, in- cluding, without limitation, advance notice before entry onto the Easements, entry only through Kennecott’s security points and entry only after appropriate security clearance. Kennecott shall have access to the Easements for inspection or any other purpose at any time. 8-4 b. The initial pipeline constructed in the Easements shall serve the Jordan Valley Membrane Plant. Jordan Valley shall have the right to utilize the two under- ground pip e lines in the Easements for concentrates from one additional water treatment plant located within Jordan Valley’s service area, but only after a pipeline has been in- stalled and used to transport and dispose of concentrates from the Jordan Valley Me m- brane Plant. 5. Reserved Rights. The Easements shall be subject to Kennecott’s uses as follows: a. Kennecott’s use of the Tailings Area for any purpose relating to the opera- tion and maintenance of the Tailings Impoundment shall be the dominant use of the prop- erty, and Jordan Valley shall accommod ate all such uses within the Tailings Area, includ- ing both existing and future uses; provided, however, if Kennecott proposes a new use of the Tailings Area that is substantially incompatible with the exercise of Jordan Valley’s permitted uses of the Tailings Area under this Agreement, the Easements shall be relo- cated as provided in paragraph 6 below. Kennecott also reserves the right to use the Tail- ings Area for purposes unrelated to the Tailings Impoundment in accordance with the provisions of subparagraph 5.b below. b. With respect to all portions of the Easements lying outside of the Tailings Area and uses of the Tailings Area that are unrelated to the Tailings Impoundment, Ken- necott reserves the right, subject to Jordan Valley’s approval, which approval shall not be unreasonably conditioned, withheld or delayed, to use the Easements for any other pur- poses not inconsistent with the rights granted to Jordan Valley herein, inc luding, wit hout limitation, the right to grant easements or other rights of use to third parties or to expand existing uses, so long as such uses do not unreasonably interfere with Jordan Valley’s permitted uses or with Jordan Valley’s access to the Easeme nts or to the pipelines and re- lated facilities located in the Pipeline Easement. Notwithstanding the other provisions of this subparagraph 5.b, Kennecott shall use reasonable efforts to give advance notice to Jordan Va lley of new or expanded mining-related surface uses within the Easements that do not materially interfere with Jordan Valley’s use of the Easements, but Kennecott shall not be required to obtain Jordan Valley’s approval of such uses. 6. Relocation of Easements. Kennecott shall have the right to relocate the Ease- ments within the Easement Corridor. In such event, Kennecott and the Dis trict shall cooperate in identifying the replacement location. If the relocation occurs prior to the design and construction of pipelines within the original Pipeline Easement, then Jordan Va lley shall bear the costs of construction and use of pipelines in the relocated Pipeline Easement. If the relocation occurs a f- ter pipelines have been installed in the Pipeline Easement, then Kennecott shall relocate the ex- isting pipelines at Kennecott’s risk and expense, and Jordan Valley shall bear any incremental increase in Jordan Valley’s maintenance, replacement, pumping, operating or any other costs as- sociated with the use of pipelines in the relocated Pipeline Ease ment. 7. Indemnity. Jordan Valley agrees to indemnify Kennecott and Kennecott’s direc- tors, officers, employees and agents (each a “Kennecott indemnified party”) and to hold each Kennecott indemnified party harmless from and against any and all claims, actions, damages, judgments, fines, pe nalties, demands, liabilities, costs, expenses (including reasonable attorneys’ 8-5 and other professional fees), clean-up costs, remediation, removal or other response costs, lega l expenses (including reasonable attorneys’ fees), investigation costs (including reasonable fees of consultants, counsel and other experts in connection with environmental investigation or testing), and any other losses, liabilities, obligations, fines, penalties (civil or criminal), damages (includ- ing co mpensatory, punitive and natural resource damages), or payments (collectively “claims”), sought or claimed by any person, governmental agency or entity arising directly or ind irectly from or out of Jordan Valley’s activities on the Easements or Jordan Valley’s construction, use, operation, maintenance and/or replacement of a pipeline or pipelines in the Easements, includ- ing, without limitation, claims arising from any alleged or actual violations of laws, regula tions or permits, claims for personal injury, damage to real or personal property, or Enviro nmental Claims. The foregoing indemnity shall not apply to the extent claims arise from the gross negli- gence or intentional wrongful acts of Kennecott or of a ny other invitee or permitee of Kennecott. The foregoing indemnity shall survive any termination of this Agreement and the Project Agreement or any reversion of the Ease ments. 8. Abandonment and Reversion of Easements. a. If, within 40 years following the initial issuance of an opera t ing permit for the Jordan Valley Membrane Plant, Jordan Valley (i) has not received regulatory ap- proval to discharge water treatment concentrates to the Great Salt Lake from the Jordan Valley Membrane Plant, or (ii) has not construc ted a pipeline within the Pipeline Ease- ment, then Jordan Valley shall relinquish the Easements to Kennecott, and shall provide Kennecott with a recordable release thereof. b. In the event Jordan Valley determines that it no longer requires any por- tion of the Easements for present or possible future pipeline use, then Jordan Valley shall relinquish the Easements to Kennecott, and shall provide Kennecott with a recordable re- lease thereof. c. Jordan Valley, at its sole cost, shall comply with all applicable legal and regulatory requirements relating to the abandonment and removal of the pipelines and the reclamation of the affected lands. 9. Governing Law. This Agreement shall be governed by and construed in accor- dance with the laws of the State of Utah, without regard to rules governing conflicts of laws. 10. Assignment; Successors and Assigns. Jordan Valley shall not assign any right, in- terest or obligation in or under this Agreement or the Easements without the prior written co n- sent of Kennecott, which co nsent shall not be unreasonably withheld. This Agreement shall be binding on the parties hereto and on their respective successors and permitted assigns. 11. Attorneys’ Fees. In the event of a breach of any of the terms of this Agreement, the non-breaching party, in addition to any other relief to which it may be entitled, shall be ent i- tled to recover from the breaching party, the non-breaching party’s costs and reasonable attor- neys’ fees incurred in enforcing its rights hereunder or in recovering damages for the breach her eof. 8-6 12. Covenants Running with the Land . The terms and conditions of this Agreement shall be covenants burdening and running with the Easements, and performance of the covenants contained herein may be specifically enforced. 13. Complete Agreement. The Project Agreement and this Agreement contain the complete agreement of the parties hereto with respect to the subject matter hereof. This Agree- ment may not be amended except in writing executed by both parties. In witness whereof, the parties have executed this Agreement as of the day and year first above written. KENNECOTT UTAH COPPER CORP ORATION By: ____________________________________ Its: ____________________________________ JORDAN VALLEY WATER CONSERVANCY DISTRICT By: ____________________________________ Its: ____________________________________ STATE OF UTAH ) : ss. COUNTY OF SALT LAKE ) The foregoing instrument was acknowledged before me this ____ day of ____________, 2004, by _______________________________, the _____________________ of Kennecott Utah Copper Corporation. __________________________________________ Notary Public 8-7 STATE OF UTAH ) : ss. COUNTY OF SALT LAKE ) The foregoing instrument was ackno wledged before me this ____ day of ____________, 2004, by _______________________________, the _____________________ of Jordan Valley Water Conservancy District. __________________________________________ Notary Public 8-8 EXHIBIT A Pipeline Easement Construction Easement 8-9 EXHIBIT B Easement Corridor 8-10 [Easement Segment to Tailings Impoundment] PIPELINE EASEMENT AGREEMENT This Pipeline Easement Agreement is entered into as of the ____ day of _____________, 2004, by and between Kennecott Utah Copper Corporation, a Delaware corporation, of 8315 West 3595 South, P.O. Box 6001, Magna, Utah 84044 (“Kennecott”), and Jordan Valley Water Conservancy Dis trict, a Utah water conservancy district, of 8215 South 1300 West, P.O. Bo x 70, West Jordan, Utah 84088-0070 (“Jordan Valley”). Recitals A. Kennecott owns the real property located in Salt Lake County, Utah, designated and described as the “Pipeline Easement” and the “Construction Easement” in Exhibit A, at- tached hereto and made a part hereof (collectively, the “Easements”). B. Pursuant to that certain Project Agreement dated as of ____________, 2004 be- tween Kennecott and Jordan Valley (as amended from time to time, the “Project Agreement”), Kennecott has agreed to grant to Jordan Valley easements for the purpose of constructing, oper- ating, maintaining, repairing and replacing an underground pipeline for the conveyance of Deep Well Concentrates from the Jordan Valley Membrane Plant upon and across the Ease ments upon the terms and conditions contained herein. C. This Agreement is entered into by the parties to implement the pertinent provi- sions of the Project Agreement. Agreement Now, therefore, in consideration of the mutual promises and benefits contained in the Project Agreement and herein, and other good and valuable consideration, the receipt and suffi- ciency of which are hereby a cknowledged, Kennecott and Jordan Valley agree as follows: 1. Definitions . As used in this Agreement, capitalized terms shall be defined as fo l- lows: a. Deep Wells means wells producing groundwater from the Principal Aqui- fer as defined in USGS/Utah Department of Natural Resources Technical Publication No. 31 and bounded on the north by 7800 South, on the south by 11800 South, on the east by the Jordan River and on the west by 3600 West. b. Deep Well Concentrates means concentrates from the Jordan Valley Membrane Plant that are generated exclusively by the treatment of water from Deep Wells. c. Easements, Pipeline Easement and Construction Easement shall ha ve the meanings set forth in Recital A, above. 8-11 d. Easement Corridor shall mean the easement corridor shown in Exhibit B, attached hereto and made a part hereof. e. Environmental Claims shall mean any and all claims, actions, damages, judgments, fines, penalties, demands, liabilities, costs, expenses (including reasonable at- torneys’ and other professional fees), clean-up costs, remediation, removal or other re- sponse costs, legal expenses (including reasonable attorneys’ fees), investigation costs (including reasonable fees of consultants, counsel and other experts in connection with enviro nmental investigation or testing), and any other losses, liabilities, obligations, fines, penalties (civil or criminal), damages (including compensatory, punitive and natural re- source damages), or payments, sought or claimed by any person, governmental agency or other entity which are based upon the violation or alleged violation of any Environmental Law or the release of any Hazardous Materials. f. Environmental Laws shall mean the following statutes and their imple- menting regulations: the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., CERCLA, the Clean Water Act, 33 U.S.C. § 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., and any other fe d- eral, state or local statute or regulations dea ling with similar matters. g. Hazardous Materials shall mean i. hazardous materials, pollutants, contaminants, dangerous substances, co n- stituents, toxic substances, hazardous or toxic chemicals, hazardous wastes and hazardous substances as those terms are defined in any Environmental Law; ii. petroleum, including crude oil and fractions thereof; iii. natural gas, synthetic gas and any mixtures thereof; iv. asbestos and/or asbestos-containing materials; v. PCBs, or PCB-containing materials or fluids; vi. any other substance, including sewage sludge, with respect to which any federal, state or local agency or other governmental entity may require ei- ther an environmental investiga tion or an environmental remediation; and vii. any other hazardous or noxious substance, material, pollutant or solid waste that is regulated by, or forms the basis of liability under, any Envi- ronmental Law. h. Jordan Valley Membrane Plant shall mean the water treatment plant co n- structed by Jordan Valley pursuant to the Project Agreement, located at approximately 8400 South, 1000 West in South Jordan, Utah. 8-12 i. Project Agreement shall have the meaning set forth in Recital B, above. j. Tailings Area shall mean those portions of the Pipeline Easement and Easement Corridor that traverse over or are in the immediate vicinity of the Tailings Im- poundment. k. Tailings Impoundment shall mean the tailings disposal facility and all re- lated improvements, structures and equipment, which facility is situated on property owned by Kennecott. 2. Grant of Easements. Kennecott hereby grants and conveys to Jordan Valley, sub- ject to existing easements, restrictions, limitations, covenants and conditions of record and to all of the terms and conditions hereof: a. A non-exclusive easement in, under, upon and across the Pipeline Ease- ment for the construction, operation, maintenance, repair and replacement of an under- ground pipeline for the conveya nce of Deep Well Concentrates, together with appurte- nant power, telemetry and communications lines and related facil ities. b. A non-exclusive easement upon and across the Construction Easement for construction activities during the periods of construction, re moval and replacement of the pipeline in the Pipeline Easement. c. A non-exclusive right of access upon Kennecott’s lands in the vicinity of the Easements for vehicular and pedestrian access for the purpose of operating, maintain- ing, repairing, inspecting and monitoring the pipeline and related facilities located on and under the Pipeline Ease ment. 3. Term. This Agreement shall remain in effect for a period of 40 years following the issuance of an operating permit for the Jordan Valley Membrane Plant, unless soo ner termi- nated in accordance with the terms hereof or at the time the Jordan Valley’s right to deliver Deep Well Concentrates terminates pursuant to Section 8.2 of the Project Agreement. Upon termina- tion of this Agreement or the earlier abandonment and re linquishment of the Easements, Jordan Valley shall restore and reclaim the Easements as and to the extent required by applicable legal and regulatory requirements; provided, however, that Jordan Valley shall not be required to re- claim mining-related surface disturbances. Upon termination, Jordan Valley shall provide Ken- necott with a recordable release of the Easements. 4. Construction and Maintenance. Jordan Valley shall perform all construction work within the Easements and operate and maintain the pipeline and related facilities located in the Pipeline Easement at its sole risk and expense, in a good and workmanlike manner, in full co m- pliance with all applicable laws and regulations and in a manner so as to avoid to the extent prac- ticable any interference with Kennecott’s operation and maintenance of the Tailings Impound- ment . Jordan Valley shall reclaim and restore areas disturbed by its construction activities within the Easements as soon as reasonably practicable following completion of the work in the affected area. 8-13 5. Restrictions on Use. All activities by Jordan Valley on the Easements shall be subject to Kennecott’s safety, security and environmental policies, procedures and permits as then in effect and to such reasonable restrictions on access that Kennecott deems appropriate, includ ing, without limitation, advance notice before entry onto the Easements, entry only through Kennecott’s security points and entry only after appropriate security clearance. Kenne- cott shall have access to the Easements for inspection or any other purpose at any time. 6. Reserved Rights. The Easements shall be subject to Kennecott’s uses, including without limitation the right to establish and relocate surface pipelines, irrigation facil ities and roads, as follows: a. Kennecott’s use of the Tailings Area for any purpose relating to the opera- tion and maintenance of the Tailings Impoundment shall be the dominant use of the prop- erty, and Jordan Valley shall accommodate all such uses within the Tailings Area, includ- ing both existing and future uses; provided, however, if Kennecott proposes a new use of the Tailings Area that is substantially incompatible with the exercise of Jordan Valley’s permitted uses of the Tailings Area under this Agreement, the Easements shall be relo- cated as provided in paragraph 7 below. Kennecott also reserves the right to use the Tail- ings Area for purposes unrelated to the Tailings Impoundment in accordance with the provisions of subparagraph 6.b below b. With respect to all portions of the Easements lying outside of the Tailings Area and uses of the Tailings Area that are unrelated to the Tailings Impoundment, Ken- necott reserves the right, subject to Jordan Valley’s approval with re spect to underground uses, which approval shall not be unreasonably conditioned, wit hheld or delayed, to use the Easements for any other purposes not inconsistent with the rights granted to Jordan Valley herein, including, wit hout limitation, the right to grant easements or other rights of use to third parties or to expand existing uses, so long as such uses do not unreasonably interfere with Jordan Valley’s permitted uses or with Jordan Valley’s access to the Ease- ments or to the pipeline and related facilities located in the Pipeline Ease ment. 7. Relocation of Easements. Kennecott shall have the right to relocate the Ease- ments within the Easement Corridor. In such event, Kennecott and the Dis trict shall cooperate in identifying the replacement location. I f the relocation occurs prior to the design and construction of the pipeline within the original Pipeline Easement, then Jordan Valley shall bear the costs of construction and use of the pipeline in the relocated Pipeline Easement. If the relocation occur s after the pipeline has been installed in the Pipeline Easement, then Kennecott shall relocate the existing pipeline at Kennecott’s risk and expense, and Jordan Valley shall bear any incremental increase in Jordan Valley’s maintenance, replacement, pumping, operating or any other costs as- sociated with the use of the pipeline in the relocated Pipeline Ease ment. 8. Indemnity. Jordan Valley agrees to indemnify Kennecott and Kennecott’s direc- tors, officers, employees and agents (each a “Kennecott indemnified par ty”) and to hold each Kennecott indemnified party harmless from and against any and all claims, actions, damages, judgments, fines, pe nalties, demands, liabilities, costs, expenses (including reasonable attorneys’ and other professional fees), clean-up cos ts, remediation, removal or other response costs, legal expenses (including reasonable attorneys’ fees), investigation costs (including reasonable fees of 8-14 consultants, counsel and other experts in connection with environmental investigation or testing), and any other losses, liabilities, obligations, fines, penalties (civil or criminal), damages (includ- ing co mpensatory, punitive and natural resource damages), or payments (collectively “claims”), sought or claimed by any person, governmental agency or entity arising directly or ind irectly from or out of Jordan Valley’s activities on the Easements or Jordan Valley’s construction, use, operation, maintenance and/or replacement of the pipeline in the Easements, includ ing, without limitation, claims arising from any alleged or actual violations of laws, regula tions or permits, claims for personal injury, damage to real or personal property, or Enviro nmental Claims. The foregoing indemnity shall not apply to the extent claims arise from the gross negligence or inte n- tional wrongful acts of Kennecott or of any other invitee or permitee of Kennecott. The forego- ing indemnity shall survive any termination of this Agreement and the Project Agreement or any reversion of the Ease ments. 9. Abandonment and Reversion of Easements. In the event Jordan Valley deter- mines that it no longer requires any portion of the Easements for present or possible future pip e- line use, then Jordan Valley shall relinquish the Easements to Kennecott, and shall provide Ken- necott with a recordable re lease thereof. 10. Governing Law. This Agreement shall be governed by and construed in accor- dance with the laws of the State of Utah, without regard to rules governing conflicts of laws. 11. Assignment; Successors and Assigns. Jordan Valley shall not assign any right, in- terest or obligation in or under this Agreement or the Easements without the prior written co n- sent of Kennecott, which co nsent shall not be unreasonably withheld. This Agreement shall be binding on the parties hereto and on their respective successors and permitted assigns. 12. Attorneys’ Fees. In the event of a breach of any of the terms of this Agreement, the non-breaching party, in addition to any other relief to which it may be entitled, shall be ent i- tled to recover from the breaching party, the non-breaching party’s costs and reasonable attor- neys’ fees incurred in enforcing its rights hereunder or in recovering damages for the breach hereof. 13. Covenants Running with the Land . The terms and conditions of this Agreement shall be covenants burdening and running with the Easements, and performance of the covenants contained herein may be specifically enforced. 14. Complete Agreement. The Project Agreement and this Agreement contain the complete agreement of the parties hereto with respect to the subject matter hereof. This Agree- ment may not be amended except in writing executed by both parties. In witness whereof, the parties have executed this Agreement as of the day and year first above written. KENNECOTT UTAH COPPER CORP ORATION By: ____________________________________ Its: ____________________________________ 8-15 JORDAN VALLEY WATER CONSERVANCY DISTRICT By: ____________________________________ Its: ____________________________________ STATE OF UTAH ) : ss. COUNTY OF SALT LAKE ) The foregoing instrument was acknowledged before me this ____ day of ____________, 2004, by _______________________________, the _____________________ of Kennecott Utah Copper Corporation. __________________________________________ Notary Public STATE OF UTAH ) : ss. COUNTY OF SALT LAKE ) The foregoing instrument was acknowledged before me this ____ day of ____________, 2004, by _______________________________, the _____________________ of Jordan Valley Water Conservancy District. __________________________________________ Notary Public 8-16 EXHIBIT A Pipeline Easement Construction Easement 8-17 EXHIBIT B Easement Corridor