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and Regulations of the Water Company previously on file with the Public Service Commission of the State of Nevada. (b) Except as hereinafter stated, the cost, determined as hereinafter provided, less the depreciation accrued thereon as of September 1, 1952, of any property mentioned in subpara­graphs (b), (d), (e), (f) and (g) of Section 1 hereof which was retired subsequent to September 1, 1952, and prior to the sale date. In the case of such property owned either by the Water Company or the Railroad Companies on September 1, 1952, said cost is to be determined by using the book cost of such property and depreciation thereon as recorded in said above mentioned books of account. Notwithstanding the provisions of this subparagraph (b) no deduction shall be made from the basic purchase price by reason of the retirement of any property removed or retired pursuant to the provisions of Section 5 of this agreement. (c) If the ledger value on the sale date of the automotive equipment, shop equipment and materials and supplies transferred to the District by the Water Company on the sale date is less than the ledger value of such property owned by the Water Company on September 1, 1952, as stated in said Section 1 (h) hereof, the difference shall be deducted from the basic purchase price. (d) All advance payments for water service credited to Account 261—Miscellaneous Unadjusted Credits of the Water Company upon the sale date for water service to be thereafter performed, and the District hereby agrees, effective on the sale date, to credit all customers with the amounts of all unused portions of said advances for water service made by such customers and credited to said account as of the sale date. (e) That portion of any sums of money deposited with the Water Company as advances for the construction by the Water Company of water mains under contracts made pursuant to Rule 9 of its said Rules and Regulations which the Water Company has not expended upon the sale date for the purposes stated in said contracts. Said unexpended sums of money shall be retained by the Water Company on and after the sale date. Section 11. It is understood that the Water Company has outstanding contracts with certain subdividers or applicants for water service made pursuant to Rule 9 of its said Rules and Regulations under which such subdividers or applicants (a) have deposited sums of money with Water Company as advances for the construction by the Water Company of certain water mains, or (b) have at their own expense constructed and conveyed to the Water Company certain water mains to Serve properties developed or being developed by such subdividers or applicants subject to refund of the cost pursuant to the Rules and Regulations of the Water Company on file with the Public Service Commission of the State of Nevada. Water Company hereby assigns to the District, effective on the sale date, all such contracts which upon said date are still wholly or partially unperformed, and the District hereby agrees, effective as of the sale date, to assume all liabilities, including liability for further refunds under said contracts, and to indemnify and save harmless the Water Company from any liability for refunds under said contracts subsequent to the sale date. The District hereby agrees to assume, effective as of the sale date, all liability under said contracts with respect to any unexpended portions in the possession of the Water Company upon the sale date of sums of money deposited with the Water Company under such contracts as advances for the construction of water mains. 2 A PPEN D IX E IiEO A. MCNAMBE J ohn h . MoNamee M c N a m e e & M c N a m e e A T T O R N E Y S A T LA W Eli PORTAL BTJXIiDING L A S V E G A S , N EV A D A March 19, 1954 P . O . B O X 4 7 2 P H O N E 1 8 8 8 Las Vegas Valley Water District 900 South Fifth Street Las Vegas, Nevada Attention: Mr. Thomas A. Campbell, President Dear Sir: R e: Existing Water and Water Rights. Pursuant to the agreement dated June 1, 1953, between Los Angeles & Salt Lake Railroad Company, Union Pacific Railroad Company and Las Vegas Land and Water' Company (“First Parties”), and Las Vegas Valley Water District (“District”), the District is purchasing certain land belonging to First Parties and all of the water and rights to any water rising upon or flowing from any of the springs or wells located upon said land. Upon this land are located what has for years been called the Las Vegas Springs, from which the Town (now City) of Las Vegas derived its municipal supply of water. Originally the water from these springs was used to irrigate what was known as the Stewart Ranch. This ranch, and the land you are purchasing from First Parties and all of the waters and water rights pertaining thereto were purchased by First Parties from the Stewarts prior to 1905, and as there was no comprehensive water law in the State of Nevada until the year 1905, the right to waters appropriated and used beneficially prior to said year are vested rights. The First Parties’ rights to the waters from Las Vegas Springs have never been questioned, and it is my opinion that said rights are unassailable. (The Stewarts reserved a continuous flow of four miners inches for the purpose of irrigating what is known as the “Stewart Burial Plot,” a four acre tract, and this supply is now furnished by pipe lines.) About 1923 the First Parties realized that steps would have to be taken to increase the supply of water in order to keep up with the increase in population in said area, and First Parties decided to drill for water upon their lands located in the vicinity of said springs. Well No. 1, a 12 inch well, was drilled to a depth of six or seven hundred feet, and resulted in tapping an artesian flow which produced a flow of over six cubic feet of water per second. Three separate applications were made to the State Engineer of the State of Nevada for permission to appropriate said water: One by Las Vegas Land and Water Company for 2.30 c.f.s. thereof for municipal supply and one by said Water Company for 1.88 c.f.s, thereof for irrigation purposes; the third, for 2.5. c.f.s. thereof by the Los Angeles & Salt Lake Railroad Company for railroad purposes, fire protection and domestic. Permits were issued on said applications and all of the conditions of said permits complied with and there now appears of record in the office of the County Recorder of Clark County, Nevada, certificates of appropriation issued by the State Engineer of the State of Nevada certifying that the applicants have appropriated and have applied to a beneficial use the amounts of water specified, and that the date of the priority of each said appropriation is August 23, 1924. The application by the Land and Water -Company for municipal purpose and its application for irrigation purposes recited that they were to be concurrent, the reason being that more water was developed than could- be used for ? municipal purposes at the time and in order to prevent wastage the excess was used to irrigate the Stewart Ranch, but with the understanding that as the municipal demands increased the applicant would use the irrigation water for municipal supply, even to the extent of depriving the Stewart Ranch of irrigation water. 1