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2.1.12 Specific Costs means construction costs for items constructed by the United
States as a part of or in connection with the construction of the Animas -La Plata Project that benefit
the ALPD Depletion Allocation alone, as described in Paragraph 8 of the Funding Agreement. The
Specific Costs include $582,400.00 of Prepaid Specific Costs, and may also include additional
Specific Costs as a portion of the Additional Repayment Obligation.
2.1.13 Up front Payment Obligation means the Up -Front Payment Obligation
defined in Paragraph 8 of the Funding Agreement, which has been satisfied, pursuant to Paragraph
8(a) of the Funding Agreement, by the escrow of the sum of $7,256,750.00.
2.1.14 Water Charge means the
ALPD Depletion Allocation optioned herein.
Agreement and comprises a base water charge
paragraph 2.4 of the Marketing Agreement.
2.2 Option.
Water Charge to be paid for that portion of the
The Water Charge is defined in the Marketing
and an additional water charge as set forth in
2.2.1 Grant of Option. For and in consideration of the option payment set forth in
paragraph 2.2.2 hereof, and effective upon approval of this Agreement by the United States in
accordance with paragraph 14(a) of the Funding Agreement, the Authority hereby grants to Purchaser
an exclusive option to acquire a partial assignment of the Authority's rights and obligations pursuant
to the Funding Agreement corresponding to 1,900 acre feet of average annual municipal and
industrial depletions out of the ALPD Depletion Allocation. The 1,900 acre feet of ALPD Depletion
Allocation optioned herein shall correlate to an annual Project water supply of 3,800 acre feet for
municipal and industrial use, which may be supplied by a combination of water diverted directly
from the natural flow of the Animas River and water released from storage in Lake Nighthorse
(previously known as Ridges Basin Reservoir). The depletion allocation herein shall permit the use
of up to 2,133 acre feet of the storage allocation of 2,919 acre feet attributable to the ALPD
Depletion Allocation to supplement direct diversions to satisfy the annual Project water supply of
3,800 acre feet optioned herein.
2.2.2 Option Payment.
2.2.2.1 The initial option payment for the option granted herein is
$1,051,175, to be paid to the Authority by the Purchaser within ten days of written approval hereof
by the United States. The initial option payment equates to the greater of (1) the total of (a) 5% of
the currently estimated Water Charge for the portion of the ALPD Depletion Allocation optioned
herein; plus (b) 5% of the Prepaid Specific Costs allocated to the portion of the ALPD Depletion
Allocation optioned herein; plus (c) 5% of the current additional cost estimate for Special Items of
Specific Costs allocated to the portion of the ALPD Depletion Allocation optioned; plus (d) 5% of
the current cost estimate for General Items of Specific Costs allocated to the portion of the ALPD
Depletion Allocation optioned herein; or (2) 100% of the currently estimated Special Items of
Specific Costs allocated to the portion of the ALPD Depletion Allocation optioned herein. The basis