Exhibit 10.2

ASSIGNMENT AND AMENDMENT AGREEMENT

     This Assignment and Amendment Agreement (the “Agreement”) is entered into
as of December 21, 2007, by and among Basin Water Resources, Inc., a Delaware
corporation (“BWRI”), and Empire Water Corporation, a Nevada corporation
(“Empire”), Indian Hills Water Conservation Corporation, a California
corporation (“IHWCC”), West Riverside Canal Company, a California corporation
(“West Riverside”), West Riverside 350 Inch Water Company, a California
corporation (“350IWC,” and together with West Riverside, the “Water Companies”),
Henry C. Cox II, an individual (“Cox”) and John L. West, an individual (“West,”
and together with IHWCC and Cox, the “Seller Parties”). BWRI, Empire, the Water
Companies and the Seller Parties are sometimes referred to herein individually
as a “party” or together as the “parties”. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in that certain Stock
and Asset Purchase Agreement, dated as of May 10, 2007, by and among BWRI, on
the one hand, and the Water Companies and the Seller Parties, on the other hand,
a copy of which is attached hereto as Exhibit A and incorporated herein by
reference (as amended hereby, the “Purchase Agreement”).

R E C I T A L S

     A.      The Seller Parties own and operate a business that, among other
things, appropriates, stores, supplies, distributes and sells water to certain
customers in the Riverside and San Bernardino area of Southern California (the
“Business”).

     B.      BWRI, the Water Companies and the Seller Parties previously entered
into the Purchase Agreement, pursuant to which such parties intended that BWRI
would acquire the Business by purchasing all of the Shares or Assets from the
Seller Parties.

     C.      The parties now desire to modify the proposed transactions
contemplated by the Purchase Agreement, as follows: (i) BWRI desires to sell,
convey, transfer and assign to Empire all of its right, title, and interest in
and to the Purchase Agreement, (ii) pursuant to Section 1.1(o) of the Purchase
Agreement, Empire intends to make the Asset Purchase Election to acquire all of
the Assets rather than the Shares, and (iii) the Seller Parties acknowledge that
an affiliate of BWRI will sell to, and operate on behalf of, Empire, one 1,000
gpm nitrate regenerable water filtration system (the “System”) pursuant to that
certain Agreement for the Purchase and Operation of Water Treatment Unit and
Operation of Water Distribution System, by and between Basin Water Company, Inc.
(“Basin”) and Empire, of even date herewith, attached hereto as Exhibit B and
incorporated herein by reference (the “Unit Purchase Agreement”).

     D.      The Seller Parties desire to enter into this Agreement to (i)
acknowledge and consent to the Assignment (as hereinafter defined) and the terms
and provisions of the Unit Purchase Agreement, (ii) modify and amend certain
provisions of the Purchase Agreement, and (iii) agree to take such further
action as necessary to perfect Empire’s ownership of and title in the Assets,
all as set forth hereinbelow.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto covenant and agree as follows:

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ARTICLE 1
ASSIGNMENT; RELEASE

     1.1      Assignment; Assumption. Effective immediately prior to the
Closing, BWRI hereby assigns all of its right, title and interest, and delegates
all of its obligations and liabilities, in and to the Purchase Agreement to
Empire, and Empire accepts such rights, title and interest, and fully assumes
such obligations and liabilities, from BWRI (the “Assignment”). Although not
required under the Purchase Agreement, the Seller Parties hereby consent to the
Assignment, and acknowledge that all rights and obligations of BWRI as
“Purchaser” under the Purchase Agreement shall automatically become the rights
and obligations of Empire.

     1.2      Unit Purchase Agreement Revenues Excluded from Net Income
Participation. The Seller Parties further confirm, acknowledge and consent to
the terms and conditions of the Unit Purchase Agreement. The Seller Parties
hereby acknowledge, agree and confirm that (i) all amounts paid to Basin, BWRI
or their affiliates under the Unit Purchase Agreement (and any other agreement
entered into pursuant to the Unit Purchase Agreement, including but not limited
to any water services agreement), shall be deemed as expenses of the Business or
Empire (or any successor entity), as the case may be, and shall be deducted from
the calculation of Net Income subject to the Net Income Participation, all as
set forth in the amendment to Section 1.5(d) of the Purchase Agreement pursuant
to Section 2.5 hereinbelow. The Seller Parties further acknowledge, agree and
confirm that they shall have no right, title or interest in or to any revenue or
income of whatever nature received by BWRI, Basin or any of its or their
affiliates relating to the Unit Purchase Agreement (and any other agreement
entered into pursuant to the Unit Purchase Agreement, including but not limited
to any water services agreement), and that all revenues or income received by
BWRI, Basin or any of its or their affiliates shall not be added to the
calculation of Net Income pursuant to Section 1.5 of the Purchase Agreement.

     1.3      Restatement of Representations and Warranties of the Seller
Parties. The Seller Parties jointly and severally represent and warrant to
Empire, on behalf of themselves and the Water Companies, that the
representations and warranties and all statements related thereto contained in
Section 2.1 of the Purchase Agreement are true, correct and complete as of the
date hereof (or as of the Closing Date, where indicated), except as (i)
specified in the corresponding paragraph of the disclosure schedules prepared by
the Seller Parties accompanying the Purchase Agreement, and (ii) as set forth on
Schedule 1.3 attached hereto and incorporated by reference.

     1.4      Asset Purchase Election. Pursuant to Section 1.1(o) of the
Purchase Agreement, effective as of the effective date of the Assignment, Empire
makes the Asset Purchase Election, and at the Closing, Empire shall purchase
only those Assets determined by Empire to be necessary or desirable for the
operation of the Business.

     1.5      Release.

          (a)      General Release.    As of the effective date of the
Assignment, in consideration of the terms, provisions, covenants and agreements
contained in this Agreement, the Seller Parties, on behalf of themselves and
their respective predecessors, subsidiaries, partners, transferors, transferees,
successors, assigns, attorneys, affiliates, officers, members,

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directors, employees, agents, representatives, administrators, heirs and
shareholders, as applicable, and each of them, in any and all capacities, do
hereby voluntarily, irrevocably, unconditionally and fully relieve, release and
forever discharge BWRI and Basin, and their predecessors, subsidiaries,
partners, transferors, transferees, successors, assigns, attorneys, affiliates,
officers, directors, members, employees, agents, representatives,
administrators, heirs and shareholders, as applicable, and each of them, of and
from any and all past, present and future claims, rights, debts, liabilities,
demands, obligations, liens, promises, acts, agreements, costs and expenses
(including, without limitation, attorney’s fees and costs), suits, damages,
actions and causes of action, etc. of whatever kind or nature in any way based
on, arising in whole or in part based on any facts, events or omissions
occurring prior to the date hereof, including but not limited to claims asserted
in or arising from or connected to the Purchase Agreement, however arising,
whether at law or in equity, contingent, known or unknown, and past actions,
omissions, obligations or duties of the other with respect thereto; provided
that this release shall not extend to (i) claims arising out of this Agreement,
or (ii) written representations or warranties made, or agreements entered into,
by a party in connection with this Agreement. No part of this release shall
release any rights or obligations of the parties created by this Agreement.

          (b)      Undiscovered Facts. The Seller Parties acknowledge that they
may discover facts or law different from, or in addition to, the facts or law
that they know or believe to be true with respect to the claims released in this
Agreement and agree, nonetheless, that this Agreement and the releases contained
in it shall be and remain effective in all respects notwithstanding such
different or additional facts or the discovery of them.

          (c)      Complete Agreement. The Seller Parties declare and represent
that they intend the releases contained herein to be complete and not be subject
to any claim of mistake, and that the releases herein express final, full and
complete releases, and regardless of the adequacy or inadequacy of the
consideration, the Seller Parties intend the releases herein to be final and
complete. The Seller Parties execute these releases with the full knowledge that
these releases cover all possible claims between them and BWRI to date, to the
fullest extent permitted by law.

          (d)      Section 1542 Waiver. In executing this Agreement, the Seller
Parties and Empire represent and warrant to BWRI, that they do so with full
knowledge of any and all rights that they may have and that they have received
independent legal advice from their attorneys with respect thereto. The Seller
Parties assume the risk of any mistake of fact and of any facts, which are
unknown, to them. It is the intention of the Seller Parties, in executing this
Agreement, that it shall be effective as a full and final accord and
satisfactory release of each and every matter specifically or generally referred
to or inferred as released in this Agreement. In furtherance of this intention,
each of the Seller Parties acknowledges that he or it is familiar with Section
1542 of the Civil Code of California, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE
DEBTOR.

 

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          (e)      Each of the Seller Parties agrees to waive and relinquish any
rights and benefits which he or it has or may have under Section 1542 of the
Civil Code of California, as well as any other statute, law, or rule of similar
effect, in any jurisdiction, to the fullest extent that he or it may lawfully
waive all such rights and benefits pertaining to each and every matter
specifically or generally referred to as released in this Agreement. Each of the
Seller Parties represents that he or it has received the advice of his or its
respective legal counsel and understands and acknowledges the significance and
consequence of this specific waiver of Section 1542.

           (f)      Covenant Not to Sue. In consideration of the terms,
provisions, covenants and agreements contained in this Agreement, each of the
Seller Parties covenants and agrees that he or it will forever refrain and
forebear from bringing, commencing or prosecuting any action, lawsuit, claim or
proceeding against BWRI or Basin, or any of BWRI’s or Basin’s predecessors,
subsidiaries, partners, transferors, transferees, successors, assigns,
attorneys, affiliates, officers, members, directors, employees, agents,
representatives, administrators, heirs and shareholders, as applicable, based
on, arising out of, or in connection with any claim released or discharged
herein including, but not limited to, any claims which are or could have been
pled to have arisen from or in connection with the Purchase Agreement.

ARTICLE 2
AMENDMENTS TO THE PURCHASE AGREEMENT

     2.1      Clause (i) of the first sentence of Section 1.3 of the Purchase
Agreement is amended and restated in its entirety as follows:

     “(i) certain debt owed by IHWCC to Cox/West Properties pursuant to the
long-term note set forth on Exhibit A attached hereto and incorporated by
reference, in the approximate principal amount not to exceed Six Hundred
Sixty-Three Thousand Dollars ($663,000), which debt Purchaser shall pay in full
at the Closing (and the amount of which has been included in the calculation of
the Purchase Price) (the “IHWCC Debt).”

     2.2      The last paragraph of Section 1.3 of the Purchase Agreement is
amended by the addition of the following provision at the end of such paragraph:

     “Notwithstanding the foregoing, the agreement to pay the IHWCC Debt shall
not create any obligations of the Purchaser to third parties, and Purchaser’s
failure to pay the IHWCC Debt for any reason shall not give rise to any
consequential damages or liabilities to third parties.”

     2.3      Section 1.4(a) of the Purchase Agreement is amended and restated
in its entirety as follows:

     “(a) The parties acknowledge that, on the Closing Date and pursuant to the
terms of this Agreement, Purchaser shall pay, to the party identified by the
Seller Parties, and according to the payoff letter, a copy of which is attached
hereto as Schedule 1.4(a) and incorporated by reference, the IHWCC Debt in full,
and in connection therewith, Purchaser may apply the One Hundred Thousand
Dollars ($100,000) refundable earnest money deposit made by Basin pursuant to
that certain Letter of Intent, dated as of April 4, 2007, by and between Basin
and the Seller Parties (the “Deposit”), toward payment of the IHWCC Debt.”

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     2.4      Section 1.4(b) of the Purchase Agreement is amended and restated
in its entirety as follows:

     “(b) At the Closing, Purchaser pay, by wire transfer or cashier’s check, an
amount equal to the sum of One Million Five Hundred Thousand Dollars
($1,500,000), less (i) the IHWCC Debt, and (ii) less any interest paid on the
Deposit.”

     2.5      Section 1.5(a) of the Purchase Agreement is amended by the
addition of the following provision following the last sentence of such section:

     “Notwithstanding the foregoing, the Seller Parties acknowledge and agree
that Purchaser’s costs of conducting its Due Diligence prior to and following
the Closing (defined in Section 3.1(d)) (including but not limited to legal,
accounting, and surveying fees, environmental reviews, title reports, overhead,
etc.) shall count, at Purchaser’s election, as either capital contributions in,
or loans to, the Business, and shall be reflected in the calculation of Net
Income Participation (defined below), as set forth on Schedule 1.5. ”

     2.6      Section 1.5(d) of the Purchase Agreement is amended by the
addition of the following provision following clause (viii) of the first
sentence of such section:

     “, and (ix) any and all amounts payable by Purchaser under that certain
Purchase and Operation of Water Treatment Unit and Operation of a Water
Treatment System, dated as of December 21, 2007, by and between Empire and Basin
Water Company, Inc.”

     2.7      Section 1.8 of the Purchase Agreement is amended and restated in
its entirety as follows:

     “The closing of the transactions contemplated by this Agreement (the
“Closing”) shall use best efforts to cause the Closing to occur as soon as
practicable, but in no event later than June 30, 2008, unless mutually agreed
upon in writing by the parties, at the offices of Purchaser or its counsel, or
such other place or time or on such other date as the parties may mutually agree
upon in writing (the “Closing Date”).”

     2.8      Section 3.3(d) of the Purchase Agreement is amended and restated
in its entirety as follows:

     “(d)      Indian Hills Golf Course. Following the Closing, Purchaser shall
provide non-potable water to the “Indian Hills Golf Course” property, currently
owned by Cox, West and their affiliates, as such property and the wells and
pipelines attached thereto are described on Schedule 3.3(d) (“Indian Hills”),
pursuant to the following terms:

          (i)      Provision of Indian Hills Water Quota. Purchaser shall
provide Indian Hills, on an annual basis, with an amount of water sufficient for
its needs, but not exceeding Five Hundred Five (505) acre feet, which the
parties acknowledge is equal to one hundred twenty percent (120%) of the largest
amount of water provided to Indian Hills by the Water Companies in any past year
(the “Indian Hills Water Quota”); provided, that in no event shall Purchaser be
required to provide Indian Hills with water in excess of the Indian Hills Water
Quota at the Indian Hills Price (defined in clause (ii) below), or at any other
price unless agreed to in writing

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by Purchaser;

          (ii)      Calculation of Indian Hills Price. For purposes of this
Agreement, the term “Indian Hills Price” shall mean the actual energy and
maintenance costs incurred by Purchaser in appropriating, storing, pumping and
distributing, as the case may be, the water distributed to Indian Hills, plus an
agreed upon amount necessary to maintain the wells and pipelines used in pumping
water to Indian Hills, which shall be determined on a monthly basis. The
following shall not be included in the calculation of the Indian Hills Price:
(1) administrative or overhead costs incurred by Purchaser, and (2) any
replenishment taxes or charges which may be imposed upon Purchaser as a result
of increased pumping and usage by Purchaser; provided however, that any
replenishment taxes or fees imposed on Purchaser as a result of historical
pumping may be included in the calculation of the Indian Hills Price.
Notwithstanding the foregoing, in the event that any Purchaser Affiliate is
entitled to receive payment relating to a matter for which indemnification is
available pursuant to Section 6.2, the Indian Hills Price shall be increased to
$280 per acre foot, and the difference between the actual costs and $280 shall
be applied toward any indemnification obligations until such time as the entire
amount owed to the Purchaser Parties under Section 6.2 has been paid.

          (iii)      Purchaser’s Right to Discontinue Business.

               (a)      The Seller Parties acknowledge that nothing herein shall
require Purchaser (or any subsequent purchaser of the Assets, Shares or
Business) to continue the Business following the Closing. Upon sixty (60) days
prior written notice to Indian Hills of its intent to cease providing the Indian
Hills Water Quota, Purchaser shall have no further liability or other obligation
to any of the Seller Parties (financial or otherwise) and any remaining
principal and interest owed under Purchaser’s Promissory Note shall be
terminated and cancelled in full; provided however that Purchaser shall be
required to make available to Indian Hills, the wells and pipelines supplying
water to the Indian Hills property (the “Necessary Equipment”) (but only to the
minimum amount necessary to provide water to Indian Hills) as described on
Schedule 3.3(d), in consideration of the full release of Purchaser from all
liabilities or obligations to the Seller Parties relating to the Necessary
Equipment (the “Equipment Purchase Consideration”), and Indian Hills shall be
entitled to continue to extract the Indian Hills Water Quota.

               (b)      If Purchaser fails to provide for sixty (60) continuous
days, at least ninety percent (90%) of the Indian Hills Water Quota to Indian
Hills pursuant to the terms of this Section 3.3(d), and such failure is not the
result of (i) an Event of Force Majeure (defined below), or (ii) actions or
omissions by Indian Hills or its agents, representatives or contractors, and
such default in not commenced to be cured by Purchaser, using commercially
reasonable efforts, after five (5) days written notice from Indian Hills or its
representative, the Seller Parties shall have the right to repurchase the
Necessary Equipment, for a purchase price equal to the Equipment Purchase
Consideration. For purposes of this Agreement, an “Event of Force Majeure” means
any cause or event which is beyond the reasonable control of Purchaser, and
which renders Purchaser’s performance of this Section 3.3(d) either impossible
or commercially impracticable, including, without limitation, inclement weather,
drought, flood, earthquake, storm, fire, lightning, work stoppages, natural
calamities, national emergencies, declarations of war, riot, civil disturbance,
sabotage, terrorism, explosions, acts of God, acts of any

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governmental body and/or agency having jurisdiction over Purchaser or the
Business, (including but not limited to the relevant watermaster), and any
federal, state, and/or local laws, rules, regulations, orders, ordinances, acts,
or mandates which would prohibit or restrict Purchaser from complying with this
Section 3.3(d) .

          (iv)      The obligation to deliver water to Indian Hills pursuant to
the terms of this Section 3.3(d) shall be considered superior to all existing
and future obligations of 350IWC to provide non-potable water from its current
sources.

          (v)       Purchaser’s obligation to provide the Indian Hills Water
Quota at the Indian Hills Price pursuant to this Section 3.3(d) shall transfer,
at the option of Cox and West, in the event that Indian Hills is sold or if Cox
and West sell their interests in the entity owning Indian Hills.

          (vi)      Notwithstanding the foregoing, the Seller Parties
acknowledge and agree that Indian Hills shall not sell, re-sell, or otherwise
transfer any water to any third party, with the exception of transfers of
quantities of water contained in the amount specified in Section 3.3(d) above to
Villa De Anza and John West.”

     2.9        Section 3.3(f) of the Purchase Agreement is amended and restated
in its entirety as follows: “Deleted.”

     2.10      Sections 5.1(h) and 5.1(l) of the Purchase Agreement are each
amended and restated in their entirety as follows: “Deleted.”

     2.11      Section 5.1(i) of the Purchase Agreement is amended and restated
in its entirety as follows:

     “Purchaser shall have completed, to its satisfaction, its Due Diligence
review of IHWCC and the Water Companies, the Business, the Assets (including,
without limitation, the Birtcher Easement, the Water Rights, and Permits), and
Purchaser and its board of directors must be satisfied that the scope and
results of such Due Diligence (taking into account, among other things, the
anticipated costs of operating the Water Companies in the future in the manner
intended by Purchaser, as well as all known, contingent and potential unknown
liabilities, including without limitation, all environmental risks, litigation
and threatened litigation affecting IHWCC or the Water Companies), are such that
Purchaser, in its sole and absolute discretion, determines that the consummation
of the transactions contemplated herein are in its and its stockholders best
interests.”

     2.12      Section 5.1 of the Purchase Agreement is amended with the
addition of the following provision following clause (n) thereof:

     “(o) The First Closing (as defined in that certain Stock Purchase
Agreement, dated as of December 21, 2007, by and between Empire and Purchaser)
shall have occurred.”

 

 

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     2.13      Section 5.1(h) of the Purchase Agreement (Environmental Review)
is hereby deleted.

     2.14      Section 5.1(l) of the Purchase Agreement (Title Insurance) is
hereby deleted.

     2.15      Section 5.1(m) of the Purchase Agreement (Real Property) is
hereby deleted.

     2.16      Section 5.1(n)(xi) of the Purchase Agreement (Opinion of Counsel)
is hereby deleted.

     2.17      Section 5.2(e)(v) of the Purchase Agreement (Purchaser’s
Promissory Note) is hereby deleted.

     2.18      Section 6.2(a) of the Purchase Agreement is amended and restated
in its entirety as follows:

     “(a) Seller Parties’ Indemnification. The Seller Parties jointly and
severally agree to indemnify, defend and hold harmless Purchaser and its
successors, assigns and affiliates and present and future directors or managers,
officers, guarantors, agents and employees (collectively, the “Purchaser
Affiliates”) against and from, all claims, losses, deficiencies, liabilities,
costs, damages and expenses, including, but not limited to, reasonable legal
fees and costs of litigation resulting from, relating to, or arising out of (i)
a breach of any representation or warranty made by the Seller Parties pursuant
to this Agreement or any Transaction Document, (ii) a breach of any covenant or
other agreement made by or to be performed by the Seller Parties pursuant to
this Agreement or any Transaction Document, (iii) the Excluded Liabilities, (iv)
any third party claims related to Purchaser’s payment of any portion of the
Purchase Price or proceeds from the Net Income Participation, to a party
identified by any Seller Party as the recipient of such payments, or (v) any
claim arising out the ownership or operation of the Assets prior to the
Closing.”

     2.19      Section 6.2(d) of the Purchase Agreement is amended and restated
in its entirety as follows:

     “(d)      Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable or common law
remedy any Indemnified Party may have for breach of representation, warranty or
covenant of the Indemnifying Party or the transactions contemplated by this
Agreement. The Seller Parties acknowledge and agree that in the event of a claim
for which indemnification is available under Section 6.2(a), Purchaser shall be
entitled to offset payments that would otherwise be owed pursuant to the Net
Income Participation or otherwise pursuant to this Agreement.”

     2.20      The name, address and counsel of and to the Purchaser set forth
in Section 7.4 of the Purchase Agreement are amended as follows:

“If to Purchaser:  Empire Water Corporation    500-666 Burrard Street   
Vancouver, BC V6C 3P6    Telephone: (604) 897-4263 

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  Facsimile: _______________   With a required copy to:  Conrad C. Lysiak, Esq. 
  601 West First Avenue    Suite 903    Spokane, WA 99201    Telephone: (509)
624-1475    Facsimile: _______________”      With a further required  Weston
Benshoof Rochefort  copy to:  Rubalcava MacCuish LLP    333 South Hope Street,
Sixteenth Floor    Los Angeles, California 90071    Telephone: (213) 576-1000   
Facsimile: (213) 576-1100    Attn: Thomas Wingard, Esq. 

 
  
     2.21      The last sentence in Section 7.15 of the Purchase Agreement is
amended and restated in its entirety by the following:

     “Further, the Seller Parties shall cooperate with Purchaser, for a period
not less than five (5) years from the Closing, in any reasonable arrangement
designed by Purchaser, to provide Purchaser with all of the rights, title, and
benefits of possession of the Assets, including without limitation, the Real
Property and the Water Rights. In connection with the foregoing, the Seller
Parties expressly agree to (i) cooperate with and reasonably assist Purchaser in
filing that certain 1918 grant deed describing the Canal in the name of
Purchaser or its designee in the Riverside and San Bernardino County Recorder’s
Offices, as applicable (ii) take such action and make such filings in the
Riverside and San Bernardino County Recorder’s Offices, as applicable, as
necessary to assist Purchaser or its designee in perfecting Purchaser’s or its
designee’s title to the Real Property, (iii) participate, to the extent deemed
by Purchaser necessary, appropriate or desirable, in any (x) quiet title or
other action to convey title to Purchaser or its designee, of all of the Assets,
including but not limited to the Real Property and Water Rights, and (y) action,
hearing or proceeding brought before any regulatory agency regarding the Water
Rights.” Except for matters pursuant to which the Seller Parties are required to
indemnify Purchaser pursuant to the indemnification provisions set forth in
Article 6 or otherwise in this Agreement, the foregoing obligations of the
Seller Parties’ set forth in this Section 7.15 shall not require the Seller
Parties to incur out of pocket expenses (other than administrative, overhead,
travel and lodging, etc.), nor shall the Seller Parties be reimbursed for the
cost of their or their affiliates time spent on such matters.

     Except as specifically set forth in Article 2 of this Agreement, all other
terms and conditions of the Purchase Agreement shall remain unmodified and in
full force and effect.

 

 

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ARTICLE 3
GENERAL PROVISIONS

     3.1      Confidentiality.

          (a)      Each of the Seller Parties covenants and agrees that such
party shall not, directly or indirectly, and shall use its best efforts to
ensure that any of its directors, officers, shareholders, employees,
representative, agents, affiliates and any other persons acting on such party’s
behalf, do not, without the prior written consent of Empire, disclose, use,
exploit, furnish or make accessible to anyone or any other entity, the existence
of this Agreement, the terms and conditions hereof and the identity of Empire.
The terms of this Section 3.1 shall survive any termination of the Agreement.

          (b)      The Seller Parties acknowledge and agree that, if in the good
faith opinion of BWRI’s or Empire’s securities or corporate counsel, that, for
purposes of United States federal and state securities laws with respect to BWRI
or Empire or their respective securities, it is necessary to disclose this
Agreement, the Purchase Agreement or the Unit Purchase Agreement, BWRI or Empire
may, without the consent of the Seller Parties, disclose the terms of this
Agreement, the Purchase Agreement or the Unit Purchase Agreement, as the case
may be, pursuant to the issuance of a press release or the filing with the
Securities Exchange Commission of a Form 8-K under the Securities Exchange Act
of 1934, as amended. The Seller Parties further acknowledge and agree that
Empire shall be entitled to seek investors or joint venture partners (each, a
“Prospective Partner”), and as such, Empire shall be entitled to divulge to such
Prospective Partners, the terms of this Agreement, the Purchase Agreement and
the Unit Purchase Agreement, and the transactions contemplated herein and
therein, as well as the results of Empire’s Due Diligence; provided however,
that each of such Prospective Partners shall be advised of the confidential
nature of this Agreement, the Purchase Agreement, or the Unit Purchase
Agreement, as well as the results of Empire’s Due Diligence, as the case may be.

          (c)      Each of the parties to this Agreement acknowledges that it
has knowledge of certain Confidential Information (defined below) pertaining to
the Assets and that such Confidential Information is confidential and
proprietary to the Seller Parties and the Water Companies and constitutes
valuable trade secrets of Seller Parties and the Water Companies, which affect,
among other things, the successful conduct, furtherance and protection of the
Business and its goodwill. Each party, subject to paragraph (b) above,
acknowledges that the unauthorized use or disclosure of Confidential Information
is likely to be highly prejudicial to the interests of the other party. The
Seller Parties agree that a substantial portion of the Purchase Price is being
paid for such Confidential Information and that it represents a substantial
investment having great economic and commercial value to Empire, and constitutes
a substantial part of the value to Empire of the Business.

          (d)      Each party further acknowledges that the other party would be
irreparably damaged if any of the Confidential Information was disclosed to, or
used or exploited on behalf of, any Person other than such party or any of its
affiliates. Accordingly, subject to clause (b) above, each party covenants and
agrees that they or it shall not, directly or indirectly, and shall use their
best efforts to ensure that any agents, representatives, affiliates and any
other persons acting on such party’s behalf (such parties and such parties’
agents, counsel, accountants, tax

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preparers, representatives, affiliates and other persons being collectively
referred to as the “Restricted Persons”) do not, without the prior written
consent of the other party, disclose, use, exploit, furnish or make accessible
to anyone or any other entity, any such Confidential Information, for the
benefit of any such Restricted Person or of any third party, at any time for so
long as such information shall remain secret or confidential or otherwise remain
wholly or partially protectible. The parties further acknowledge that limited
disclosure of this Agreement may be made to the Jurupa Unified School District
(the “District”), but only to the extent necessary to inform the District’s
consent to an assignment of the certain Water Supply, Sale, and Purchase
Agreement from IHWCC to the Assignee.

          (e)      For purposes of this Agreement, the term “Confidential
Information” shall mean: (i) information or material relating to the Business or
Assets that is not generally available to or used by others and that could have
commercial value or other utility in the Business in which the Seller Parties,
the Water Companies and their affiliates or clients are engaged, including but
not limited to, as the following may relate to the Business: know-how, data,
data files, computer software, marketing plans, business plans, technical
information, marketing information, trade secrets, statistical data, payroll and
financial information, names of any clients, lead lists, names of vendors and
suppliers, names of any former or current employees used in the operation of the
Business, production costs, and other proprietary information relating thereto,
together with all analyses, compilations, studies or other documents, records or
data prepared by the Seller Parties, the Water Companies, or Empire, as the case
may be, or their respective representatives or affiliates, which contain or
otherwise reflect or are generated from such information; and (ii) this
Agreement, all Transaction Documents, and all schedules and exhibits thereto,
the terms and conditions of the foregoing, the terms and conditions of any terms
sheets related to the foregoing, and all communication between the parties or
their representatives, whether oral, written or through any other medium,
related to the foregoing.

          (f)      The Seller Parties agree and acknowledge that the Seller
Parties’ Confidential Information shall become the property of Empire as of the
First Closing, and therefore the foregoing restrictions contained in this
Section 3.1 shall lapse with respect to BWRI and Empire as of the date of the
First Closing.

     3.2      Standstill. From the date of this Agreement until the Closing
Date, none of the Seller Parties will, directly or indirectly, nor will such
party authorize or direct any of its agents, representatives, affiliates and any
other persons acting on such party’s behalf to: (i) acquire, agree to acquire,
make any proposal to acquire, cause to be acquired, or in any way participate in
a “group” (within the meaning of Section 13(d)(3) of the Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder) to do any of
the foregoing, Beneficial Ownership (defined below) of securities (including
convertible debt instruments and preferred stock or any shares of capital stock
issuable upon the conversion or exercise thereof) of Basin (“Basin Shares”) or
Empire (“Empire Shares”); (ii) sell, transfer, assign, offer, pledge, contract
to sell, transfer or assign, sell any option or contract to purchase, purchase
any option or contract to sell, transfer or assign, grant any option, right or
warrant to purchase, or otherwise transfer, assign or dispose of, directly or
indirectly, any Beneficial Ownership of Basin Shares or Empire Shares now held
by such party; (iii) publicly announce or disclose any intention, plan or
arrangement inconsistent with the foregoing; or (iv) take any actions which
would be

 

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inconsistent with the purpose and intent of this Section 3.2. For purposes of
this Agreement, “Beneficial Ownership” shall have the meaning set forth in Rule
13d-3 under the Exchange Act.

     3.3      Notices. All notices, consents, waivers and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when: (i) delivered by hand (with written confirmation of receipt), (ii)
sent by facsimile (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (iii) when received
by the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):

If to the Seller Parties or  Mr. Henry C. Cox, II,  the Water Companies:  John
L. West    Indian Hills Water Conservation Corporation    8175 Liminite Dr.   
Riverside, CA    Telephone: (951) 360-2070    Facsimile: (951) 360-____     
With a required copy to:  Lobb Cliff & Lester, LLP    1325 Spruce Street  Suite
300   Riverside, California 92507    Telephone: (951) 788-9410    Facsimile:
(951) 788-0766    Attn: Paul Cliff, Esq.    If to BWRI:  Peter Jensen    Larry
Rowe    Basin Water Resources, Inc.    8731 Prestige Court    Rancho Cucamonga,
CA 91730    Telephone: (909) 481-6800    Facsimile: (909) 481-6801    With a
required copy to:  Weston Benshoof Rochefort    Rubalcava MacCuish LLP    333
South Hope Street, Sixteenth Floor    Los Angeles, California 90071   
Telephone: (213) 576-1000    Facsimile: (213) 576-1100    Attn: Thomas Wingard,
Esq.    If to Empire:  Empire Water Corporation    500-666 Burrard Street 

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  Vancouver, BC V6C 3P6    Telephone: (604) 897-4263    Facsimile:    Attn:   
With a required copy to:  Conrad C. Lysiak    601 West First Avenue    Suite
903    Spokane, WA 99201    Telephone: (509) 624-1475    Facsimile: 

     3.4      Dates of Notices and Actions. All notices required to be given
hereunder shall be effective as of the date of delivery. If the date of any
notice required to be given hereunder or action required to be taken hereunder
falls on a weekend or holiday, such notice or action may be delivered or taken
at any time through the next occurring business day.

     3.5      Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement must be brought against any of the parties in the United States
District Court for the Central District of California in Los Angeles,
California, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world.

     3.6      Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (i) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party, (ii) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given, and (iii) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.

     3.7      Entire Agreement. All prior agreements, representations and
understandings between the parties are incorporated in this Agreement and,
together with the Purchase Agreement, constitute the entire contract between the
parties. The terms of this Agreement are intended by the parties as a final
expression of their agreement with respect to such terms as are included herein.
This Agreement supersedes the letter agreement, dated as of November 12, 2007,
by and among BWRI and the Seller Parties, and may not be contradicted by
evidence of any prior or contemporaneous written or oral representations,
agreements or understandings,

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whether express or implied. The parties further intend that this Agreement
constitutes the complete and exclusive statement of its terms and that no
extrinsic evidence whatsoever may be introduced in any judicial proceeding, if
any, involving this Agreement. No amendment or variation of the terms of this
Agreement shall be valid unless made in writing and signed by each of the
parties.

     3.8       Schedules and Exhibits. The schedules and exhibits attached
hereto are hereby incorporated by reference into this Agreement in their
entirety. The disclosures in the schedules and exhibits must relate only to the
section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement. In the event of any inconsistency
between the statements in the body of this Agreement and those in the schedules
or the exhibits (other than an exception expressly set forth as such in the
schedules and exhibits with respect to a specifically identified representation
or warranty), the statements in the body of this Agreement will control.

     3.9       Assignment, No Third-Party Rights. No party may assign any of its
rights or obligations under this Agreement without the prior written consent of
the others, which consent will not be unreasonably withheld or delayed. Subject
to the foregoing, this Agreement will apply to, be binding in all respects upon,
and inure to the benefit of the permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy or
claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and permitted
assigns.

     3.10      Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

     3.11      Section Headings; Construction. The headings of sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to “Section” or “Sections” refer to the
corresponding section or sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word “including” does not
limit the preceding words or terms.

     3.12      Attorney’s Fees. The prevailing party in any litigation,
arbitration, mediation, bankruptcy, insolvency or other proceeding relating to
the enforcement or interpretation of this Agreement may recover from the
unsuccessful party(ies) all costs, expenses and reasonable attorney’s fees
(including expert witness and other consultants’ fees and costs) relating to or
arising out of (i) the proceeding (whether or not the proceeding proceeds to
judgment) and (ii) any post-judgment or post-award proceeding including, without
limitation, one to enforce or collect any judgment or award resulting from the
proceeding. All such judgments and awards shall contain a specific provision for
the recovery of all such subsequently incurred costs, expenses and actual
attorney’s fees.

 

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     3.13      Governing Law. This Agreement will be governed by the laws of the
State of California without regard to conflicts of laws principles.

     3.14      Further Assurances; Additional Documents and Acts. Each party
agrees to execute and deliver such additional documents and instruments and to
perform such additional acts as may be necessary, appropriate or desirable to
effectuate, carry out and perform all of the terms, provisions and conditions of
this Agreement and the transactions contemplated hereby, including but not
limited to, within ten (10) days after written request by any party, a
certificate stating, to the party's knowledge, that: (a) this Agreement is in
full force and effect; and (b) this Agreement has not been modified except by
any instrument or instruments identified in the certificate.

     3.15      Counterparts; Facsimile. This Agreement may be executed in one or
more counterparts, all of which when fully executed and delivered by all parties
hereto and taken together shall constitute a single agreement, binding against
each of the parties. To the maximum extent permitted by law or by any applicable
governmental authority, any document may be signed and transmitted by facsimile
with the same validity as if it were an ink-signed document. Each party
represents and warrants that the person signing this Agreement on its behalf is
duly authorized (on behalf of the respective entity for which such signatory has
acted) to execute and deliver this instrument and any other document related to
this transaction, thereby fully binding each such respective entity.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

 

 

 

 

 

 

 

 

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     IN WITNESS WHEREOF, the undersigned have executed this Assignment and
Amendment Agreement as of the date first set forth above.

BWRI:  BASIN WATER RESOURCES, INC.  a Delaware corporation     By: PETER JENSEN 
  Name: Peter Jensen    Its: CEO      EMPIRE:  EMPIRE WATER CORPORATION    a
Nevada corporation      By: ALFRED NUTT    Name: Alfred Nutt    Its:      WEST
RIVERSIDE:  WEST RIVERSIDE CANAL COMPANY  a California corporation     By: 
____________________________________ Name: Henry C. Cox, II   Its: President   
  350IWC:  WEST RIVERSIDE 350 INCH WATER COMPANY  a California corporation    
By:  ____________________________________   Name: Henry C. Cox    Its:
President      COX:  By:  ____________________________________                  
                                        Henry C. Cox, II   WEST:  By: 
____________________________________                                            
              John L. West

[SIGNATURE PAGE TO ASSIGNMENT AND AMENDMENT AGREEMENT]

 

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Schedule 1. 3

     Each of the lettered paragraphs below correspond to the lettered paragraphs
in Section 2.1 of the Stock and Asset Purchase Agreement, dated May 2007
(“Original Agreement”):

     (a)      Organization. The Water Companies are not aware if any meetings of
their shareholders or boards of directors were held prior to June 25, 2007. The
Water Companies are not certain as to the identities of all shareholders and
have relied upon public notice to inform unknown shareholders of the shareholder
meetings held by both of the Water Companies n June 25, 2007.

     (b)      Capital Structure. Pursuant to the Asset Purchase Election made by
Purchaser and Section 1.1(o) of the Original Agreement, the representations and
warranties set forth in Sections 2.1(b)(ii) through 2.1(b)(v) are eliminated
from the Original Agreement.

     (d)      Assets are subject to liens for current secured personal and real
property taxes not yet due and payable.

     (e)      Real and Tangible Property.

          (i)      Seller Parties are not in possession of a current survey of
the Real Property, and the Real Property may be subject to one or more
encroachments, claims for prescriptive easement, or claims for adverse
possession. Further, First American Title Insurance Company had declined to
issue a preliminary title report or title insurance policy covering the Real
Property.

          (ii)      For a period in excess of five (5) years, Seller Parties
have not used a number of the water wells historically used by Seller Parties.

          (iii)      Water wells and other equipment that have not been used by
Seller Parties in the past five (5) years may need substantial physical
rehabilitation and refurbishment before use can be made of them to pump
quantities of water consistent with historical usages of Seller Parties.

     (o)      Tax Matters.

          (ii)      Payment of Taxes. The Necessary Equipment and other
improvements erected on the Canal have not been assessed for real and personal
property tax purposes. Additionally, the real property Assets of West Riverside
have not been assessed by the California State Board of Equalization as may be
mandated under applicable law, which such assessments are not subject to Article
13A of the California Constitution (Proposition 13).

 

 

 

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