-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QYdyptxwqVkfCWLYP79HGOjxYfr0jD/R3X1eLKaDF2rHXdef49+483kPsP8bRAQ+ 4sNeYZp6/CiRXnzeQmO3sw== 0000936392-97-000587.txt : 19970502 0000936392-97-000587.hdr.sgml : 19970502 ACCESSION NUMBER: 0000936392-97-000587 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970430 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PICO HOLDINGS INC /NEW CENTRAL INDEX KEY: 0000830122 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 942723335 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-18786 FILM NUMBER: 97592369 BUSINESS ADDRESS: STREET 1: 875 PROSPECT STREET STREET 2: SUITE 301 CITY: LA JOLLA STATE: CA ZIP: 92037 BUSINESS PHONE: 619-456-6022 MAIL ADDRESS: STREET 1: ONE ALMADEN BLVD STREET 2: STE 300 CITY: SAN JOSE STATE: CA ZIP: 95113-2213 FORMER COMPANY: FORMER CONFORMED NAME: CITATION INSURANCE GROUP DATE OF NAME CHANGE: 19940527 10-K/A 1 FORM 10-K AMENDMENT #1 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________ FORM 10-K/A (Mark One) AMENDMENT NO. 1 TO [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission File Number 0-18786 PICO HOLDINGS, INC. (Exact name of registrant as specified in its charter) California 94-2723335 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 875 Prospect Street, Suite 301 La Jolla, California 92037 (Address of principal executive offices) Registrant's telephone number, including area code (619) 456-6022 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III or this Form 10-K or any amendment to this Form 10-K. [ ] Approximate aggregate market value of the registrant's Common Stock held by nonaffiliates of the registrant (based on the closing sales price of such stock as reported in the Nasdaq National Market) on March 24, 1997 was $74,222,080. Excludes shares of Common Stock held by directors, officers and each person who holds 5% or more of the Registrant's Common Stock. Number of shares of Common Stock, $.001 par value, outstanding as of March 24, 1997 was 32,486,718. As of such date, 4,572,015 shares of Common Stock were held by a subsidiary and an affiliate of the Registrant. DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the definitive Proxy Statement for the Annual Meeting of Stockholders scheduled for June 5, 1997 are incorporated by reference in Part III herein. 2 FORM 10-K/A AMENDMENT NO. 1 The undersigned registrant hereby amends the following items of its Annual Report on Form 10-K for the fiscal year ended December 31, 1996 as set forth in the pages attached hereto: PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT, SCHEDULE AND REPORTS ON FORM 10-K (a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS. 1. Financial Statements. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * Consolidated Balance Sheets as of December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . * Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . * Consolidated Statement of Changes in Shareholders' Equity for the Years Ended December 31, 1996, 1995 and 1994 . . . * Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . * Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * - ------------------------ * Filed with original Form 10-K on April 15, 1997 2. Financial Statement Schedules. Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Schedule II - Condensed Financial Information of Registrant . . . . . . . . . . . . . . . . 6-7 Schedule III - Supplementary Insurance Information . . . . . . . . . . . . . . . . . . . . 8-10 Schedule V - Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . 11
3. Exhibits
Exhibit Number Description + 2.2 Agreement and Plan of Reorganization, dated as of May 1, 1996 among PICO, Citation Holdings, Inc., and Physicians and amendment thereto dated August 14, 1996 and related Merger Agreement. +++++ 2.3 Second Amendment to Agreement and Plan of Reorganization dated November 12, 1996. # 2.4 Agreement and Debenture, dated November 14, 1996 and November 27, 1996, respectively, by and between Physicians and PC Quote, Inc. 2.5 Purchase and Sale Agreement by, between and among Nevada Land and Resource Company, LLC, GEC, Western Water Company and Western Land Joint Venture dated April 9, 1997. +++++ 3.1 Amended and Restated Articles of Incorporation of PICO. + 3.2.2 Amended and Restated Bylaws of PICO. ++++ 4.2 First Amendment to Rights Agreement dated April 30, 1996. +++++ 4.3 Second Amendment to Rights Agreement dated November 20, 1996.
2 3
Exhibit Number Description -* 10.7 Key Officer Performance Recognition Plan. * 10.8 Flexible Benefit Plan. -* 10.9 Amended and Restated 1983 Employee Stock Option Plan. -**** 10.10 Salary Reduction Profit Sharing Plan as amended and restated effective January 1, 1994 and Amendments Nos. 1 and 2 thereto dated March 13, 1995 and March 15, 1995, respectively. -* 10.11 Employee Stock Ownership Plan and Trust Agreement. -*** 10.11.1 Amended Employee Stock Ownership Plan and Trust Agreement. -***** 10.11.2 Amendment to Employee Stock Ownership Plan dated October 1, 1992. -**** 10.11.3 Amendment to Employee Stock Ownership Plan dated March 15, 1995. * 10.16 Office Lease between CIC and North Block Partnership dated July, 1990. *** 10.16.1 Amendments Nos. 1 and 2 to Office Lease between CIC and North Block Partnership dated January 6, 1992 and February 5, 1992, respectively. **** 10.16.2 Amendments Nos. 3 and 4 to Office Lease between CIC and North Block Partnership dated December 6, 1993 and October 4, 1994, respectively. -* 10.22 1991 Employee Stock Option Plan. -***** 10.23 PICO Severance Plan for Certain Executive Officers, Senior Management and Key Employees of the Company and its Subsidiaries, including form of agreement. -# 10.55 Consulting Agreements, effective January 1, 1997, regarding retention of Ronald Langley and John R. Hart as consultants by Physicians and GEC. ++ 10.57 PICO 1995 Stock Option Plan. -+++ 10.58 Key Employee Severance Agreement and Amendment No. 1 thereto, each made as of November 1, 1992, between PICO and Richard H. Sharpe and Schedule A identifying other substantially identical Key Employee Severance Agreements between PICO and certain of the executive officers of PICO. +++ 10.59 Agreement for Purchase and Sale of Shares, dated May 9, 1996, among Physicians, GPG and GEC. ++ 10.60 Agreement for Purchase and Sale of Certain Assets, dated July 14, 1995 between Physicians, PRO and Mutual Assurance, Inc. ++ 10.61 Stock Purchase Agreement dated March 7, 1995 between Sydney Reinsurance Corporation and Physicians. ++ 10.62 Letter Agreement, dated September 5, 1995 between Physicians, Christopher Ondaatje and the South East Asia Plantation Corporation Limited. ++++ 10.63 Amendment No. 1 to Agreement for Purchase and Sale of Certain Assets, dated July 30, 1996 between Physicians, PRO and Mutual Assurance, Inc. +++++ 16.1 Letter regarding change in Certifying Accountant from Deloitte & Touche, LLP, independent auditors. # 21. Subsidiaries of PICO. # 27. Financial Data Schedule. _____________ * Incorporated by reference to exhibit of same number filed with Registration Statement on Form S-1 (File No. 33-36383).
3 4
Exhibit Number Description *** Incorporated by reference to exhibit of same number filed with 1992 Form 10-K. **** Incorporated by reference to exhibit of same number filed with 1994 Form 10-K. ***** Incorporated by reference to exhibit bearing the same number filed with Registration Statement on Form S-4 (File No. 33-64328). + Filed as Appendix to the prospectus in Part I of Registration Statement on Form S-4 (File No. 333-06671). ++ Incorporated by reference to exhibit filed with Physicians' Registration Statement No. 33-99352 on Form S-1 filed with the SEC on November 4, 1995. +++ Incorporated by reference to exhibit filed with Registration Statement on Form S-4 (File No. 333-06671). ++++ Incorporated by reference to exhibit filed with Amendment No. 1 to Registration Statement No. 333-06671 on Form S-4. +++++ Incorporated by reference to exhibit of same number filed with Form 8-K dated December 4, 1996. # Incorporated by reference to exhibit of same number filed with Form 10-K dated April 15, 1997. - Executive Compensation Plans and Agreements.
(b) REPORTS ON FORM 8-K. On December 4, 1996 and December 30, 1996, PICO filed a Form 8-K and a Form 8-K/A, respectively, with the Securities and Exchange Commission. The Form 8-K reported the consummation of the Merger, the amendment of PICO's Articles of Incorporation and Bylaws and a change in the Company's accountants. The Form 8-K/A provided the pro forma financial information of PICO for the quarter ended and as of September 30, 1996 with respect to the Merger. 4 5 REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Shareholders and Board of Directors of PICO Holdings, Inc. Our report on the consolidated financial statements of PICO Holdings, Inc. and subsidiaries (the "Company") as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 is included on page 46 of the Company's previously filed Form 10-K. In connection with our audits of such financial statements, we have also audited the financial statement schedules listed in the index on page 2 of this Form 10-K/A. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Coopers & Lybrand L.L.P. San Diego, California April 7, 1997 5 6 SCHEDULE II CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY) On November 20, 1996, Physicians Insurance Company of Ohio ("Physicians") consummated a transaction (the "Merger") pursuant to which Citation Holdings, Inc. ("Holdings"), a wholly owned subsidiary of Citation Insurance Group ("CIG"), merged with and into Physicians pursuant to an Agreement and Plan of Reorganization dated as of May 1, 1996 with Physicians being the accounting acquiror. Pursuant to the Merger, each outstanding share of the common stock of Physicians was converted into the right to receive 5.0099 shares of CIG's common stock. Upon the consummation of the merger, CIG changed its name to PICO Holdings, Inc., which is the continuing registrant. The Merger was accounted for under the purchase method of accounting. Financial results for the year ended December 31, 1996 include the operations of CIG as if the Merger had occurred on November 1, 1996. Financial activity for the period November 1, 1996 through November 20, 1996 was not significant. Due to the structure of this reverse merger transaction as described above, there was no holding company for the accounting acquiror prior to the November 20, 1996 merger date. Accordingly the only condensed financial statements presented herein are the condensed balance sheet as of December 31, 1996 and the condensed statements of operations and cash flows for the two month period ended December 31, 1996.
CONDENSED BALANCE SHEET December 31, 1996 ------------ ASSETS Cash and cash equivalents $12,658,537 Investments in subsidiaries 96,629,262 Deferred income taxes 3,627,667 Other assets 818,836 ------------ Total assets 113,734,302 ============ LIABILITIES AND SHAREHOLDERS' EQUITY Accrued expense and other liabilities 3,530,722 ------------ Preferred stock, $.01 par value, authorized 2,000,000 shares in 1996; none issued Common stock, $.001 par value; authorized 100,000,000 shares in 1996, issued 32,488,718 32,487 Additional paid-in capital 42,965,063 Net unrealized appreciation (depreciation) on investments 11,837,511 Cumulative foreign currency translation adjustment (27,159) Equity changes of investee company (986,361) Retained earnings 64,226,714 ------------ 118,048,255 Less treasury stock, at cost (1,940,315 shares in 1996) 7,844,675 ------------ Total shareholders' equity 110,203,580 ------------ Total liabilities and shareholders' equity $113,734,302 ============
This statement should be read in conjunction with the notes to the consolidated financial statements included in the Company's 1996 Form 10-K. 6 7 SCHEDULE II CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY) CONDENSED STATEMENT OF OPERATIONS For the Two Month period ended December 31, 1996 ----------- Equity in earnings of subsidiary $22,693,381 Expenses 928,288 ----------- Income before income taxes 21,765,093 Provision for income taxes -- ----------- Net income $21,765,073 =========== CONDENSED STATEMENT OF CASH FLOWS Operating activities Net income $21,765,093 Adjustments to reconcile net income to net cash used by operating activities: Equity in earnings of subsidiary (22,693,381) Changes in assets and liabilities Accrued expenses and other liabilities 811,638 Other assets (437,405) ----------- Net cash used by operating activities (554,055) ----------- Investing activities Dividends from subsidiary 13,212,592 ----------- Net cash provided by investing activities 13,212,592 ----------- Increase in cash and cash equivalents 12,658,537 Cash and cash equivalents at beginning of period 0 ----------- Cash and cash equivalents at end of period $12,658,537 =========== This statement should be read in conjunction with the notes to the consolidated financial statements included with the Company's 1996 Form 10-K. 7 8 SCHEDULE III PICO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION (In thousands) December 31, 1994
Other Deferred Future Policy Policy Benefits Policy Benefits Claims & Net Losses and Acquisition Losses, Claims Unearned Benefits Premium Investment Loss Segment Costs Loss Expenses Premiums Payable Revenue Income Expenses ------- ------------ ------------- -------- ------- ------- ------ -------- Medical professional liability $ 305 $180,691 $15,919 -- $20,026 $10,413 $11,639 Life and health 2,508 45,874 194 -- 3,922 3,691 79 ------- ---------- ---------- --- -------- --------- -------- Total medical professional liability and life and health 2,813 226,565 16,113 -- 23,948 14,104 11,718 Other operations -- -- -- 1,537 1,272 -- ------- ---------- ---------- --- -------- --------- -------- Total $2,813 $226,565 $16,113 -- $25,485 $15,376 $11,718 ======= ========== ========== === ======== ========= ========
Amortization of Deferred Policy Other Acquisition Operating Premiums Segment Costs Expenses Written ------- ----- -------- ------- Medical professional liability $ 817 $1,721 $12,092 Life and health 318 2,569 ------- ---------- Total medical professional liability and life and health 1,135 4,290 Other operations -- 3,634 ------- ---------- Total $1,135 $7,924 ------- ----------
8 9 SCHEDULE III PICO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION (In thousands) December 31, 1995
Other Deferred Future Policy Policy Benefits Policy Benefits Claims & Net Losses and Acquisition Losses, Claims Unearned Benefits Premium Investment Loss Segment Costs Loss Expenses Premiums Payable Revenue Income Expenses ------- ------------ ------------- -------- ------- ------- ------ -------- Medical professional liability $ 272 $168,485 $12,985 -- $17,120 $ 5,928 $21,247 Life and health 2,113 47,553 171 1,870 4,007 701 Other Property and Casualty 510 61,312 17,702 2,421 170 1,925 ------- ---------- -------- ---- -------- --------- ---------- Total medical professional liability, life and health, and other property casualty 2,895 277,350 30,858 -- 21,411 10,105 23,873 Other operations -- -- -- -- 5,979 5,110 -- ------- ---------- -------- ---- -------- --------- ---------- Total $2,895 $277,350 $30,858 -- $27,390 $15,215 $23,873 ======= ========== ======== ==== ======== ========= ==========
Amortization of Deferred Policy Other Acquisition Operating Premiums Segment Costs Expenses Written ------- ----- -------- ------- Medical professional liability $ 723 $1,053 $13,079 Life and health 368 2,390 Other Property and Casualty 4,282 10,755 ----------- ------- -------- Total medical professional liability, life and health, and other property casualty 1,091 7,725 23,834 Other operations -- 9,916 -- ----------- ------- -------- Total $1,091 $17,641 $23,834 =========== ======= ========
9 10 SCHEDULE III PICO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION (In thousands) December 31, 1996
Other Deferred Future Policy Policy Benefits Policy Benefits Claims & Net Losses and Acquisition Losses, Claims Unearned Benefits Premium Investment Loss Segment Costs Loss Expenses Premiums Payable Revenue Income Expenses ------- ------------ ------------- -------- ------- ------- ------ -------- Medical professional liability $ -- $142,965 $ -- -- $ 7,362 $ 4,881 $ 2,605 Life and health 2,501 45,516 489 1,471 3,397 3,612 Other Property and Casualty 5,421 109,058 34,808 31,399 2,540 20,328 ------ -------- ------- -- ------- ------- ------- Total medical professional liability, life and health, and other property casualty 7,922 297,539 35,297 -- 40,232 10,818 26,545 Other operations -- -- -- 665 -- ------ -------- ------- -- ------- ------- ------- Total $7,922 $297,539 $35,297 -- $40,232 $11,483 $26,545 ====== ======== ======= == ======= ======= =======
Amortization of Deferred Policy Other Acquisition Operating Premiums Segment Costs Expenses Written ------- ----- -------- ------- Medical professional liability $ 272 $1,010 $ 28 Life and health 330 1,229 1,471 Other Property and Casualty 1,604 10,100 37,529 ------ ------- ------- Total medical professional liability, life and health, and other property casualty 2,206 12,339 $39,028 Other operations -- 7,713 -- ------ ------- ------- Total $2,206 $20,052 $39,028 ====== ======= =======
10 11 SCHEDULE V PICO HOLDINGS, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
Additions (1) (2) Balance at Charged to Charged to Balance Beginning Costs Other at End Description of Period Expenses Accounts Deductions of Period ----------- --------- -------- -------- ---------- --------- Year-end December 31, 1996 Allowance for Doubtful Accounts, net $ 78,000 $ (117,470) $ -- $(156,387) $ 116,917 Valuation Allowance for Deferred Federal Income Taxes -- -- 6,664,000 -- 6,664,000 Year-ended December 31, 1995 Allowance for Doubtful Accounts, net $ 196,000 $ (11,385) -- $(106,615) $ 78,000 Valuation Allowance for Deferred Federal Income Taxes 10,772,320 (8,922,371) (1,849,949) -- -- Year-ended December 31, 1994 Allowance for Doubtful Accounts, net 285,000 (45,796) -- (43,204) 196,000 Valuation Allowance for Deferred Federal Income Taxes 13,834,298 (5,317,367) 2,255,389 -- 10,772,320
11 12 FORM 10-K/A AMENDMENT NO. 1 Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. PICO HOLDINGS, INC. By: /s/ Gary W. Burchfield ------------------------------------- Gary W. Burchfield, Chief Financial Officer and Treasurer Date: April 30, 1997 12 EX-2.5 2 EXHIBIT 2.5 1 EXHIBIT 2.5 PURCHASE AND SALE AGREEMENT BY, BETWEEN AND AMONG NEVADA LAND AND RESOURCE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY (THE "COMPANY"), GLOBAL EQUITY CORPORATION, AN ONTARIO, CANADA CORPORATION ("GLOBAL"), WESTERN WATER COMPANY, A DELAWARE CORPORATION ("WESTERN WATER"), AND WESTERN LAND JOINT VENTURE, A DELAWARE GENERAL PARTNERSHIP ("WESTERN LAND JV"). EFFECTIVE AS OF APRIL 9, 1997 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ----------- 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II PURCHASE AND SALE AND CONSULTING AGREEMENT . . . . . . . . . . . . . . . . . . . . 7 ------------------------------------------ 2.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.2 Consulting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE III CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ------------- 3.1 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.2 Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE IV AS-IS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ----- 4.1 "AS IS" Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE V INTERIM OPERATING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 --------------------------- 5.1 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.2 Sales, Leases and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.3 Additional Covenants Pending Closing . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE VI REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ------------------------------ 6.1 Joint Representations and Warranties of Western Water and Western Land JV . . . . . 16 6.2 Representations and Warranties of Western Land JV . . . . . . . . . . . . . . . . . 17 6.3 Representations and Warranties of Western Water . . . . . . . . . . . . . . . . . . 19 6.4 Representations and Warranties of Global . . . . . . . . . . . . . . . . . . . . . 20 6.5 Knowledge and Limitation of Warranties . . . . . . . . . . . . . . . . . . . . . . 21 6.6 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE VII REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 -------- 7.1 Western Land JV's and Western Water's Remedies . . . . . . . . . . . . . . . . . . 23 7.2 Global's Remedies Prior to Closing . . . . . . . . . . . . . . . . . . . . . . . . 25 7.3 Global's Remedies After Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 27 7.4 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 7.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE VIII CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ------- 8.1 Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 8.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 8.3 Closing Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 8.4 Delivery of Promissory Note as Partial Payment to Western Water . . . . . . . . . . 36 8.5 Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.6 Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.7 No Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.8 Access to Documents and Property . . . . . . . . . . . . . . . . . . . . . . . . . 37
3 ARTICLE IX CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 ------------ 9.1 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 ARTICLE X RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ------------ 10.1 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ------------- 11.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 11.2 Agreement Binding on Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 11.3 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 11.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 11.5 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 11.6 Place of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 11.7 Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 11.8 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 11.9 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 11.10 Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 11.11 No Recordation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 11.12 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 11.14 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 11.15 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 11.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
EXHIBIT A - INVENTORY OF REAL PROPERTY EXHIBIT B - CONSULTING AGREEMENT EXHIBIT C - PROMISSORY NOTE EXHIBIT D - WESTERN LAND JV ASSIGNMENT OF LLC MEMBER INTEREST EXHIBIT E - WESTERN WATER ASSIGNMENT OF LLC MEMBER INTEREST 4 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT ("Agreement") is entered into effective for all purposes as of the 9th day of April, 1997 (the "Effective Date"), by, between and among Nevada Land and Resource Company, LLC, a Delaware limited liability company (the "Company"), Global Equity Corporation, an Ontario, Canada corporation ("Global"), Western Water Company, a Delaware corporation ("Western Water"), and Western Land Joint Venture, a Delaware general partnership ("Western Land JV"). W I T N E S E T H: WHEREAS, the Company owns an interest in the Property, as hereinafter defined; WHEREAS, Global desires to purchase from Western Water and Western Water desires to sell to Global the interests of Western Water in the Company, on the terms and conditions hereinafter set forth; WHEREAS, Global desires to purchase from Western Land JV and Western Land JV desires to sell to Global the interests of Western Land JV in the Company, on the terms and conditions hereinafter set forth; WHEREAS, in connection with its purchase of the interests in the Company, Global desires to make a capital contribution to the Company in order to enable the Company to pay in full the Existing Indebtedness, as hereinafter defined; NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 5 ARTICLE I DEFINITIONS 1.1 DEFINITIONS. For purposes of this Agreement, the following capitalized terms used herein shall have the meanings ascribed to such terms in this Section 1.1: AFFILIATE. The term "Affiliate" shall mean any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such Person, as the case may be. For purposes of this definition, "control" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled by" shall have the meanings correlative to the foregoing. BUSINESS DAY. The term "Business Day" shall mean any day other than a Saturday, Sunday or a day on which national banking associations are authorized or required to close. CLOSING. The term "Closing" shall have the meaning ascribed to it in Section 3.1. CLOSING DATE. The term "Closing Date" shall have the meaning ascribed to it in Section 8.2. COMPANY. The term "Company" shall have the meaning ascribed to it in the opening paragraph of this Agreement. CONSIDERATION. The term "Consideration" shall have the meaning ascribed to it in Section 3.1. 2 6 CONSULTING AGREEMENT. The term "Consulting Agreement" shall mean the agreement attached hereto as Exhibit "B" to be entered into by and between the Western Affiliate and the Company as of the Closing for the purposes set forth in Section 2.2 hereof. CONTRACTS. The term "Contracts" shall mean any and all exploration, licensing, leasing, servicing, supply, maintenance, employment and consultant contracts to which the Company is a party, or the rights and obligations to which the Company has succeeded. DEFERRED AMOUNT. The term "Deferred Amount" shall mean a portion of the Western Water Purchase Price equal to the sum of One Million Three Hundred Thirty-Six Thousand Dollars ($1,336,000). DEPOSIT. The term "Deposit" shall mean, collectively, the Western Water Deposit and the Western Land JV Deposit, together with any interest earned thereon while in Escrow. DOCUMENTS. the term "Documents" shall have the meaning ascribed to such term in Section 8.8 hereof. EFFECTIVE DATE. The term "Effective Date" shall have the meaning ascribed to such term in the first paragraph of this Agreement. EXCLUDED DOCUMENTS. The term "Excluded Documents" shall have the meaning ascribed to such term in Section 8.8. ESCROW. The term "Escrow" shall have the meaning ascribed to such term in Section 3.1. ESCROW AGENT. The term "Escrow Agent" shall have the meaning ascribed to such term in Section 3.1. 3 7 EXISTING INDEBTEDNESS PAYOFF. The term "Existing Indebtedness Payoff" shall mean the amount necessary to pay the Existing Indebtedness in full at Closing and obtain a release of the Existing Mortgage. EXISTING MORTGAGE. The term "Existing Mortgage" shall mean, collectively, the mortgage and security agreement, assignment of rents and leases and/or similar documents, encumbering the Land, executed by the Company for the benefit of Morgan Stanley Mortgage Capital, Inc. ("Lender") securing indebtedness ("Existing Indebtedness") in the original principal amount of Twelve Million Dollars ($12,000,000), and certain UCC filings executed by the Company in connection therewith, showing the Company as debtor and the Lender as the secured party. GLOBAL. The term "Global" shall have the meaning ascribed to it in the opening paragraph of this Agreement. GOVERNMENTAL AUTHORITIES. The term "Governmental Authorities" shall mean the various governmental and quasi-governmental bodies or agencies having jurisdiction over the Company or the Land or any portion thereof. LAND. The term "Land" shall mean all of the real property owned by the Company in the State of Nevada as of the Effective Date, as more particularly described in Exhibit "A" attached hereto, except for any permissible sale of the Land that may occur prior to the Closing as provided in Section 5.2A., together with all of the Company's interests, if any, in and to any appurtenances pertaining thereto, including without limitation all easement rights, air rights, right of ways, water rights, and oil, gas or mineral rights. 4 8 NLRC LLC AGREEMENT. The term "NLRC LLC Agreement" shall mean that certain Limited Liability Company Agreement of the Company, dated as of September 28, 1995, by and between Western Water and Western Land JV, the Company having been originally formed under the name of Silver State Land Company, LLC and such name having been changed to Nevada Land and Resource Company, LLC by filing of an Amended and Restated Certificate of Formation with the Secretary of State of Delaware on November 21, 1995. NOTICE. The term "Notice" shall have the meaning ascribed to it in Section 11.4. PERSON. The term "Person" shall mean any individual, partnership, limited partnership, joint venture, trust, estate, corporation, joint stock company, association, limited liability company or other legal entity. PROMISSORY NOTE. The term Promissory Note" shall mean the Promissory Note in form attached hereto as Exhibit "C". PROPERTY. The term "Property" shall mean all of the Company's interests as of the Effective Date with respect to Land, the Contracts, and all certificates, permits, entitlements, plans, renderings, reports, studies and other documents pertaining to the Land, except for the Excluded Documents, in possession of the Company. PURCHASE AND SALE. The term "Purchase and Sale" shall have the meaning ascribed to it in Section 2.2. SECURITIES ACT. The term "Securities Act" shall have the meaning ascribed to it in Section 6.5. 5 9 SECURITIES LAWS. The term "Securities Laws" shall have the meaning ascribed to it in Section 6.5. WESTERN AFFILIATE. The term "Western Affiliate" shall have the meaning ascribed to it in Section 2.1. WESTERN LAND JV. The term "Western Land JV" shall have the meaning ascribed to it in the opening paragraph of this Agreement. WESTERN LAND JV ASSIGNMENT OF LLC INTEREST. The term "Western Land JV Assignment of LLC Interest" shall mean the Assignment of LLC Interest, in the form of Exhibit "D" attached hereto, to be executed and delivered at the Closing by Western Land JV and accepted by Global. WESTERN LAND JV DEPOSIT. The term "Western Land JV Deposit" shall have the meaning ascribed to it in Section 3.2. WESTERN LAND JV INTEREST. The term "Western Land JV Interest" shall mean the entire interest of Western Land JV in the Company. WESTERN LAND JV PURCHASE PRICE. The term "Western Land JV Purchase Price" shall mean an amount equal to Twenty-Four Million Five Hundred Thousand Dollars ($24,500,000). WESTERN WATER. The term "Western Water" shall have the meaning ascribed to it in the opening paragraph of this Agreement. WESTERN WATER ASSIGNMENT OF LLC INTEREST. The term "Western Water Assignment of LLC Interest" shall mean the Assignment of LLC Interest, in the form of Exhibit "E" hereto, to be executed and delivered at Closing by Western Water and accepted by Global. 6 10 WESTERN WATER DEPOSIT. The term "Western Water Deposit" shall have the meaning ascribed to it in Section 3.2. WESTERN WATER INTEREST. The term "Western Water Interest" shall mean the entire interest of Western Water in the Company. WESTERN WATER PURCHASE PRICE. The term "Western Water Purchase Price" shall mean an amount equal to Thirteen Million Three Hundred Sixty Thousand Dollars ($13,360,000). ARTICLE II PURCHASE AND SALE AND CONSULTING AGREEMENT 2.1 PURCHASE AND SALE. At Closing, upon the payment of the Consideration, Western Land JV shall assign to Global and Global shall assume from Western Land JV the Western Land JV Interest and Western Water shall assign to Global and Global shall assume from Western Water the Western Water Interest (the "Purchase and Sale"). A portion of the Western Water Purchase Price in the Deferred Amount shall be paid by Global to Western Water by Global's execution and delivery of the Promissory Note to Western Water at the Closing as provided in Section 8.4 hereof. The portion of the Consideration attributable to the Existing Indebtedness Payoff shall be paid by Global to the Lender at Closing, but shall be deemed to be a capital contribution by Global to the Company in connection with its acquisition of the Western Land JV Interest and the Western Water Interest. 2.2 CONSULTING AGREEMENT. On or prior to the Closing, Western Land JV or its affiliate and Western Water shall form a joint venture (the "Western Affiliate") to serve as a consultant to the Company as hereinafter provided. At Closing, upon payment of the Consideration, Global and the Western Affiliate shall execute the 7 11 Consulting Agreement. At the Closing, the NLRC Agreement shall be amended and restated upon the terms and conditions acceptable to Global, in its sole and absolute discretion, except that it shall commit the Company to enter into the Consulting Agreement with the Western Affiliate and provide that management of the Company shall be vested in a five (5) member board, three (3) of whom shall be selected by Global and two (2) of whom shall be selected by Western Water, with all decisions subject to majority approval of all members of the board, in their sole and absolute discretion. In no event shall the Western Affiliate have any interest in the Company or be required to contribute any capital or other property to the Company for any reason whatsoever. ARTICLE III CONSIDERATION 3.1 CONSIDERATION. Promptly upon execution hereof, the parties shall open an escrow (the "Escrow") at First American Title Guaranty Company (the "Escrow Agent") at 1737 North First Street, San Jose, California, Attn: Bill Perry, Escrow No. 512782. Global agrees to deliver into Escrow in cash or by wire transfer the Western Land JV Purchase Price, the Western Water Purchase Price, except for the Deferred Amount, the Existing Indebtedness Payoff and the Promissory Note in the Deferred Amount (collectively, the "Consideration"), by 12:00 p.m. Pacific Time on the Closing Date. The close of escrow (the "Closing") shall occur on the Closing Date at such time as Global has delivered the Consideration to the Escrow Agent and the parties have deposited into Escrow all other instruments and documents necessary to close the Escrow as provided in Section 8.3 hereof. 8 12 3.2 DEPOSIT. Global has deposited the sum of Five Hundred Thousand Dollars ($500,000) (the "Western Land JV Deposit") with the Escrow Agent for payment to Western Land JV at the Closing and the sum of Two Hundred Seventy Five Thousand Dollars ($275,000) (the "Western Water Deposit") with the Escrow Agent for payment to Western Water at the Closing. In the event that the transaction contemplated hereby is consummated, the Western Land JV Deposit shall be applied against the Western Land JV Purchase Price, and the Western Water Deposit shall be applied against the Western Water Purchase Price. In the event that the transaction contemplated hereby is not consummated, the Deposit shall be retained by Western Land JV and Western Water or returned to Global as set forth in Article VII, or Section 8.1D., as applicable. ARTICLE IV AS-IS 4.1 "AS IS" TRANSACTION. A. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. Notwithstanding anything contained herein to the contrary, it is understood and agreed that except as provided in this Agreement, neither the Company, nor Western Water or Western Land JV, have made and none of the foregoing are now making, and they specifically disclaim, any warranties, representations or guaranties of any kind or character, express or implied, oral or written, past, present or future, with respect to the Company, the Western Land JV Interest, the Western Water Interest or the Property, including, but not limited to, warranties, representations or guaranties as to (i) matters of title, or water or other mineral rights, (ii) environmental matters relating to the Land or any portion thereof, (iii) geological conditions, including, without 9 13 limitation, subsidence, subsurface conditions, water table, underground water reservoirs, limitations regarding the withdrawal of water and earthquake faults and the resulting damage of past and/or future earthquakes, (iv) whether, and to the extent to which the Land or any portion thereof is affected by any stream (surface or underground), body of water, flood prone area, flood plain, floodway or special flood hazard, (v) drainage, (vi) soil conditions, including the existence of instability, past soil repairs, soil additions or conditions of soil fill, or susceptibility to landslides, or the sufficiency of any undershoring, (vii) zoning to which the Land or any portion thereof may be subject, (viii) the availability of any utilities to the Land or any portion thereof including, without limitation, water, sewage, gas and electric, (ix) usages of adjoining property, (x) access to the Land or any portion thereof, (xi) the value, size, location, quality, description, suitability, title or rights to, or physical condition of the Land or any portion thereof, (xii) any income, expenses, charges, liens, encumbrances, liabilities, easements, licenses, options, rights or claims on or affecting or pertaining to the Land or any portion thereof or the Company, (xiii) the presence of Hazardous Substances (hereinafter defined) in or on, under or in the vicinity of the Land, (xiv) the condition or use of the Land or compliance of the Land with any or all past, present or future federal, state or local ordinances, rules, regulations or laws, building, fire or zoning ordinances, codes or other similar laws, (xv) the existence or non-existence of underground storage tanks, (xvi) any other matter affecting the stability or integrity of the Land, (xvii) the potential for development of the Land, (xviii) the existence of vested land use, zoning or building entitlements affecting the Land, (xix) the merchantability of the Land or fitness of the Land for any particular purpose (Global affirming that Global has not relied on the 10 14 Company's, Western Land JV's or Western Water's skill or judgment to select the Land for any particular purpose, and that neither the Company, nor Western Water or Western Land JV makes any warranty that the Land is fit for any particular purpose), (xx) tax consequences, or (xxi) the existence or non-existence of any default or any event, occurrence, condition or act which, with the giving of notice, the lapse of time, or both, is or would become a default under any Contract or any lease, license, easement, option, permit, certificate or agreement which comprises any part of, or relate to, the Property. SUBJECT TO THE WARRANTIES AND REPRESENTATIONS OF WESTERN WATER AND WESTERN LAND JV PROVIDED IN THIS AGREEMENT, GLOBAL ACKNOWLEDGES AND AGREES THAT UPON THE CLOSING, GLOBAL SHALL ACCEPT THE WESTERN WATER INTEREST AND THE WESTERN LAND JV INTEREST AND ITS INVESTMENT IN THE PROPERTY THROUGH THE COMPANY "AS IS, WHERE IS," WITH ALL FAULTS. GLOBAL ACKNOWLEDGES THAT IT HAS FULLY REVIEWED ALL OF THE "DOCUMENTS" (AS THAT TERM IS DEFINED IN SECTION 8.8) TO WHICH GLOBAL HAS BEEN GIVEN ACCESS AND WHICH ARE LOCATED AS OF THE EFFECTIVE DATE IN THE SAN DIEGO OFFICE OF WESTERN WATER AND IN THE RENO OFFICE OF THE COMPANY, AND GLOBAL ACKNOWLEDGES AND AGREES THAT WHETHER OR NOT IT HAS REVIEWED SUCH DOCUMENTS GLOBAL SHALL ACQUIRE THE WESTERN WATER INTEREST AND THE WESTERN LAND JV INTEREST AND ITS INTEREST IN THE COMPANY SUBJECT TO ALL MATTERS DISCLOSED IN SUCH DOCUMENTS. GLOBAL ACKNOWLEDGES THAT IT HAS HAD THROUGH THE EFFECTIVE DATE TO CONDUCT ITS DUE DILIGENCE ON THE PROPERTY. FURTHER, GLOBAL 11 15 ACKNOWLEDGES THAT EXHIBIT "A" CONSTITUTES THE COMPANY'S GOOD FAITH EFFORT AT DEVELOPING AN INVENTORY OF THE REAL PROPERTY OWNED BY THE COMPANY, BUT THE COMPANY, WESTERN WATER AND WESTERN LAND JV ARE MAKING NO WARRANTY CONCERNING THE ACCURACY OF SUCH INVENTORY, INCLUDING BUT NOT LIMITED TO ANY AND ALL MINERAL, WATER, OIL AND GAS RIGHTS OR AS TO THE STATE OF TITLE OF SUCH REAL PROPERTY. _______ _______ _______ Western Water Western Land JV Global Initials Initials Initials B. "HAZARDOUS SUBSTANCES" DEFINED. For purposes hereof, "Hazardous Substances" means any hazardous, toxic or dangerous waste, substance or material, pollutant or contaminant, as defined for purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended ("CERCLA"), or the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), as amended ("RCRA"), or any other federal, state or local law, ordinance, rule or regulation applicable to the Land, or any substance which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, or any substance which contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls (pcbs), radon gas, urea formaldehyde, asbestos, lead or electromagnetic waves. C. GLOBAL REPRESENTED BY COUNSEL. Global hereby represents and warrants to the Company, Western Water and Western Land JV that: 1. Global is represented by legal counsel in connection with the transactions contemplated by this Agreement; and 2. Global is acquiring the Western Land JV Interest and the Western 12 16 Water Interest and therefore an indirect interest in the Property for business, commercial, investment or other similar purpose. _______ _______ _______ Western Water Western Land JV Global Initials Initials Initials ARTICLE V INTERIM OPERATING COVENANTS 5.1 OPERATIONS. Pending the Closing, the Company agrees to continue to operate, manage and maintain the Property in the ordinary course of the Company's business and substantially in accordance with the Company's present practices, subject to ordinary wear and tear and further subject to Section 5.2. 5.2 SALES, LEASES AND ENCUMBRANCES. A. Prior to the Closing, the Company shall not sell, lease or otherwise encumber any portion of the Property, except for any pending sale pursuant to a purchase and sale agreement entered into prior to the Effective Date with a third party bidder or bidders in connection with the sixty-four thousand (64,000) acres of the Land subject to the pending "Nevada Land Rush" auction. B. Prior to the Closing the Company will not modify any existing financing secured by the Property, incur any indebtedness for borrowed money, enter into any lease or modify or renew any existing lease concerning any portion of the Land. C. Prior to the Closing, the Company shall not enter into any Contract or modify, extend or renew any existing Contract. 13 17 D. Prior to the Closing, neither Western Water nor Western Land JV shall sell, assign, hypothecate, encumber or otherwise transfer any portion of the Western Land JV Interest or the Western Water Interest. E. In the event any sale of Land permitted pursuant to the terms of this Agreement is closed prior to the Closing Date, the Consideration paid by Global shall be reduced by the net amount of proceeds received by the Company, if any, which has been distributed to Western Land JV and Western Water in connection with such sale (the calculation of such net sale proceeds to include a deduction for all selling expenses and capital expenditures made by the Company in connection with such sale). Prior to the Closing Date, the Company shall provide an accounting to Global of all pending sales and all sales proceeds which have been received after March 11, 1997. F. Prior to the Closing, Western Water and Western Land JV shall consult with Global and cooperate with Global concerning any changes that Global may request to any purchase agreement which the Company proposes to enter into in connection with the Nevada Land Rush, and Western Water and Western Land JV shall keep Global fully apprised of the status of all material matters in connection with the Nevada Land Rush, including but not limited to bids received. 5.3 ADDITIONAL COVENANTS PENDING CLOSING. Prior to the Closing, Western Water and Western Land JV shall do or refrain from doing the following: A. Western Water and Western Land JV shall cause to be filed on a timely basis all income tax returns that are or have been required to be filed with respect to the Western Water Interest and the Western Land JV Interest, Western Water and Western Land JV shall each pay all income taxes that may become due 14 18 with respect to their respective interests in the Company prior to the Closing (this covenant shall survive the Closing with respect to any income taxes that might be payable for the period prior to the Closing); B. Western Water and Western Land JV shall cause the Company to file on a timely basis all employment tax returns and reports that are required to be filed with respect to the Company and shall cause the Company to pay all employment taxes that may become due with respect to the Company's operations prior to the Closing. C. The Company shall not make any distributions of cash or other property to Western Water, Western Land JV or their Affiliates; D. The Company shall pay normal and customary expenses of the Company as and when due, including payments, if any, as they become due on the Existing Indebtedness; E. The Company shall not commence any litigation or other proceeding or enter into any settlement agreement; F. The Company shall not acquire or agree to acquire by merging or consolidating with, or by purchasing the assets of, or by any other manner, any business or assets of any corporation, partnership, limited liability company or other business organization or division thereof; and G. The Company shall not adopt or amend any employee benefit or company share or option plan, or hire any new employees or consultants, modify the terms of any existing employee or consultant agreement, pay any special bonus or special renumeration or increase the salaries, wage rates or fees paid to its employees 15 19 or consultants or grant any severance or termination pay to any employee, manager or officer. ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.1 JOINT REPRESENTATIONS AND WARRANTIES OF WESTERN WATER AND WESTERN LAND JV. The following constitute the sole representations and warranties made jointly by Western Water and Western Land JV. A. The Company is a limited liability company, duly organized and validly existing pursuant to the laws of the State of Delaware, and pursuant to that certain Limited Liability Company Agreement dated as of September 28, 1995, and that certain Certificate of Formation, filed with the Secretary of State of Delaware on September 28, 1995, as amended and restated pursuant to that certain Amended and Restated Certificate of Formation, filed with the Secretary of State of Delaware on November 21, 1995, counsel for Global having been previously provided by the Company with a true and correct copy of the foregoing organizational documents of the Company. B. The execution and delivery of this Agreement and the performance by the Company of its obligations hereunder have been duly authorized by all necessary action on the part of the Company. This Agreement has been duly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, subject to equitable principles and principles governing creditors' rights generally. 16 20 C. No consent, waiver, approval or authorization is required from any person or entity (that has not already been obtained) in connection with the execution and delivery of this Agreement by the Company or the performance by the Company of the transactions contemplated hereby. D. The Company is not a "foreign person" or "foreign corporation" as those terms are defined in the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. E. To the best of Western Water's and Western Land JV's actual knowledge, except as disclosed in the Documents with respect to the pending mechanic's lien claims (i) recorded against a portion of the Property on July 20, 1993 by TIC - The Industrial Company, and (ii) filed November 4, 1996, as document number 209621 by Bose Industries, Inc., there is no pending or threatened litigation (including without limitation, environmental litigation, or eminent domain, condemnation or similar proceedings) affecting the Property or against the Company, and neither the Company nor Western Water or Western Land JV has any actual knowledge that any proceedings are contemplated. F. To the best of Western Water's and Western Land JV's actual knowledge, Western Water and Western Land JV are the only members of the Company. 6.2 REPRESENTATIONS AND WARRANTIES OF WESTERN LAND JV. The following constitute the sole representations and warranties of Western Land JV to Global. A. Western Land JV is a Delaware general partnership, duly organized and existing pursuant to the laws of the State of Delaware. 17 21 B. Western Land JV is the sole owner of the entire Western Land JV Interest and no portion of such interest has been previously sold, assigned, hypothecated, encumbered or otherwise transferred to any other Person. Western Land JV has the full right, power and authority to enter into this Agreement and to convey the entire Western Land JV Interest to Global in accordance with the terms of this Agreement. C. The execution and delivery of this Agreement and the performance by Western Land JV of its obligations hereunder have been duly authorized by all necessary action on the part of Western Land JV, this Agreement has been duly authorized, executed and delivered by Western Land JV and constitutes the legal, valid and binding obligation of Western Land JV, subject to equitable principles and principles governing creditors' rights generally. D. No consent, waiver, approval or authorization is required from any person or entity (that has not already been obtained) in connection with the execution and delivery of this Agreement by Western Land JV or the performance by Western Land JV of the transactions contemplated hereby, except as provided in Section 8.1.A.4. E. Western Land JV is not a "foreign person" or "foreign corporation" as those terms are defined in the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. F. To the best of Western Land JV's actual knowledge, Global has been provided with access to or the Company has caused to be delivered to Global a copy of all Documents. 18 22 G. Western Land JV has no actual knowledge of any matter which is material to the use, ownership, operation or value of the Property that is not disclosed in the Documents (except for matters concerning the Property which may be discussed in the Excluded Documents); provided, however, that Western Land JV makes absolutely no representation or warranty whatsoever, express or implied, as to the completeness or accuracy of the Documents or as to the current, past or future value of the Property or market or industry conditions. 6.3 REPRESENTATIONS AND WARRANTIES OF WESTERN WATER. The following constitute the sole representations and warranties of Western Water to Global. A. Western Water is a corporation, duly organized and validly existing pursuant to the laws of the State of Delaware. B. Western Water is the sole owner of the entire Western Water Interest and no portion of such interest has been previously sold, assigned, hypothecated, encumbered or otherwise transferred to any other Person. Western Water has the full right, power and authority to enter into this Agreement and to convey the entire Western Water Interest to Global in accordance with this Agreement. C. The execution and delivery of this Agreement and the performance by Western Water of its obligations hereunder have been duly authorized by all necessary action on the part of Western Water, this Agreement has been duly authorized, executed and delivered by Western Water and constitutes the legal, valid and binding obligation of Western Water, subject to equitable principles and principles governing creditors' rights generally. 19 23 D. No consent, waiver, approval or authorization is required from any person or entity (that has not already been obtained) in connection with the execution and delivery of this Agreement by Western Water or the performance by Western Water of the transactions contemplated hereby, except as provided in Section 8.1.A.4. E. Western Water is not a "foreign person" or "foreign corporation" as those terms are defined in the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. F. To the best of Western Water's actual knowledge Global has been provided with access to or the Company has caused to be delivered to Global a copy of all Documents. G. Western Water has no actual knowledge of any matter which is material to the use, ownership, operation or value of the Property that is not disclosed in the Documents (except for matters concerning the Property which may be discussed in the Excluded Documents); provided, however, that Western Water makes absolutely no representation or warranty whatsoever, express or implied, as to the completeness or accuracy of the Documents or as to the current, past or future value of the Property or market or industry conditions. 6.4 REPRESENTATIONS AND WARRANTIES OF GLOBAL. Global represents and warrants to the Company, Western Land JV and Western Water as follows: A. Global is a corporation duly organized, validly existing and in good standing under the laws of Ontario, Canada, with all requisite power and authority to enter into this Agreement and to conduct the business of the Company as contemplated by this Agreement. 20 24 B. Global has the full right, power and authority to enter into this Agreement and to carry out all of the terms of the transaction contemplated hereby. C. The execution and delivery of this Agreement and the performance by Global of its obligations hereunder have been duly authorized by all necessary action on the part of Global. This Agreement has been duly authorized, executed and delivered by Global and constitutes the legal, valid and binding obligation of Global, subject to equitable principles and principles governing creditors' rights generally. D. No consent, waiver, approval or authorization is required for any person or entity (that has not already been obtained) in connection with the execution and delivery of this Agreement by Global or the performance by Global of the transactions contemplated hereby. E. Global has legally binding financial commitments or readily available funds sufficient to enable it to perform its obligations under this Agreement. 6.5 KNOWLEDGE AND LIMITATION OF WARRANTIES. A. Global acknowledges and agrees that all references in this Agreement and in any Exhibits attached hereto to the phrases "within actual knowledge," "to the actual knowledge of," "known to," or similar phrases (1) shall mean the current actual (not constructive or imputed) personal knowledge of Larry D. Kelley and Jeffrey A. Dritley, in the case of Western Land JV, and of Peter Jensen, Arik Prawer and John Huston, in the case of Western Water; (2) shall not in any case mean or refer to the actual, constructive or imputed knowledge of any other employee, trustee, partner, agent, officer, director or other representative of either 21 25 Western Land JV or Western Water; and (3) shall in no event impose upon Western Land JV or Western Water or any of their respective officers, directors, agents or employees or any of the above-named individuals any duty or obligation to verify, inquire or make any independent inquiry or investigation of any such representation, warranty or statement or to inspect or review any of the Documents. B. The warranties, representations and covenants made by each party to this Agreement shall survive the Closing and shall expire one (1) year thereafter. Accordingly, any party which may desire to bring a claim with respect to any breach of warranty, representation or covenant hereunder shall provide written notice of such claim to all other parties prior to the expiration of one (1) year from the Closing. 6.6 SECURITIES LAWS. Global is acquiring its interest in the Company for investment, solely for its own account, with the intention of holding such interest for investment and not with a view to, or for resale in connection with, any distribution or public offering or resale of any portion of such interest within the meaning of the Securities Act of 1933 (the "Securities Act") or any other applicable federal or state security law, rule or regulation ("Security Laws"). Global acknowledges that it is aware that its interest in the Company has not been registered under the Securities Act or under any other Security Laws in reliance upon exemptions contained therein. Global understands and acknowledges that its representations and warranties contained herein are being relied upon by the Company, Western Water, Western Land JV and the constituent owners of such persons as the basis for exemption of the transfer of interests in the Company from the registration requirements of the Securities Act and other Security Laws. Global acknowledges that the Company will 22 26 not and has no obligation to register any interest in the Company under the Securities Act or other Security Laws. Global acknowledges that prior to the execution of this Agreement, it has had an opportunity to review the NLRC LLC Agreement, and any and all other information regarding the Company which has been provided by Western Water and Western Land JV to Global. Global hereby acknowledges that it understands that the acquisition of its interest in the Company is a speculative investment involving a high degree of risk and does hereby represent that it has net worth sufficient to bear the economic risk of its investment in the Company and to justify its investing in a highly speculative venture of this type. Each of the representations, warranties and acknowledgements of Global set forth above shall be deemed for purposes of this Section 6.5 to also have been made by the persons making the decisions on behalf of Global to acquire its interest in the Company. ARTICLE VII REMEDIES 7.1 WESTERN LAND JV'S AND WESTERN WATER'S REMEDIES. IN THE EVENT THAT CLOSING AND THE CONSUMMATION OF THE TRANSACTION CONTEMPLATED HEREBY DOES NOT OCCUR AS A RESULT OF A DEFAULT BY GLOBAL IN THE PERFORMANCE OF ITS OBLIGATIONS PURSUANT TO THIS AGREEMENT AND SUCH DEFAULT IS NOT THE RESULT OF A FAILURE BY WESTERN WATER OR WESTERN LAND JV TO PERFORM HEREUNDER, WESTERN LAND JV AND WESTERN WATER SHALL BE ENTITLED, AS ITS SOLE AND EXCLUSIVE REMEDY, IN LAW OR IN EQUITY, TO TERMINATE THIS AGREEMENT AND RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES AND 23 27 NOT AS A PENALTY, IN FULL SATISFACTION OF CLAIMS AGAINST GLOBAL HEREUNDER. IN THE EVENT THE CLOSING AND THE CONSUMMATION OF THE TRANSACTION HEREIN CONTEMPLATED DOES NOT OCCUR AS HEREIN PROVIDED BY REASON OF ANY DEFAULT OF GLOBAL, GLOBAL AND WESTERN LAND JV AND WESTERN WATER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES SUFFERED BY WESTERN WATER AND WESTERN LAND JV AS A RESULT OF GLOBAL'S FAILURE TO CONSUMMATE THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT, AND THAT UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS AGREEMENT, THE LIQUIDATED DAMAGES PROVIDED FOR IN THIS SECTION REPRESENT A REASONABLE ESTIMATE OF THE DAMAGES WHICH WESTERN WATER AND WESTERN LAND JV WILL INCUR AS A RESULT OF SUCH FAILURE; PROVIDED, HOWEVER, THAT THIS PROVISION WILL NOT WAIVE OR AFFECT ANY INDEMNITY OBLIGATION OF GLOBAL HEREUNDER OR WESTERN LAND JV'S OR WESTERN WATER'S RIGHTS WITH RESPECT THERETO. THEREFORE, GLOBAL AND WESTERN WATER AND WESTERN LAND JV DO HEREBY AGREE THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT WESTERN WATER AND WESTERN LAND JV WOULD SUFFER IN THE EVENT THAT GLOBAL DEFAULTS AND FAILS TO CONSUMMATE THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT IS AN AMOUNT EQUAL TO THE DEPOSIT. SAID AMOUNT WILL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR THE BREACH OF THIS AGREEMENT BY GLOBAL. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY 24 28 WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO WESTERN LAND JV AND WESTERN WATER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. UPON DEFAULT BY GLOBAL, THIS AGREEMENT WILL BE TERMINATED AND, EXCEPT FOR ANY INDEMNITY OBLIGATIONS OF GLOBAL HEREUNDER WHICH MAY BE ENFORCED BY WESTERN LAND JV AND/OR WESTERN WATER IN ADDITION TO RETENTION BY WESTERN LAND JV AND WESTERN WATER OF THE DEPOSIT, NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER. _______ _______ _______ Global Western Land JV Western Water Initials Initials Initials 7.2 GLOBAL'S REMEDIES PRIOR TO CLOSING. IN THE EVENT THAT PRIOR TO THE CLOSING THE COMPANY, WESTERN LAND JV OR WESTERN WATER FAILS TO PERFORM ANY MATERIAL OBLIGATION UNDER THIS AGREEMENT FOR ANY REASON EXCEPT THE FAILURE BY GLOBAL TO PERFORM A MATERIAL OBLIGATION, GLOBAL SHALL HAVE THE RIGHT TO (I) BRING AN ACTION FOR SPECIFIC PERFORMANCE UNDER THIS AGREEMENT, (II) PROCEED WITH THE PURCHASE OF THE PROPERTY, OR (III) TERMINATE THIS AGREEMENT BY DELIVERING WRITTEN NOTICE TO THE COMPANY, WESTERN LAND JV AND WESTERN WATER PRIOR TO THE CLOSING. IN THE EVENT THAT GLOBAL ELECTS TO TERMINATE THIS AGREEMENT, THE DEPOSIT SHALL BE RETURNED TO GLOBAL, WESTERN WATER AND WESTERN LAND JV SHALL PAY ALL ESCROW CANCELLATION FEES AND CHARGES, AND GLOBAL SHALL HAVE THE RIGHT TO COLLECT FROM THE 25 29 COMPANY, WESTERN LAND JV AND/OR WESTERN WATER, JOINTLY AND SEVERALLY TO THE EXTENT EACH SUCH PARTY IS IN DEFAULT OF ANY OF ITS MATERIAL OBLIGATIONS HEREUNDER, AS COMPENSATION FOR ANY AND ALL DAMAGES (ACTUAL, CONSEQUENTIAL, PUNITIVE OR OTHERWISE) ASSOCIATED WITH THIS AGREEMENT AND THE DUE DILIGENCE CONDUCTED BY GLOBAL ACTUAL OUT-OF POCKET COSTS INCURRED BY GLOBAL UP TO A MAXIMUM AMOUNT OF TWO HUNDRED THOUSAND DOLLARS ($200,000.00). GLOBAL HEREBY WAIVES ALL OTHER REMEDIES AGAINST THE COMPANY, WESTERN LAND JV AND/OR WESTERN WATER WHICH GLOBAL MIGHT OTHERWISE HAVE AT LAW OR IN EQUITY BY REASON OF SUCH MATERIAL DEFAULT BY ANY OF THEM. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, IN THE EVENT THAT PRIOR TO CLOSING, GLOBAL HAS ACTUAL KNOWLEDGE (NOT CONSTRUCTIVE KNOWLEDGE) OF ANY MATERIAL MISREPRESENTATION BY WESTERN WATER OR WESTERN LAND JV OR ANY MATERIAL BREACH OF THEIR MATERIAL WARRANTIES OR COVENANTS CONTAINED HEREIN, AND GLOBAL ELECTS TO AFFIRM THIS AGREEMENT AND PROCEED WITH THE CLOSING, SUCH ELECTION SHALL, UPON THE CLOSING, CONSTITUTE A WAIVER BY GLOBAL OF ANY AND ALL CLAIMS RELATING TO SUCH MATERIAL MISREPRESENTATION OR MATERIAL BREACH OF MATERIAL WARRANTY OR COVENANT. _______ _______ _______ Global Western Land JV Western Water Initials Initials Initials 26 30 7.3 GLOBAL'S REMEDIES AFTER CLOSING. IN THE EVENT THAT AFTER THE CLOSING BUT DURING THE PERIOD SET FORTH IN SECTION 6.5(B) GLOBAL DISCOVERS ANY MATERIAL BREACH OF A MATERIAL WARRANTY OR COVENANT OR MATERIAL MISREPRESENTATION BY WESTERN LAND JV OR WESTERN WATER, EXCLUDING ANY BREACH OF WARRANTY OR MISREPRESENTATION AMOUNTING TO FRAUD, GLOBAL'S SOLE AND EXCLUSIVE REMEDY, IN LAW OR IN EQUITY, SHALL BE TO COLLECT EXCLUSIVELY FROM THE PARTY RESPONSIBLE FOR SUCH BREACH OF WARRANTY OR COVENANT OR MISREPRESENTATION ALL DAMAGE DIRECTLY INCURRED BY GLOBAL AND REASONABLY FORESEEABLE, INCLUDING ATTORNEYS' FEES AND COSTS PURSUANT TO SECTION 7.5 HEREOF, PROVIDED HOWEVER, THAT (I) GLOBAL SHALL HAVE NO CLAIM OR CAUSE OF ACTION HEREUNDER UNLESS AND ONLY TO THE EXTENT THAT THE TOTAL DOLLAR AMOUNT OF SUCH DAMAGES (INCLUDING UNDER THE ASSIGNMENTS OF LLC INTERESTS) INCURRED BY GLOBAL IN THE AGGREGATE EXCEEDS THE SUM OF FOUR HUNDRED FIFTY THOUSAND DOLLARS ($450,000) AND (II) THE TOTAL DOLLAR AMOUNT WHICH MAY BE COLLECTED BY GLOBAL HEREUNDER FOR ALL DAMAGES INCURRED BY GLOBAL (INCLUDING UNDER THE ASSIGNMENTS OF LLC INTERESTS) SHALL IN NO EVENT EXCEED THE SUM OF TEN MILLION DOLLARS ($10,000,000) REGARDLESS OF THE AMOUNT OF DAMAGES INCURRED BY GLOBAL. AFTER THE EXPIRATION OF THE PERIOD SET FORTH IN SECTION 6.5(B), GLOBAL SHALL HAVE NO RIGHT TO MAKE ANY SUCH CLAIM. IN THE EVENT OF FRAUD BY EITHER WESTERN WATER OR WESTERN LAND JV, 27 31 GLOBAL AGREES TO ASSERT ANY CLAIM WITH RESPECT THERETO EXCLUSIVELY AGAINST THE PARTY RESPONSIBLE THEREFOR. _______ _______ _______ Global Western Land JV Western Water Initials Initials Initials 7.4 EXCULPATION. EXCEPT IN THE EVENT OF FRAUD, IN NO EVENT SHALL WESTERN LAND JV, WESTERN WATER OR ANY OF THEIR RESPECTIVE DIRECT OR INDIRECT PARTNERS, MEMBERS, SHAREHOLDERS, OWNERS OR AFFILIATES, OR ANY OFFICER, DIRECTOR, EMPLOYEE OR AGENT OF THE FOREGOING, OR ANY CONTROLLING PERSON THEREOF HAVE ANY LIABILITY FOR ANY CLAIM, CAUSE OF ACTION OR OTHER LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE COMPANY, THE WESTERN LAND JV INTEREST, THE WESTERN WATER INTEREST OR THE PROPERTY IN EXCESS OF THE AMOUNTS SET FORTH IN SECTIONS 7.2 AND 7.3 HEREOF, WHETHER SUCH CLAIM, CAUSE OF ACTION OR LIABILITY IS BASED UPON CONTRACT, COMMON LAW, STATUTE, EQUITY OR OTHERWISE. _______ _______ _______ Global Western Land JV Western Water Initials Initials Initials 7.5 ATTORNEYS' FEES. In the event any party hereto is required to employ an attorney because any litigation arises out of this Agreement between the parties hereto, the nonprevailing party shall pay the prevailing party all reasonable fees and expenses, including attorneys' fees and expenses, incurred in connection with such litigation. 28 32 ARTICLE VIII CLOSING 8.1 CONDITIONS TO CLOSING. A. The obligations of the Company, Western Water and Western Land JV under this Agreement to consummate the transactions contemplated hereby shall be subject to the satisfaction of the following conditions on or before the Closing Date, except to the extent any of such conditions may have been waived by the Company, Western Water and Western Land JV in writing at Closing, in their sole and absolute discretion: 1. All material representations and warranties of Global in this Agreement shall be true and correct in all material respects as of the Effective Date and at all times through the Closing Date and Global shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by Global in a timely manner as and when required prior to the Closing Date or at the Closing. 2. No order, writ, injunction or decree shall have been entered or be in effect by any court of competent jurisdiction or any Governmental Authority, and no statute, rule, regulation or other requirement shall have been promulgated or enacted and be in effect, that restrains, enjoins or invalidates the transactions contemplated hereby. 3. No suit or other proceeding or claims shall be pending or threatened by any third party before any court or Governmental Authority or otherwise asserted against the Company (except as allowed by Section 9.1 hereof) which involves a claim in excess of Four Hundred Fifty Thousand Dollars ($450,000) 29 33 in value (a) concerning any portion of the Property, the Western Water Interest or the Western Land JV Interest, or (b) seeking to restrain or prohibit or declare illegal, or seeking substantial damages against the Company, Western Water, Western Land JV or any of their Affiliates in connection with, the transactions contemplated by this Agreement. 4. If Global is unable to conclude that consummation of the transaction is exempt from the filing and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, such waiting period shall have expired or been terminated, and no action by the Federal Trade Commission or the Antitrust Division of The Department of Justice challenging or seeking to enjoin such consummation shall have been instituted or be pending. B. The obligations of Global under this Agreement to consummate the transactions contemplated herein shall be subject to the satisfaction of the following conditions on or before the Closing Date, except to the extent any such conditions may have been waived by Global in writing at Closing, in its sole and absolute discretion: 1. All material representations and warranties of Western Water and Western Land JV in this Agreement shall be true and correct in all material respects as of the Effective Date and at all times through the Closing Date, and the Company, Western Water and Western Land JV shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Company, Western Water or 30 34 Western Land JV in a timely manner as and when required prior to the Closing Date or at the Closing. 2. No order, writ, injunction or decree shall have been entered and be in effect by any court of competent jurisdiction or any Governmental Authority, and no statute, rule, regulation or other requirement shall have been promulgated or enacted and be in effect, that restrains, enjoins or invalidates the transactions contemplated hereby. 3. No suit or other proceeding shall be pending or threatened by any third party before any court or Governmental Authority which involves a claim in excess of Four Hundred Fifty Thousand Dollars ($450,000) in value (a) concerning any portion of the Property, the Western Water Interest or the Western Land JV Interest or (b) seeking to restrain or prohibit or declare illegal, or seeking substantial damages against Global in connection with, the transactions contemplated by this Agreement. 4. There shall have been no material adverse change in the business or operations with respect to the Company since the Effective Date and no event shall have occurred or circumstances exist that is reasonably likely to result in such a material adverse change. 5. Unless the Company shall have provided Global with reliable information based on which it can reasonably be concluded that the consummation of the transaction is exempt from the filing and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations promulgated by the Federal Trade Commission pursuant thereto, such waiting period shall have expired or been terminated, and no 31 35 action by the Federal Trade Commission or the Antitrust Division of the Department of Justice challenging or seeking to enjoin such consummation shall have been instituted or be pending. C. In the event any of the conditions set forth in Section 8.1.A.1, 8.2.A.2 or 8.1.A.3 or 8.1.A.4 hereof is not satisfied or waived in writing by Western Water and Western Land JV prior to the Closing, this Agreement and the Escrow established hereunder shall terminate upon written notice to Global and the Deposit shall be promptly returned to Global, except in the event this Agreement is terminated pursuant to Section 8.A.1, in which event the Deposit shall be promptly released to Western Land JV and Western Water, as they shall direct to the Escrow Agent, and the parties shall have no further rights or obligations hereunder. D. In the event any of the conditions set forth in Section 8.1.B.1, 8.1.B.2, 8.1.B.3, 8.1.B.4 or 8.1.B.5 is not satisfied or waived in writing by Global prior to the Closing, this Agreement and the Escrow established hereunder shall terminate upon written notice by Global to Western Land JV and Western Water, in which event the Deposit shall be promptly returned to Global and, if applicable, Global shall have the specific rights and remedies set forth Section 7 hereof. 8.2 CLOSING DATE. The Closing shall be held through the Escrow Agent on April 23, 1997 or such earlier or later date as Western Land JV, Western Water and Global shall mutually agree, in each parties' sole and absolute discretion ("Closing Date"). 8.3 CLOSING MATTERS. A. Prior to the Closing Date, Western Land JV shall deliver to the Escrow Agent the following: 32 36 1. Four (4) duly executed counterparts of the Western Land JV Assignment of LLC Interest; 2. A certified LP-1 for Western Affiliate; 3. A duly executed non-foreign entity certification, certifying, in compliance with Section 1445 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, that neither the Company nor Western Land JV is not a "foreign person"; 4. Escrow instructions sufficient to enable the Escrow Agent to close the Escrow in accordance with the terms of this Agreement; 5. A certified copy of a resolution of the general partner(s) of Western Land JV authorizing them to consummate this transaction on behalf of Western Land JV in accordance with this Agreement; and 6. Such other documents and instruments as may be reasonably required to consummate this transaction in accordance with this Agreement. B. Prior to the Closing Date, Western Water shall deliver to the Escrow Agent the following: 1. Four (4) counterparts of the Western Water Assignment of LLC Interest; 2. A duly executed non-foreign entity certification, certifying, in compliance with Section 1445 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, that Western Water is not a "foreign person"; 33 37 3. Escrow instructions sufficient to enable the Escrow Agent to close the Escrow in accordance with the terms of this Agreement; 4. A certified copy of a resolution of the Board of Directors of Western Water authorizing Western Water to consummate this transaction in accordance with this Agreement; and 5. Such other documents and instruments as may be reasonably required to consummate this transaction in accordance with this Agreement. C. Prior to the Closing Date, Western Land JV and Western Water shall cause the Western Affiliate to deliver to the Escrow Agent the following: 1. Four (4) duly executed counterparts of Consulting Agreement; 2. Escrow instructions sufficient to enable the Escrow Agent to close the Escrow in accordance with the terms of this Agreement; and 3. Such other documents and instruments as may reasonably be required to consummate this transaction in accordance with this Agreement. D. Prior to the Closing Date, Western Land JV and Western Water shall cause the Lender to deliver to the Escrow Agent the following: 1. The original promissory note pertaining to the Existing Indebtedness to be marked "paid" at the Closing upon payment of the Existing Indebtedness to Lender by Global; 2. A payoff demand and a duly executed and full reconveyance of the Existing Mortgage for each county in Nevada in which the Existing Mortgage is recorded; 34 38 3. A duly executed and notarized termination of assignment of leases and rents for each county in Nevada in which the Assignment of Leases and Rents pertaining to the Existing Indebtedness has been recorded; and 4. A UCC-2 duly executed by Lender with respect to each UCC-1 filed in connection with the Existing Indebtedness to be filed with the appropriate office in the State of Nevada by the Escrow Agent promptly after the Closing. E. Prior to the Closing Date (except as noted in Section 8.3E.1 below), Global shall deliver to the Escrow Agent the following: 1. The Consideration in cash or by wire transfer, less the Deposit and the Deferred Amount, (all monies Global is required to deliver shall be available for disbursement by wire transfer to the Company, the Lender, Western Water and Western Land JV, as applicable, no later than 12:00 noon, Pacific Time, on the Closing Date provided that all parties have made all deposits into Escrow required of them on or prior to the Closing Date); 2. The Promissory Note in the Deferred Amount duly executed by Global; 3. Global' share of the closing costs to be paid by it hereunder; 4. Four (4) duly executed counterparts of the Western Land JV Assignment of LLC Interest; 5. Four (4) duly executed counterparts of the Western Water Assignment of LLC Interest; 35 39 6. Four (4) duly executed counterparts of the Consulting Agreement; 7. Escrow instructions sufficient to enable the Escrow Agent to close the Escrow in accordance with the terms of this Agreement; 8. A certified copy of a resolution of the Board of Directors of Global authorizing Global to consummate this transaction in accordance with this Agreement and to execute the Promissory Note; and 9. Such other documents and instruments as may be reasonably required to consummate this transaction in accordance with this Agreement. 8.4 DELIVERY OF PROMISSORY NOTE AS PARTIAL PAYMENT TO WESTERN WATER. Western Water and Global agree that the Deferred Amount portion of the Western Water Purchase Price shall be paid with the Promissory Note executed by Global at the Closing and delivered to Western Water. 8.5 CLOSING COSTS. Global shall pay for all costs and expenses incurred in connection with any and all inspections, investigations, reviews, studies and reports undertaken by or at the request of Global and all other costs and expenses incurred by it in connection with the acquisition of its interest in the Company. Escrow fees shall be paid one-half by Western Water and Western Land JV and one-half by Global. Each party shall be responsible for the payment of its own attorneys' fees incurred in connection with the transaction that is the subject of this Agreement and such expenses incurred by Western Water and Western Land JV shall not be paid by the Company. 36 40 8.6 COMMISSIONS. Western Water, Western Land JV, the Company and Global each represents and warrants to the others that no brokerage commission or finders' or other similar fee is payable to any person or entity in connection with the transaction contemplated hereby, and each agrees to and does hereby indemnify and hold the others harmless against the payment of any commission to any other person or entity claiming by, through or under Western Land JV, Western Water, the Company or Global, as applicable. This indemnification shall extend to any and all claims, liabilities, costs and expenses (including reasonable attorneys' fees and litigation costs) arising as a result of such claims and shall survive the Closing. This Section 8.6 shall expressly survive any Closing or any termination of this Agreement. 8.7 NO PRORATIONS. There shall be no prorations, or credits to the Consideration to be paid by Global at the closing. Subject to the terms and conditions of the Western Land JV Assignment of LLC Interest and the Western Water Assignment of LLC Interest, the Company will continue to pay all expenses and liabilities of the Company whether incurred prior to or after the Closing and whether or not such expenses and liabilities are customarily prorated items. 8.8 ACCESS TO DOCUMENTS AND PROPERTY. A. Pending the Closing, except for internal market studies, appraisals, business plans, sensitivity studies or similar subjective evaluations of the Property (collectively, the "Excluded Documents"), Western Water and Western Land JV will continue to provide access to and make available for review and copying between the hours of 8:00 a.m. and 6:00 p.m., all reports, studies, analyses, plans, charts, schedules and other background information pertaining to the Company or the Property in the possession or control of the Company, Western Water or Western 37 41 Land, including without limitation any title policies, title documents, loan documents, leases, licenses, rights of way, environmental and engineering reports, minutes, employment and consultant agreements, and any material correspondence, agreements, memoranda and documentation relating to the Company or the Property in the possession or control of the Company, Western Water or Western Land (collectively, all such material in the possession or control of the Company, Western Water or Western Land shall be referred to as the "Documents"). B. Prior to the Closing, Global and its agents, employees, contractors and consultants shall have the right to enter on the Property for the purpose of performing any inspection thereof that Global may desire to make, provided that Global shall not perform any invasive testing of the Property without the consent of Western Land JV and Western Water, in their sole and absolute discretion. Prior to any entry on the Property, Global shall obtain and deliver evidence to the Company of general liability insurance coverage in a minimum amount of one million dollars ($1,000,000), and Global shall indemnify, defend and hold the Company, Western Land JV and Western Water harmless from and against any and all claims, costs, damages, obligations or liabilities arising in connection with such entry and inspection (including reasonable attorneys' fees and costs). ARTICLE IX CONDEMNATION 9.1 CONDEMNATION. If, prior to Closing, any Governmental Authority or other entity having condemnation authority shall institute an eminent domain proceeding or take any steps preliminary thereto (including the giving of any direct or indirect notice of intent to institute such proceedings) with regard to any material 38 42 portion of the Land, constituting in excess of Four Hundred Fifty Thousand Dollars ($450,000) in value of the Property, the Company shall give prompt notice of same to Global. If such proceedings are not dismissed on or before the Closing Date, Global shall be entitled, as its sole and exclusive remedy, to terminate this Agreement upon written notice to the Company on the Closing Date, in which event the Deposit shall be promptly returned to Global and the parties shall have no further rights or obligations hereunder except as may be set forth herein. In the event Global does not terminate this Agreement pursuant to the preceding sentence, Global shall be conclusively deemed to have elected to purchase the Western Water Interest and the Western Land JV Interest subject to such condemnation and waives any right to terminate this Agreement as a result thereof. If the consideration does not involve a portion of the Property in excess of Four Hundred Fifty Thousand Dollars ($450,000) in value or Global waives or is deemed to have waived the right to terminate this Agreement as a result of such condemnation, the parties hereto shall close this Agreement in accordance with the terms hereof with no reduction in the Consideration, and the proceeds of such condemnation shall be paid to the Company. ARTICLE X RISK OF LOSS 10.1 RISK OF LOSS. The parties hereto acknowledge and agree that any improvements to the Land are not a material element of this transaction, and therefore, if prior to Closing, any of such improvements to the Land shall be damaged or destroyed by fire or other casualty, such event shall not affect the obligations of the parties pursuant to this Agreement and each agrees to proceed to 39 43 close this Agreement in accordance with the terms hereof, with the proceeds of any casualty insurance being payable to the Company. ARTICLE XI MISCELLANEOUS 11.1 ENTIRE AGREEMENT. This Agreement, together with the Exhibits and Schedules attached hereto, contains the entire agreement of the parties hereto. There are no other agreements, oral or written, and this Agreement can be amended only by written agreement signed by the parties hereto, and by reference, made a part hereof. 11.2 AGREEMENT BINDING ON PARTIES. Except as hereinafter provided, this Agreement, and the terms, covenants, and conditions herein contained, shall inure to the benefit of and be binding upon the heirs, personal representatives, successors, and assigns of each of the parties hereto. No party may assign its rights hereunder without the prior written consent of the other parties, except that Global may assign this Agreement to or designate one or more wholly owned subsidiaries or other Affiliates to become a member of the Company. No assignment permitted hereunder shall relieve any party from any of its obligations under this Agreement. Any assignment in violation of the provisions of this Section 11.2 shall be void and shall constitute a material default under this Agreement. 11.3 EFFECTIVE DATE. The "Effective Date" of this Agreement shall be the date on which this Agreement has been executed by all of the Company, Western Land JV, Western Water, and Global. 40 44 11.4 NOTICE. Any notice, communication, request, reply or advice (collectively, "Notice") provided for or permitted by this Agreement to be made or accepted by either party must be in writing. Notice may, unless otherwise provided herein, be given or served by A) depositing the same in the United States mail, postage paid, certified, and addressed to the party to be notified, with return receipt requested, B) by delivering the same to such party, or an agent of such party, in person or by commercial courier, C) by facsimile, or D) by depositing the same into custody of a nationally recognized overnight delivery service such as Federal Express Corporation, Airborne Express, Emery or DHL. Notice given in any manner shall be effective only if and when received by the party to be notified between the hours of 8:00 a.m. and 5:00 p.m. of any Business Day with delivery made after such hours to be deemed received the following Business Day. For the purposes of notice, the addresses of the parties shall, until changed as hereinafter provided, be as follows: THE COMPANY: Nevada Land and Resource Company LLC P.O. Box 1200 Rocklin, California 95677-1200 Attn: Mr. Larry D. Kelley Fax: (916) 624-0741 AND TO: Morgan Stanley Real Estate Fund 1999 Avenue of the Stars Suite 2000 Los Angeles, California 90067-6086 Attn: Mr. Jeffrey A. Dritley Fax: (310) 203-9703 AND TO: Jones, Day, Reavis & Pogue 77 West Wacker Drive Suite 3500 Chicago, Illinois 60601-1692 Attn: Robert C. Lee, Esq. Fax: (312) 782-8585 41 45 AND TO: Western Water Company 4660 La Jolla Village Drive Suite 680 San Diego, California 92122 Attn: Mr. Peter L. Jensen Fax: (619) 535-9260 AND TO: Troy & Gould 1801 Century Park East 16th Floor Los Angeles, California 90067 Attn: William Gould, Esq. Fax: (310) 201-4746 WESTERN LAND JV: Western Land Joint Venture 1999 Avenue of the Stars Suite 2000 Los Angeles, California 90067-6086 Attn: Mr. Jeffrey A. Dritley Fax: (310) 203-9703 WITHA COURTESY COPY TO: Jones, Day, Reavis & Pogue 77 West Wacker Drive Suite 3500 Chicago, Illinois 60601-1692 Attn: Robert C. Lee, Esq. Fax: (312) 782-8585 WESTERN WATER: Western Water Company 4660 La Jolla Village Drive Suite 680 San Diego, California 92122 Attn: Mr. Peter L. Jensen Fax: (619) 535-9260 WITH A COURTESY COPY TO: Troy & Gould 1801 Century Park East 16th Floor Los Angeles, California 90067 Attn: William Gould, Esq. Fax: (310) 201-4746 42 46 GLOBAL: John R. Hart President and CEO Global Equity Corporation 875 Prospect, Suite 301 La Jolla, CA 92037 Fax: (619) 454-1170 AND TO: Gray Cary Ware & Freidenrich 400 Hamilton Avenue Palo Alto, CA 94301 Attn: Jeffrey A. Trant, Esq. Fax: (415) 328-3029 The parties hereto shall have the right from time to time to change their respective addresses, and each shall have the right to specify as its address any other address within the United States of America upon written notice to the other party. Any notice which Global desires to send to the Company, Western Water and Western Land JV may be sent in a single notice delivered to all parties to receive notices on behalf of the Company. 11.5 TIME OF THE ESSENCE. Time is of the essence in all things pertaining to the performance of this Agreement. 11.6 PLACE OF PERFORMANCE. This Agreement is made and shall be performable in La Jolla, California, and shall be construed in accordance with the laws of the State of California. 11.7 VENUE. Venue shall be in San Diego County. 11.8 CURRENCY. All dollar amounts are expressed in United States currency. 11.9 SECTION HEADINGS. The section headings contained in this Agreement are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several sections hereof. 11.10 OBLIGATIONS. Subject to Section 6.5.B hereof, to the extent necessary to carry out the terms and provisions hereof, the terms, conditions, obligations and 43 47 rights set forth herein shall not be deemed terminated at the time of Closing nor will they merge into the various documents executed and delivered at the time of Closing. 11.11 NO RECORDATION. Without the prior written consent of the Company, there shall be no recordation of either this Agreement or any memorandum hereof, or any affidavit pertaining hereto and any such recordation of this Agreement or memorandum hereof, by Global without the prior written consent of the Company shall constitute a default hereunder by Global, whereupon this Agreement shall, at the option of the Company, terminate and be of no further force and effect. Upon termination all Deposit shall be retained by Western Land JV and Western Water, the parties shall have no further duties or obligations one to the other, except as may be set forth in Section 7.1. 11.12 MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple counterparts (each of which is to be deemed original for all purposes). 11.13 SEVERABILITY. If any provision of this Agreement or application to any party or circumstance shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances, other than those as to which it is so determined invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be valid and shall be enforced to the fullest extent permitted by law. 11.14 COOPERATION. Each party hereto shall cooperate with the other parties in all respects in implementing the transaction contemplated by this Agreement. Each 44 48 party shall execute and deliver such instruments and other documents as may be reasonably requested by the other party to carry out the purpose of this Agreement. 11.15 POSSESSION. Possession of the Property, including but not limited to the Land and all bank accounts, funds, records, documents, reports, studies, equipment, furnishings and other assets of the Company shall remain with the Company at the Closing (other than the Excluded Documents which shall remain with Western Water and Western Land JV) and be delivered to the new members of the Company as directed by Global. 11.16 CONFIDENTIALITY. Each party to this Agreement expressly acknowledges and agrees that the transactions contemplated by this Agreement and the terms, conditions and negotiations concerning the same shall be held in the strictest confidence by each of them and shall not be disclosed by any of them, except (1) to their respective legal counsel, accountants, consultants, officers, partners, directors and shareholders, (2) to the extent that such disclosure may be necessary for their respective performances hereunder, and (3) to the extent Global and Western Water may be required to publicly announce this transaction at the time of signing this Agreement pursuant to SEC regulations and/or Canadian Regulations pertaining to such disclosure requirements. Global further acknowledges and agrees that, unless and until the Closing occurs, all information obtained by Global in connection with the Company or the Land will not be disclosed by Global to any third person without the prior written consent of the Company. Nothing contained in this Section 11.16 shall preclude or limit any party from disclosing any information otherwise deemed confidential under this Section 11.16 in connection with such party's enforcement of its rights following a disagreement hereunder or in response 45 49 to lawful process or subpoena or other valid or enforceable order of a court of competent jurisdiction or any filings with Governmental Authorities required by reason of the transactions provided for herein. The provisions of this Section 11.16 shall survive any termination of this Agreement. 46 50 IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date. "THE COMPANY" NEVADA LAND AND RESOURCE COMPANY, LLC, a Delaware limited liability company By: Western Land Joint Venture, a Delaware general partnership By: /s/ JEFFREY A. DRITLEY ------------------------------ Name: Jeffrey A. Dritley ---------------------------- Title: President --------------------------- By: Western Water Company, a Delaware corporation By: /s/ PETER JENSEN ----------------------------- Name: Peter Jensen --------------------------- Title: Chief Executive Officer -------------------------- "WESTERN LAND JV" WESTERN LAND JOINT VENTURE, a Delaware general partnership By: /s/ JEFFREY A. DRITLEY ----------------------------- Name: Jeffrey A. Dritley --------------------------- Title: President -------------------------- (SIGNATURES CONTINUE NEXT PAGE) 47 51 "WESTERN WATER" WESTERN WATER COMPANY, a Delaware corporation By: /s/ PETER JENSEN ----------------------------- Name: Peter Jensen --------------------------- Title: Chief Executive Officer -------------------------- "GLOBAL" GLOBAL EQUITY CORPORATION, an Ontario, Canada corporation By: /s/ JOHN R. HART ----------------------------- Name: John R. Hart --------------------------- Title: President and CEO -------------------------- 48 52 EXHIBIT A ATTACH ULLMAN INVENTORY DATED MARCH 27, 1997 53 EXHIBIT B FORM OF CONSULTING AGREEMENT 54 EXHIBIT C PROMISSORY NOTE 55 EXHIBIT D WESTERN LAND JV ASSIGNMENT OF LLC MEMBER INTEREST THIS ASSIGNMENT OF LLC MEMBER INTEREST (this "Assignment") is made and entered into as of the 23rd day of April, 1997 (the "Effective Date"), by and among Western Land Joint Venture, a Delaware general partnership (sometimes referred to herein as the "Assignor"), Global Equity Corporation, an Ontario, Canada corporation (sometimes referred to herein as the "Assignee") and Western Water Company, a Delaware corporation ("Western Water"); W I T N E S E T H: WHEREAS, Assignor is a member in Nevada Land and Resource Company, a Delaware limited liability company (hereinafter sometimes referred to as the "Company") formed pursuant to the Delaware Limited Liability Company Act, 6 Del. C. Section Section 18-101, et seq. by the filing of a Certificate of Formation with the Secretary of State of Delaware on September 28, 1995 as amended and restated pursuant to that certain Amended and Restated Certificate of Formation filed with the Secretary of State of Delaware on November 21, 1995 (the "Certificate of Formation"), to be governed by the terms and subject to the conditions set forth in that certain Limited Liability Company Agreement made and entered into as of September 28, 1995 (the "LLC Agreement"), by and among Assignor and Western Water; and WHEREAS, Assignor desires to assign and Assignee desires to accept an assignment of all of Assignor's right, title and interest in and to the Company as provided in that certain Purchase and Sale Agreement (the "Purchase Agreement") dated April 9, 1997, by and among the Company, Assignor, Assignee and Western 1 56 Water; all capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such terms in such Purchase and Sale Agreement) (herein such interest is sometimes referred to as the "Assigned Interest"); and NOW, THEREFORE, the parties hereto do hereby agree as follows: 1. ASSIGNMENT OF ASSIGNED INTEREST. Assignor does hereby ASSIGN, TRANSFER, SET OVER and DELIVER unto Assignee, its successors, legal representatives and assigns, the Assigned Interest, TO HAVE AND TO HOLD such Assigned Interest unto Assignee, its successors, legal representatives and assigns, forever. By signing below, all parties consent to the Assignment of the Assigned Interest to Assignee and the admission of Assignee as a member of the Company, and expressly waive any rights they may have under the LLC Agreement, provided that nothing herein shall constitute a waiver of rights between Assignor and Western Water. Following this Assignment, Assignor shall have no further rights or interest in the Company. 2. ASSUMPTION OF OBLIGATIONS. Assignee hereby agrees to assume and perform all of Assignor's liabilities, obligations and responsibilities as a member of the Company arising from and after the Effective Date, except as provided in Paragraphs 3 and 4 below. 3. INDEMNIFICATION BY ASSIGNEE. Subject to the limitations set forth hereinbelow, Assignee will indemnify and hold harmless the Indemnified Parties (as defined below) from and against any and all losses, liabilities, costs (including reasonable fees and disbursements of counsel), expenses, penalties, judgments, damages, claims and demands of every kind and character arising out of or in connection with the following regardless of by whom or when asserted and 2 57 regardless of whether known or unknown, fixed or contingent, or asserted or unasserted as of the Effective Date: (1) the business of the Company which is conducted from and after the Effective Date; (2) any claims or liabilities concerning the business of the Company from the date of its formation and prior to the Effective Date, provided that the aggregate amount paid by Assignee or the Company in connection with all such claims and liabilities together with damages for breach of warranties, covenants or representations does not exceed the sum of Four Hundred Fifty Thousand Dollars ($450,000) (the "Threshold Amount"); and (3) any claims or liabilities concerning the business of the Company which is conducted prior to the Effective Date, whether or not due to the negligent act or omission of the Company, to the extent payment by Assignor pursuant to Paragraph 4 below of all such claims or liabilities together with damages for breach of warranties, covenants or representations in the aggregate exceeds the sum of Ten Million Dollars ($10,000,000) (the "Ceiling Amount"). Notwithstanding the foregoing, this indemnification shall exclude (A) any obligations of or acts to be performed by the Indemnified Parties as a member of the Company prior to the Effective Date; (B) any claims resulting from the fraud or willful misconduct of the Indemnified Parties, and (C) any federal or state income tax liabilities of any Indemnified Party attributable to the period prior to the Effective Date hereof. For purposes of this Assignment "Indemnified Parties" shall mean the Assignor, any shareholder, partner, or other beneficial owner of Assignor, any person who directly or indirectly controls, is controlled by or is under common control with the Assignor or any shareholder, partner, director or other beneficial owner of Assignor, and any shareholder, partner, officer, employee, agent, successor or assign of any of the foregoing, provided, however, that any person that is an 3 58 Indemnified Party on the date of this Assignment shall always be an Indemnified Party. If any action or claim shall be brought or asserted against any Indemnified Party, in respect of which indemnity may be sought from Assignee, such Indemnified Party shall promptly notify Assignee in writing and Assignee shall assume the defense thereof, including the employment of counsel and the payment of all expenses. Such Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the cost and expense of such Indemnified Party unless (A) the employment thereof has been specifically authorized by Assignee in writing, (B) Assignee has failed to assume the defense and employ counsel or (C) the named parties to any such action (including any impleaded parties) include both such Indemnified Party and Assignee, and Assignee shall have been advised by the counsel employed by such Indemnified Party that there may be one or more legal defenses available to such Indemnified Party which are different from or in addition to those available to Assignee (in which case Assignee shall not have the right to assume the defense of such action on behalf of such Indemnified Party). 4. INDEMNIFICATION BY ASSIGNOR. Subject to the limitations set forth hereinbelow, Assignor will indemnify and hold harmless the Assignee's Indemnified Parties from and against any and all losses, liabilities, costs (including reasonable fees and disbursements of counsel), expenses, penalties, judgments, damages, claims and demands of every kind and character (collectively, the "Assignee Indemnity Claims") arising out of or in connection with the following regardless of how such indemnified liabilities arose or arise and regardless of by whom or when asserted and regardless of whether known or unknown, fixed or contingent, or asserted or 4 59 unasserted as of the Effective Date: (1) any claims or liabilities resulting from the fraud or willful misconduct of the Indemnified Parties; (2) any federal or state income tax liabilities of any Indemnified Party and employment taxes of the Company due prior to the Effective Date; and (3) any claims or liabilities concerning the business of the Company from the date of its formation and prior to the Effective Date in the event such claims or liabilities are due to either employment claims or the negligent act or omission of the Company; provided that the aggregate amount of all such claims and liabilities paid by Assignee, together with damages for breach of warranties, covenants or representations, exceed the Threshold Amount but only to the extent in excess of the Threshold Amount and the dollar amount of such claims or liabilities paid by Assignor together with damages for breach of warranties, covenants or representations does not exceed the Ceiling Amount. Notwithstanding the foregoing, this indemnification shall exclude (A) any claims or liabilities attributable to any alleged negligent omission or failure to act by Assignor or the Company prior to the Effective Date in connection with any Hazardous Material (as hereinafter defined) contamination of the Property, (B) any matter concerning the condition of the Property as of the Effective Date, including but not limited to those matters set forth in Paragraph 4.1 of the Purchase Agreement, unless specifically related to claims or liabilities due to the negligent acts or omissions of the Company covered by subparagraph (3) above, or (C) any matter disclosed in the Documents to which Assignee has been provided access prior to the Effective Date pursuant to the Purchase Agreement. In addition, prior to asserting any claim hereunder Assignee shall submit such claim for payment to its insurance company or title insurance company if such claim is insured, and Assignee shall assert such claim against 5 60 Assignor only to the extent the claim is not covered by such policy. For purposes of this Paragraph 5 "Assignee's Indemnified Parties" shall mean the Assignee, any shareholder, partner or other beneficial owner of Assignee, any person who directly or indirectly controls, is controlled by or is under common control with Assignee or any shareholder, partner, direct or other beneficial owner of Assignee, and any shareholder, partner, officer, employee, agent, successor or assign of any of the foregoing, provided, however, that any person that is an Assignee's Indemnified Party on the date of this Assignment shall always be an Assignee's Indemnified Party. If any action or claim shall be brought or asserted against any Assignee's Indemnified party, in respect of which indemnity may be sought from Assignor, such Assignee's Indemnified Party shall promptly notify Assignor in writing and Assignor shall assume the defense thereof, including the employment of counsel and the payment of all expenses. Such Assignee's Indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the cost and expense of such Assignee's Indemnified Party, unless (A) the employment thereof has been specifically authorized by Assignor in writing, (B) Assignor has failed to assume the defense and employ counsel or (C) the named parties to any such action (including any impleaded parties) include both Assignor and such Assignee's Indemnified Party, and Assignee's Indemnified Party shall have been advised by the counsel employed by such Assignee's Indemnified Party that there may be one or more legal defenses available to Assignor which are different from or in addition to those available to such Assignee's Indemnified Party (in which case Assignor shall not have the right to assume the defense of such action on behalf of such Assignee's Indemnified Party). 6 61 6. HAZARDOUS MATERIALS. The term "Hazardous Materials" as used in this Agreement shall mean any hazardous, toxic or dangerous waste, substance or material, pollutant or contaminant, as defined for purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended ("CERCLA"), or the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), as amended ("RCRA"), or any other federal, state or local law, ordinance, rule or regulation applicable to the Land, or any substance which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, or any substance which contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls (pcbs), radon gas, urea formaldehyde, asbestos, lead or electromagnetic waves. 7. EFFECTIVE DATE. This Assignment is effective as of the Effective Date and from and after the Effective Date (A) Assignor shall cease to be a member of the Company and (B) that portion of the net profits or net losses and cash flow (including cash flow which has not been distributed) of the Company allocable to the Assigned Interest shall be credited, distributed or charged, as the case may be, to Assignee and not to Assignor in accordance with the terms of the amended and restated NRLC Agreement which Assignee may adopt. 8. FUTURE COOPERATION ON SUBSEQUENT DOCUMENTS. Assignor and Assignee mutually agree to cooperate at all times from and after the Effective Date with respect to the supplying of any information requested by the other regarding any of the matters described in this Assignment, and each agrees promptly to execute such further deeds, bills of sale, assignments, amendments to the Company's organizational documents, releases, indemnifications, assumptions, estoppel 7 62 certificates, notifications, or such other documents or instruments and to take all necessary action and to perform such additional acts as may be reasonably requested and appropriate for the purpose of giving effect to, evidencing, performing or giving notice of the terms, provisions and conditions of this Assignment, all transactions contemplated herein and carrying out the business of the Company from and after the effective date of this Assignment. 9. DURATION OF INDEMNIFICATION. The indemnifications provided by the parties contained in this Assignment shall survive the consummation of the transactions contemplated hereby and shall expire one (1) year from the Effective Date. Accordingly, any party which may desire to bring a claim with respect to any indemnification hereunder shall provide written notice of such claim to all other parties prior to the expiration of one (1) year from the Effective Date. 10. BINDING EFFECT. Except as herein otherwise provided to the contrary, this Assignment shall be binding upon and inure to the benefit of the parties hereto, their heirs, legal and personal representatives, successors and assigns; provided, however, that neither party shall have any right, power and authority to assign any rights, powers, duties or obligations hereunder, except that Assignee may assign its interest in this Assignment to any parent or subsidiary corporation or to any Affiliate, as such term is defined in the Purchase Agreement. 11. AMENDMENTS. No amendment, alteration, modification or waiver of this Assignment, or any part hereof, shall be valid or effective unless in writing and signed by all the parties hereto. 8 63 12. APPLICABLE LAWS. This Assignment shall be governed by and construed in accordance with the laws of the State of California and the applicable federal laws of the United States. 13. COUNTERPARTS. This Assignment may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute but one and the same instrument which may be sufficiently evidenced by one counterpart, and any of the parties hereto may execute this Assignment by signing any such counterpart. 14. WAIVER. No consent or waiver, either expressed or implied, by any party to or of any breach or default by any other party, in the performance by such other party of the obligations thereof under this Assignment shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such other party of the same or any other obligations of such other party under this Assignment. Failure on the part of any party to complain or to pursue complaints with respect to any acts or failure to act of any other party, or failure on the part of any party to declare any other party in default, irrespective of how long such default continues, shall not constitute a waiver by such party of the rights and remedies thereof under this Assignment or otherwise at law or in equity. 15. HEADINGS AND TITLES. The headings and titles of the Articles, Sections, Subsections and Paragraphs herein have been inserted as a matter of convenience of reference only and shall not control or affect the meaning or construction of any of the operative terms or provisions herein, unless the latter are ambiguous, uncertain or indefinite, in which case, such titles and headings may be looked to in determining the proper construction and meaning of this Assignment and the parties' intentions. 9 64 16. GENDER. Whenever the context shall so require, all words herein in any gender shall be deemed to include the masculine, feminine, or neuter gender, and all singular words shall include the plural, and all plural words shall include the singular. 17. CONSTRUCTION. In case any one or more of the provisions contained in this Assignment shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalid, illegal or unenforceable provision or provisions shall be fully severable and shall not affect any other provision hereof and this Assignment shall be construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein. Furthermore, in lieu of each such illegal, invalid or unenforceable provision there shall be added automatically as part of this Assignment a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 18. NO THIRD PARTY BENEFICIARY RIGHTS. This Assignment is made solely and specifically between and for the benefit of the parties hereto, and their respective successors and assigns, subject to the express provisions hereof relating to successors and assigns, and no other person, individual, corporation or entity, whatsoever, shall have any rights, interests, or claims hereunder or be entitled to any benefits under or on account of this Assignment as a third party beneficiary or otherwise. 19. EXHIBITS AND RECITALS. All recital paragraphs and exhibits, attachments, annexed instruments and addenda referred to herein shall be considered a part of this Assignment as fully as if and with the same force and effect as if such recital paragraphs and exhibits, attachments, annexed instruments or addenda had been included herein in full. 10 65 20. LANGUAGE. The parties hereto acknowledge that each of them and their counsel have reviewed and revised this Assignment and that the language used in this Assignment shall be deemed to be the language chosen by the parties to express their mutual intent, and the parties hereby agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Assignment or any amendments or exhibits hereto and that no rule of strict construction shall be applied against any party. 21. ATTORNEYS' FEES. In the event any party hereto is required to employ an attorney because any litigation arises out of this Agreement between the parties hereto, the nonprevailing party shall pay the prevailing party all reasonable fees and expenses, including attorneys' fees and expenses, incurred in connection with such litigation. IN WITNESS WHEREOF, this Assignment is executed as of the day and year first above written. ASSIGNOR: WESTERN LAND JOINT VENTURE, a Delaware general partnership By:______________________________ Name:_________________________ Title:________________________ 11 66 ASSIGNEE: GLOBAL EQUITY CORPORATION an Ontario, Canada corporation By:______________________________ Name:_________________________ Title:________________________ WESTERN WATER: WESTERN WATER COMPANY, a Delaware corporation By:______________________________ Name:_________________________ Title:________________________ 12 67 EXHIBIT E WESTERN WATER ASSIGNMENT OF LLC MEMBER INTEREST THIS ASSIGNMENT OF LLC MEMBER INTEREST (this "Assignment") is made and entered into as of the 9th day of April, 1997 (the "Effective Date"), by and among Western Water Company, a Delaware corporation (sometimes referred to herein as the "Assignor") and Global Equity Corporation, Inc., an Ontario, Canada corporation (sometimes referred to herein as the "Assignee") and Western Land Joint Venture, a Delaware general partnership ("Western Land"); W I T N E S E T H: WHEREAS, Assignor is a member in Nevada Land and Resource Company, a Delaware limited liability company (hereinafter sometimes referred to as the "Company") formed pursuant to the Delaware Limited Liability Company Act, 6 Del. C. Section Section 18-101, et seq. by the filing of a Certificate of Formation with the Secretary of State of Delaware on September 28, 1995 as amended and restated pursuant to that certain Amended and Restated Certificate of Formation filed with the Secretary of State of Delaware on November 21, 1995 (the "Certificate of Formation"), to be governed by the terms and subject to the conditions set forth in that certain Limited Liability Company Agreement made and entered into as of September 28, 1995 (the "LLC Agreement"), by and among Assignor and Western Land; and WHEREAS, Assignor desires to assign and Assignee desires to accept an assignment of all of Assignor's right, title and interest in and to the Company as 1 68 provided in that certain Purchase and Sale Agreement (the "Purchase Agreement") dated April 9, 1997 by and among the Company, Assignor, Assignee and Western Land; all capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such terms in such Purchase and Sale Agreement) (herein such interest is sometimes referred to as the "Assigned Interest"); and WHEREAS, as of the execution of this Assignment, Assignor and Western Land are the only members of the Company; and NOW, THEREFORE, the parties hereto do hereby agree as follows: 1. ASSIGNMENT OF ASSIGNED INTEREST. Assignor does hereby ASSIGN, TRANSFER, SET OVER and DELIVER unto Assignee, its successors, legal representatives and assigns, the Assigned Interest, TO HAVE AND TO HOLD such Assigned Interest unto Assignee, its successors, legal representatives and assigns, forever. By signing below, all parties consent to the assignment of the Assigned Interest to Assignee and the admission of Assignee as a member of the Company, and expressly waive any rights they may have under the LLC Agreement, provided that nothing herein shall constitute a waiver of rights between Assignor and Western Land JV. Following this Assignment, Assignor shall have no further rights or interest in the Company. 2. ASSUMPTION OF OBLIGATIONS. Assignee hereby agrees to assume and perform all liabilities, obligations and responsibilities as a member of the Company arising in from and after the Effective Date except as provided in Paragraphs 3 and 4 below. 3. INDEMNIFICATION BY ASSIGNEE. Subject to the limitations set forth hereinbelow, Assignee will indemnify and hold harmless the Indemnified Parties (as 2 69 defined below) from and against any and all losses, liabilities, costs (including reasonable fees and disbursements of counsel), expenses, penalties, judgments, damages, claims and demands of every kind and character arising out of or in connection with the following regardless of by whom or when asserted and regardless of whether known or unknown, fixed or contingent, or asserted or unasserted as of the Effective Date: (1) the business of the Company which is conducted from and after the Effective Date; (2) any claims or liabilities concerning the business of the Company from the date of its formation and prior to the Effective Date, provided that the aggregate amount paid by Assignee or the Company in connection with all such claims and liabilities, together with damages for breach of warranties, covenants or representations, does not exceed the sum of Four Hundred Fifty Thousand Dollars ($450,000) (the "Threshold Amount"); and (3) any claims or liabilities concerning the business of the Company which is conducted prior to the Effective Date, whether or not due to the negligent act or omission of the Company, to the extent payment by Assignor pursuant to Paragraph 4 below of all such claims or liabilities, together with damages for breach of warranties, covenants or representations, in the aggregate exceeds the sum of Ten Million Dollars ($10,000,000) (the "Ceiling Amount"). Notwithstanding the foregoing, this indemnification shall exclude (A) any obligations of or acts to be performed by the Indemnified Parties as a member of the Company prior to the Effective Date, (B) any claims resulting from the fraud or willful misconduct of the Indemnified Parties, and (C) any federal or state income tax liabilities of any Indemnified Party and liabilities arising out of any act or failure to act on the part of any Indemnified Party attributable to the period prior to the Effective Date hereof. For purposes of this Assignment, "Indemnified Parties" 3 70 shall mean the Assignor, any shareholder, partner, or other beneficial owner of Assignor, any person who directly or indirectly controls, is controlled by or is under common control with the Assignor or any shareholder, partner, director or other beneficial owner of Assignor, and any shareholder, partner, officer, employee, agent, successor or assign of any of the foregoing, provided, however, that any person that is an Indemnified Party on the date of this Assignment shall always be an Indemnified Party. If any action or claim shall be brought or asserted against any Indemnified Party, in respect of which indemnity may be sought from Assignee, such Indemnified Party shall promptly notify Assignee in writing and Assignee shall assume the defense thereof, including the employment of counsel and the payment of all expenses. Such Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the cost and expense of such Indemnified Party unless (a) the employment thereof has been specifically authorized by Assignee in writing, (b) Assignee has failed to assume the defense and employ counsel or (c) the named parties to any such action (including any impleaded parties) include both Assignor and such Indemnified Party and Assignee, and Assignee shall have been advised by the counsel employed by such Indemnified Party that there may be one or more legal defenses available to such Indemnified Party which are different from or in addition to those available to such Indemnified Party (in which case Assignee shall not have the right to assume the defense of such action on behalf of such Indemnified Party). 4. INDEMNIFICATION BY ASSIGNOR. Subject to the limitation set forth hereinbelow, Assignor will indemnify and hold harmless the Assignee's Indemnified Parties from and against any and all losses, liabilities, costs (including reasonable fees 4 71 and disbursements of counsel), expenses, penalties, judgments, damages, claims and demands of every kind and character (collectively, the "Assignee Indemnity Claims") arising out of or in connection with the following regardless of how such indemnified liabilities arose or arise and regardless of by whom or when asserted and regardless of whether known or unknown, fixed or contingent, or asserted or unasserted as of the Effective Date: (1) any claims or liabilities resulting from the fraud or willful misconduct of the Indemnified Parties; (2) any federal or state income tax liabilities of any Indemnified Party and employment taxes of the Company prior to the Effective Date; and (3) any claims or liabilities concerning the business of the Company from the date of its formation and prior to the Effective Date in the event such claims or liabilities are due to either employment claims or the negligent act of omission of the Company; provided that the aggregate amount of all such claims and liabilities paid by Assignee, together with damages for breach of warranties, covenants or representations, exceed the Threshold Amount but only to the extent in excess of the Threshold Amount and the dollar amount of such claims or liabilities paid by Assignor, together with damages for breach of warranties, covenants or representations, does not exceed the Ceiling Amount. Notwithstanding the foregoing, this indemnification shall exclude (A) any claims or liabilities attributable to any alleged negligent omission or failure to act by Assignor or the Company prior to the Effective Date in connection with any Hazardous Material (as hereinafter defined) contamination of the Property, (B) any matter concerning the condition of the Property as of the Effective Date, including but not limited to those matters set forth in Paragraph 4.1 of the Purchase Agreement, unless specifically related to claims or liabilities due to the negligent acts or omissions of the Company 5 72 covered by subparagraph (3) above, or (C) any matter disclosed in the Documents to which Assignee has been provided access prior to the Effective Date pursuant to the Purchase Agreement. In addition, prior to asserting any claim hereunder Assignee shall submit such claim for payment to its insurance company or title insurance company if such claim is insured, and Assignee shall assert such claim against Assignor only to the extent the claim is not covered by such policy. For purposes of this paragraph 5, "Assignee's Indemnified Parties" shall mean the Assignee, any shareholder, partner or other beneficial owner of Assignee, any person who directly or indirectly controls, is controlled by or is under common control with Assignee or any shareholder, partner, director or other beneficial owner of the Assignee, and any shareholder, partner, officer, employee, agent, successor or assignor of any of the foregoing, provided, however, that any person that is an Assignee's Indemnified Party on the date of this Assignment shall always be an Assignee's Indemnified Party. If any action or claim shall be brought or asserted against any Assignee's Indemnified Party, in respect of which indemnity may be sought from Assignor, such Assignee's Indemnified Party shall promptly notify Assignor in writing and Assignor shall assume the defense thereof, including the employment of counsel and the payment of all expenses. Such Assignee's Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the cost and expense of such Assignee's Indemnified Party, unless (d) the employment thereof has been specifically authorized by Assignor in writing, (e) Assignor has failed to assume the defense and employ counsel or (f) the named parties to any such action (including any impleaded parties) include both Assignor and such Assignee's Indemnified 6 73 Party, and Assignor shall have been advised by the counsel employed by such Assignee's Indemnified Party that there may be one or more legal defenses available to Assignor which are different from or in addition to those available to such Assignee's Indemnified Party (in which case Assignor shall not have the right to assume the defense of such action on behalf of such Assignee's Indemnified Party). 6. HAZARDOUS MATERIALS. The term "Hazardous Materials" as used in this Agreement shall mean any hazardous, toxic or dangerous waste, substance or material, pollutant or contaminant, as defined for purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended ("CERCLA"), or the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), as amended ("RCRA"), or any other federal, state or local law, ordinance, rule or regulation applicable to the Land, or any substance which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, or any substance which contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls (pcbs), radon gas, urea formaldehyde, asbestos, lead or electromagnetic waves. 7. EFFECTIVE DATE. This Assignment is effective as of the Effective Date, and from and after the Effective Date (g) Assignor shall cease to be a member of the Company and (h) that portion of the net profits or net losses and cash flow (including cash flow which has not been distributed) of the Company allocable to the Assigned Interest shall be credited, distributed or charged, as the case may be, to Assignee and not to Assignor in accordance with the terms of the amended and restated NLRC Agreement which Assignee may adopt. 7 74 8. FUTURE COOPERATION ON SUBSEQUENT DOCUMENTS. Assignor and Assignee mutually agree to cooperate at all times from and after the Effective Date with respect to the supplying of any information requested by the other regarding any of the matters described in this Assignment, and each agrees promptly to execute such further deeds, bills of sale, assignments, amendments to the Company's organizational documents, releases, indemnifications, assumptions, estoppel certificates, notifications, or such other documents or instruments and to take all necessary action and to perform such additional acts as may be reasonably requested and appropriate for the purpose of giving effect to, evidencing, performing or giving notice of the terms, provisions and conditions of this Assignment, all transactions contemplated herein and carrying out the business of the Company from and after the effective date of the Assignment. 9. DURATION OF INDEMNIFICATION. The indemnifications provided by the parties contained in this Assignment shall survive the consummation of the transactions contemplated hereby; and shall expire one (1) year from the Effective Date. Accordingly, any party which may desire to bring a claim with respect to any indemnification hereunder shall provide written notice of such claim to all other parties prior to the expiration of one (1) year from the Effective Date. 10. BINDING EFFECT. Except as herein otherwise provided to the contrary, this Assignment shall be binding upon and inure to the benefit of the parties hereto, their heirs, legal and personal representatives, successors and assigns; provided, however, that neither party shall have any right, power and authority to assign any rights, powers, duties or obligations hereunder, except that Assignee may assign its 8 75 interest in this Assignment to any parent or subsidiary corporation or to any Affiliate, as such term is defined in the Purchase Agreement. 11. AMENDMENTS. No amendment, alteration, modification or waiver of this Assignment, or any part hereof, shall be valid or effective unless in writing and signed by all the parties hereto. 12. APPLICABLE LAWS. This Assignment shall be governed by and construed in accordance with the laws of the State of California and the applicable federal laws of the United States. 13. COUNTERPARTS. This Assignment may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute but one and the same instrument which may be sufficiently evidenced by one counterpart, and any of the parties hereto may execute this Assignment by signing any such counterpart. 14. WAIVER. No consent or waiver, either expressed or implied, by any party to or of any breach or default by any other party, in the performance by such other party of the obligations thereof under this Assignment shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such other party of the same or any other obligations of such other party under this Assignment. Failure on the part of any party to complain or to pursue complaints with respect to any acts or failure to act of any other party, or failure on the part of any party to declare any other party in default, irrespective of how long such default continues, shall not constitute a waiver by such party of the rights and remedies thereof under this Assignment or otherwise at law or in equity. 9 76 15. HEADINGS AND TITLES. The headings and titles of the Articles, Sections, Subsections and Paragraphs herein have been inserted as a matter of convenience of reference only and shall not control or affect the meaning or construction of any of the operative terms or provisions herein, unless the latter are ambiguous, uncertain or indefinite, in which case, such titles and headings may be looked to in determining the proper construction and meaning of this Assignment and the parties' intentions. 16. GENDER. Whenever the context shall so require, all words herein in any gender shall be deemed to include the masculine, feminine, or neuter gender, and all singular words shall include the plural, and all plural words shall include the singular. 17. CONSTRUCTION. In case any one or more of the provisions contained in this Assignment shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalid, illegal or unenforceable provision or provisions shall be fully severable and shall not affect any other provision hereof and this Assignment shall be construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein. Furthermore, in lieu of each such illegal, invalid or unenforceable provision there shall be added automatically as part of this Assignment a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 18. NO THIRD PARTY BENEFICIARY RIGHTS. This Assignment is made solely and specifically between and for the benefit of the parties hereto, and their respective successors and assigns, subject to the express provisions hereof relating to successors and assigns, and no other person, individual, corporation or entity, whatsoever, shall 10 77 have any rights, interests, or claims hereunder or be entitled to any benefits under or on account of this Assignment as a third party beneficiary or otherwise. 19. EXHIBITS AND RECITALS. All recital paragraphs and exhibits, attachments, annexed instruments and addenda referred to herein shall be considered a part of this Assignment as fully as if and with the same force and effect as if such recital paragraphs and exhibits, attachments, annexed instruments or addenda had been included herein in full. 20. LANGUAGE. The parties hereto acknowledge that each of them and their counsel have reviewed and revised this Assignment and that the language used in this Assignment shall be deemed to be the language chosen by the parties to express their mutual intent, and the parties hereby agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Assignment or any amendments or exhibits hereto and that no rule of strict construction shall be applied against any party. 21. ATTORNEYS' FEES. In the event any party hereto is required to employ an attorney because any litigation arises out of this Agreement between the parties hereto, the nonprevailing party shall pay the prevailing party all reasonable fees and expenses, including attorneys' fees and expenses, incurred in connection with such litigation. 11 78 IN WITNESS WHEREOF, this Assignment is executed as of the day and year first above written. ASSIGNOR: WESTERN WATER COMPANY a Delaware corporation By:______________________________ Name:_________________________ Title:________________________ ASSIGNEE: GLOBAL EQUITY CORPORATION, INC., an Ontario, Canada corporation By:______________________________ Name:_________________________ Title:________________________ WESTERN LAND JV: WESTERN LAND JOINT VENTURE, a Delaware general partnership By:______________________________ Name:_________________________ Title:________________________ 12 -----END PRIVACY-ENHANCED MESSAGE-----