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503635 B-607 P-553 04128193 13:4V'C"Y& 28 OF. 99 <br />and <br />(c) The Company has been formed as provided herein; <br />(d) The parties have entered into a mutually <br />acceptable EPR Operating Agreement. <br />3.7 Storage Conversion Option. <br />(a) VA shall have the option to convert all its <br />right, title and interest in and to the Chalk Mountain Storage <br />and the Buffehr's Storage for an equivalent amount of storage <br />in Eagle Park Reservoir (the "Storage Conversion Option") for <br />no additional charge and Climax hereby grants to VA the <br />Storage Conversion Option. The Storage conversion option may <br />be exercised only in the event that all of the following <br />occur: <br />(i) the EPR Firm Annual Yield in Eagle Park <br />Reservoir is less than (A) 500 acre feet; plus (B) an amount of <br />water necessary to satisfy any and all increments of the 600 AF <br />Option exercised and/or-not yet waived; <br />(ii) VA has not exercised the VA Conversion Option; <br />and <br />(iii) the conditions have not been met for the <br />provisional exercise of the the Climax Conversion Option <br />pursuant to Section 3.6. <br />(b) Upon exercise of the Storage Conversion Option, <br />VA shall take storage in Eagle Park Reservoir subject to any <br />Climax contingencies that have not been satisfied. <br />(c) The term of the Storage Conversion option shall <br />be equal to the term of the 600 AF Option. VA may elect to <br />exercise the Storage Conversion Option by delivery of written <br />notice to Climax of its election to so exercise. Within <br />30 days of such notice, VA.shall reconvey to Climax by special <br />warranty deed all its right, title and interest in and to the <br />Chalk Mountain Storage and Buffehr's Storage, free and clear <br />of any liens and encumbrances created by, through or under VA, <br />and Climax shall convey to VA by special warranty deed 250 <br />acre feet of storage in Eagle Park Reservoir. <br />(d) Upon exercise of the Storage conversion-option, <br />delivery of the AW Priority Water shall be governed by the <br />terms of an EPR Operating Agreement entered into by VA and <br />Climax as described in Section 3.4(b). <br />FKPD:b09 -20- <br />0 <br />r f. <br />.w <br />• <br />•