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10. Charge. In consideration of the water leased under this Agreement, including any <br />Option Water, Lessee agrees to pay Pueblo Water a charge of per acre-foot of water for <br />the quantity of water identified in paragraph 2 above. The par les agree that the water leased <br />hereunder is on a "take or pay" basis. Accordingly, Lessee must pay the charge for all leased <br />water, whether or not said quantities of water are actually taken by Lessee or are required for use <br />by Lessee. Likewise, Pueblo Water agrees to make the water available for delivery throughout <br />the term of this Agreement subject to paragraphs 13 through 16 below. The failure of Lessee to <br />take delivery of the full quantity of water contracted for and paid for in any given Contract Year <br />does not entitle Lessee to a refund of any sums paid or to receive any portion of such unused <br />water in an subsequent Contract Year. <br />11. Payments. <br />11.1. On the Effective Date of this Agreement, Lessee must pay to Pueblo Water the first <br />Contract Year payment ofm <br />11.2. Additional payments in an amount equal to the Contract Year quantity of water <br />described in paragraph 2 multiplied by the applicable per -acre-foot charge as determined <br />under paragraphs 10 and 12 are due from Lessee to Pueblo Water on the first day of each <br />Contract Year thereafter for the term of this Agreement. <br />11.3. On the Effective Date of this Agreement, Lessee will also pay to Pueblo Water a <br />one-time non-refundable fee ofin consideration of legal and administrative costs <br />incurred by Pueblo Water for this greement. <br />11.4. Delinquent balances will be subject to a late payment charge of 1.5% per month <br />on the unpaid balance. No water will be delivered under this Agreement if Lessee has an <br />unpaid balance. <br />12. Escalation. The charge for water for the second and all subsequent Contract Years of <br />this Agreement will be annually adjusted based upon the percentage increase, if any, over the <br />previous calendar year in Pueblo Water's water rates for its general customers for treated water. <br />For example, if the percentage increase for the second Contract Year is five percent, then the <br />price for the second Contract Year will beper acre-foot, and if the percentage increase <br />for the third Contract Year is also five percen , en the price per acre-foot for the third Contract <br />Year will bea five percent increase over the second Contract Year price. Pueblo Water <br />will give to e s written notice before the end of the Contract Year of any rate increase <br />pursuant to this paragraph that will take effect in the next Contract Year. <br />13. Pueblo City Charter Provision. This Agreement involves the use of water outside the <br />territorial limits of the City of Pueblo and is specifically limited by the provisions of the City <br />Charter governing such use. The City Charter provides, among other things, that: "The Board of <br />Water Works shall have and exercise all powers which are granted to cities of the first class by <br />the Constitution and Laws of the State of Colorado, except the power to levy and collect taxes <br />directly or indirectly. Surplus water may be supplied to territories outside the City until same is <br />needed by the inhabitants of the City." <br />Page 3of7 <br />