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0 the audit fees described below,with a remaining balance of at least$2.000.000. "Unamortized Balance"shall mean the unamortized or undepreciated cost to the Collector and CARL as of June 30.2018.of equipment(as shown on Attachment A)used under the Current Collection Agreement that was purchased prior to March 31.2017.as determined in accordance with the Current Collection Agreement based on records prepared according to GAAP(which will be$1,171.302). 2. The Reserve will be determined,as follows: a. Not later than January I.2019.Collector shall submit to City its proposed calculation of the Reserve along with its audited financial statement for the year ending June 30. 2018. b. Within 60 days of receipt,City shall review Collector's proposed calculation for compliance with this Agreement,consistency with the audited financial statement as well as Collector's corresponding books of account.and mathematical accuracy. c. Following City's review of Collector's proposed calculation.City and Collector shall meet for a period of up to 60 days to discuss any exceptions taken to the Collector's proposed calculations. d. The agreed upon calculations(or if no agreement is reached the City stairs recommended calculations)shall be submitted to City Council for approval. e. City Council shall act upon the submitted calculations within a period of90 days following City Council receipt thereof. Prior to taking action on the request.at least one(I)noticed public hearing shall be held upon the calculations. 3. The Reserve will be applied,as follows: a. First, as a credit to the Deficit: b. Second. if any Reserve remains following step a,as a credit to the Unamortized Balance: c. Third. if any Reserve remains following steps a and b.to Collector to reimburse it for the special short period audit costs for Collector and CART tinder Section 2 above: d. Fourth.if any Reserve remains following steps a. b and c: i. Up to$2.000.000. the entire remaining amount shall be transferred by the Collector to the City. ii. Following steps a.b.c and d.i.. if any Reserve remains.then 50%of the remainder shall be transferred by the Collector to the City.and 50%shall be shared with the Collector up to a maximum share to the Collector of $130.1.5. For example: If following step c there remains$2.130,000.the City shall receive $2,065.000 and the Collector shall receive$65.000:or.if $2.300.000 remains,then the City shall receive$2.1 70.000 and the Collector shall receive$130,145. e. It is the intent of the City to: i. First,to the extent sufficient for such purpose.apply from the Reserve an amount equal to 0.5%of the sum of the actual Gross Rate Revenues and Transfer Station Revenues each rate year to supplement the 3.5% franchise fees required under the New Collection Agreement:and,if any Reserve remains. ii. To mitigate future rate increases under the New Collection Agreement. Page 2 of 3