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CMC000776 <br />503635 B-607 P-553 04128193 13:44 PG 26 OF 99 <br /> (e) EPR Conversion option Exercise and Closing. <br /> VA or Climax may elect to exercise its respective EPR <br /> Conversion option by delivery of written notice to the other <br /> party of its election to exercise its EPR Conversion option. <br />`i Within 30 days of receipt of such notice of election to <br /> exercise, Climax shall transfer and convey to VA Shares in the <br />1. Company representing 500 acre feet of EPR Firm Annual Yield in <br /> Eagle Park Reservoir. Such Shares shall be free and clear of <br /> all liens, encumbrances, leases, contracts, assessments, <br /> charges or interests. Contemporaneously, VA shall convey to <br /> Climax by special warranty deed the AW Water Rights, free and <br /> clear of all liens, encumbrances, leases, contracts, <br /> assessments, charges or interest created by, through or under <br />i VA; whereupon, VA shall have no further obligation to pay the <br /> delivery charges and delivery facilities assessments set forth <br /> in Sections 2.7 and 2.8, and VA shall have no further.rights, <br /> obligations, or liabilities associated with the AW Water <br /> Rights. <br /> 3.5 600 AF Option. Climax hereby grants to VA the <br /> additional option to purchase Shares of the Company <br /> representing 600 acre feet of additional EPR Firm Annual Yield <br /> in Eagle Park Reservoir (the 11600 AF Option"). <br /> (a) Term. The term of the 600 AF Option shall be <br /> three years commencing upon the later of (i) exercise or <br /> expiration of the EPR Conversion options; or (ii) four years <br /> from the date of the Closing on the AW Water Rights. <br />(b) Increments. The 600 AF Option shall consist of <br />three 200 acre feet increments. VA must exercise or waive a <br />200 acre feet increment in each year of the term of the 600 AF <br />Option; provided, however, that VA may nevertheless elect to <br />exercise any non-waived increment(s) before the exercise of <br />such increment(s) is due. An increment shall be exercised by <br />payment of $1,200,000 per 200 acre feet of EPR Firm Annual <br />Yield. Such payment shall be made on or before the last day <br />of each year of the term of the 600 AF Option. <br />(c) increment Waiver. If VA fails to timely elect <br />to exercise any 200 acre feet increment, it shall have waived <br />N the right to exercise as to such 200 acre feet increment. The <br />waiver of any individual 200 acre foot increment shall not <br />', affect VA's ability to exercise any remaining 200 acre.f,eet <br />increments. <br />(d) CPI Adjustment. The 600 AF Option price or any <br />portion thereof shall be adjusted annually by an amount equal <br />to the increase, if any, in the average CPI for the <br />FM:b09 -18- <br /> <br />r? <br />• <br />•