Document:

<PAGE>   1
                                                                   EXHIBIT 10.20

                                                              CAWCD Revised 5/84

                                                      Contract No. 5-07-30-W0067

                                 UNITED STATES
                           DEPARTMENT OF THE INTERIOR
                             BUREAU OF RECLAMATION

                      SUBCONTRACT AMONG THE UNITED STATES,
                THE CENTRAL ARIZONA WATER CONSERVATION DISTRICT,
                      AND THE CHAPARRAL CITY WATER COMPANY
                          PROVIDING FOR WATER SERVICE

                            CENTRAL ARIZONA PROJECT

                               Table of Contents
<TABLE>
<CAPTION>
Article                       Title                    Page
-------                       -----                    ----
<S>       <C>                                           <C>
1.        PREAMBLE.....................................  1

2.        EXPLANATORY RECITALS.........................  2

3.        DEFINITIONS..................................  3

4.        DELIVERY OF WATER............................  3

     .1    Obligations of the United States............  3
     .2    Term of Subcontract.........................  4
     .3    Conditions Relating to Delivery and Use.....  4
     .4    Procedure for Ordering Water................  7
     .5    Points of Delivery--Measurement and
           Responsibility for Distribution of Water.... 10
     .6    Temporary Reductions........................ 11
     .7    Priority in Case of Shortage................ 12
     .8    Secretarial Control of Return Flow.......... 13
     .9    Water and Air Pollution Control............. 15
     .10   Quality of Water............................ 15
     .11   Exchange Water.............................. 15
     .12   Entitlement to Project M&I Water............ 16
     .13   Delivery of Project Water Prior
           to Completion of Project Works.............. 17

5.        PAYMENTS..................................... 16

     .1    Water Service Charges for Payment
           of Operation, Maintenance, and Replacement
           Costs....................................... 17
</TABLE>
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     .2   M&I Water Service Charges......................   19
     .3   Loss of Entitlement............................   22
     .4   Refusal to Accept Delivery.....................   22
     .5   Charge for Late Payments.......................   22

6.      GENERAL PROVISIONS...............................   23

     .1   Repayment Contract Controlling.................   23
     .2   Effluent Exchanges.............................   23
     .3   Notices........................................   24
     .4   Water Conservation Program.....................   24
     .5   Rules, Regulations, and Determinations.........   25
     .6   Officials Not to Benefit.......................   25
     .7   Assignment Limited -- Successors and Assigns
          Obligated......................................   26
     .8   Judicial Remedies Not Foreclosed...............   26
     .9   Books, Records, and Reports....................   26
     .10  Equal Opportunity..............................   26
     .11  Title VI, Civil Rights Act of 1964.............   28
     .12  Confirmation of Subcontract....................   28
     .13  Contingent on Appropriation or
          Allotment of Funds.............................   29
     .14  Addendum A.....................................   29

          Signatory Page.................................   29

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                                                              CAWCD Revised 5/84

                                                     Contract No. 5-07-30-W0067

                                 UNITED STATES
                           DEPARTMENT OF THE INTERIOR
                             BUREAU OF RECLAMATION

                      SUBCONTRACT AMONG THE UNITED STATES,
                THE CENTRAL ARIZONA WATER CONSERVATION DISTRICT,
                      AND THE CHAPARRAL CITY WATER COMPANY
                          PROVIDING FOR WATER SERVICE

                            CENTRAL ARIZONA PROJECT

     1.   PREAMBLE:
          THIS SUBCONTRACT, made this 6th day of December, 1984, in pursuance
generally of the Act of June 17, 1902 (32 Stat. 388), and acts amendatory
thereof or supplementary thereto, including but not limited to the Boulder
Canyon Project Act of December 21, 1928 (45 Stat. 1057), as amended, the
Reclamation Project Act of August 4, 1939 (53 Stat. 1187), as amended, the
Reclamation Reform Act of October 12, 1982 (96 Stat. 1263), and particularly
the Colorado River Basin Project Act of September 30, 1968 (82 Stat. 885), as
amended, all collectively hereinafter referred to as the "Federal Reclamation
Laws," among the UNITED STATES OF AMERICA, hereinafter referred to as the
"United States" acting through the Secretary of the Interior, the CENTRAL
ARIZONA WATER CONSERVATION DISTRICT, hereinafter referred to as the
"Contractor," a water conservation district organized under the laws of
Arizona, with its principal place of business in Phoenix, Arizona, and the
CHAPARRAL CITY WATER COMPANY, hereinafter

<PAGE>   4
referred to as the "Subcontractor," with its principal place of business in
Fountain Hills, Arizona;

         WITNESSETH, THAT:

     2.  EXPLANATORY RECITALS:

         WHEREAS, the Colorado River Basin Project Act provides, among other
things, that for the purposes of furnishing irrigation and municipal and
industrial water supplies to water deficient areas of Arizona and western New
Mexico through direct diversion or exchange of water, control of floods,
conservation and development of fish and wildlife resources, enhancement of
recreation opportunities, and for other purposes, the Secretary of the Interior
shall construct, operate, and maintain the Central Arizona Project; and

         WHEREAS, pursuant to the provisions of Arizona Revised Statutes
Sections 45-2601 et seq., the Contractor has been organized with the power to
enter into a contract or contracts with the Secretary of the Interior to
accomplish the purposes of Arizona Revised Statutes, Sections 45-2601 et seq.;
and

         WHEREAS, pursuant to Section 304(b)(1) of the Colorado River Basin
Project Act, the Secretary of the Interior has determined that it is necessary
to effect repayment of the cost of constructing the Central Arizona Project
pursuant to a master contract and that the United States, together with the
Contractor, shall be a party to contracts that are in conformity with and
subsidiary to the master contract; and

         WHEREAS, the United States and the Contractor entered into Contract
No. 14-06-W-245 dated December 15, 1972, hereinafter referred to as the
"Repayment Contract," a copy of which is

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attached hereto as Exhibit "A" and by this reference made a part hereof,
whereby the Contractor agrees to repay to the United States the reimbursable
costs of the Central Arizona Project allocated to the Contractor; and

        WHEREAS, the Subcontractor is in need of a water supply and desires to
subcontract with the United States and the Contractor for water service from
water supplies available under the Central Arizona Project; and

        WHEREAS, upon completion of the Central Arizona Project, water shall be
available for delivery to the Subcontractor;

        NOW THEREFORE, in consideration of the mutual and dependent covenants
herein contained, it is agreed as follows:

     3. DEFINITIONS:

        Definitions included in the Repayment Contract are applicable to this
subcontract; Provided, however, That the terms "Agricultural Water" or
"Irrigation Water" shall mean water used for the purposes defined in the
Repayment Contract on tracts of land operated in units of more than 5 acres.
The first letters of terms so defined are capitalized herein. As heretofore
indicated, a copy of the Repayment Contract is attached as Exhibit "A."

     4. DELIVERY OF WATER:

        4.1  Obligations of the United States.  Subject to the terms,
conditions, and provisions set forth herein and in the Repayment Contract,
during such periods as it operates and maintains the Project Works, the United
States shall deliver Project Water for M&I use by the Subcontractor. The United

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States shall use all reasonable diligence to make available to the
Subcontractor the quantity of Project Water specified in the schedule submitted
by the Subcontractor in accordance with Article 4.4. After transfer of OM&R to
the Operating Agency, the United States shall make deliveries of Project Water
to the Operating Agency which shall make subsequent delivery to the
Subcontractor as provided herein.

        4.2  Term of Subcontract.  This subcontract shall become effective upon
its confirmation as provided for in Article 6.12 and shall remain in effect for
a period of 50 years beginning with the January 1 of the Year following that in
which the Secretary issues the Notice of Completion of the Water Supply System;
Provided, That this subcontract may be renewed upon written request by the
Subcontractor upon terms and conditions of renewal to be agreed upon not later
than 1 year prior to the expiration of this subcontract; and Provided, further,
That such terms and conditions shall be consistent with Article 9.9 of the
Repayment Contract.

        4.3  Conditions Relating to Delivery and Use.  Delivery and use of
water under this subcontract is conditioned on the following, and the
Subcontractor hereby agrees that:

             (a) All uses of Project Water and Return Flow shall be consistent
with Arizona water law unless such law is inconsistent with the Congressional
directives applicable to the Central Arizona Project.

             (b) The system or systems through which water for Agricultural,
M&I, and Miscellaneous (including ground water recharge) purposes is conveyed
after delivery to the

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Subcontractor shall consist of pipelines, canals, distribution systems, or
other conduits provided and maintained with linings adequate in the Contracting
Officer's judgment to prevent excessive conveyance losses.

             (c) The Subcontractor shall not pump, or within it legal
authority, permit others to pump ground water from within the exterior
boundaries of the Subcontractor's service area, which has been delineated on a
map filed with the Contractor and approved by the Contractor and the
Contracting Officer, for use outside of said service area unless such pumping
is permitted under Title 45, Chapter 2, Arizona Revised Statutes, as it may be
amended from time to time, and the Contracting Officer, the Contractor, and the
Subcontractor shall agree, or shall have previously agreed, that a surplus of
ground water exists and drainage is or was required; Provided, however, That
such pumping may be approved by the Contracting Officer and the Contractor, and
approval shall not be unreasonably withheld, if such pumping is in accord with
the Basin Project Act and upon submittal by the Subcontractor of a written
certification from the Arizona Department of Water Resources or its successor
agency that the pumping and transportation of ground water is in accord with
Title 45, Chapter 2, Arizona Revised Statutes, as it may be amended from time
to time.

             (d) The Subcontractor shall not sell or otherwise dispose of or
permit the sale or other disposition of any Project Water for use outside of
Maricopa, Pinal, and Pima Counties; Provided, however, That this does not
prohibit exchanges of Project Water covered by separate agreements; and
Provided,

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further, That this does not prohibit effluent exchanges with Indian tribes
pursuant to Article 6.2.

             (e) (i) Project Water scheduled for delivery in any Year under this
subcontract may be used by the Subcontractor or resold or exchanged by the
Subcontractor pursuant to appropriate agreements approved by the Contracting
Officer and the Contractor. If said water is resold or exchanged by the
Subcontractor for an amount in excess of that which the Subcontractor is
obligated to pay under this subcontract, the excess amount shall be paid
forthwith by the Subcontractor to the Contractor for application against the
Contractor's Repayment Obligation to the United States; Provided, however, That
the Subcontractor shall be entitled to recover actual costs of transportation,
treatment, and distribution, including but not limited to capital costs and OM&R
costs.

                 (ii) Project Water scheduled for delivery in any Year under
this subcontract that cannot be used, resold, or exchanged by the Subcontractor
may be made available by the Contracting Officer and Contractor to other users.
If such Project Water is sold to or exchanged with other users, the
Subcontractor shall be relieved of its payments hereunder only to the extent of
the amount paid to the Contractor by such other users, but not to exceed the
amount the Subcontractor is obligated to pay under this subcontract for said
water.

                 (iii) In the event the Subcontractor or the Contracting Officer
and the Contractor are unable to sell any portion of the Subcontractor's Project
Water scheduled for delivery and not required by the Subcontractor, the
Subcontractor

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shall be relieved of the pumping energy portion of the OM&R charges associated
with the undelivered water as determined by the Contractor.

            4.4  Procedure for Ordering Water.

                 (a) At least 15 months prior to the date the Secretary expects
to issue the Notice of Completion of the Water Supply System, or as soon
thereafter as is practicable, the Contracting Officer shall announce by written
notice to the Contractor the amount of Project Water available for delivery
during the Year in which said Notice of Completion is issued (initial Year of
water delivery) and during the following Year. Within 30 days of receiving such
notice, the Contractor shall issue a notice of availability of Project Water to
the Subcontractor. The Subcontractor shall, within a reasonable period of time
as determined by the Contractor, submit a written schedule to the Contractor
and the Contracting Officer showing the quantity of water desired by the
Subcontractor during each month of said initial Year and the following Year.
The Contractor shall notify the Subcontractor by written notice of the
Contractor's action on the requested schedule within 2 months of the date of
receipt of such request.

                 (b) The amounts, times, and rates of delivery of Project Water
to the Subcontractor during each Year subsequent to the Year following said
initial Year of water delivery shall be in accordance with a water delivery
schedule for that Year. Such schedule shall be determined in the following
manner:

                    (i) On or before June 1 of each Year beginning with the
Year following the initial Year of water

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delivery pursuant to this subcontract, the Contracting Officer shall announce
the amount of Project Water available for delivery during the following Year
in a written notice to the Contractor. In arriving at this determination, the
Contracting Officer, subject to the provisions of the Repayment Contract, shall
use his best efforts to maximize the availability and deliver of Arizona's full
entitlement of Colorado River water over the term of this subcontract. Within
30 days of receiving said notice, the Contractor shall issue a notice of
availability of Project Water to the Subcontractor.

        (ii)    On or before October 1 of each Year beginning with the Year
following said initial Year of water delivery, the Subcontractor shall submit
in writing to the Contractor and Contracting Officer a water delivery schedule
indicating the amounts of Project Water desired by the Subcontractor during
each month of the following Year along with a preliminary estimate of the
Project Water desired for the succeeding 2 years.

        (iii)   Upon receipt of the schedule, the Contractor and Contracting
Officer shall review it and, after consultation with the Subcontractor, shall
make only such modifications to the schedule as are necessary to ensure that
the amounts, times, and rates of deliver to the Subcontractor are consistent
with the deliver capability of the Project, considering, among other things,
the availability of water and the delivery schedules of all subcontractors;
Provided, That this provision shall not be construed to reduce annual
deliveries to the Subcontractor.

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<PAGE>   11
        (iv)    On or before November 15 of each Year beginning with the Year
following said initial Year of water delivery, the Contractor shall determine
and furnish to the Subcontractor and the Contracting Officer the water delivery
schedule for the following Year which shall show the amount of water to be
delivered to the Subcontractor during each month of that Year, contingent upon
the Subcontractor remaining eligible to receive water under all terms contained
herein.

    (c) The monthly water delivery schedules may be amended upon the
Subcontractor's written request to the Contractor. Proposed amendments shall be
submitted by the Subcontractor to the Contractor no later than 15 days before
the desired change is to become effective, and shall be subject to review and
modification in like manner as the schedule. The Contractor shall notify the
Subcontractor and the Contracting Officer of its action on the Subcontractor's
requested schedule modification within 10 days of the Contractor's receipt of
such request.

    (d) The Contractor and the Subcontractor shall hold the United States, its
officers, agents, and employees, harmless on account of damage or claim of
damage of any nature whatsoever arising out of or connected with the actions of
the Contractor regarding water delivery schedules furnished to the
Subcontractor.

    (e) In no event shall the Contracting Officer or the Contractor be required
to deliver to the Subcontractor from the Water Supply System in any one month a
total amount of Project Water greater than 11 percent of the Subcontractor's

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maximum entitlement; Provided, however, That the Contracting Officer may deliver
a greater percentage in any month if such increased delivery is compatible with
the overall delivery of Project Water to other subcontractors as determined by
the Contracting Officer and Contractor and if the Subcontractor agrees to accept
such increased deliveries.

          4.5 Points of Delivery -- Measurement and Responsibility for
Distribution of Water.

              (a) The water to be furnished to the Subcontractor pursuant to
this subcontract shall be delivered at turnouts to be constructed by the United
States at such point(s) on the Water Supply System as may be agreed upon in
writing by the Contracting Officer and the Contractor, after consultation with
the Subcontractor.

              (b) Unless the United States and the Subcontractor agree by
contract to the contrary, the Subcontractor shall construct and install, at its
sole cost and expense, connection facilities required to take and convey the
water from the turnouts to the Subcontractor's service area. The Subcontractor
shall furnish, for approval of the Contracting Officer, drawings showing the
construction to be performed by the Subcontractor within the Water Supply System
right-of-way 6 months before starting said construction. The facilities may be
installed, operated, and maintained on the Water Supply System right-of-way
subject to such reasonable restrictions and regulations as to type, location,
methods of installation, operation, and maintenance as may be prescribed by the
Contracting Officer.

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<PAGE>   13

              (c) All water delivered from the Water Supply System shall be
measured with equipment furnished and installed by the United States and
operated and maintained by the United States or the Operating Agency. Upon the
request of the Subcontractor or the Contractor, the accuracy of such
measurements shall be investigated by the Contracting Officer or the Operating
Agency, Contractor, and Subcontractor, and any errors which may be mutually
determined to have occurred herein shall be adjusted; Provided, That in the
event the parties cannot agree on the required adjustment, the Contracting
Officer's determination shall be conclusive.

              (d) Neither the United States, the Contractor, nor the Operating
Agency shall be responsible for the control, carriage, handling, use, disposal,
or distribution of Project Water beyond the delivery point(s) agreed to pursuant
to Subarticle 4.5(a). The Subcontractor shall hold the United States, the
Contractor, and the Operating Agency harmless on account of damage or claim of
damage of any nature whatsoever for which there is legal responsibility,
including property damage, personal injury, or death arising out of or connected
with the Subcontractor's control, carriage, handling, use, disposal, or
distribution of such water beyond said delivery point(s).

          4.6 Temporary Reductions. In addition to the right of the United
States under Subarticle 8.3(a)(iv) of the Repayment Contract temporarily to
discontinue or reduce the amount of water to be delivered, the United States or
the Operating Agency may, after consultation with the Contractor, temporarily
discontinue or reduce the quantity of water to be furnished to the

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Subcontractor as herein provided for the purposes of investigation, inspection,
maintenance, repair, or replacement of any of the Project facilities or any part
thereof necessary for the furnishing of water to the Subcontractor, but so far
as feasible the United States or the Operating Agency shall coordinate any such
discontinuance or reduction with the Subcontractor and shall give the
Subcontractor due notice in advance of such temporary discontinuance or
reduction, except in case of emergency, in which case no notice need be given.
Neither the United States, its officers, agents, and employees, shall be liable
for damages when, for any reason whatsoever, any such temporary discontinuance
or reduction in delivery of water occurs. If any such discontinuance or
temporary reduction results in deliveries to the Subcontractor of less water
than what has been paid for in advance, the Subcontractor shall be entitled to
be reimbursed for the appropriate proportion of such advance payments prior to
the date of the Subcontractor's next payment of water service charges or the
Subcontractor may be given credit toward the next payment of water charges if
the Subcontractor should so desire.

        4.7 Priority in Case of Shortage. Subject to the provisions of Section
304(e) of the Basin project Act, any Project Water furnished for non-Indians
through Project facilities shall, in the event of shortage thereof, as
determined by the Contracting Officer after consultation with the Contractor, be
reduced pro rata until exhausted, first for Miscellaneous Water uses and next
for Agricultural Water uses

                                       12

<PAGE>   15
before water furnished for non-Indian M&I use is reduced. Thereafter, water for
M&I uses shall be reduced pro rata among all non-Indian M&I users. All Project
Water converted from agricultural to M&I use shall be delivered with the same
priority as other Project M&I Water. Pursuant to the authority vested in the
Secretary by the Reclamation Act of 1902 (32 Stat. 388), as amended and
supplemented, the Basin project Act, the Regulations for Implementing the
Procedural Provisions of the National Environmental Policy Act (40 CFR Part
1505), and the Implementing Procedures of the U.S. Department of the Interior
(516 DM 5.4), the relative priorities between Indian and non-Indian uses will
be determined by the Secretary consistent with the allocations published in the
Federal Register on March 24, 1983.

        4.8     Secretarial Control of Return Flow.

                (a)     The Secretary reserved the right to capture all Return
Flow flowing from the exterior boundaries of the Contractor's Service Area as a
source of supply and for distribution to and use of the Central Arizona Project
to the fullest extent practicable. The Secretary also reserves the right to
capture for Project use Return Flow which originates or results from water
contracted for from the Central Arizona Project within the boundaries of the
Contractor's Service Area if, in his judgment, such Return Flow is not being
put to a beneficial use. The Subcontractor may recapture and reuse or sell its
Return Flow; Provided, however, That such Return Flow may not be sold for use
outside Maricopa, Pinal, and Pima Counties; and Provided, further, That this
does not prohibit effluent exchanges with Indian tribes pursuant to Article 6.2

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<PAGE>   16
The Subcontractor shall, at least 60 days in advance of any proposed sale of
such water, furnish the following information in writing to the Contracting
Officer and the Contractor:

        (i) The name and address of the prospective buyer.

       (ii) The location and proposed use of the Return Flow.

      (iii) The price to be charged for the Return Flow.

                  (b) The price charged for the Return Flow may cover the cost
incurred by the Subcontractor for Project Water plus the cost required to make
the Return Flow usable. If the price received for the Return Flow is greater
than the costs incurred by the Subcontractor, as described above, the excess
amount shall be forthwith returned by the Subcontractor to the Contractor for
application against the Contractor's Repayment Obligation to the United States.
Costs required to make Return Flow usable shall include but not be limited to
capital costs and OM&R costs including transportation, treatment, and
distribution, and the portion thereof which may be retained by the Subcontractor
shall be subject to the advance approval of the Contractor and the Contracting
Officer.

                  (c) Any Return Flow captured by the United States and
determined by the Contracting Officer and the Contractor to be suitable and
available for use by the Subcontractor may be delivered by the United States or
Operating Agency to the Subcontractor as a part of the water supply for which
the Subcontractor subcontracts hereunder and such water shall be accounted and
paid for pursuant to the provisions hereof.

                  (d) All capture, recapture, use, reuse, and sale of Return
Flow under this article shall be in accord with Arizona

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water law unless such law is inconsistent with the Congressional directives
applicable to the Central Arizona Project.

         4.9 Water and Air Pollution Control. The Subcontractor, in carrying
out this subcontract, shall comply with all applicable water and air pollution
laws and regulations of the United States and the State of Arizona and shall
obtain all required permits or licenses from the appropriate Federal, State, or
local authorities.

         4.10 Quality of Water. The operation and maintenance of Project
facilities shall be performed in such manner as is practicable to maintain the
quality of water made available through such facilities at the highest level
reasonably attainable as determined by the Contracting Officer. Neither the
United States, the Contractor, nor the Operating Agency warrants the quality of
water and is under no obligation to construct or furnish water treatment
facilities to maintain or better the quality of water. The Subcontractor waives
its right to make a claim against the United States, the Operating Agency, the
Contractor, or another subcontractor because of changes in water quality caused
by the commingling of Project water with other water.

         4.11 Exchange Water.

              (a) Where the Contracting Officer determines the Subcontractor is
physically able to receive Colorado River mainstream water in exchange for or in
replacement of existing supplies of water from surface sources other than the
Colorado River, the Contracting Officer may require that the Subcontractor
accept said mainstream water in exchange for or in replacement of said existing
supplies pursuant to the provisions of Section 304(d) of the Basin Project Act;
Provided, however, That a

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subcontractor on the Project aqueduct shall not be required to enter into
exchanges in which existing supplies of water from surface sources are diverted
for use by other subcontractors downstream on the Project aqueduct.

          (b) If, in the event of shortages, the Subcontractor has yielded water
from other surface water sources in exchange for Colorado River mainstream water
supplied by the Contractor or the Operating Agency, the Subcontractor shall have
first priority against other users supplied with Project Water that have not
yielded water from other surface water sources but only in quantities adequate
to replace the water so yielded.

     4.12 Entitlement to Project M&I Water.

          (a) For the Year in which the Secretary issued the Notice of
Completion of the Water Supply System, the Subcontractor's entitlement to
Project Water for M&I uses shall be determined by the Contractor after
consultation with the Subcontractor and the Contracting Officer. Commencing with
the Year following that in which the Secretary issues the Notice of Completion
of the Water Supply System, the Subcontractor is entitled to take a maximum of
6978 acre-feet of Project Water for M&I uses including but not limited to ground
water recharge.

          (b) If at anytime during the term of this subcontract there is
available for allocation additional M&I Project Water, or Agricultural Water
converted to M&I use, it shall be delivered to the Subcontractor at the same
water service charge per acre-foot and with the same priority as other M&I
Water, upon execution or amendment of an appropriate subcontract

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among the United States, the Contractor, and the Subcontractor and payment of
an amount equal to the acre-foot charges previously paid by other
Subcontractors pursuant to Article 5.2 hereof plus interest. In the case of
Agricultural Water conversions, the payment shall be reduced by all previous
payments of agricultural capital charges for each acre-foot of water converted.
The interest due shall be calculated for the period between issuance of the
Notice of Completion of the Water Supply System and execution or amendment of
the subcontract using the weighted interest rate received by the Contractor on
all investments during that period.

                4.13    Delivery of Project Water Prior to Completion of Project
Works. Prior to the date of issuance of the Notice of Completion of the Water
Supply System by the Secretary, water may be made available for delivery by the
Secretary on a "when available" basis at a water rate and other terms to be
determined by the Secretary after consultation with the Contractor.

        5.      PAYMENTS:

                5.1     Water Service Charges for Payment of Operation,
Maintenance, and Replacement Costs. Subject to the provisions of Article 5.4
hereof, the Subcontractor shall pay in advance for Project OM&R costs estimated
to be incurred by the United States or the Operating Agency. At least 15 months
prior to first delivery of Project Water, or as soon thereafter as is
practicable, the Contractor shall furnish the Subcontractor with an estimate of
the Subcontractor's share of OM&R costs to the end of the initial Year of water
delivery and an estimate of such costs for the following Year. Within a
reasonable time of the

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receipt of said estimates, as determined by the Contractor, but prior to the
delivery of water, the Subcontractor shall advance to the Contractor its share
of such estimated costs to the end of the initial month of water delivery and
without further notice or demand shall on or before the first day of each
succeeding month of the initial Year of water delivery and the following Year
advance to the Contractor in equal monthly installments the Subcontractor's
share of such estimated costs. Advances of monthly payments for each subsequent
Year shall be made by the Subcontractor to the Contractor on the basis of
annual estimates to be furnished by the Contractor on or before June 1
preceding each said subsequent Year and the advances of payments for said
estimated costs shall be due and payable in equal monthly payments on or before
the first day of each month of the subsequent year. Differences between actual
OM&R costs and estimated OM&R costs shall be determined by the Contractor and
shall be adjusted in the next succeeding annual estimates; Provided, however,
That if in the opinion of the Contractor the amount of any annual OM&R estimate
is likely to be insufficient to cover the above-mentioned costs during such
period, the  Contractor may increase the annual estimate of the Subcontractor's
OM&R costs by written notice thereof to the Subcontractor, and the
Subcontractor shall forthwith increase its remaining monthly payments in such
Year to the Contractor by the amount necessary to cover the insufficiency. All
estimates of OM&R costs shall be accompanied by data and computations relied on
by the Contractor in determining the amounts of the estimated OM&R costs and
shall be subject to joint review by the Subcontractor and the Contractor.

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<PAGE>   21

          5.2 M&I Water Service Charges.

              (a) Subject to provisions of Article 5.4 hereof and in addition to
the OM&R payments required in Article 5.1 hereof, the Subcontractor shall, in
advance of the delivery of Project M&I Water by the United States or the
Operating Agency, make payment to the Contractor in equal semiannual
installments of an M&I Water service capital charge based on a maximum
entitlement of 6978 acre-feet per year multiplied by the rate set forth in the
following schedule.

<TABLE>
<CAPTION>
       Payment for                   Payment due for each acre-
  the calendar year of               foot of purchased capacity
  --------------------               --------------------------
  <S>                                <C>
        1988-1993                              $ 5
        1994                                     6
        1995                                     8
        1996                                    10
        1997                                    12
        1998                                    14
        1999                                    15
        2000                                    16
        2001                                    17
        2002                                    18
        2003                                    19
        2004                                    20
        2005                                    21
        2006                                    22
        2007                                    23
        2008                                    24
        2009                                    25
        2010                                    26
        2011                                    27
        2012                                    28
        2013                                    29
        2014                                    30
        2015                                    31
        2016                                    32
        2017                                    33
        2018                                    34
        2019                                    35
        2020                                    36
        2021                                    37
        2022                                    38
        2023                                    39
        2024                                    40
        2025 - through the end of the term      40
               of this subcontract
</TABLE>

                                       19
<PAGE>   22

              (b) The M&I Water service capital charge may be adjusted
periodically by the Contractor as a result of repayment determinations provided
for in the Repayment Contract and to reflect all sources of revenue, but said
charge per acre-foot shall not be greater than the amount required to amortize
Project capital costs allocated to the M&I function and determined by the
Contracting Officer to be a part of the Contractor's Repayment Obligation. Such
amortization shall include interest at 3.342 percent per annum. If any
adjustment is made in the M&I Water service capital charge, notice thereof shall
be given by the Contractor to the United States and to the Subcontractor on or
before June 1 of the Year preceding the Year the adjusted charge becomes
effective. The M&I Water service capital charge payment for the initial Year
shall be advanced to the Contractor in equal semiannual installments on or
before December 1 preceding the initial Year and June 1 of said initial Year;
Provided, however, That the payment of the initial M&I Water service capital
charge shall not be due until the Year in which Project Water is available to
the Subcontractor after Notice of Completion of the Water Supply System is
issued. Thereafter, for each subsequent Year, payments by the Subcontractor in
accordance with the foregoing provisions shall be made in equal semiannual
installments on or before the December 1 preceding said subsequent Year and the
June 1 of said subsequent Year as may be specified by the Contractor in written
notices to the Subcontractor.

              (c) On or before the first anniversary of execution of this
subcontract and on or before each succeeding
<PAGE>   23
anniversary, the Subcontractor shall pay, in addition to all other payments
required herein, an M&I subcontract charge. The subcontract charge shall be
$2.00 per acre-foot for 6978 acre-feet of M&I Water. Prior to the date of
issuance of the Notice of Completion of the Water Supply System, the
subcontract charge shall be paid each Year by the Subcontractor to the United
States. The Contracting Officer shall advise the Contractor of the amounts and
dates of the Subcontractor's payments. After the date of issuance of the Notice
of Completion of the Water Supply System, the subcontract charge shall be paid
each Year to the Contractor by the Subcontractor and the Contractor shall
credit the revenues obtained from the subcontract charge against the
Subcontractor's water service charges payable to the Contractor that Year.

        (d) Funds advanced to the United States by the Subcontractor pursuant
to Article 5.2 (c) as a subcontracting charge shall be credited by the
Contractor against the Subcontractor's initial capital charges for water
deliveries under this subcontract. Credit provided to the Subcontractor shall
include interest from the date the Subcontractor's funds are transferred to the
United States through the effective date of credit for payment of capital costs
as recorded in the Contractor's records. Interest credited to the Subcontractor
shall be at an annual rate of 1 (one) percent less than the weighted rate
received by the Contractor on all investments during the period for which the
Subcontractor's payments earn an interest credit.

                                       21
<PAGE>   24
                  (e) Payment of all M&I Water service capital and corresponding
OM&R charges becoming due hereunder prior to or on the dates stipulated in
Articles 5.1 and 5.2 is a condition precedent to receiving M&I Water under this
subcontract.

            5.3 Loss of Entitlement. The Subcontractor shall have no right to
delivery of water from Project facilities during any period in which the
Subcontractor may be in arrears in the payment of any charges due the
Contractor. The Contractor may sell to another entity any water determined to be
available under the Subcontractor's entitlement for which payment is in arrears;
Provided, however, That the Subcontractor may regain the right to use any unsold
portion of the water determined to be available under the original entitlement
upon payment of all delinquent charges plus any difference between the
subcontractual obligation and the price received in the sale of the water by the
Contractor and payment of charges for the current period.

            5.4 Refusal to Accept Delivery. In the event the Subcontractor fails
or refuses in any Year to accept delivery of the quantity of water available for
delivery to and required to be accepted by it pursuant to this subcontract, or
in the event the Subcontractor in any Year fails to submit a schedule for
delivery as provided in Article 4.4 thereof, said failure or refusal shall not
relieve the Subcontractor of its obligation to make the payments required in
this subcontract.

            5.5 Charge for Late Payments. The Subcontractor shall pay a late
payment charge on installments or charges which are received after the due date.
The late payment charge percentage rate calculated by the Department of the
Treasury and published quarterly in the Federal Register shall be used;
Provided, That the late payment charge percentage rate shall not be less than

                                       22
<PAGE>   25
0.5 percent per month. The late payment charge percentage rate applied on an
overdue payment shall remain in effect until payment is received. The late
payment rate for a 30-day period shall be determined on the day immediately
following the due date and shall be applied to the overdue payment for any
portion of the 30-day period of delinquency. In the case of partial late
payments, the amount received shall first be applied to the late charge on the
overdue payment and then to the overdue payment.

      6. GENERAL PROVISIONS:

            6.1 Repayment Contract Controlling. Pursuant to the Repayment
Contract, the United States has agreed to construct and, in the absence of an
approved Operating Agency, to operate and maintain the works of the Central
Arizona Project and to deliver Project Water to the various subcontractors
within the Project Service Area; and the Contractor has obligated itself for the
payment of various costs, expenses, and other amounts allocated to the
Contractor pursuant to Article 9 of the Repayment Contract. The Subcontractor
expressly approves and agrees to all the terms presently set out in the
Repayment Contract including Subarticle 8.8(b)(viii) thereof, or as such terms
may be hereafter amended, and agrees to be bound by the actions to be taken and
the determinations to be made under that Repayment Contract, except as otherwise
provided herein.

            6.2 Effluent Exchanges. The Subcontractor may enter into direct
effluent exchange agreements with Indian entities which have received an
allocation of Project Water and receive all benefits from the exchange. If the
Subcontractor chooses to exchange directly with the Indians, then the
Subcontractor's entitlement to Project Water shall be reduced by the amount of
Project Water received in exchange by the Subcontractor. The

                                       23
<PAGE>   26
Subcontractor may also offer raw sewage or effluent to the Contractor for the
purpose of exchanging such sewage or effluent for the benefit of all
subcontractors. If such an exchange is consummated, the Subcontractor's
entitlement to Project Water shall remain at the level specified in Article
4.12. A copy of the above referenced agreements shall be filed with the
Contractor and the Contracting Officer.

     6.3 Notices. Any notice, demand or request authorized or required by this
subcontract shall be deemed to have been given when mailed, postage prepaid, or
delivered to the Regional Director, Lower Colorado Region, Bureau of
Reclamation, P. O. Box 427, Boulder City, Nevada 89005, on behalf of the
Contractor or Subcontractor; to the Central Arizona Water Conservation
District, 23636 North 7th Street, Phoenix, Arizona 85024, on behalf of the
United States or Subcontractor; and to the Chaparral City Water Company, P. O.
Box 17030, Fountain Hills, AZ 85268 on behalf of the United States or
Contractor. The designation of the addressee or the address may be changed by
notice given in the same manner as provided in this Article for other notices.

     6.4 Water Conservation Program.

         (a) While the contents and standards of a given water conservation
program are primarily matters of State and local determination, there is a
strong Federal interest in developing an effective water conservation program
because of this subcontract. The Subcontractor shall develop and implement an
effective water conservation program for all uses of water which is provided
from or conveyed through Federally constructed or Federally financed
facilities. That water conservation program shall contain definite goals,
appropriate water conservation measures, and time schedules for meeting the
water conservation objectives.

         (b) A water conservation program, acceptable to the Contractor and the
Contracting Officer, shall be in existence prior to one or all of the following:
(1) service of Federally stored/conveyed water; (2) transfer of operation and
maintenance of the Project facilities to the Contractor or Operating Agency; or
(3) transfer of the Project to an operation and maintenance status. The
distribution and use of Federally stored/conveyed

                                       24
<PAGE>   27
water and/or operation of Project facilities transferred to the Contractor shall
be consistent with the adopted water conservation program. Following execution
of this subcontract, and at subsequent 5-year intervals, the Subcontractor shall
resubmit the water conservation plan to the Contractor and the Contracting
Officer for review and approval. After review of the results of the previous 5
years and after consultation with the Contractor, the Subcontractor, and the
Arizona Department of Water Resources or its successor, the Contracting Officer
may require modifications in the water conservation program to better achieve
program goals.

          6.5 Rules, Regulations, and Determinations.

              (a) The Contracting Officer shall have the right to make, after an
opportunity has been offered to the Contractor and Subcontractor for
consultation, rules and regulations consistent with the provisions of this
subcontract, the laws of the United States and the State of Arizona, to add to
or to modify them as may be deemed proper and necessary to carry out this
subcontract, and to supply necessary details of its administration which are not
covered by express provisions of this subcontract. The Contractor and
Subcontractor shall observe such rules and regulations.

              (b) Where the terms of this subcontract provide for action to be
based upon the opinion or determination of any party to this subcontract,
whether or not stated to be conclusive, said terms shall not be construed as
permitting such action to be predicated upon arbitrary, capricious, or
unreasonable opinions or determinations. In the event that the Contractor or
Subcontractor questions any factual determination made by the Contracting
Officer, the findings as to the facts shall be made by the Secretary only after
consultation with the Contractor or Subcontractor and shall be conclusive upon
the parties.

          6.6 Officials Not to Benefit.

              (a) No Member of or Delegate to Congress or Resident Commissioner
shall be admitted to any share or part of this subcontract or to any benefit
that may arise herefrom. This restriction shall not be construed to extend to
this subcontract if made with a corporation or company for its general benefit.

                                       25
<PAGE>   28
              (b) No official of the Subcontractor shall receive any benefit
that may arise by reason of this subcontract other than as a water user within
the Project and in the same manner as other water users within the Project.

          6.7 Assignment Limited--Successors and Assigns Obligated. The
provisions of this subcontract shall apply to and bind the successors and
assigns of the parties hereto, but no assignment or transfer of this subcontract
or any part or interest therein shall be valid until approved by the Contracting
Officer.

          6.8 Judicial Remedies Not Foreclosed. Nothing herein shall be
construed (a) as depriving any party from pursuing and prosecuting any remedy in
any appropriate court of the United States or the State of Arizona which would
otherwise be available to such parties even though provisions herein may declare
that determinations or decisions of the Secretary or other persons are
conclusive or (b) as depriving any party of any defense thereto which would
otherwise be available.

          6.9 Books, Records, and Reports. The Subcontractor shall establish and
maintain accounts and other books and records pertaining to its financial
transactions, land use and crop census, water supply, water use, changes of
Project works, and to other matters as the Contracting Officer may require.
Reports thereon shall be furnished to the Contracting Officer in such form and
on such date or dates as he may require. Subject to applicable Federal laws and
regulations, each party shall have the right during office hours to examine and
make copies of each other's books and records relating to matters covered by
this subcontract.

          6.10 Equal Opportunity. During the performance of this subcontract,
the Subcontractor agrees as follows:

              (a) The Subcontractor shall not discriminate against any employee
or applicant for employment because of race, color, religion, sex, or national
origin. The Subcontractor shall take affirmative action to ensure that
applicants are employed, and that employees are treated during employment
without regard to their race, color, religion, sex, or national origin. Such
action shall include, but not be limited to the following: Employment,
upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff
or termination; rates of pay or other forms of compensation; and selection for

                                       26
<PAGE>   29
training, including apprenticeship. The Subcontractor agrees to post in
conspicuous places, available to employees and applicants for employment,
notices to be provided setting forth the provisions of this nondiscrimination
clause.

          (b)  The Subcontractor shall, in all solicitations or advertisements
for employees placed by or on behalf of the Subcontractor, state that all
qualified applicants shall receive consideration for employment without
discrimination because of race, color, religion, sex, or national origin.

          (c)  The Subcontractor shall send to each labor union or
representative of workers with which it has a collective bargaining agreement
or other contract or understanding, a notice, to be provided by the Contracting
Officer, advising said labor union or workers' representative of the
Subcontractor's commitments under Section 202 of Executive Order 11246 of
September 24, 1965, and shall post copies of the notice in conspicuous places
available to employees and applicants for employment.

          (d)  The Subcontractor shall comply with all provisions of Executive
Order No. 11246 of September 24, 1965, as amended, and of the rules,
regulations, and relevant orders of the Secretary of Labor.

          (e)  The Subcontractor shall furnish all information and reports
required by said amended Executive Order and by the rules, regulations, and
orders of the Secretary of Labor, or pursuant thereto, and shall permit access
to its books, records, and accounts by the Contracting Officer and the Secretary
of Labor for purposes of investigation to ascertain compliance with such rules,
regulations, and orders.

          (f)  In the event of the Subcontractor's noncompliance with the
nondiscrimination clauses of this subcontract or with any of the such rules,
regulations, or orders, this subcontract may be canceled, terminated, or
suspended, in whole or in part, and the Subcontractor may be declared
ineligible for further Government contracts in accordance with procedures
authorized in said amended Executive Order and such other sanctions may be
imposed and remedies invoked as provided in said amended Executive Order, or by
rule, regulation, or order of the Secretary of Labor, or as otherwise provided
by law.

          (g)  The Subcontractor shall include the provisions of paragraphs (a)
through (g) in every subcontract or purchase order unless exempted by the
rules, regulations, or orders of the Secretary of Labor issued pursuant to
Section 204 of said amended Executive Order, so that such provisions shall be
binding upon each subcontractor or vendor. The Subcontractor shall take such
action with respect to any subcontract or purchase order as may be directed by
the Secretary of Labor as a means of enforcing such provisions, including
sanctions for

                                       27

<PAGE>   30

noncompliance; Provided, however, That in the event a Subcontractor becomes
involved in, or is threatened with, litigation with a subcontractor or vendor as
a result of such direction, the Subcontractor may request the United States to
enter into such litigation to protect the interest of the United States.

          6.11 Title VI, Civil Rights Act of 1964.

              (a) The Subcontractor agrees that it shall comply with Title VI of
the Civil Rights Act of July 2, 1964 (78 Stat. 241), and all requirements
imposed by or pursuant to the Department of the Interior Regulation (43 CFR 17)
issued pursuant to that title to the end that, in accordance with Title VI of
that Act and the Regulation, no person in the United States shall, on the
grounds of race, color, or national origin be excluded from participation in, be
denied the benefits of, or be otherwise subjected to discrimination under any
program or activity for which the Subcontractor receives financial assistance
from the United States and hereby gives assurance that it shall immediately take
any measures to effectuate this agreement.

              (b) If any real property or structure thereon is provided or
improved with the aid of Federal financial assistance extended to the
Subcontractor by the United States, this assurance obligates the Subcontractor,
or in the case of any transfer of such property, any transferee for the period
during which the real property or structure is used for a purpose involving the
provision of similar services or benefits. If any personal property is so
provided, this assurance obligates the Subcontractor for the period during which
it retains ownership or possession of the property. In all other cases, this
assurance obligates the Subcontractor for the period during which the Federal
financial assistance is extended to it by the United States.

              (c) This assurance is given in consideration of and for the
purpose of obtaining any and all Federal grants, loans, contracts, property,
discounts, or other Federal financial assistance extended after the date hereof
to the Subcontractor by the United States, including installment payments after
such date on account of arrangements for Federal financial assistance which were
approved before such date. The Subcontractor recognizes and agrees that such
Federal financial assistance shall be extended in reliance on the
representations and agreements made in this assurance, and that the United
States shall reserve the right to seek judicial enforcement of this assurance.
This assurance is binding on the Subcontractor, its successors, transferees, and
assignees.

          6.12 Confirmation of Subcontract. The Subcontractor shall promptly
seek a final decree of the proper court of the State of Arizona approving and
confirming the subcontract and
<PAGE>   31

decreeing and adjudging it to be lawful, valid, and binding on the
Subcontractor. The Subcontractor shall furnish to the United States a certified
copy of such decree and of all pertinent supporting records. This subcontract
shall not be binding on the united States, the Contractor or the Subcontractor
until such final decree has been entered.

          6.13 Contingent on Appropriation or Allotment of Funds. The
expenditure or advance of any money or the performance of any work by the United
States hereunder which may require appropriation of money by the Congress or the
allotment of funds shall be contingent upon such appropriation or allotment
being made. The failure of the Congress to appropriate funds or the absence of
any allotment of funds shall not relieve the Subcontractor from any obligation
under this subcontract. No liability shall accrue to the United States in case
such funds are not appropriated or allotted.

          6.14 Addendum A. This subcontract shall also include the terms,
conditions, and provisions of Addendum A, which is attached hereto and by this
reference made a part hereof.

          IN WITNESS WHEREOF, the parties hereto have executed this subcontract
No. 5-07-30-W0067 the day and year first above-written.

Legal Review and Approval                THE UNITED STATES OF AMERICA

By: /s/ [Signature Illegible]            By: /s/ [Signature Illegible]
   --------------------------------         --------------------------------
         Field Solicitor                          Regional Director
         Phoenix, Arizona                         Lower Colorado Region
                                                  Bureau of Reclamation

                                         CENTRAL ARIZONA WATER
                                         CONSERVATION DISTRICT

Attest: /s/ [Signature Illegible]        By: /s/ [Signature Illegible]
       ----------------------------         --------------------------------
Title: Secretary                         Title: President

                                       29

<PAGE>   32
                                          CHAPARRAL CITY WATER COMPANY

Attest: /s/ HOWARD J. BRESSLER            By: /s/ [Signature Illegible]
       -------------------------------       ---------------------------------
Title: Vice President - Sec.              Title: President

                                       30
<PAGE>   33

                                   ADDENDUM A

      The following is substituted for Article 5.4: "In the event the
Subcontractor fails or refuses in any Year to accept delivery of the quantity of
water available for delivery to and required to be accepted by it pursuant to
this subcontract, or in the event the Subcontractor in any Year fails to submit
a schedule for delivery as provided in Article 4.4 hereof, said failure or
refusal shall not relieve the Subcontractor of its obligation to make the
payments required in this subcontract. The Subcontractor agrees to make payment
for available water which is refused in the same manner as if said water were
scheduled for delivery to and accepted by it in accordance with this subcontract
except as provided in Subarticle 4.3(e) and Article 5.3; Provided, however, That
if the Subcontractor shall require Distribution Works constructed pursuant to
Section 309(b) of the Basin Project Act, as amended, to transport water from the
Central Arizona Project aqueduct to the point of treatment or use, then the
Subcontractor shall not be required to pay capital or OM&R charges until January
1, 1990, or until such time as the Subcontractor begins taking Project Water
through the Distribution Works constructed pursuant to a repayment contract
under the aforementioned Act, whichever comes first."

<PAGE>   34

                                   EXHIBIT A
<PAGE>   35
                       CERTIFICATE OF CORPORATE SECRETARY

     I, Howard J. Bressler, do hereby certify that I am the duly elected and
qualified Secretary of Chaparral City Water Company, an Arizona corporation,
(the "Corporation"); that the following is a true and correct copy of
resolutions duly adopted by unanimous written consent of the Board of Directors
of the Corporation on July 27, 1984; and that such resolutions have not been
amended, rescinded or repealed since their adoption and are on the date hereof
in full force and effect:

     WHEREAS, the Corporation has previously resolved to obtain a Central
     Arizona Project water allocation; and

     WHEREAS, Paragraph 27 of the "Contract Between the United States and the
     Chaparral City Water Company Providing for Construction of a Water
     Distribution System, Central Arizona Project" (the "Repayment Contract")
     specifically requires the Board of Directors of the Corporation to approve
     certain matters; and

     WHEREAS, the "Subcontract Among the Untied States, the Central Arizona
     Water Conservation District and the Corporation" (the "Subcontract") and
     the Repayment Contract are required to be validated by a proper court of
     the State of Arizona.

     NOW, THEREFORE, BE IT RESOLVED, that the President, or any other officer
     of the Corporation, be and each of them hereby is authorized to execute
     the Repayment Contract under which the Central Arizona Project related
     facilities will be constructed; and

     RESOLVED FURTHER, that the President, or any other officer of the
     Corporation, be and each of them hereby is directed to prepare and file
     with the Arizona Corporation Commission any rate application which may be
     required for the payment of the Corporation's obligations under the
     Repayment Contract; and

<PAGE>   36
     RESOLVED FURTHER, that the President, or any other officer of the
     Corporation, be and each of them hereby is authorized, subject to the
     Arizona Corporation Commission's approval, to establish a $200,000 line of
     credit for the purposes of financing any cost overruns which may occur
     under the Repayment Contract; and

     RESOLVED FURTHER, that the President, or any other officer of the
     Corporation, be and each of them hereby is directed to execute the
     Subcontract for the purchase of Central Arizona Project water; and

     RESOLVED FURTHER, that the proper officers of the Corporation be and each
     of them hereby is authorized in the name and on behalf of the Corporation,
     to conduct any and all negotiations, to make any and all arrangements, do
     and perform any and all acts and things and to execute and deliver any and
     all officer's certificates and other documents and instruments as they
     may deem necessary or appropriate in order to effectuate the purposes of
     each and all of the foregoing resolutions.

     IN WITNESS WHEREOF, I have hereto affixed my name as Secretary of the
Corporation and have caused the Corporate Seal of the Corporation to be affixed
this 27th day of July, 1984.

  [SEAL]                                               /s/ HOWARD J. BRESSLER
                                                       ------------------------
                                                       Howard J. Bressler
                                                       Secretary

                                      -2-
<PAGE>   37

                               [SERVICE AREA MAP]<PAGE>   1
                                                                   EXHIBIT 10.21

                                                                APO Draft 5-82
                                                                APO Revised 9-82
                                                                RO Revised 10-82
                                                                RO Revised 11-82
                                                                RO Revised 02-83
                                                                RO Revised 03-83

                                                      Contract No. 5-07-30-W0068

                                 UNITED STATES
                           DEPARTMENT OF THE INTERIOR
                             BUREAU OF RECLAMATION

                   CONTRACT BETWEEN THE UNITED STATES AND THE
                          CHAPARRAL CITY WATER COMPANY

                     PROVIDING FOR CONSTRUCTION OF A WATER
                              DISTRIBUTION SYSTEM

                            CENTRAL ARIZONA PROJECT
<TABLE>
<CAPTION>

Article                             Title                                  Page
-------                             -----                                  ----
<C>       <S>                                                              <C>
   1      Preamble........................................................   1
   2      Explanatory Recitals............................................   1
   3      Definitions.....................................................   3
   4      Construction of Distribution System and Limit of
            Expenditures Therefor.........................................   5
   5      Mitigation......................................................   8
   6      Termination.....................................................   9
   7      Construction Management Support Services Provided by
            Contractor....................................................  10
   8      Declaration of Completion.......................................  10
   9      Repayment by Contractor.........................................  11
  10      Operation and Maintenance of Transferred Works--Payment
            of Miscellaneous Costs........................................  13
  11      Examination and Inspection of Project Works for Determining
            Adequacy of Operation and Maintenance Program.................  15
  12      Reserve Fund....................................................  16
  13      General Obligation--Benefits Conditioned Upon Payment...........  17
  14      Quality of Water................................................  18
  15      Water and Air Pollution Control.................................  18
  16      Books, Records, and Reports.....................................  18
  17      Rules, Regulations, and Determinations..........................  18
  18      Notices.........................................................  19
  19      Equal Opportunity...............................................  19
  20      Title VI, Civil Rights Act of 1964..............................  20
  21      Charge for Late Payments........................................  21
  22      Contingent on Appropriation or Allotment of Funds...............  21
  23      Assignment Limited--Successors and Assigns Obligated............  21
  24      Officials Not to Benefit........................................  21
  25      Changes in Contractor's Organization............................  22
  26      Administration of Project Lands.................................  22
  27      Confirmation of Contract........................................  22
          Signatory Page..................................................  23
</TABLE>
<PAGE>   2
Repayment Contract                                                 EXHIBIT 10.21

                                                                APO Draft 5-82
                                                                APO Revised 9-82
                                                                RO Revised 10-82
                                                                RO Revised 11-82
                                                                RO Revised 02-83
                                                                RO Revised 03-83

                                                      Contract No. 5-07-30-W0068

                                 UNITED STATES
                           DEPARTMENT OF THE INTERIOR
                             BUREAU OF RECLAMATION

                   CONTRACT BETWEEN THE UNITED STATES AND THE
                          CHAPARRAL CITY WATER COMPANY

                     PROVIDING FOR CONSTRUCTION OF A WATER
                              DISTRIBUTION SYSTEM

                            CENTRAL ARIZONA PROJECT

                                    Preamble

     1.   THIS CONTRACT, made this 6th day of December, 1984, in pursuance
generally of the Reclamation Act of June 17, 1902 (32 Stat. 388), and acts
amendatory thereof or supplementary thereto, including but not limited to the
Reclamation Project Act of August 4, 1939 (53 Stat. 1187), as amended, and the
Colorado River Basin Project Act of August 4, 1939 (53 Stat. 1187), as amended,
and the Colorado River Basin Project Act of September 30, 1968 (82 Stat. 885),
as amended on December 20, 1982, hereinafter referred to as the "Basin Project
Act," all collectively hereinafter referred to as the "Federal Reclamation
Laws," between the UNITED STATES OF AMERICA, hereinafter referred to as the
"United States," acting through the Secretary of the Interior, and the
CHAPARRAL CITY WATER COMPANY, hereinafter referred to as the "Contractor,"
organized under the laws of Arizona, with its principal place of business in
Fountain Hills, Arizona;

          WITNESSETH, THAT:

                              Explanatory Recitals

     2.   WHEREAS, the Basin Project Act provides, among other things, that for
the purposes of furnishing irrigation and municipal and industrial water
supplies to water deficient areas of Arizona and western New Mexico

<PAGE>   3
through direct diversion or exchange of water, for control of floods,
conservation and development of fish and wildlife resources, enhancement of
recreation opportunities, and for other purposes, the Secretary of the Interior
shall construct, operate, and maintain the Central Arizona Project; and

     WHEREAS, on December 6, 1984, the United States, the Contractor, and the
Central Arizona Water Conservation District entered into a water service
subcontract, which provides for the delivery of Central Arizona Project water to
the Contractor; and

     WHEREAS, in order to utilize the water supply made available under the
aforesaid subcontract to irrigate eligible lands and/or for municipal,
industrial, and domestic purposes, the Contractor desires that the United
States construct a distribution system; and

     WHEREAS, Section 309(b) of the Basin Project Act authorizes the
appropriation of Federal funds for construction of distribution and drainage
facilities for non-Indian lands and directs the Secretary to enter into
agreements with the non-Federal interests which require the non-Federal
interests to provide not less than 20 percent of the total cost of such
facilities during the construction of such facilities; and

     WHEREAS, the Contractor has submitted to the Secretary of the Interior a
report in acceptable form, entitled "Engineering Report for Construction of a
Water Distribution System," dated April 1984, herein styled "proposal," setting
forth a distribution system plan and estimated cost in detail comparable to
those included in preauthorization reports required for a Federal Reclamation
Project; and

                                       2
<PAGE>   4
          WHEREAS, on February 22, 1984, the Contractor entered into a
Memorandum of Understanding with the United States, hereinafter styled "MOU,"
providing for repayment of certain costs incurred by the United States in
connection with the development of plans and designs and specifications for the
distribution system prior to execution and validation of a repayment contract;
and

          WHEREAS, the United States is willing to undertake the construction of
the distribution system as described in the proposal under the conditions
hereinafter set forth;

          NOW THEREFORE, in consideration of the covenants herein contained, it
is agreed as follows:

                                  DEFINITIONS

     3.   When used herein, unless otherwise distinctly expressed or manifestly
incompatible with the intent thereof, the term:

          (a)  "Secretary" or "Contracting Officer" shall mean the Secretary of
the Interior of the United States or his duly authorized representative;

          (b)  "Central Arizona Water Conservation District" shall mean the
water conservation district, organized under the laws of Arizona, which is
responsible for repayment of reimbursable Central Arizona Project costs
allocable thereto, pursuant to Contract No. 14-06-W-245, dated December 15,
1972, between the United States and the district;

          (c)  "Central Arizona Project" shall mean the project works
authorized by Section 301(a) of the Basin Project Act and constructed by the
United States pursuant to the provisions of said Act;

                                       3
<PAGE>   5
     (d)  "Distribution system" or "project" shall mean and include the
undertaking for construction set forth in the proposal, and shown on a map
designated Exhibit "A" which is attached hereto and expressly made a part of
this contract, including any modifications therein pursuant to the provisions
of Subarticle 4(f);

     (e)  "Project works" shall mean and include all works and facilities
constructed in accordance with the plan set forth in the proposal and including
any modifications therein pursuant to the provisions of Subarticle 4(f),
together with land, interests in land, and rights-of-way for such works and
facilities;

     (f)  "Year" shall mean the calendar year;

     (g)  "Agricultural water" shall mean water used on irrigable lands
primarily in the commercial production of agricultural crops or livestock,
including domestic use incidental thereto, on tracts of land operated in units
of more than 5 acres;

     (h)  "Municipal, industrial, and domestic water," herein referred to as
"M&I water," shall mean water delivered by means of the project works and not
used as agricultural water;

     (i)  "Repayment obligation" shall mean the total amount of money repayable
to the United States by the Contractor under the terms of this contract;

     (j)  "Contractor's service area" shall mean the area of land within the
exterior boundaries of the Contractor as shown on Exhibit "A".

                                       4
<PAGE>   6
                Construction of Distribution System and Limit of
                             Expenditures Therefor

     4. (a) Subject to the terms and conditions of this contract, the United
States will undertake the construction of the project as described in the
proposal, or as modified pursuant to Subarticle 4(f), including but not limited
to preparation of final planning and environmental documentation, issuance of
specifications, awarding of construction contracts, and acquiring and
withdrawing lands as necessary for project purposes. The total cost of the
project, including allowances for price escalation, is $4,115,000, plus interest
during construction, based on estimated construction expenditures of $3,292,000
by the United States and estimated contributions by the Contractor of $823,000.
Subject to the provisions of Article 22, the United States will expend toward
construction of the project, exclusive of interest during construction, funds
not to exceed $3,292,000.

       (b) The Contractor shall contribute no less than 20 percent of the total
cost of the project during the construction period. Contributions by the
Contractor, in the form of cash and/or goods and services, will be provided as
scheduled in the proposal and as deemed necessary by the Contracting Officer to
supplement Federal funding. If the project cannot be completed with the
aforesaid Federal funds and contributions, the Contractor will provide to the
United States the additional contributions necessary to complete the project as
provided herein. The additional contributions may be in the form of cash and/or
goods and services. All contributions of goods and services shall be subject to
prior approval of the Contracting Officer.

                                       5
<PAGE>   7

              (c) The obligations of the United States under this contract shall
be contingent upon the Contractor establishing a line of credit of not less than
$200,000 for the purpose of financing any cost overruns. If the Contracting
Officer determines that the project cannot be completed within the total project
cost specified in Subarticle 4(a), the Contracting Officer shall so advise the
Contractor by written notice. The notice shall specify the estimated amount of
the cost overrun, show when the additional funds will be required, and direct
the Contractor to proceed with the procurement of funds to meet the schedule,
and the Contractor shall forthwith secure the required amount of funds. In the
event the $200,000 line of credit authorization will not, as determined by the
Contracting Officer, be required to fund cost overruns, with the prior approval
of the Contracting Officer, the Contractor may use said line of credit for other
authorized purposes.

              (d) The Federal cost of the project shall include all expenditures
by the United States of whatsoever kind in connection with, arising out of, or
resulting from the construction and operation and maintenance during
construction of the project and the performance of said work, including but not
limited to: interest during construction on costs allocated to the M&I water
supply function as provided in Subarticle 4(e); the costs incurred by the United
States pursuant to the aforesaid MOU; the costs of labor, material, equipment,
engineering and legal work; the cost of superintendence, administration and
overhead, rights-of-way, property, and damage of any kind; all sums expended in
surveys and investigations in connection with the project, both prior to and
after the execution of this

                                       6
<PAGE>   8

contract; and the cost of all soil investigations and other preliminary work.
The determination of what costs are properly chargeable and the amount thereof
shall be made by the Contracting Officer after such consultation with the
Contractor as the Contracting Officer determines to be appropriate.

        (e) Interest during construction shall be computed as follows: Compound
interest at the rate of 3.342 percent per annum will be computed and accrued
from the date of expenditure of Federal funds for construction to the date of
notice of completion on that portion of the Federal expenditures which is
allocable to M&I water supply purposes based upon the ratio of the estimated
quantity of water to be delivered for M&I water purposes through the project
works during the entire repayment period to the total estimated quantity of
water to be delivered for all purposes through the project works during said
period, said ratio expressed as a decimal being 1.00. The interest so computed
shall be included as part of the repayment obligation to be repaid pursuant to
the schedule included in Subarticle 9(c). The amount of M&I water furnished
during the repayment period from project works shall be metered, or measured by
such other means as may be established by the Contracting Officer. During
project construction, the United States shall install metering devices in
consultation with the Contractor to determine the quantity of M&I water
deliveries by and the through the project works. The cost of such metering
devices shall be a part of the repayment obligation to be repaid to the United
States in accordance with Article 9. During periods when the Contractor is
operating and maintaining the project works, the installation

                                       7
<PAGE>   9
and cost of metering devices shall be the responsibility of the Contractor. The
Contractor shall care for, operate, and maintain all such metering devices in
accordance with the provisions of Article 10. The Contracting Officer and his
representatives shall be allowed access at all times to all metering devices.

            (f) If the Contracting Officer determines changes in location, size,
or capacity of any of the project works to be expedient, economical, necessary,
or advisable, during the progress of the work, the Contracting Officer may,
after consultation with the Contractor, make such changes to the extent that
such changes do not substantially change the basic character or service
capability of the project.

                                   Mitigation

      5. (a) If the Contractor is contributing proposed designs, plans, and
specifications as part of its contributions toward the project pursuant to
Subarticles 4(a) and 4(b), the Contractor shall incorporate in such designs,
plans, and specifications, the environmental measures specified in the
environmental clearance documents associated with this contract (the
Environmental Impact Statement on Water Allocations and Water Service
Contracting, Central Arizona Project, dated March 19, 1982, and the supporting
National Environmental Policy Act Compliance Checklist dated September 19,
1984). Except as provided in Subarticle 5(b), all construction costs properly
allocable to mitigation shall be included in the Contractor's repayment
obligation and be repaid in accordance with the provisions of Article 9.

            (b) The Contracting Officer, with the cooperation of the Contractor,
shall conduct cultural resource surveys and perform mitigation

                                       8
<PAGE>   10
measures on sites that would be disturbed by construction of the project works.
The cost of such cultural surveys and cultural resource site mitigation
measures shall be nonreimbursable in accordance with the Historical and
Archeological Data Act of June 27, 1960 (74 Stat. 220), as amended; Provided,
however, That the nonreimbursable costs for such surveys and mitigation
measures shall not exceed 1 percent of the total amount authorized to be
appropriated for construction of the project works.

                                  Termination

     6. (a) The United States reserves the right to terminate this contract no
later than 60 days after the first major construction contract bid opening, as
determined by the Contracting Officer, by written notice thereof to Contractor
if:

            (1) The least cost construction contract bid that is acceptable to
the Contracting Officer exceeds the estimate of construction cost contained in
the approved proposal to such an extent that, as determined solely by the
Contracting Officer after consultation with the Contractor, it appears unlikely
that the project can be completed within the total project cost specified in
Subarticle 4(a) and the amount of the line of credit authorized for cost
overruns pursuant to Subarticle 4(c); or

            (2) The Contractor has not made arrangements to secure non-Federal
funding to finance its contributions as specified in Subarticles 4(a) and 4(b)
on a schedule compatible with Federal funding or anticipated Federal funding.

        (b) If the contract is terminated for either of the above reasons, the
costs incurred by the United States pursuant to this contract shall be repaid
to the United States by the Contractor pursuant to a bill

                                       9
<PAGE>   11
for collection or a repayment schedule furnished by the Contracting Officer to
the Contractor after consultation with the Contractor. The termination of this
contract shall not relieve the Contractor of the responsibility to repay any
such costs to the United States. The provisions of Article 21 shall apply in
the case of any late payments.

        Construction Management Support Services Provided By Contractor

     7.   In the event that the Contractor's contributions toward the project
pursuant to Subarticles 4(a) and 4(b) include construction management support
services, the following shall apply:

          (a)  Construction management support services provided by the
Contractor shall be performed in accordance with Federal procurement
regulations.

          (b)  The Contractor shall prepare and furnish to the Contracting
Officer, at such intervals as the Contracting Officer may designate, but at
least once each month, written reports fully describing the progress and cost
of work scheduled and performed. Said reports shall be prepared in such form
and in such manner as the Contracting Officer may from time to time prescribe.

          (c)  The Contractor may utilize in connection with construction
management support services such independent, expert, consulting, or
supervisory services as the Contractor may deem necessary, and the reasonable
cost of such services shall be considered a contribution of the Contractor
towards the project.

                           Declaration of Completion

     8.   Upon substantial completion of the project or such part thereof as
the Federal funds and Contractor's contributions will allow, or at such

                                       10
<PAGE>   12
time as the benefits from the project are substantially available to Contractor,
whichever first occurs, all as determined by the Contracting Officer, the United
States shall give the Contractor written notice of completion of the project,
including a statement of the total estimated or actual repayment obligation.

                            Repayment by Contractor

      9.    (a) The Contractor is obligated for and shall repay to the United
States, on account of construction and operation and maintenance during
construction by the United States, all costs of the project works funded by the
United States (which are determined by the Contracting Officer to be allocable
to the Contractor) in accordance with the provisions of this contract. The
Contractor shall be obligated to repay the United States the actual cost of
construction and operation and maintenance during construction incurred by the
United States, but not exceeding $3,292,000 as specified in Subarticle 4(a),
plus interest during construction.

            (b) The Contractor shall repay to the United States the amount of
the repayment obligation in not to exceed 40 successive semiannual principal
installments, plus interest at the rate of 3.342 percent per annum on 100
percent of the repayment obligation outstanding on the payment date. The first
payment shall become due and payable on February 1 of the year following that in
which the United States gives the Contractor notice of completion, and shall
include all interest accruing during the period from date of issuance of the
notice of completion through the January 31 immediately preceding the initial
payment date. Subsequent semiannual

                                       11
<PAGE>   13
payments shall become due and payable on August 1 of that year and on
February 1 and August 1 of each succeeding year until such time as the repayment
obligation has been fully repaid and shall include all interest for the 6-month
period ending January 31 or July 31 immediately preceding the payment dates. The
interest payments shall be in addition to the principal payments to be made
pursuant to the repayment schedule contained in subarticle (c) hereof. With each
semiannual payment due and payable on February 1, the Contractor shall submit a
written report to the Contracting Officer showing the actual deliveries of M&I
water through the project works during the preceding year.

     (c) Unless and until modified as hereinafter provided, the Contractor's
repayment schedule shall be based upon an estimated obligation of $3,347,000
(including estimated interest during construction). The repayment schedule is
as follows:
<TABLE>
<CAPTION>
  Semiannual                                    Semiannual
   Payment                Payment                Payment            Payment
  ----------             ----------            -----------          ---------
  <S>                    <C>                   <C>                  <C>
       1                 $     0                   21               $ 83,500
       2                       0                   22                 83,500
       3                   8,500                   23                 93,000
       4                   8,500                   24                 93,000
       5                  17,000                   25                103,000
       6                  17,000                   26                103,000
       7                  25,000                   27                113,000
       8                  25,000                   28                113,000
       9                  32,500                   29                123,500
      10                  32,500                   30                123,500
      11                  40,500                   31                134,500
      12                  40,500                   32                134,500
      13                  48,500                   33                145,500
      14                  48,500                   34                145,500
      15                  57,000                   35                157,500
      16                  57,000                   36                169,000
      17                  65,000                   37                169,000
      18                  65,000                   38                182,000
      19                  74,500                   39                182,500
      20                  74,500                   40                182,500
</TABLE>

                                       12

<PAGE>   14

              (d) The estimated repayment obligation shall be considered as the
amount of the repayment obligation until such time as revision is determined
necessary by the Contracting Officer after consultation with the Contractor or
such time as the actual repayment obligation is established, and payments shall
be made to the United States on the basis of such estimate. If the revised or
actual repayment obligation is less than the estimated repayment obligation, the
amount of each payment shall be in the amount and order as provided therein
until the obligation is repaid in full. The effect of this procedure shall be to
reduce the length of the repayment period.

              (e) The Contractor shall take all actions necessary to ensure that
required rate increases will be implemented which, together with revenues from
the sale of water and such other revenues as may be available to the Contractor,
shall provide sufficient revenues to meet its obligations under this contract
and to make in full all payments to the United States on or before the dates
such payments become due. The Contracting Officer shall have the right to seek
to compel by mandamus, and/or any other appropriate action in a court of law,
the performance by the Contractor and by any and all other State, county, and
Contractor officials of the foregoing obligation.

                    Operation and Maintenance of Transferred
                    Works -- Payment of Miscellaneous Costs

          10. (a) Upon substantial completion of the project works, or as
otherwise determined by the Contracting Officer, and following written
notification, the care, operation, and maintenance of any or all of the project
works shall be transferred to the Contractor. Title of such transferred works
will remain in the name of the United States.

              (b) The Contractor, without expense to the United States, shall
care for, operate, and maintain such transferred works in full compliance with
the terms of this contract, and in such manner that said transferred works will
remain in good and efficient condition.

                                        13

<PAGE>   15
     (c)  Necessary repairs of the transferred works shall be made promptly by
the Contractor. In case of unusual conditions or serious deficiencies in the
care, operation, and maintenance of the transferred works threatening or
causing interruption of service, as determined by the Contracting Officer, the
Contracting Officer may issue to the Contractor a special written notice of the
necessary repairs. Within 60 days of receipt of such notice, the Contractor
shall either make the repairs or submit an acceptable plan for accomplishing
the work. If the Contractor fails to meet the conditions stated above, the
Contracting Officer may cause the repairs to be made and the cost thereof shall
be paid by the Contractor as directed by the Contracting Officer.

     (d)  No substantial change shall be made or encroachment allowed by the
Contractor to any of the transferred works or on rights-of-way for such works,
without first obtaining the consent of the Contracting Officer.

     (e)  The Contractor shall hold the United States, its officers, agents,
and employees harmless as to any and all damages which may, in any manner,
result from the care, operation; and maintenance of any of the project works
transferred to the Contractor.

     (f)  In the event the Contracting Officer determines that the Contractor
is operating the transferred works or any part thereof in violation of this
contract, the United States may take over from the Contractor the care,
operation and maintenance of the transferred works by giving written notice to
the Contractor of such election and the effective date thereof. Thereafter,
during the period of operation by the United States, upon written notification
from the Contracting Officer, the

                                       14

<PAGE>   16
Contractor shall pay to the United States, annually in advance, the cost of
operation and maintenance of such works as determined by the Contracting
Officer. If the Contractor holds title to ground-water wells which are being
used by the Contractor to supply water to lands in the Contractor's service area
at the time of such takeover of care, operation, and maintenance by the United
States, the Contractor shall continue to operate and maintain such wells to as
to help satisfy, to the greatest extent possible, the reasonable water
requirements of its water users. Following written notification from the
Contracting Officer, the care, operation, and maintenance of the works may be
retransferred to the Contractor.

            (g) In addition to all other payments to be made by the Contractor
under this contract, the Contractor shall, during the period of time any or all
of the project works are being operated, pay the United States, following the
receipt of a detailed statement, miscellaneous costs incurred by the United
States for unusual work involved in the administration and supervision of this
contract.

          Examination and Inspection of Project Works for Determining
                 Adequacy of Operation and Maintenance Program

      11.   (a) The Contracting Officer may, from time to time, make
examinations and evaluations of project works being operated by the Contractor
with a view to assisting the Contractor in determining the condition of the
works and the adequacy of the operation and maintenance program. The
examinations and evaluations may include any or all of the project works which
were constructed by the United States and transferred to the Contractor or
project works which were constructed by the Contractor with funds advanced or
reimbursed by the United States. Reports of the examinations and evaluations,
including recommendations, will be prepared and copies will be furnished to the
Contractor. The examinations and evaluations will be without cost to the
Contractor, except for such costs incurred by the Contractor and/or its agents
to provide access, to operate any mechanical or electrical equipment, or to
answer questions.

            (b) If deemed necessary by the Contracting Officer or requested by
the Contractor, special inspections of any project works being operated by the
Contractor, and of the Contractor's books and records may be made to ascertain
the extent of any operation and maintenance deficiencies, to

                                       15

<PAGE>   17
determine the remedial measures required for their correction, and to assist
the Contractor in solving specific problems. Any special inspection or audit,
except in a cost of emergency, shall be made after written notice to the
Contractor and the actual cost incurred by the United States shall be
reimbursed by the Contractor to the United States.

          (c) The State of  Arizona shall be provided an opportunity to observe
and participate, at its own expense, in the examinations and inspections. The
Contractor and the State of Arizona will be provided copies of reports and
recommendations relating to such examinations and inspections.

                                  Reserve Fund

      12. (a) Commencing with execution of this contract, the Contractor shall
accumulate and maintain a reserve fund that will be available to cover
unforeseen extraordinary costs as provided in Subarticle 12(d). Such reserve
fund shall be accumulated by the Contractor with annual deposits or investments
of not less than $3,660 to a Federally insured interest- or dividend-bearing
account, or in securities guaranteed by the Federal Government; Provided, That
a reasonable amount of time shall be allowed to make the money in the reserve
fund available to meet the expenses for the purpose for which it was
accumulated. Such annual deposits and accumulation of interest to the reserve
fund shall continue until the basic amount of $53,000 is accumulated.
Thereafter, the annual deposits may be discontinued and the interest earnings
shall continue to accumulate and be retained as part of an expanding reserve
fund.

          (b) Upon mutual agreement between the Contractor and the Contracting
Officer, the reserve fund and the annual installments may be adjusted to
reflect adequacy or inadequacy of the accumulated fund with respect to risk and
uncertainty stemming from the size and complexity of the project, size of the
annual operation and maintenance budget, addition, deletion or changes in
project works and operation and maintenance costs not contemplated when this
contract was executed. If the total fund requirement and annual installments
are adjusted downward, the excess increment of the fund, and the difference
between the annual deposit required by this article and the newly adjusted
deposit requirement shall

                                       16
<PAGE>   18
be applied toward accelerated repayment of the Contractor's repayment
obligation to the United States.

          (c)  Whenever the reserve fund exceeds the basic amount specified
above, the excess annual reserve fund deposit not required shall be applied each
year toward accelerated repayment of the Contractor's obligation under this
contract.

          (d)  Expenditures shall be made from such reserve fund only for
meeting unforeseen extraordinary costs of operation and maintenance, repair or
replacement, betterment in situations where recurrence of severe problems can be
eliminated, and unusual operation and maintenance costs during periods of
special stress such as may be caused by drought, hurricane, storms, or other
like emergencies. Proposed expenditures from the said fund shall have the prior
review and approval of the Contracting Officer. Whenever said reserve fund is
reduced below the current balance by expenditures therefrom, the current balance
shall be restored by the accumulation of annual deposits, as specified above,
commencing with the next year following that in which the fund is reduced.

          (e)  During any period in which any of the project works are operated
and maintained by the United States, the reserve fund shall be available for
like use by the United States.

          (f)  On or before February 1 of each year, the Contractor shall
provide an annual statement of the balance and composition (principal and
accumulated interest) of the reserve fund account to the Contracting Officer.

                         General Obligation -- Benefits
                            Conditioned Upon Payment

     13.  (a)  The obligation of the Contractor to pay the United States as
provided in this contract is a general obligation of the Contractor
notwithstanding the manner in which the obligation may be distributed among the
Contractor's water users and notwithstanding the default of individual water
users in their obligations to the Contractor.

          (b)  The payment of charges becoming due hereunder is a condition
precedent to receiving benefits under this contract. No water will be made
available to the Contractor through project facilities during any period in
which the Contractor may be in arrears in the advance payment of any operation
and maintenance charges due the United States or in arrears for more than 12
months in the payment of any construction charges due the United States. The
Contractor shall not furnish water made available pursuant to this contract for
lands or parties which are in arrears in the advance payment of operation and
maintenance or toll charges or in arrears more than 12 months in the payment of
construction charges as levied or established by the Contractor.

                                       17
<PAGE>   19
                                Quality of Water

     14.  The operation and maintenance of project facilities shall be
performed in such manner as is practicable to maintain the quality of raw water
made available through such facilities at the highest level reasonably
attainable as determined by the Contracting Officer. The United States does not
warrant the quality of water and is under no obligation to construct or furnish
water treatment facilities to maintain or better the quality of water.

                        Water and Air Pollution Control

     15.  The Contractor, in carrying out this contract, shall comply with all
applicable water and air pollution laws and regulations of the United States
and the State of Arizona and shall obtain all required permits or licenses from
the appropriate Federal, State or local authorities.

                          Books, Records, and Reports

     16.  The Contractor shall establish and maintain accounts and other books
and records pertaining to its financial transactions, land use and crop census,
water supply, water use, changes of project works, and to other matters as the
Contracting Officer may require. Reports thereon shall be furnished to the
Contracting Officer in such form and on such date or dates as he may require.
Subject to applicable Federal laws and regulations, each party shall have the
right during office hours to examine and make copies of each other's books and
records relating to matters covered by this contract.

                     Rules, Regulations, and Determinations

     17.  (a)  The Contracting Officer shall have the right to make, after an
opportunity has been offered to the Contractor for consultation, rules and
regulations consistent with the provisions of this contract, the laws of the
United States and the State of Arizona, to add to or to modify them as may be
deemed proper and necessary to carry out this contract, and to supply necessary
details of its administration which are not covered by express provisions of
this contract. The Contractor shall observe such rules and regulations.

          (b)  Where the terms of this contract provide for action to be based
upon the opinion or determination of either party to this contract, whether or
not stated to be conclusive, said terms shall not be construed as permitting
such action to be predicated upon arbitrary, capricious, or unreasonable
opinions or determinations. In the event that the Contractor questions any
factual determinations made by the Contracting Officer, the findings as to
the facts shall be made by the Secretary only after consultation with the
Contractor and shall be conclusive upon the parties.

                                       18

<PAGE>   20

                                    Notices

     18.  Any notice, demand, or request authorized or required by this
contract shall be deemed to have been given, on behalf of the Contractor, when
mailed, postage prepaid, or delivered to the Regional Director, Lower Colorado
Region, Bureau of Reclamation, P.O. Box 427, Boulder City, Nevada 89005, and on
behalf of the United States, when mailed, postage prepaid, or delivered to the
President, Chaparral City Water Company, P.O. Box 17030, Fountain Hills,
Arizona 85268. The designation of the addressee or the address may be changed
by notice given in the same manner as provided in this article for other
notices.

                               Equal Opportunity

     19.  During the performance of this contract, the Contractor agrees as
follows:

          (a) The Contractor will not discriminate against any employee or
applicant for employment because of race, color, religion, sex, or national
origin. The Contractor will take affirmative action to ensure that applicants
are employed, and that employees are treated during employment, without regard
to their race, color, religion, sex, or national origin. Such action shall
include, but not be limited to the following: employment, upgrading, demotion,
or transfer; recruitment or recruitment advertising; layoff or termination;
rates of pay or other forms of compensation; and selection for training,
including apprenticeship. The Contractor agrees to post in conspicuous places,
available to employees and applicants for employment, notices to be provided by
the Contracting Officer setting forth the provisions of this nondiscrimination
clause.

          (b) The Contractor will, in all solicitations or advertisements for
employees placed by or on behalf of the Contractor, state that all qualified
applicants will receive consideration for employment without discrimination
because of race, color, religion, sex, or national origin.

          (c) The Contractor will send to each labor union or representative of
workers with which it has a collective bargaining agreement or other contract or
understanding, a notice, to be provided by the Contracting Officer, advising
said labor union or workers' representative of the Contractor's commitments
under Section 202 of Executive Order 11246 of September 24, 1965, and shall post
copies of the notice in conspicuous places available to employees and applicants
for employment.

          (d) The Contractor will comply with all provisions of Executive Order
No. 11246 of September 24, 1965, as amended, and of the rules, regulations, and
relevant orders of the Secretary of Labor.

          (e) The Contractor will furnish all information and reports required
by said amended Executive Order and by the rules, regulations, and orders of
the Secretary of Labor, or pursuant thereto, and will permit

                                       19
<PAGE>   21
access to its books, records, and accounts by the Contracting Officer and the
Secretary of Labor for purposes of investigation to ascertain compliance with
such rules, regulations, and orders.

            (f) In the event of the Contractor's noncompliance with the
nondiscrimination clauses of this contract or with any of such rules,
regulations, or orders, this contract may be canceled, terminated, or suspended,
in whole or in part, and the Contractor may be declared ineligible for further
Government contracts in accordance with procedures authorized in said amended
Executive Order, and such other sanctions may be imposed and remedies invoked as
provided in said Executive Order, or by rule, regulation, or order of the
Secretary of Labor, or as otherwise provided by law.

            (g) The Contractor will include the provisions of paragraph (a)
through (g) in every subcontract or purchase order unless exempted by rules,
regulations, or orders of the Secretary of Labor issued pursuant to Section 204
of said amended Executive Order, so that such provisions will be binding upon
each subcontractor or vendor. The Contractor will take such action with respect
to any subcontract or purchase order as may be directed by the Secretary of
Labor as means of enforcing such provisions, including sanctions for
noncompliance; Provided, however, that in the event the Contractor becomes
involved in, or is threatened with, litigation with a subcontractor or vendor
as a result of such direction, the Contractor may request the United States to
enter into such litigation to protect the interests of the United States.

                       Title VI, Civil Rights Act of 1964

      20.   (a) The Contractor agrees that it will comply with Title VI of the
Civil Rights Act of July 2, 1964 (78 Stat. 241), and all requirements imposed by
or pursuant to the Department of the Interior Regulation (43 CFR 17) issued
pursuant to that title, to the end that, in accordance with Title VI of that Act
and the Regulation, no person in the United States shall, on the grounds of
race, color, or national origin be excluded from participation in, be denied the
benefits of, or be otherwise subjected to discrimination under any program or
activity for which the Contractor receives financial assistance from the United
States and hereby gives assurance that it will immediately take any measures to
effectuate this agreement.

            (b) If any real property or structure thereon is provided or
improved with the aid of Federal financial assistance extended to the
Contractor by the United States, this assurance obligates the Contractor, or in
the case of any transfer of such property, any transferee for the period during
which the real property or structure is used for a purpose involving the
provision of similar services or benefits. If any personal property is so
provided, this assurance obligates the contractor for the period during which
it retains ownership or possession of the property. In all other cases, this
assurance obligates the Contractor for the period during which the Federal
financial assistance is extended to it by the United States.

                                       20
<PAGE>   22
          (c)  This assurance is given in consideration of and for the purpose
of obtaining any and all Federal grants, loans, contracts, property, discounts,
or other Federal financial assistance extended after the date hereof to the
Contractor by the United States, including installment payments after such date
on account of arrangements for Federal financial assistance which were approved
before such date. The Contractor recognizes and agrees that such Federal
financial assistance will be extended in reliance on the representations and
agreements made in this assurance, and that the United States shall reserve the
right to seek judicial enforcement of this assurance. This assurance is binding
on the Contractor, its successors, transferees, and assignees.

                            Charge for Late Payments

     21.  The Contractor shall pay a late payment charge on installments or
charges which are received after the due date. the late payment charge
percentage rate calculated by the Department of the Treasury and published
quarterly in the Federal Register shall be used; Provided, That the late payment
charge percentage rate will not be less than 0.5 percent per month. The late
payment charge percentage rate applied on an overdue payment will remain in
effect until payment is received. The late payment rate for a 30-day period will
be determined on the day immediately following the due date and will be applied
to the overdue payment for any portion of the 30-day period of delinquency. In
the case of partial late payments, the amount received will first be applied to
the late charge on the overdue payment and then to the overdue payment.

               Contingent on Appropriation or Allotment of Funds

     22.  The expenditure or advance of any money or the performance of any
work by the United States hereunder which may require appropriation of money by
the Congress or the allotment of funds shall be contingent upon such
appropriation or allotment being made. The failure of the Congress to
appropriate funds or the absence of any allotment of funds shall not relieve
the Contractor from any obligations under this contract. No liability shall
accrue to the United States in case such funds are not appropriated or allotted.

              Assignment Limited--Successors and Assigns Obligated

     23.  The provisions of this contract shall apply to and bind the
successors and assigns of the parties hereto, but no assignment or transfer of
this contract or any part or interest therein shall be valid until approved by
the Contracting Officer.

                            Officials Not to Benefit

     24.  (a)  No member of or Delegate to Congress or Resident Commissioner
shall be admitted to any share or part of this contract or to any benefit that
may rise herefrom. This restriction shall not be construed to extend to this
contract if made with a corporation or company for its general benefit.

                                       21
<PAGE>   23
          (b)  No official of the Contractor shall receive any benefit that may
arise by reason of this contract other than as a water user within the project
and in the same manner as other water users within the project.

                      Changes in Contractor's Organization

     25.  While this contract is in effect, no change shall be made in the
Contractor's organization, by inclusion or exclusion of lands, by dissolution,
consolidation, merger or otherwise, except upon the Contracting Officer's
written consent.

                        Administration of Project Lands

     26.  The land and rights-of-way acquired and needed by the United States
for the purposes of care, operation, and maintenance of project works may be
used by the Contractor for such purposes. The Contractor shall not issue
rights-of-way across project land, issue land rights to project lands, or issue
leases, licenses, permits, or special use agreements involving project land,
rights-of-way, or transferred works. All such land use instruments may be
issued only by the Contracting Officer. Lands and rights-of-way withdrawn or
acquired primarily for, or later determined to be used or, recreation, fish and
wildlife enhancement or mitigation, or other special purposes, shall be
reserved primarily for those purposes; any other land or rights-of-way use
shall be secondary in nature and compatible with said recreation, fish and
wildlife, or special purpose uses.

                            Confirmation of Contract

     27.  Upon the execution of this contract, the Contractor shall promptly
seek a final decree of a court of competent jurisdiction of the State of
Arizona approving and confirming the contract and decreeing and adjudging it to
be lawful, valid, and binding on the Contractor. The Contractor shall furnish
to the United States a certified copy of such

                                       22
<PAGE>   24
decree and of all pertinent supporting records. This contract shall not be
binding on the United States or the Contractor until such final decree has been
entered.

      IN WITNESS WHEREOF, the parties hereto have executed this Contract No.
5-07-30-W0068 the day and year first above written.

Legal Review and Approval                 THE UNITED STATES OF AMERICA

By: /s/ [SIGNATURE ILLEGIBLE]             By: /s/ [SIGNATURE ILLEGIBLE]
   ----------------------------------        ----------------------------------
    Field Solicitor, Phoenix, Arizona         Regional Director
                                              Lower Colorado Region
                                              Bureau of Reclamation

                                          CHAPARRAL CITY WATER COMPANY
                                          -------------------------------------

ATTEST:

/s/ HOWARD J. BRESSLER                    By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------        ----------------------------------
Secretary
                                          Title  President
                                               --------------------------------

                                       23

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