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SEC. 4. Mearican concession.—That in case said company shall decide or prefer to build its said canal partially in the Republic of Mexico, then it shall submit to the Secretary of the Interior satisfactory evidence that it has procured from the Republic of Mexico a franchise or concession for such privilege which in the judgment and opinion of said Secretary is satisfactory and sufficient for the purposes sought to be accomplished by this contract, otherwise construction of a portion of said canal through the Republic of Mexico shall be rejected, abandoned, and not further considered ; but said Secretary may nevertheless require said canal to be built entirely in the United States, notwithstanding any franchise or concession granted by the Republic of Mexico. SEC. 5. Action on report of survey.—That on receipt and consideration of the report or reports of said surveys, specifications, and estimates as hereinabove provided for, and of evidence of the procurance of said franchise or concession from the Republic of Mexico in case same shall be submitted, the Secretary of the Interior shall— (a) Require further or additional surveys, specifications, and estimates, or a changed or modified plan in whole or in part to be made and submitted, together with such other requirements as may by said Secretary be deemed necessary to insure the permanency and success of the enterprise, all within such time or times as said Secretary may prescribe, whereupon the plans, surveys, specifications, and estimates as so modified and amended may be rejected and disapproved or accepted and approved in their entirety, as provided in subdivisions (b) and (c) of this section ; or (b) Reject and disapprove of said surveys, specifications, and estimates in their entirety for any reason in his judgment deemed sufficient, in which case this contract shall be and become void and of no further force and effect whatsoever; or (c) Accept and approve same in their entirety as representing a practical and sufficient plan and scheme of works and reclamation for the purposes of this contract, in which event the company shall have the right to connect its said proposed irrigation system with the said Laguna Dam and to enlarge said main canal of the United States on compliance and in accordance with the terms and conditions of this contract. SEC. 6. Change of articles of incorporation and by-laws.--That prior to any acceptance or approval of the surveys, specifications, and estimates hereinabove provided for the company shall cause its articles of incorporation and by-laws to be so modified and amended, not inconsistent with the laws of the United States or of the State of California, as to conform with the requirements of the Secretary of the Interior, and no change shall be made in said articles of incorporation without the consent and approval of the Secretary of the Interior until after the payment to the United States of all sums provided to be paid under sections 10 and 12 of this contract. SEC. 7. Contracts for sale of stock to be approved by Secretary.—That pending the completion of all payments to be made to the United States hereunder, except for operation and maintenance as provided for in section 15 hereof, or pending the prior termination of this contract, the company shall not sell or otherwise dispose of any of its stock or rights to the use of water, except upon such terms and conditions as shall have been approved by the Secretary of the Interior. SEC. S. Sales of stock.-Sales of stock or rights to the use of water or contracts therefor by the company may be in amounts sufficient to furnish a water supply appurtenant to 160 acres of land and no more, to any one person, at a price not exceeding actual and necessary cost of constructing said irrigation system, and all such sales or contracts shall be subject to the conditions and limitations of section 2 of the act of February 21, 1911 (36 Stat., 925). SEc. 9. Escront deposit of first payments for stock.--That the first payments on account of the purchase of stock or water rights in said company pursuant to the terms hereof, shall be not less than $10 per irrigable acre of the land to be reclaimed by use of water thus procured, and the entire amount of such first payment shall be deposited in escrow in such national banks as the Secretary of the Interior may designate, not exceeding $300,000 in any one bank, to be later paid over to the company, its authorized officers and agents or returned to the purchasers of the stock, as hereinafter provided. SEC. 10. Requirements as to sales of stock or water rights.--That in case the company shall have sold or contracted to sell stock or water rights sufficient for the reclamation of 120,000 acres of said lands, and first payments on account of such sales shall have been made in escrow, as aforesaid, and applications of the purchasers of said stock or water rights to enter an equal or greater area of said lands have been approved, or are entitled to be approved by the Land Department of the United States, within 90 days from and including the day, on which said lands are opened to entry by order of the Secretary of the Interior, then and thereupon on the direction of the Secretary of the Interior, such escrow banks shall, out of such escrow deposits, pay over to the United States, to be covered into the Treasury to the credit of the Yuma project, pursuant to the provisions of the act of February 21, 1911 (36 Stat., 925), the sum of $200,000 to apply on the total amount to be paid by said company for the permanent and perpetual right to use said dam and diversion works and enlarged canal of the United States as in this contract provided, and the balance remaining, together with any accrued interest, of such funds deposited in escrow as aforesaid, shall be paid over to the company, its authorized officers and agents. - SEC. 11. Result of rejection of plans, specifications, and estimates or of insufficient sales of stock or water rights.--That in the event of the rejection by the Secretary of the Interior as provided in section 5 hereof, of the plans, Specifications, and estimates, or in case the stock or water rights sold and areas entered shall fail to equal the amounts specified in the last preceding paragraph within the time therein specified or such extension of time as the Secretary of the Interior may elect to grant, then and thereupon all of such deposits on account of the purchase of stock or of water rights, together with any accrued interest, shall, on the certificate of the Secretary of the Interior, be repaid by said escrow-holding banks to the respective purchasers of stock or water rights, or their successors in interest in law entitled thereto, whereupon this contract shall be and become terminated and of no further force or effect: Provided, That no extension of time by the Secretary of the Interior under this or the previous section shall extend to a date more than one year from the date of the order of the Secretary opening said lands to entry on a specified future date, as provided in section 10 hereof. SEC. 12. Cost of connection with the Laguna Dam.—That in case the conditions and payments provided for in section 10 hereof shall be complied with and made as therein provided, then the company shall pay to the United States for the credit of said Yuma project the further sum of $760,000, in six equal annual installments, the first installment thereof to be due within 2 years from the date of the payment provided for in section 10 hereof, the remaining installments to be paid within 3, 4, 5, 6, and 7 years from the date of said first payment, respectively, making a total of $960,000 to be paid to the United States to the credit of said Yuma project for the right to the perpetual use of said Laguna Dam, diversion works and enlarged canal as in this contract provided; and on the failure of the company to make any such payment at the time and in the amount specified, then and thereupon all or any payments theretofore made shall be and become forfeited to the United States to the credit of said Yuma project, as liquidated damages, and as further consideration for entering into this contract on the part of the United States, the said company hereby releases and relinquishes any and all claims whatsoever for said moneys or any portion thereof so forfeited and paid as liquidated damages as aforesaid: Provided, That the Secretary of the Interior may, in his discretion, extend the time for any such payment on the payment of 4 per cent interest in advance: Provided further, That said entire sum of $960,000 shall in any case be paid within 10 years from the date of said first payment; also, on failure to make such payment or payments within the time or extension thereof as herein specified, this contract may be canceled in its entirety by the Secretary of the Interior. SEC. 13. Construction.—That in the event said balance of said first payments for stock or water rights is paid to the company as provided in section 11, the company shall proceed at once with diligence to build, construct, and install such diversion works, canals, laterals, and other structures and equipment, all pursuant to and in strict accordance with such plans, surveys, specifications, and estimates of costs theretofore approved by the Secretary of the Interior as in this contract stipulated, and said company shall continue such construction operations to the completion of said works and appurtenant structures in their entirety with all reasonable diligence commensurate with the size and importance of the enterprise: Provided, That, in the judgment of the Secretary of the Interior, all or any part of such work of construction and installation as pertains to the connection with the Laguna Dam or the enlargement or modification of any existing works of the United States may be per

formed by the United States, in accordance with said surveys and specifications, at the expense of the company on advances of funds by the company to the United States from time to time as needed for that purpose. If any portion of the work of construction, installation, enlargement, or modification pertaining to the connection with the Laguna Dam or any other existing works of the United States shall be done by the Imperial Laguna Water Co., its successors or assigns, all such work shall be subject to the direction and supervision of the Secretary of the Interior.

SEC. 14. Supervision and inspection of construction.-That all work of construction and installation aforesaid, whether in modification or enlargement of existing works of the United States or otherwise, and materials used therein, shall be subject at all times to the inspection and approval of the Secretary of the Interior or his authorized agents and engineers, to the end that all of such works of construction shall conform strictly with said surveys and specifications, or such modification thereof as said Secretary may approve in writing; and in case of failure to construct any of said works in accordance with said surveys and specifications said Secretary may, at his option, replace such unsatisfactory construction work at the expense of the company, or stop said work of construction, or cancel this contract, or resort to any other lawful remedy, and the decision of the Secretary of the Interior as to whether or not said surveys and specifications or modifications thereof have been complied with shall be final and conclusive. It is further agreed that the company shall make complete and detailed fiscal and progress reports of all its business and operations to the Secretary of the Interior annually, or at such other times as required, and its books and records shall be open to inspection by the Secretary of the Interior or his authorized agents until such time as the project is completed.

SEC. 15. Operation and maintenance.—That subject to the provisions of the act of February 21, 1911 (36 Stat. 925), and the act of June 17, 1902 (32 Stat. 388), and supplementary or amendatory legislation by Congress, the United States shall have and retain perpetually the complete control, operation, and management of said dam, diversion works, and enlarged canal and appurtenant structures, and the company shall pay quarterly on demand to the United States, to the credit of said Yuma project, its proportionate share of the cost of operation and maintenance of said dam, diversion works, and enlarged canal for the preceding quarter, such payment by the company to consist of such proportion of the total cost of such operation and maintenance as the amount of water carried by the company bears to the total amount of water carried in said main canal at the point of delivery to the company's canal, and no greater charge shall be made by the company to its customers or water users for the service thus rendered by the United States than the amounts thus paid to the United States: Provided, That in the event of the failure of the company to pay all operation and maintenance charges as they shall become due to the United States, the Secretary of the Interior, in addition to any other remedy which may be available to him for recovery of such charges, is hereby authorized to shut off the water from the intake of said company until such time as all sums due have been paid, with interest thereon at the rate of 7 per cent per annum.

SEC. 16. Title to diversion works. That the title to, and ownership of, said dam, diversion works and enlarged canal and appurtenant structures, shall be and remain in the United States, subject, however, to the provisions of the act of February 21, 1911 (36 Stat. 925), and the act of June 17, 1902 (32 Stat. 388), and supplementary and amendatory legislation by Congress.

SEC. 17. Priority of water rights. That the company hereby acknowledges, admits, and concedes the prior and superior right of the United States to the waters of the Colorado River for the full and perpetual irrigation and reclamation of all lands under and irrigated from said Laguna Dam on project constructed by the United States, either in California or Arizona, which can be irrigated under structures and works now constructed and in operation, or which may be constructed and put into operation within 10 years from the date hereof, and in operating said Laguna Dam and diversion works the United States shall be required to deliver to the company only such water as may be available in excess of the requirements of the United States, as aforesaid, of which the United States, its authorized officers and agents shall be the sole judge, as long as the United States shall remain in control of said dam and diversion works. And furthermore, the United States, its officers and agents, make no guaranty or representations whatsoever as to the quantity of water

that may be available, without storage, for delivery to the company or that such amount will be sufficient for the irrigation and reclamation of the lands under the company's project, or any part thereof, and the company undertakes and agrees to so advise the public in all water stock or contracts issued by it. It is further agreed and mutually understood that nothing herein contained shall be construed as affecting, or intending to affect, the right of third parties under lawful existing appropriations of water for irrigation purposes, or as applicable to any irrigation project south of the international boundary line between the Unted States and Mexico.

SEC. 18. Assignment of contract.—This contract shall be assigned or transferred only with the approval of the Secretary of the Interior.

SEC. 19. Forfeitures and uairers.—That in addition to the particular penalties or liquidate damages in this contract described, the Secretary of the Interior shall have the right, upon due hearing, to cancel and terminate this contract at any time for failure of the company or its successors to comply with any of its conditions or provisions, notwithstanding no specific penalty is attached to such provision, and in addition the penalties or damages in this contract prescribed shall not be exclusive, the Secretary of the Interior may resort to all legal remedies for the enforcement of this contract; and it is further agreed and understood that a waiver of any condition or modification hereof by the United States shall not be construed as a modification of the contract except to the extent of the particular waiver or modificaion.

SEC. 20. Inhibition on Government officers.—No Member or Delegate to Congress, or Resident Commissioner, after his election or appointment or either before or after he has qualified and during his continuance in office, shall be admitted to any share or part of this contract or agreement, or to any benefit to arise thereupon. Nothing, however, herein contained shall be construed to extend to any incorporated company where such contract or agreement is made for the general benefit of such incorporation or company, as provided in section 116 of the act of Congress approved March 4, 1909 (35 Stat., 1109).

In witness whereof the parties hereto have caused the execution of these presents as of the day and year first above written, the Secretary of the Interior acting for and in behalf of the United States and the Imperial Laguna Water Co., a corporation, by its proper officers theretofore duly authorized by resolution of its board of directors.

FRANKLIN K. LANE, Secretary of the Interior.

MARK, ROSE,

For the Imperial Laguna Water Co. Mr. Gates. Now, the Secretary in effect adopted course A. He required further and additional surveys to be made, as will appear from the letter addressed to Mr. Mark Rose, president Imperial Laguna Water Co., April 16, 1918, which will later be placed in the record, but not by us. While we were making our survey the Secretary of the Interior negotiated a contract with the Imperial irrigation district-

The CHAIRMAN (interposing). The Secretary did? Mr. GATES. Yes, sir; for another survey of a canal of much larger capacity than that provided for in the Rose contract and extending on to connect with the Imperial irrigation district. In the first draft of the proposed contract submitted by the Secretary of the Interior to the Imperial irrigation district for approval and ratification it was stated in paragraph 9 thereof that “It is understood and agreed that this contract is subject to a certain other contract between the United States and the Imperial Laguna Water Co., dated July 6, 1917.” In January, 1918, we filed the report of our engineers, together with maps, plans, specifications, and estimates of cost. They were made by Mr. Charles G. Frisbie, chief engineer of Imperial Laguna Water Co.; Mr. C. S. Alverson, hydraulic consulting engineer and for many years city engineer of the city of San

Diego, Calif.; and Mr. James W. Reagan, consulting engineer and chief engineer of the Los Angeles County Board of Flood Control. Mr. SMITH of Idaho. I didn't understand whether the Secretary approved this contract. Mr. GATEs. Well, I will show you that in just a moment, Mr. Smith. On July 6, 1917, the Secretary of the Interior transmitted the approved contract to Mr. Rose accompanied by a letter reading as follows: DEPARTMENT OF THE INTERIOR, Washington, July 6, 1917. DEAR MR. Rose: Referring to application for canal from Laguna Dam for irrigation of lands in southern California, adjacent to or near the present irrigated areas in Imperial Valley, I have approved and transmit herewith form of contract providing for surveys and investigations and for the carrying forward of the plan if found feasible. Cordially, yours, FRANKLIN K. LANE. Mr. MARK Rose, Representing Imperial Laguna Water Co., Washington, D. C.

Mr. LITTLE. May I ask you a question right there? How much land is there in that corner you have set off up there? Mr. GATEs. You mean that yellow portion I just showed you? The CHAIRMAN. One township, isn't it? Mr. GATEs. It is, I should say, an irrigable area of about 23,000 aCreS. Mr. Rose. It is approximately 30,000 acres, but there are approximately 23,000 acres of that that are reasonably irrigable lands. It will probably all be irrigable, but it would cost in the neighborhood of $200 an acre to level quite a little of it. Mr. LITTLE. And you want that under your contract? Mr. Rose. Our people went into this with the idea of acquiring a little piece of land. There were lots of people who put up money to back this proposition whose sons have grown up since Imperial Valley was settled and who wish to obtain some of this land. Mr. LITTLE. I understand you waive the rest of the contract? Mr. GATES. Yes, sir; if our offer is accepted; but only as to the area embraced in the contract. We would then irrigate about onetenth of the lands embraced in the contract instead of all of it. Mr. LITTLE. You claim you have some sort of a lien upon the rest of it? Mr. GATES. Yes—well, not a lien on the land, but an agreement as to the disposition of the land. Mr. SINNOTT. You don’t want that subject to the farm unit? Mr. GATEs. No, sir. Mr. SMITH of Idaho. Now, what has Mr. Rose done since, during the two years? Mr. GATEs. Since 1918, following out the suggestion contained in Mr. Bradley’s letter of April 18, 1918, suggesting that all parties get together, Mr. Rose has endeavored to cooperate with all the interests involved; and to that end a proposition was made to the board of directors of the Imperial irrigation district February 21. 1918, as follows: Upon condition that the Imperial irrigation district will, within six months

from date and execution of written agreement to be entered into in accordance with this offer, commence and diligently pursue to completion the work of

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