FRGC Investment, LLC, James P. Mehen, Tax Matters Partner - Page 5




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               The 1996 purchase agreement contained several contingencies,           
          including approval by the Coconino County Board of Supervisors              
          (Coconino County Board) for final plat and zoning.  The agreement           
          also provided that, if the buyer failed to close escrow for any             
          reason, the buyer agreed to provide the seller with copies of any           
          and all plans, engineering, plats, studies, surveys, and the                
          like, if requested by the seller.                                           
               Petitioner presented a general development plan report (1997           
          plan) for the property to the Coconino County Board in August               
          1997.  The 1997 plan was a complete zoning change from the zoning           
          approved in the 1983 minutes.  Petitioner planned to present the            
          zoning request for the property to the Coconino County Board at a           
          November 17, 1997, board hearing.  Several weeks prior to the               
          scheduled board hearing, Walker met with Paul Babbitt (Babbitt),            
          head of the Coconino County Board.  Babbitt indicated that he               
          would oppose the zoning request as a result of a groundswell of             
          protest from the community against development of 260 acres of              
          dry lake area within the subject property.  On November 17, 1997,           
          petitioner met with Babbitt, another county supervisor, and a               
          county attorney before the hearing was to begin.  Petitioner was            
          told “in no uncertain terms” that the zoning request did not have           
          the votes to pass.  Petitioner immediately requested an extension           
          of the December 31, 1997, escrow deadline from Walker, who                  
          rejected the extension because the property had been “tied up”              






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