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12. Charge. In consideration of the water to be leased under this Agreement, Lessee agrees <br />to pay the Board a fee of $366.25 per acre -foot of water so leased, plus any rate increase as more <br />particularly set forth in paragraph 14 below, during the term of this Agreement. The parties <br />agree that the water leased hereunder is on a "take or pay" basis. Accordingly, Lessee shall pay <br />the annual charge for water, whether or not said quantities of water are actually taken by Lessee <br />or are required for use by Lessee. Likewise, the Board agrees to make the water available for <br />delivery each year throughout the terns of this Agreement. <br />13. Payments. The charge for water shall be paid annually in advance pursuant to the <br />following schedule: <br />13.1. On the date of mutual execution of this Agreement, Lessee shall pay the Board <br />$6,226.25, representing the first lease payment through December 31, 2012. <br />13.2 If Lessee exercises its option to lease additional water as described in paragraph 1, <br />then beginning and due on January 1, 2013, Lessee will pay the Board an amount equal to the <br />additional quantity of water leased multiplied by the applicable per- acre -foot charge as set forth <br />in paragraph 12. Delinquent balances shall be subject to a late payment charge of 1.5% per <br />month on the unpaid balance. No water will be delivered under this Agreement if the Lessee has <br />an unpaid balance. <br />13.3 In addition, Lessee will pay to the Board upon execution of this Agreement a non - <br />reimbursable fee of $500 in consideration of legal and administrative costs incurred by the Board <br />for this Agreement. <br />14. Escalation. The charge for water leased by the Board to Lessee for the period of January <br />1, 2013 through December 31, 2013 shall be adjusted based upon the percentage increase, if any, <br />over the previous year of the Board's water rates for its general customers for treated water. The <br />Board will give to Lessee at least 30 days written notice of any rate increase pursuant to this <br />paragraph before such increase shall be effective. <br />15. 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 />16. Determination of Water Availability by Board. The Board has determined that the <br />welfare of Pueblo and its inhabitants requires a stable water supply not only for its citizens but <br />also for the other customers of the Board putting to beneficial use the water belonging to the <br />Board. Therefore, the extent to which limitation of water delivery outside Pueblo may be <br />necessary to enable the Board to provide adequately for users inside Pueblo is a fact to be <br />determined by the Board in the exercise of its reasonable discretion from time to time as <br />occasion may require. <br />Page 3 of 7 <br />