William T. and Nicole L. Gladden - Page 11




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          Thus, if petitioners' partnership or if any of the other                     
          Harquahala Valley landowners had not agreed to relinquishment of             
          the water rights, HID could not have disposed of the water rights            
          relating to the land of the objecting landowners.                            
               Apparently, one Harquahala Valley landowner voted against               
          relinquishment of the water rights, but the record does not                  
          disclose the subsequent history of that landowner and its receipt            
          of Colorado River water.                                                     
               In late 1992, in exchange for relinquishment of its Colorado            
          River water rights, HID received $28.7 million from the Interior             
          Department.                                                                  
               On January 5, 1993, HID's board of directors met and                    
          authorized distribution of $24.6 million to the Harquahala Valley            
          landowners who had approved relinquishment of the water rights.              
          As part of the distribution that occurred, petitioners'                      
          partnership received $1,088,132.                                             
               Upon receipt of the above funds, each Harquahala Valley                 
          landowner entered into a distribution agreement and release                  
          (Distribution Agreement) with HID under which it was provided                
          that the landowners would return to HID any “relinquishment                  
          funds” they received if an error in payment occurred or if HID               
          incurred a liability necessitating the use of the funds.                     
               There is no express provision in the Distribution Agreement             
          indicating that the distribution occurred in exchange for any                
          right of the landowners in Colorado River water.                             




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