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N County u security for the Bonds, until and unless such proceeds are used to remedy the loss or damage for which such proceeds are received, in which event the repairing of the property damaged or the replacement of the property destroyed shall be commenced within a reasonable time after the receipt of such proceeds and shall proceed on a reasonable and continuous basis. No Free Service The County will not render or cause to be rendered any free use of any nature of the System, nor will any preferential rates be established for users of the same class. Operating Budget On or before the last day of each Fiscal Year, the County shall adopt an annual budget for the System for the ensuing Fiscal Year, which shall include a budget for Operating Expenses. The Operating Expenses incurred in any Fiscal Year will not exceed the reasonable and necessary amounts required therefor and the County will not expend any amount or incur any obligation for the operation, maintenance, and repair of the System in excess of the amount provided for the purpose in the annual budget for the then current Fiscal Year except upon resolution of the Board declaring that such expense are necessary for the operation and maintenance of the System. If the budget discloses that the estimated Revenues and other revenues, funds, and receipts pledged under the Resolution will be insufficient during which Fiscal Year, after payment of the Operating Expenses, to meet the rate covenant set forth herein, the County shall forthwith revise the rates, fees, and charges imposed with respect to the System in order to cure such estimated deficiency and to comply with the rate covenant. There shall be included in the budget amounts necessary to provide for the orderly replacement of the depreciable capital assets of the System. Consulting Engineers The County will annually retain the Consulting Engineers for the purpose of providing the County with competent engineering counsel with respect to the economical and efficient operation of the entire water and sewer system of the County and in connection with the making of capital improvements thereto and renewals and replacements thereof. The County may, however, employ additional engineers at any time with relation to specific engineering and operation problems arising in connection therewith. No Competing Systems To the MI extent permitted by law, the County will not grant, renew, extend, or allow to expand any franchise or permit for any system similar to the System within the service area of the System. 54616.1 C-4 II