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tax. The Company may petition the City to exempt or reduce the franchise fee applicable to customers who bypass or pose an imminent threat of physically bypassing the Company's distribution system for economic reasons, including the existence of the franchise fee. The City shall not unreasonably withhold such exemption or reduction in franchise fees for such customers. 6.3 Calculation of Fee. The City may impose the franchise fee: (i) as a combination of percentage of gross revenues received from customers in the Residential Customer Class for its utility operations within the City or as a flat meter fee per customer, for customers in non-residential customer classes ("Combination Fee Method"), or(ii) as a flat meter fee per customer within the City("Flat Fee Method"), or(iii)as a fee based on units of gas delivered to any class of retail customers within the corporate limits of the City("Unit Fee Method"). The method of imposing the franchise fee: the percent of revenue rate, the flat rate and the per unit rate may differ for each customer class. If prior to the expiration of this franchise, customers in the Company's Residential Customer Class begin to purchase and/or transport gas from companies other than the Company, the City may only impose the Flat Fee Method or the Unit Fee Method, as a way of collecting fees. If the percentage of Combination Fee Method has previously been implemented, it must be changed to the Flat Fee Method or the Unit Fee Method. 6.4 Collection of the Fee. The franchise fee will be payable not less often than quarterly and based on any of the alternative formulas described in Section 6.3 during complete billing months of the period for which payment is to be made. The franchise fee formula may be changed by ordinance from time to time; however, each change must meet the same notice requirements and may not be made more often than annually. Such fee shall not exceed any amount that the Company may legally charge to its customers prior to payment to the City. Such fee is subject to subsequent reductions to account for uncollectibles and customer refunds incurred by the Company. The Company agrees to make available for inspection by the City at reasonable times all records necessary to audit the Company's determination of the franchise fee payments. SECTION 7. LIMITATION ON APPLICABILITY; NO WAIVER. This Ordinance constitutes a franchise agreement between the City and its successors and the Company and its successors and permitted assigns, as the only parties. No provision of this franchise shall in any way inure to the benefit of any third person (including the public at large) so as to constitute any such person as a third party beneficiary of the agreement or of any one or more of the terms hereof, or otherwise give rise to any cause of action in any person not a party hereto. This franchise agreement shall not be interpreted to constitute a waiver by the City of any of its defenses of immunity or limitations on liability under Minnesota Statutes, Chapter 466. SECTION 8. AMENDMENT PROCEDURE. Either party to this franchise agreement may at any time propose that the agreement be amended. This Ordinance may be amended at any time by the City passing a subsequent ordinance declaring the provisions of the amendment, which amendatory ordinance shall become WS-17809602 12 5 SH155-77