1998-141-RES WHEREAS, CITY COUNCIL DID HERETOFORE ONTHE 8TH DAY OF JUNE eretofore, on the 8th day of June,

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Cost of Service = BDA + Operations Fee where BDA is the Base Delivery Amount used by the Plant, and in essence, is the cost of delivery of Raw Water by the City to the Plant, as more specifically detailed in Schedule 5. Operations Fee is the general fee charged by the City to provide Raw Water service hereby, and is equal to ten percent (10%) ofthe BDA on an annualized basis. For monthly billing purposes pursuant to Section 7.02, the BDA and the Operation Fee for any fiscal year shall be estimated based on the annual operating budget of the City prepared in regard to such fiscal year and invoiced on a monthly basis according to use. The City shall provide such estimated amounts and shall provide Panda the opportunity to comment thereon to applicable City officials, as soon as practicable after the adoption thereof. Promptly after any such fiscal year is completed and the annual audit of the City's operating budget is conducted, a final adjustment to increase or decrease the applicable Raw Water charges, as the case may be, shall be performed and agreed to between the Parties. Should a sum be due Panda, City shall credit Panda's account in the amount of the sum (to be fully and immediately applied against any amounts owed by Panda hereunder until such credit is exhausted). Should a sum be due the City, Panda shall make a payment to the City. At Panda's request, the sum may be paid out at no interest over a period of time not to exceed twelve (12) months. A lump sum payment shall be made in regard to the final year of this Agreement, as amended and extended. Section 7.02. Invoices. The City shall prepare and deliver a monthly invoice to Panda (an "Invoice"), which shall include charges for the Raw Water delivered (calculated pursuant to Section 7.01) during the previous month. Panda shall pay the amounts due pursuant to each Invoice in accordance with the payment instructions contained therein within thirty (30) days after receipt thereof. In regards to matters applicable to Section 6.02, such matters shall be addressed in accordance with Section 6.02. Panda shall notify the City of any other disputed amounts indicating the amount of the dispute and the basis therefor. In the event that the City agrees with Panda, it shall notify Panda and reflect the appropriate adjustments in the next Invoice delivered to Panda. Otherwise, the City shall give written notice to Panda of its disagreement with Panda regarding the disputed amount, stating the reasons therefor, within thirty (30) days after receipt of the notification of the disputed amount by Panda. If the Parties fail to reach an agreement with respect to such Invoice dispute within sixty (60) days after delivery of the City's notice to Panda, the provisions of Article XIII shall apply with respect thereto. Section 7.03. Minimum Payment. In the event Panda does not use an average of eight (8) million gallons per Day of Raw Water from the Source pursuant to this Agreement, during any fiscal year of the City and after the Commercial Operations Date, Panda shall owe a Minimum Payment (herein so called) to the City, payable within thirty (30) Days after receipt of a separate written invoice from the City in this regard equal to the following: the amounts derived from Items 6 and 9 under Base Delivery Amount in Schedule 5 which are attributable to the reservation of an average of eight (8) million gallons per Day of Raw Water (as described above) minus the amount calculated in such Items for purposes of determining the Base Delivery Amount under Schedule 5 (all such amounts in the formula immediately above shall use the procedure set forth in Item I of "Calculations" of Schedule 5 hereto). ARTICLE VIII ADDITIONAL OBLIGATIONS AND COVENANTS Section 8.01. Insurance. (a) The City agrees to maintain insurance applicable to its performance under this Agreement with the Texas Municipal League or any other appropriate and equivalent insurance carrier during the term of this Agreement. (b) During construction of the Pipeline, Panda agrees to maintain general liability insurance applicable to its performance under this Agreement with a reputable insurance company, including coverage for the protection and/or restoration of any damage to the City's rights-of-way. Section 8.02. Approvals: Assistance. The City agrees to acquire and maintain in full force and effect throughout the Term all Approvals necessary for it to fulfill its obligations hereunder and to comply with all Regulatory Requirements in its performance of its obligations hereunder. The City agrees to secure all modifications -6- G:\A TTORNEY\Scott\Current Work\water agr - finaLdoc6