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CM0000779 <br />503635 B-607'P-553 04128193 13:44 PG 29 OF 99 <br />f 54 <br />r? <br />U <br />3.8 Enlargement Option. <br />(a) Grant and General Terms.' In the event that Eagle <br />Park Reservoir is at anytime enlarged to a storage capacity in <br />excess of its 'current capacity of approximately 3,000 acre <br />feet, VA shall have, and Climax hereby grants to VA, the right <br />=) to exercise the further option to•purchase Shares representing <br />(i) the first 500 acre feet of increased EPR Firm Annual Yield <br />plus 50% of any additional EPR Firm Annual Yield resulting <br />from such enlargement of Eagle Park Reservoir for a total of <br />up to an additional 1,000 acre feet of EPR Firm Annual Yield <br />(the "Enlargement Option").. The Enlargement option as to an <br />additional 1000 acre feet of EPR Firm Annual Yield is in <br />addition to the 1100 acre feet of EPR Firm Annual Yield <br />available under the EPR Conversion Options and the 600 AF <br />Option. <br />(b) Term. The <br />of five years commencing <br />expiration of the final <br />(ii) the completion of a <br />Reservoir. <br />Enlargement Option shall have a term <br /> <br />upon the later of (i) the exercise or <br />increment of the 600 AF Option; or <br />ny such enlargement of Eagle Park <br />-' (c) Increments. The Enlargement Option shall <br />consist of up to five 200 acre feet increments. VA must <br />exercise or waive a 200 acre feet increment in each year of <br />the term of the Enlargement Option; provided, however, that VA <br />may nevertheless elect to exercise any non-waived increment(s) <br />before the exercise of such increment(s) is due. An increment <br />shall be exercised by payment of $1,200,000 million per 200 <br />acre feet of EPR Firm Annual Yield. Such payment shall be <br />made on or before the last day of each year of the term of the <br />I Enlargement option. <br />(d) Increment Waiver: If VA fails to timely elect <br />to exercise any-200 acre feet increment, it shall have waived <br />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 foot <br />increments. <br />(e) CPI Adjustment. The Enlargement Option price or <br />any portions thereof shall be adjusted by an annual <br />calculation equal to the CPI as described in Section 3.5(d) <br />above. The Enlargement Option CPI adjustment shall commence <br />from the later of the exercise or expiration of the EPR <br />Conversion options. <br />FUD:h09 -21-