William T. and Nicole L. Gladden - Page 10




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               On August 11, 1992, the Harquahala Valley landowners,                   
          including the partnership, held an election in which they                    
          approved relinquishment by HID of the Colorado River water rights            
          under the Subcontract.                                                       
               On December 1, 1992, a final agreement (Master Agreement)               

          was entered into between the Interior Department and HID for                 
          relinquishment or termination of HID’s water rights under the                
          Subcontract.  Thereunder, HID relinquished to the Interior                   
          Department its rights under the above 1983 water supply                      
          Subcontract to receive over the course of the next 40 or more                
          years Colorado River water, and the Interior Department agreed to            
          discharge HID's debt to the Federal Government in relation to the            
          construction of the local water distribution system and to pay               
          HID $28.7 million.                                                           
               The Master Agreement acknowledged that the terms and                    
          conditions under which HID relinquished its Colorado River water             
          rights were approved by the Harquahala Valley landowners.                    
               The Master Agreement provided that, in entering into the                
          agreement, HID was acting in its capacity as a municipal                     
          corporation of the State of Arizona and that there existed no                
          third-party beneficiaries to the Agreement.                                  
               Under the July 17, 1992, notice to the landowners and under             
          the Master Agreement, landowners who did not agree to                        
          relinquishment of their water rights had the option to continue              
          to receive Colorado River water under the 1983 Subcontract.                  



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