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11. Transportation and Evaporation Losses. The water delivered hereunder will be <br /> measured at the outlet of the reservoir from which released or from the point of discharge of <br /> direct flow transmountain water or reusable return flow. Lessee will bear all transportation and <br /> evaporation losses from the place of release or discharge. <br /> 12. Charge. In consideration of the water leased under this Agreement, Lessee agrees to pay <br /> Pueblo Water each Contract Year during the term of this Agreement a charge of$630.63 per <br /> acre-foot of water for the quantity of water identified in paragraph 1 above, plus all rate increase <br /> as more particularly set forth in paragraph 14. The parties agree that the water leased hereunder <br /> is on a"take or pay"basis. Accordingly, Lessee must pay the Contract Year 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 each Contract <br /> Year throughout the term of this Agreement subject to paragraphs 15 through 18 below. The <br /> failure of Lessee to take delivery of the full quantity of water contracted for and paid for in any <br /> Contract Year does not entitle Lessee to the delivery of additional quantities of water in any <br /> subsequent Contract Year or to a refiund of any sums paid. However, in the event that Pueblo <br /> Water is unable to make the deliveries of water to Lessee specified in this Agreement for the <br /> reasons stated in paragraphs 15 through 18, then Lessee's payment for water will be reduced or <br /> refunded in proportion to any reduction of deliveries by Pueblo Water. <br /> 13. Payments. The charge for water must be paid on the first day of each Contract Year in <br /> advance pursuant to the following schedule: <br /> 13.1. On the effective date of this Agreement, Lessee must pay to Pueblo Water the <br /> first Contract Year payment of$252,252.00. <br /> 13.2 Additional payments in an amount equal to the Contract Year quantity of water <br /> described in paragraph 1 multiplied by the applicable per-acre-foot charge as determined tinder <br /> paragraphs 12 and 14 are due from Lessee to Pueblo Water on the first day of each Contract Year <br /> thereafter for the term of this Agreement. Delinquent balances will be subject to a late payment <br /> charge of 1.5% per month on the unpaid balance. No water will be delivered under this <br /> Agreement if Lessee has an unpaid balance. <br /> 13.3 In addition, Lessee will pay to Pueblo Water upon execution of this Agreement a <br /> non-refundable fee of $1,000 in consideration of legal and administrative costs incurred by <br /> Pueblo Water for this Agreement. <br /> 14. 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 be $662.16 per acre-foot, and if the percentage increase <br /> for the third Contract Year is also five percent, then the price per acre-foot for the third Contract <br /> Year will be $695.27, a five percent increase over the second Contract Year price. Pueblo Water <br /> will give to Lessee 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 /> Page 3 of 7 <br /> f, <br />