WHEREAS, Southwest Texas Municipal Gas Corporation (“Corporation”) was originally created on behalf of the City of Alpine and the City of Marfa (“Cities”) for the construction of a municipal gas utility and transmission system (“System”), and such Corporation on behalf of the Cities did cause to be issued Southwest Texas Municipal Gas Corporation First Mortgage Bonds, Series 1964 and Series 1996, which were later exchanged for the Corporation’s First Mortgage Refunding Bonds, Series 1972 and Subordinated Interest Notes, Series 1972 (“Bonds and Notes”); and

WHEREAS, it is provided in the instruments authorizing the financing of the Corporation’s Bonds and Notes that once the indebtedness of the Corporation is retired the title to the System owned by the Corporation shall be vested in both Cities; and

WHEREAS, pursuant to Article 1112, Tex. Rev. Civ. Stat. Ann., on January 17, 1998, the residents of the Cities have authorized the sale of a portion of the Corporation’s System constituting the transmission system and distribution properties in Reeves County, all as specified in the Asset Purchase Agreement entered into between the Corporation and West Texas Gas, Inc; and

WHEREAS, the Corporation pursuant to an Asset Purchase Agreement (“Agreement”) between the Cities and the Corporation did sell to West Texas Gas, Inc. Corporation the gas utility transmission lines and distribution system owned by the Corporation in Reeves County and the gas distribution system in Balmorhea, Saragosa and Toyahvale; and the receipts from such sale together with other moneys of the Corporation were sufficient to redeem all of the Corporation’s Bond and Note indebtedness as represented by the Corporation’s First Mortgage Refunding Bonds, Series 1972 and Subordinated Interest Notes, Series 1972; and

WHEREAS, the Cities hereby pursuant to a deed, bill of sale and assignment dated June 1, 1964 from the Corporation received upon the redemption of the Bonds and Notes, the Gas System as follows:

a. All right, title and interest of Grantor in and to the natural gas distribution pipeline System and transmission lines belonging to Grantor and located within five (5) miles of the corporate limits of said City as said limits exist on the date of the delivery of this Deed;

b. An undivided one-half (˝) interest in and to all natural gas transmission lines and distribution pipeline systems belonging to Grantor and located without said five (5) mile area (except those situated within (5) miles of the corporate limits, as the same exist on the date of the delivery of this Deed, of the City of Alpine, Texas); and

c. An undivided one-half (˝) interest in and to all other assets of Grantor, real, personal or mixed, irrespective of the County or place where located and wherever the same may be found.

a. All right, title and interest of Grantor in and to the natural gas distribution pipeline system and transmission lines belonging to Grantor and located within five (5) miles of the corporate limits of said City as said limits exist on the date of the delivery of this Deed;

b. An undivided one-half (˝) interest in and to all natural gas transmission lines and distribution pipeline systems belonging to Grantor and located without said five (5) mile area (except those situated within (5) miles of the corporate limits, as the same exists on the date of the delivery of this Deed of the City of Alpine, Texas); and

c. An undivided one-half (˝) interest in and to all other assets of Grantor, real, personal or mixed, irrespective of the County or place where located and wherever the same may be found.

WHEREAS, this Gas System of the Corporation which was not sold to West Texas Gas, Inc. is now vested in the Cities and such Cities deem it advisable to enter into this Agreement pursuant to the Texas Interlocal Cooperations Act, Chapter 791, Texas Government Code and other applicable laws.

NOW, THEREFORE, in consideration of the covenants, and agreements herein made and subject to the conditions set forth herein the Cities together with the Corporation’s agreement agree as follows:

1. Operation. That the Corporation shall continue to operate and maintain the Gas System since the original funding in 1964, and such Gas System shall be maintained in good condition and the same shall be operated in an efficient manner and at reasonable expense, and the Corporation shall maintain insurance on the Gas System in an amount which would usually be carried by a private company in a similar type of business.

2. Rates That the Corporation shall obtain the approval of both Cities to any changes in the rates and requirements of the Gas System of its users.

3. Accounts and Fiscal Year. The Corporation shall keep proper books of records and accounts in which complete and correct entries shall be made of all transactions relating to the Gas System, and shall have said books audited once each fiscal year by a certified public accountant with a copy of such audit to be delivered to each City.

4. Indebtedness. The Corporation will not sell or encumber the Gas System, or any substantial part thereof, or incur indebtedness unless expressly authorized by the governing bodies of the Cities except in the matter of entering into normal equipment leases and installment purchases of equipment for the Gas System in the usual course of business.

5. Public Property. By this agreement the Cities authorize the use by the Corporation of any and all property, streets, alleys, public ways and bridges and general utility assessments of the Cities as determined by the Cities and the Corporation to be necessary for operating and maintaining the Gas System.

6. Force Majeure. If, by reasons for Force Majeure, any party hereto shall be rendered unable wholly or in part to carry out its obligations under this Agreement, with the exception as hereinafter provided, then such party shall give notice and full particulars of such Force Majeure in writing to the other party within a reasonable time after occurrence of the event or cause relied upon, and the obligation of the party giving such notice, so far as it is affected by such Force Majeure, shall be suspended during the continuance of the inability then claimed, but for no longer period, and any such party shall endeavor to remove or overcome such inability with all reasonable dispatch. The term Force Majeure as employed herein, shall mean act of God, strikes, lockouts, or other industrial disturbances, act of public enemy, orders of any kind of the Government of the United States of America of Texas or any civil or military authority, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes, storms, floods, washouts, droughts, arrest, restraint of government and people, civil disturbances, explosions and people, civil disturbances, explosions, breakage or accidents to machinery, pipelines or canals, or other causes not reasonably within the control of the party claiming such inability. It is understood and agreed that the settlement of strikes and lockouts shall be entirely within the discretion of the party having difficulty and that the above requirement that any Force Majeure shall be remedied within all reasonable dispatch shall not require the settlement if strikes and lockouts by exceeding the demands of the opposing party or parties when settlement is unfavorable to it in the judgement of the party having the difficulty.

7. Terms of Agreement. That the term of this Agreement shall be for ten (10) years from the date of the execution and shall be subject to renewal by the parties hereto.

IN WITNESS WHEREOF, Southwest Texas Municipal Gas Corporation, the City of Alpine and the City of Marfa acting to the authority of the respective governing bodies have caused this Agreement to be declared executed in several counterparts each of which shall constitute an original as of the ___________ day of _______________________, 2008, which is the date of this Agreement.

                                      SOUTHWEST TEXAS MUNICIPAL GAS CORPORATION


                                      ________________________________________
                                          President , Board of Directors
                                            					
Attest:


________________________________     SEAL:
Secretary, Board of Directors


                                      City of Alpine
                                       				

                                      ___________________________________

                                                Mayor

   SEAL:

_______________________________    
City Secretary						


                                      City of Marfa


                                      _________________________________________
                                                Mayor                     

Attest:								

_________________________________
City Administrator             				

   SEAL:
   
   
The foregoing INTERLOCAL  GOVERNMENTAL AGREEMENT was approved by the Alpine City Council on May 20, 2008.


COMMITTEE MEMBERS - Manuel Payne
                    Hal Craig
                    Avinash Rangra, Chair