EXHIBIT 10.1

PURCHASE AND SALE AGREEMENT

AMONG

CIL&D, LLC

KAISER EAGLE MOUNTAIN, LLC

EAGLE MOUNTAIN MINING & RAILROAD COMPANY, LLC

EAGLE MOUNTAIN ACQUISITION LLC,

EAGLE MOUNTAIN LLC

AND

EAGLE CREST ENERGY COMPANY

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TABLE OF CONTENTS

 

1.

Joint Escrow

  2    2.

[Reserved]

  2    3.

Purchase of KEM Units and Purchase Price

  2    4.

Security for the Timely Performance of the Promissory Notes

  3   

4.1

Security for the $4.25 Million Note

  3   

4.2

Security for the $19 Million Note

  3    5.

Purchase of Lot 104

  4    6.

Eagle Mountain Railroad

  4    7.

Mining Rights

  4    8.

Additional Transaction Documents

  4    9.

Dismissal of Project Claims and Eminent Domain

  5   

9.1

State Water Board Dismissal

  5   

9.2

FERC Dismissal

  5   

9.3

Minimum Value of Just Compensation

  5    10.

Due Diligence

  6    11.

Conditions Precedent to the Obligations of Seller

  6   

11.1

Buyer’s Representations And Warranties Remain True

  6   

11.2

Payment of the Purchase Price

  6   

11.3

Minimum Shareholder Guaranties and Shareholder Pledge Agreements

  6   

11.4

Receipt and Recordation of $4.25 Million Note Security Documents

  6   

11.5

Receipt and Recordation of $19 Million Note Security Documents

  7   

11.6

Receipt of Certain Agreements

  7   

11.7

Lot 104 Sale

  7   

11.8

Performance of Covenants

  7   

11.9

No Injunction

  7   

11.10

Title Policy

  7   

11.11

Escrow Agreement

  7    12.

Conditions Precedent to the Obligations of Buyer

  7   

12.1

Seller’s Representations and Warranties Remain True

  7   

12.2

Performance of Covenants

  8   

12.3

Delivery of KEM Units

  8   

12.4

Receipt of Certain Agreements

  8   

12.5

Reserved

  8   

12.6

Lot 104 Documents

  8   

12.7

No Injunction

  8   

12.8

Resignations and Appointments

  8   

12.9

Title Policy

  8   

12.10

Escrow Agreement

  9   

12.11

Termination of Certain Material Contracts

  9   

12.12

Unwinding of the 1999 BLM Land Exchange

  9   

12.13

Administrative Management Services Agreement

  9   

12.14

Termination, Settlement & Net Revenue Sharing Agreement

  9   

12.15

FIRPTA Certificate

  10   

12.16

Railroad Contribution

  10   

 

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13.

Closing

  10    14.

Representations and Warranties of Seller

  10   

14.1

Organization and Authorization

  10   

14.2

Ownership

  10   

14.3

No Violation

  11   

14.4

Certain Litigation

  11   

14.5

Environmental Conditions

  11   

14.6

Material Contracts

  12   

14.7

KEM Assets & Liabilities

  12   

14.8

Employees and Employee Matters

  12   

14.9

Compliance

  13   

14.10

Insurance

  13   

14.11

Entity Documents

  13   

14.12

Brokers

  13   

14.13

Tax Matters

  13   

14.14

Eagle Mountain Property

  14   

14.15

Books & Records

  15   

14.16

Affiliate Transactions

  15   

14.17

Operations of KEM

  15   

14.18

Town Site License Agreements

  15   

14.19

Reserved

  15   

14.20

Disclosure

  15   

14.21

No Additional Representations; Knowledge Defined

  15    15.

Representations and Warranties of Buyer

  16   

15.1

Organization and Authorization

  16   

15.2

Buyer has no Interest in KEM Until the Purchase Price is Paid

  16   

15.3

Securities Law Matters

  16   

15.4

Discharge of Implied Warranties

  17    16.

Nature and Survival of Representations

  17    17.

“AS IS, WHERE IS”

  17    18.

Financial Assurances

  18    19.

Termination and Remedies

  18   

19.1

[Reserved]

  18   

19.2

Termination and Abandonment

  18   

19.3

Effects of Termination

  18    20.

Additional Obligations and Matters

  19   

20.1

Records

  19   

20.2

Commission and Fees Payable by Seller

  19   

20.3

Commissions and Fees Payable by Buyer

  19   

20.4

Cooperation

  19    21.

Tax, Proration and Other Covenants

  20   

21.1

Taxes

  20   

21.2

Prorations

  20   

21.3

Indemnity by KEM

  21   

21.4

Affirmative Covenants and Agreements of Seller

  22   

21.5

Negative Covenants and Agreements of Seller

  22   

21.6

Negative Covenants and Agreements of Buyer, Parent and Eagle Crest

  24   

21.7

Excluded Liabilities

  24   

21.8

Covenant to Convey the Eagle Mountain Property

  24   

21.9

Leases

  25   

 

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21.10

Indemnification

  25   

21.11

Environmental Covenants

  29    22.

Miscellaneous Provisions

  29   

22.1

Expenses

  29   

22.2

Time is of the Essence

  29   

22.3

Computation of Time

  29   

22.4

Third Party Beneficiaries

  29   

22.5

Definition of Affiliate

  29   

22.6

Waiver

  29   

22.7

Governing Law; Submission to Jurisdiction; Waivers

  30   

22.8

Binding Effect and Restrictions on Assignment by Buyer

  30   

22.9

Entire Agreement

  30   

22.10

Headings

  31   

22.11

Notices

  31   

22.12

Counterparts

  32   

22.13

Severability

  33   

22.14

Reserved

  33   

22.15

Schedules

  33   

 

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Exhibits

 

EXHIBITS

  

DESCRIPTION

“A”    Eagle Mountain Assets “B”    $4.25 Million Note “C”    $19 Million Note
“D”    KEM $4.25 Million Note Guaranty “E”    Deed of Trust “F”    Eagle Crest
Guaranty “G”    Shareholder Guaranty “H”    Shareholder Pledge Agreement “I”   
Parent $4.25 Million Note Guaranty “J”    Parent Pledge Agreement “K”    Buyer
Pledge Agreement “L”    KEM $19 Million Note Guaranty “Q”    Lot 104 Sale
Agreement “R”    Railroad Assets “S”    Railroad Operating Agreement “T”   
Mining Agreement “U”    Access Agreement “V”    Utilities Agreement “W”    State
Water Board Dismissal “X”    FERC Dismissal “Y-1”    Listing of Officers and
Managers of Subsidiaries “Y-2”    Form of Resignation Letter “Z”    Form of
Assignment of Contracts

 

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“AA” Form of Railroad Assets Contribution Agreement “BB” Form of Second
Amendment to Administrative Management and Services Agreement “CC” Form of
Amendment to Revenue Sharing Agreement “DD” Form of Office Lease “EE” Form of
Warehouse and Maintenance Lease “FF” FPN Lease

SCHEDULES

 

14.4

Litigation/Claims

14.5

Environmental Matters

14.6

Kaiser Eagle Mountain Material Contracts List

14.7

Assets & Liabilities other than Kem Assets

14.9

Compliance

14.10

Insurance

14.14

Eagle Mountain Property

14.16

Affiliate Transactions

18

Financial Assurances

21.1(c)

Purchase Price Allocation DISCLOSURE SCHEDULE CIL&D Retained Rights

 

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PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (this “Agreement”) is entered into on the 25th
day of June, 2015 (the “Effective Date”), by and among CIL&D, LLC, a Delaware
limited liability company (“Seller”), KAISER EAGLE MOUNTAIN, LLC, a Delaware
limited liability company and wholly-owned subsidiary of Seller (“KEM”), EAGLE
MOUNTAIN MINING & RAILROAD, LLC, a Delaware limited liability company and
wholly-owned subsidiary of Seller (“EMMR”), EAGLE MOUNTAIN ACQUISITION LLC, a
Delaware limited liability company (“Buyer”), EAGLE MOUNTAIN LLC, a Delaware
limited liability company (“Parent”), and EAGLE CREST ENERGY COMPANY, a
California corporation (“Eagle Crest”). Seller, KEM, EMMR, Buyer, Parent and
Eagle Crest are individually referred to herein as a “Party” and collectively as
the “Parties.” Buyer, Parent and Eagle Crest are also sometimes individually
referred to as a “Buyer Party” and collectively as the “Buyer Parties.” Seller,
KEM and EMMR are also sometimes individually referred to as a “Seller Party” and
collectively as the “Seller Parties.”

RECITALS

A. Seller owns 100% of the ownership interest (the “KEM Units”) in KEM and Buyer
desires to purchase the KEM Units from Seller and Seller is willing to sell the
KEM Units to Buyer upon the terms and conditions provided in this Agreement. The
assets of KEM relate to the site commonly referred to as the Eagle Mountain
mine, which is located in Riverside County, California and the real property,
mining and mill site claims, personal property and any rights or interests
related to the Eagle Mountain mine site that may be owned or controlled by KEM
are generally depicted and described in EXHIBIT “A” attached hereto
(collectively the “KEM Assets”); provided, however, the Eagle Mountain railroad
and its obligations and related real property (including the railroad spur),
rights-of-way, easements, fixtures, vehicles and equipment as more fully
described in Exhibit “R” (collectively, the “Railroad Assets”) are expressly
excluded from the KEM Assets as at the time of the sale of the KEM Units to
Buyer and the Railroad Assets will be transferred from KEM to EMMR prior to the
closing of such sale pursuant to that certain Railroad Asset Contribution
Agreement (as defined below).

B. In addition to Buyer’s purchase of the KEM Units from Seller, Buyer desires
to purchase Lot 104 consisting of approximately 3.5 acres located in the Lake
Tamarisk Subdivision (the “Lot 104”) from Lake Tamarisk Development, LLC, a
Delaware limited liability company and wholly-owned subsidiary of Seller (“Lake
Tamarisk”). The sale of Lot 104 shall occur concurrently with the Closing (as
defined below) of the Sale Transaction (as defined below), pursuant to that
certain Lot 104 Sale Agreement (as defined below), and the satisfaction of all
conditions to closing under the Lot 104 Sale Agreement (so as to permit the
concurrent closing of the sale of Lot 104 with the Closing of the Sale
Transaction) shall be a condition precedent to Buyer’s obligation to proceed to
Closing under this Agreement.

C. The Parties desire to enter into this Agreement and to pursue the
transactions and other agreements contemplated hereby, which, along with the
payment of the Purchase Price, is referred to herein as the “Sale Transaction.”

D. As a part of the Sale Transaction and concurrently with the Closing, KEM
shall enter into that certain Mining Agreement (as defined below) with EMMR.

E. Eagle Crest is the developer of hydro-electric and water storage projects
that, along with other activities related thereto, would be constructed,
maintained and operated on portions of the Eagle Mountain Property (the
“Project”) pursuant to the Federal Energy Regulatory Commission (“FERC”) License
issued in June 2014 (the “License”). Upon the acquisition of KEM by Buyer, the
Buyer Parties and KEM, and their respective owners (including Eagle Crest), will
all be Affiliates (as defined below) and they will directly and indirectly
benefit from the Sale Transaction.

 

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AGREEMENT

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

1. JOINT ESCROW. Concurrently with the execution of this Agreement, the Parties,
and First American Title Insurance Company (“Escrow Agent” or “Title Company”)
will enter into that certain Escrow Instructions and Agreement of even date with
this Agreement (the “Escrow Agreement”) providing for a joint escrow (the
“Escrow”) and the closing of the Sale Transaction (the “Closing”) pursuant to
the terms, procedures, covenants and conditions set forth in the Escrow
Agreement.

2. [RESERVED]

3. PURCHASE OF KEM UNITS AND PURCHASE PRICE. Subject to the terms and conditions
set forth in this Agreement, Seller agrees to sell to Buyer, and Buyer agrees to
purchase from Seller, on the Closing Date (as defined below), the KEM Units. In
addition to the value of the other consideration to be received by or for the
benefit of Seller as provided in this Agreement, the purchase price payable by
Buyer for the KEM Units shall be Twenty-Four Million Nine Hundred Fifty Thousand
Dollars and No Cents ($24,950,000.00) exclusive of the amount of the interest
that may accrue and be payable under the promissory notes described below (the
“Purchase Price”), with the Purchase Price payable as follows:

(a) Upon Closing, Seller shall be paid One Million Seven Hundred Thousand
Dollars and No Cents ($1,700,000.00) in cash (the “Cash Down Payment”);

(b) Upon Closing, Seller shall receive Buyer’s executed promissory note on the
terms and in the form attached hereto as Exhibit “B” in the principal amount of
Four Million Two Hundred Fifty Thousand Dollars and No Cents ($4,250,000.00)
which note shall accrue interest at the rate of six percent (6%) per annum
compounded annually and with such other terms and conditions as set forth
therein (the “$4.25 Million Note”). Buyer’s payment of the $4.25 Million Note
shall be guaranteed and secured as provided in Section 4.1 below; and

(c) Upon Closing, Seller shall receive Buyer’s executed promissory note on the
terms and in the form attached as Exhibit “C” in the principal amount of
Nineteen Million Dollars and No Cents ($19,000,000.00) which note shall accrue
interest at the rate of five and seventy-one one hundredths percent (5.71%) per
annum compounded monthly and with such other terms and conditions as set forth
therein (the “$19 Million Note”). Buyer’s payment of the $19 Million Note shall
be guaranteed and secured as provided in Section 4.2 below.

 

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4. SECURITY FOR THE TIMELY PERFORMANCE OF THE PROMISSORY NOTES.

4.1 SECURITY FOR THE $4.25 MILLION NOTE. Buyer’s timely performance of its
obligations under the $4.25 Million Note shall be guaranteed and secured as
follows:

(a) KEM shall guaranty Buyer’s payment and performance of Buyer’s obligations
under the $4.25 Million Note on the terms and in the form attached hereto as
EXHIBIT “D” (the “KEM $4.25 Million Guaranty”). To secure the timely performance
of the KEM $4.25 Million Note Guaranty, KEM shall grant a Deed of Trust,
Assignment of Leases and Rents Security Agreement and Fixture Filing on the
terms and in the form attached hereto as EXHIBIT “E” (the “Deed of Trust”);

(b) Eagle Crest shall guaranty Buyer’s payment and performance of Buyer’s
obligations under the $4.25 Million Note on the terms and in the form attached
hereto as EXHIBIT “F” (the “Eagle Crest Guaranty”);

(c) The shareholders, security holders and debt holders (collectively
“Shareholders” or individually a “Shareholder”) of Eagle Crest representing not
less than ninety seven percent (97%) of all issued and outstanding common stock,
preferred stock and promissory notes of Eagle Crest as of the Closing Date
(collectively, the “Securities”) shall individually guaranty the payment and
performance by Eagle Crest of Eagle Crest’s obligations under the Eagle Crest
Guaranty on the terms and in the form attached hereto as EXHIBIT “G” (each, a
“Shareholder Guaranty”). Timely performance of each Shareholder Guaranty shall
be secured by the pledge of all of such Shareholder’s Securities on the terms
and in the form attached hereto as EXHIBIT “H” herein by this reference (each, a
“Shareholder Pledge Agreement”);

(d) Parent shall guaranty Buyer’s payment and performance of Buyer’s obligations
under the $4.25 Million Note on the terms and in the form attached hereto as
EXHIBIT “I” (the “Parent Guaranty”). The timely performance of the Parent
Guaranty shall be secured by the pledge by Parent of one hundred percent
(100%) of its equity interest in Buyer (the “Landco Units”) on the terms and
conditions and in the form attached hereto as EXHIBIT “J” (the “Parent Pledge
Agreement”); and

(e) Buyer shall provide security for the $4.25 Million Note by pledging the KEM
Units to Seller on the terms and in the form attached hereto as EXHIBIT “K” (the
“Buyer Pledge Agreement”).

The KEM $4.25 Million Guaranty, Deed of Trust, Eagle Crest Guaranty, each
Shareholder Guaranty, each Shareholder Pledge Agreement, the Parent Guaranty,
the Parent Pledge Agreement and the Buyer Pledge Agreement are collectively
referred to herein as the “$4.25 Million Note Security Documents.”

4.2 SECURITY FOR THE $19 MILLION NOTE. Buyer’s timely performance of its
obligations under the $19 Million Note shall be guaranteed and secured as
follows:

(a) KEM shall unconditionally guaranty Buyer’s payment and performance of
Buyer’s obligations under the $19 Million Note on the terms and in the form
attached herein as EXHIBIT “L” (the “KEM $19 Million Note Guaranty”).

 

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(b) Timely performance by KEM of the KEM $19 Million Guaranty shall also be
secured by the Deed of Trust;

(c) Timely performance by Buyer of its obligations under the $19 Million Note
shall also be secured by the Buyer Pledge Agreement; and

(d) Parent shall unconditionally guaranty Buyer’s payment and performance of
Buyer’s obligations under the $19 Million Note pursuant to the Parent Guaranty.

(e) Timely performance by Parent of the Parent Guaranty shall be secured by the
Parent Pledge Agreement.

The KEM $19 Million Note Guaranty, Deed of Trust, Buyer Pledge Agreement, Parent
Guaranty and Parent Pledge Agreement are collectively referred to herein as the
“$19 Million Note Security Documents”. The $19 Million Note Security Documents
and the $4.25 Million Note Security Documents are collectively referred to
herein as the “Security Documents.”

5. PURCHASE OF LOT 104. Concurrently herewith, Lake Tamarisk and KEM shall enter
into that certain Purchase and Sale Agreement and Joint Escrow Instructions
between Buyer and Lake Tamarisk, a copy of which is attached hereto and
incorporated herein by this reference as Exhibit “Q” (the “Lot 104 Sale
Agreement”), by which Lake Tamarisk shall agree to sell to Buyer, and Buyer
shall agree to purchase from Lake Tamarisk, Lot 104 upon the terms and
conditions contained therein.

6. EAGLE MOUNTAIN RAILROAD. As a part of the consideration for Seller to enter
into this Agreement and to undertake the Sale Transaction, prior to the Closing
Date the Parties agree that KEM shall transfer to EMMR all of the Railroad
Assets pursuant to that certain Railroad Asset Contribution Agreement the form
of which is attached hereto as Exhibit “AA” (the “Railroad Asset Contribution
Agreement”). In addition, as a part of the Closing, KEM and EMMR shall enter
into that certain Eagle Mountain Railroad Agreement the form of which is
attached hereto as Exhibit “S” (the “Railroad Operations Agreement”).

7. MINING RIGHTS. As a part of the consideration for the Parties to enter into
this Agreement and to undertake the Sale Transaction, KEM and EMMR shall enter
into that certain Mining Lease and Agreement the form of which is attached
hereto as Exhibit “T” (the “Mining Agreement”) at the Closing.

8. ADDITIONAL TRANSACTION DOCUMENTS. As a part of the consideration for the
Parties to enter into this Agreement and to undertake the Sale Transaction, the
Parties agree that KEM and EMMR shall enter into the following agreements at the
Closing:

(a) That certain Access and Joint Use Agreement and the easements and
rights–of-way referenced therein in the form attached hereto as “Exhibit “U”
(the “Access Agreement”); and

(b) That certain Water and Utilities Joint Use Agreement and any agreements
referenced therein in the form attached hereto as Exhibit “V” (the “Utilities
Agreement”).

(c) That certain Assignment and Assumption of Contracts in the form attached
hereto as Exhibit “Z” (the “Assignment of Contracts”) by which KEM shall assign,
and EMMR shall assume, all rights and obligations under the following Material
Contracts (which Assignment of Contracts may contain consents to assignment by
the appropriate counterparties):

(i) Settlement Agreement dated as of January 15, 2015, by and among Edison
Construction, Inc., Perrault Corporation and KEM.

 

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9. DISMISSAL OF PROJECT CLAIMS AND EMINENT DOMAIN.

9.1 STATE WATER BOARD DISMISSAL. Within three (3) business days following the
Closing, KEM shall withdraw its petition filed with the California State Water
Resources Control Board (the “State Water Board”) regarding the Project on the
terms in the form attached hereto as Exhibit “W” (the “State Water Board
Dismissal”). KEM’s attorneys shall transmit an executed State Water Board
Dismissal to the State Water Board on the instruction of KEM. This Section 9.1
shall survive the Closing.

9.2 FERC DISMISSAL. Within three (3) business days following the Closing, KEM
shall withdraw its petition for rehearing filed with FERC regarding the License;
provided, however, there shall be preserved the right to challenge whether the
holder of the License for the Project has the right of eminent domain if a Buyer
Party or KEM is in default of any of their respective obligations under this
Agreement or any of the Security Documents following the Closing Date, and the
License holder shall not assert any defense of exhaustion of administrative
remedies or any judicial or defense in any eminent domain proceeding involving
the Eagle Mountain Assets. The terms and form of dismissal of KEM’s FERC
petition for rehearing is attached as Exhibit “X” (the “FERC Dismissal”). KEM’s
attorneys shall transmit a fully-executed original of the FERC Dismissal to FERC
on the instruction of KEM. This Section 9.2 shall survive the Closing and will
be binding on any successors and assigns of a Buyer Party.

9.3 MINIMUM VALUE OF JUST COMPENSATION. The Buyer Parties, on behalf of
themselves, their Affiliates, and any future successors and assigns, or any
party exercising of the rights under the License as it now or hereafter exists
(or any future FERC license for the Project or other similar project on the
Eagle Mountain Property) (any one of them being the “License Holder”), hereby
agree and commit that in the event of any exercise of power of eminent domain
for transfer or acquisition of all of the Eagle Mountain Property, including any
easement or other interest therein, initiated by the License Holder, the minimum
amount of agreed eminent domain just compensation to be paid to Seller or KEM
(and their successors and assigns), as applicable, in the event Seller should
reacquire directly or indirectly the Eagle Mountain Property or any portion
thereof, shall be not less than the sum of (a) the Purchase Price; plus (b) all
interest due under the $4.25 Million Note and the $19 Million Note through their
stated maturity dates (with the assumptions that there has been no acceleration
or prepayment of such Notes and that the maturity date of the $19 Million Note
has been extended by Buyer through the Final Maturity Date, as defined therein)
less any amounts previously paid to Seller thereunder; plus (c) all costs and
expenses of any kind or nature of Seller and/or KEM in such eminent domain or
affiliated proceeding, including reasonable, out-of-pocket legal and expert
witness fees, costs and expenses, discovery costs including deposition costs,
costs of preparation or duplication of exhibits and any other recoverable court
costs, and other litigation-related expenses incurred by the condemnee through
the course of the defense of the eminent domain action (collectively, the
“Minimum Just Compensation”). The Minimum Just Compensation shall be the minimum
amount of compensation to be paid by the condemnor to Seller or KEM and their
successors and assigns for the acquisition by eminent domain of all of the Eagle
Mountain Property, whether such condemnation occurs under authority of 16 U.S.C.
§ 814, provisions of the California Eminent Domain Law, or otherwise and shall
be the minimum amount to be paid notwithstanding any potentially conflicting
provisions relating to fair market value, litigation expenses, recoverable
costs, or compensable property interests under any otherwise applicable
provisions of law. The commitment to the Minimum Just Compensation hereunder
shall have been memorialized in a recorded, binding, enforceable covenant (the

 

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“Memorandum of Minimum Just Compensation”) benefitting the Eagle Mountain
Property and the beneficiaries of the $4.25 Million Note and the $19 Million
Note to be recorded prior to the Closing, and the Buyer Parties shall provide
written notice of the terms of this provision to any and all successors or
transferees of any of its interests in this Agreement, the FERC License, or the
Eagle Mountain Property prior to any transfer or assignment of any interest
therein. This Section 9.3 will expressly survive any termination of this
Agreement and will be binding on any successors and assigns of a Buyer Party.

10. DUE DILIGENCE Buyer has already conducted due diligence on KEM, the KEM
Assets and the Eagle Mountain Property prior to the Effective Date. However,
subject to the terms and conditions of this Agreement, prior to Closing, Seller
shall continue to cooperate with Buyer’s additional due diligence on KEM, the
KEM Assets and the Eagle Mountain Property and provide Buyer and its agents and
representatives with such information, materials, instruments, documents and
agreements, and books and records (collectively, “Due Diligence Information”) as
Buyer may reasonably request in connection with its due diligence to the extent
such documents and information are within the possession or control of Seller or
KEM, as applicable. All due diligence has been and shall continue to be at
Buyer’s sole cost and expense. All due diligence and all Due Diligence
Information provided and obtained shall continue to be subject to the provisions
and obligations of that certain Confidentiality and Non-Disclosure Agreement
among Eagle Crest, KEM, and Seller dated as of January 1, 2015 (the
“Confidentiality Agreement”). The Parties further acknowledge and agree that the
terms and provisions of the Confidentiality Agreement shall remain in full force
and effect notwithstanding the termination of this Agreement for any reason.
Notwithstanding anything to the contrary contained herein, in accordance with
the terms of that certain Access and Testing Agreement among Eagle Crest and KEM
dated as of March 26, 2015 (the “Access and Testing Agreement”), the Buyer
Parties retain the right to disclose New Information to Permitted Parties (each
as defined in the Access and Testing Agreement).

11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The obligation of Seller
to sell the KEM Units to Buyer is subject to fulfillment prior to or on the
Closing Date of each of the following conditions, any of which may be waived by
Seller in writing:

11.1 BUYER’S REPRESENTATIONS AND WARRANTIES REMAIN TRUE. The representations and
warranties by Buyer contained in Section 15 of this Agreement shall be true and
correct in all material respects on the Closing Date as though made at and as of
that date (or in the case of any representation or warranty which specifically
relates to an earlier date, as of such date). Seller shall have received a
certificate to that effect dated as of the Closing Date signed by a duly
authorized representative of Buyer.

11.2 PAYMENT OF THE PURCHASE PRICE. Buyer shall have deposited the Purchase
Price for delivery to Seller through Escrow, including the Cash Down Payment,
the $4.25 Million Note and the $19 Million Note.

11.3 MINIMUM SHAREHOLDER GUARANTIES AND SHAREHOLDER PLEDGE AGREEMENTS.
Fully-executed originals of the Shareholder Guaranties, Shareholder Pledge
Agreements (and related documents), and original certificates and instruments
representing at least ninety-seven percent (97%) of the Securities shall have
been deposited by Buyer for delivery to Seller through Escrow.

11.4 RECEIPT AND RECORDATION OF $4.25 MILLION NOTE SECURITY DOCUMENTS. The
executed $4.25 Million Note Security Documents shall have been deposited by
Buyer for delivery to Seller through Escrow, to be recorded or filed, as
appropriate, by Escrow Agent upon Closing, all as provided in the Escrow
Agreement.

 

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11.5 RECEIPT AND RECORDATION OF $19 MILLION NOTE SECURITY DOCUMENTS. The
executed $19 Million Note Security Documents shall have been deposited by Buyer
for delivery to Seller through Escrow, to be recorded or filed, as appropriate
(and if not already recorded or filed), by Escrow Agent after Closing, all as
provided in the Escrow Agreement.

11.6 RECEIPT OF CERTAIN AGREEMENTS. Two (2) executed, counterpart originals to
each of the following documents shall have been delivered into Escrow:

(a) The Railroad Agreement;

(b) The Mining Agreement;

(c) The Access Agreement;

(d) The Utilities Agreement; and

(e) The Assignment of Contracts.

11.7 LOT 104 SALE. The conditions precedent to closing under the Lot 104 Sale
Agreement shall have been satisfied or waived as required thereunder.

11.8 PERFORMANCE OF COVENANTS. Buyer shall in all material respects have
performed and complied with all terms, agreements, covenants and conditions of
this Agreement to be performed or complied with by it at or prior to the
Closing.

11.9 NO INJUNCTION. No preliminary or permanent injunction that restricts,
prevents or prohibits the Sale Transaction shall be outstanding.

11.10 TITLE POLICY. The Title Company shall have confirmed its commitment
(subject only to the payment of the applicable premiums) to issue to Seller a
CLTA standard coverage lender’s title insurance policy for the real property a
part of the KEM Assets dated as of the Closing Date (the “Seller Title Policy”)
with coverage in the amount of Twenty-Two Million Nine Hundred Fifty Thousand
Dollars ($22,950,000) showing Seller as the named insured, in the form and with
the endorsements set forth on the pro forma title policy attached to the Escrow
Agreement attached hereto as (the “KEM Pro Forma Title Policy”) at least two
(2) days prior to the anticipated Closing Date subject only to the exceptions to
title shown in the KEM Pro Forma Title Policy.

11.11 ESCROW AGREEMENT. The conditions to Closing for the Sale Transaction set
forth in the Escrow Agreement, shall have all been satisfied or waived by the
applicable party for whose benefit the condition exists. The Buyer shall have
delivered to Escrow Agent a “Closing Statement” consistent with this Agreement
in the form reasonably required by the Escrow Agent.

12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. Buyer’s obligation to
purchase the KEM Units from Seller is subject to fulfillment prior to or on the
Closing Date of each of the following conditions, which may be waived by Buyer
in writing:

12.1 SELLER’S REPRESENTATIONS AND WARRANTIES REMAIN TRUE. The representations
and warranties of Seller contained in Section 14 of this Agreement shall be true
and correct in all material respects on the Closing Date as through made at and
as of that date (or in the

 

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case of any representation or warranty which specifically relates to an earlier
date, as of such date); provided however, that the updating of any of Seller’s
representations and warranties as a result of events that have occurred since
the Effective Date that do not otherwise constitute breaches of this Agreement
by Seller, shall not be considered a failure of this condition. Buyer shall have
received a certificate to that effect dated as of the Closing signed by a duly
authorized representative of Seller with respect to the representations and
warranties of Seller. Buyer must also have received from Seller a Certification
of Non-Foreign Status in form and substance reasonably satisfactory to Buyer, in
accordance with Treasury Regulation Sec. 1.145-2(b).

12.2 PERFORMANCE OF COVENANTS. Seller shall in all material respects have
performed and complied with all terms, agreements, covenants and conditions of
this Agreement to be performed or complied with by it or prior to the Closing.

12.3 DELIVERY OF KEM UNITS. Seller shall have delivered to Buyer through Escrow
certificate(s) representing the KEM Units and an executed assignment
transferring the ownership of the KEM Units to Buyer; provided, however it is
recognized that a new unit certificate for the KEM Units reflecting Buyer as the
owner and an executed blank unit assignment shall be delivered to Seller in
accordance with the terms of the Buyer Pledge Agreement.

12.4 RECEIPT OF CERTAIN AGREEMENTS. Two (2) executed, counterpart originals to
each of the following documents shall have been delivered into Escrow:

(a) The Railroad Agreement;

(b) The Mining Agreement;

(c) The Access Agreement;

(d) The Utilities Agreement; and

(e) The Assignment of Contracts.

12.5 RESERVED.

12.6 LOT 104 DOCUMENTS. The conditions precedent to closing under the Lot 104
Sale Agreement shall have been satisfied.

12.7 NO INJUNCTION. No preliminary or permanent injunction that restricts,
prevents or prohibits the Sale Transaction shall be outstanding.

12.8 RESIGNATIONS AND APPOINTMENTS. Seller shall have caused KEM to duly appoint
as the only officers and managers of KEM effective as of the Closing such
persons as Buyer instructs Seller in Buyer’s sole discretion, which such
appointees shall be appointed by the current managers of KEM in connection with
such managers’ resignations. Buyer shall have received resignation letters from
all of the officers and directors of KEM which officers and directors are listed
on EXHIBIT “Y-1”, substantially in the form set forth on EXHIBIT “Y-2” attached
hereto. As part of the resignation letters there shall be a mutual general
release between the Subsidiaries and such officers and directors, but the
general release shall not release any indemnification and hold harmless
provisions and obligations of KEM to such individuals in accordance with their
existing terms.

12.9 TITLE POLICY. The Title Company shall have confirmed its commitment
(subject only to the payment of the applicable premiums) to issue to KEM (on
behalf of Buyer) a

 

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CLTA standard coverage owner’s title insurance policy for the real property a
part of the KEM Assets, dated as of the Closing Date (the “Buyer Title Policy”)
with coverage in the amount of the Purchase Price, showing KEM as the named
insured, in the form and with the endorsements set forth on the KEM Pro Forma
Title Policy and subject only to the exceptions to title shown in such KEM Pro
Forma Title Policy at least two (2) days prior to the anticipated Closing Date.

12.10 ESCROW AGREEMENT. The conditions to Closing for the Sale Transaction set
forth in the Escrow Agreement shall have all been satisfied or waived by the
applicable party for whose benefit the condition exists.

12.11 TERMINATION OF CERTAIN MATERIAL CONTRACTS. The following Material
Contracts identified on Schedule 14.6 shall have been terminated with respect to
Seller and/or KEM (as specified below) as of or prior to the Closing Date, and
Seller and/or KEM shall provide Buyer with evidence of such termination:

(i) that certain Amended and Restated Agreement among the National Park Service,
Mine Reclamation Corporation, Eagle Mountain Reclamation, Inc. and KEM shall
have been terminated in its entirety; and

(ii) that certain Consulting Agreement among Kay Hazen & Company, KEM and Seller
shall have been terminated (with a new Consulting Agreement entered into between
KEM and Kay Hazen & Company effective as of the Closing Date).

12.12 UNWINDING OF THE 1999 BLM LAND EXCHANGE. All documentation required to
implement the Final Judgment and Order of Dismissal (Civ. No. ED CV 99-0454 &
Civ. No. ED CV 00-0041) and the unwinding of the 1999 land swap between the
Bureau of Land Management and KEM referred to therein shall have been executed
and recorded if necessary.

12.13 ADMINISTRATIVE MANAGEMENT SERVICES AGREEMENT. That certain Administrative
Management Services Agreement dated as of August 1, 2014, by and among KSC
Recovery, Inc., Seller, KEM and LT, as amended by that certain First Amendment
to Administrative Management Services Agreement dated as of January 15, 2015,
shall have been further amended to provide for continued services following the
Closing. Such amendment shall be in the form attached as Exhibit “BB” (the
“Second Amendment to Administrative and Management Services Agreement”).

12.14 TERMINATION, SETTLEMENT & NET REVENUE SHARING AGREEMENT. That certain
Termination, Settlement & Net Revenue Sharing Agreement dated as of January 1,
2015 by and among KEM, LT, Seller and Mine Reclamation, LLC (the “Revenue
Sharing Agreement”), shall have been amended to clarify that the obligations of
KEM under the Revenue Sharing Agreement shall be suspended so that KEM will have
no present obligations under the Revenue Sharing Agreement after the Closing so
long as Seller has not foreclosed on the Landco Units or KEM Units pursuant to
the Parent Pledge Agreement or Buyer Pledge Agreement, as applicable (it being
understood and agreed that after such foreclosure, the obligations of KEM under
the Revenue Sharing Agreement will be reinstated in their entirety). When those
Notes are paid in full, the Revenue Sharing Agreement shall be terminated with
respect to KEM, and KEM shall have no further obligations or liabilities under
the Revenue Sharing Agreement from and after the date of such payment in full.
Such amendment shall be in the form attached as Exhibit “CC” (the “Amendment to
Revenue Sharing Agreement”). The Amendment to Revenue Sharing Agreement

 

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shall provide that (i) a memorandum of the Amendment to Revenue Sharing
Agreement shall be recorded in appropriate land records at KEM’s request and
(ii) once KEM’s obligations under the Revenue Sharing Agreement (as amended)
have terminated according to the terms thereof, a memorandum sufficient to
remove the Revenue Sharing Agreement (as amended) from the land records of the
Eagle Mountain Property shall be recorded in the appropriate land records at
KEM’s request.

12.15 FIRPTA CERTIFICATE. Seller shall deliver to Buyer at the Closing a
properly executed affidavit prepared in accordance with Treasury Regulations
Section 1.1445-2(b) certifying its non-foreign status in a form mutually
agreeable to the Buyer.

12.16 RAILROAD CONTRIBUTION. All transactions contemplated under the Railroad
Contribution Agreement shall have been completed, and KEM shall no longer be the
owner of any Railroad Assets.

13. CLOSING. The Closing shall take place at the offices of Escrow Agent or at
such other location as may be mutually agreed by Seller and Buyer on or before
the Closing Expiration Date (as defined in Section 19 below). The actual date of
the Closing is the “Closing Date.”

14. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller, on behalf of the Seller
Parties, represents and warrants to the Buyer Parties:

14.1 ORGANIZATION AND AUTHORIZATION. Seller has been duly organized, is validly
existing and in good standing under the laws of the State of Delaware and is
qualified to do business in the State of California. Seller (f/k/a Kaiser
Ventures LLC) is a company in dissolution but a Certificate of Cancellation for
the Company has not yet been filed with the Delaware Secretary of State and the
Sale Transaction is within the powers of Seller under its Plan of Dissolution
and Liquidation approved by the members of Seller on May 22, 2013. Seller is not
a foreign person for purposes of Treasury Regulation Sec. 1.1445-2(b). Seller
has the requisite limited liability company power and authority to execute and
deliver this Agreement and the other agreements referenced herein, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby, including, without limitation, the Sale Transaction. KEM and EMMR are
each duly organized, validly existing and in good standing under the laws of the
State of Delaware and each is qualified to do business in the State of
California. The membership interests of KEM (represented by units) have been
duly and validly issued and are fully paid and non-assessable. The execution,
delivery and performance of this Agreement and the other agreements referenced
herein, the Sale Transaction and the other transactions contemplated by this
Agreement (to the extent applicable) have been duly authorized by all necessary
limited liability company action on the part of each of the Seller Parties. This
Agreement and the other agreements referenced herein have been duly executed and
delivered by each of the Seller Parties (to the extent applicable) and, assuming
this Agreement and the other agreements referenced herein constitute valid and
legally binding obligations of the Buyer Parties, constitutes the valid and
legally binding obligation of each of the Seller Parties (as applicable)
enforceable in accordance with its terms and conditions, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.

14.2 OWNERSHIP. Seller is the record and beneficial owner of the KEM Units.
There are no owners of units or other securities or any options, warrants,
purchase rights, convertible instruments or other contracts or commitments
convertible into units or other securities

 

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in KEM other than Seller. Upon consummation of the Sale Transaction, Buyer shall
be the sole, lawful owner of the KEM Units, free and clear of all security
interests, liens, claims, pledges, options or other encumbrances, except any
that may be imposed by applicable securities laws except for security interests
arising from this Agreement or the transactions contemplated herein. There are
no outstanding options, warrants, purchase rights, convertible instruments or
other contracts or commitments convertible into the KEM Units that require or
permit Seller to sell, transfer, issue or otherwise dispose of the KEM Units,
except pursuant to the express terms of this Agreement. As at Closing, KEM will
not directly or indirectly own any equity securities of, or interests in, any
Person.

14.3 NO VIOLATION. The execution, delivery and performance of this Agreement by
each Seller Party and KEM and the consummation by each Seller Party and KEM of
the transactions contemplated hereby, including, without limitation, the Sale
Transaction, does not or will not (i) conflict with or result in a violation
pursuant to any provision of the organizational documents of such Seller Party
or KEM; (ii) contravene any law or any order, writ, judgment, injunction,
decree, determination or award currently in effect with respect to such Seller
Party or KEM; (iii) cause a breach or default by any Seller Party or KEM under
any agreement to which a Seller Party or KEM is party, which such breach or
default is reasonably likely to have a Material Adverse Effect (as defined in
Section 21.4); or (iv) except as contemplated by this Agreement and the Security
Documents, result in the creation of any lien on any of the assets of KEM. KEM
is not in violation or default (x) of any provisions of its limited liability
company agreement or other organizational documents, (y) under any note,
indenture or mortgage, or (z) under any lease, agreement, contract, purchase
order or other obligations to the extent listed or reflected on SCHEDULE 14.6.

14.4 CERTAIN LITIGATION. Except as set forth in SCHEDULE 14.4 attached hereto,
there are no claims, litigation or other proceedings pending, or to Seller’s
Knowledge, threatened in writing, by or before any governmental agency, person,
or entity involving KEM, KEM’s managers or officers, the KEM Units or the KEM
Assets, or that could reasonably be expected to have a Material Adverse Effect
on KEM or on any Seller Party’s ability to perform any of such Seller Party’s
obligations under this Agreement or the other agreements referenced herein.
Except as set forth in SCHEDULE 14.4 attached hereto, no Seller Party is the
subject of any judgment, order or decree of any government authority that
impacts the KEM Assets.

14.5 ENVIRONMENTAL CONDITIONS. Except for the matters described as set forth on
SCHEDULE 14.5 attached hereto, to Seller’s Knowledge, (i) KEM is not required as
of the date of this Agreement to implement or pay for any Remedial Action and
(ii) neither KEM nor Seller have received written notice from any governmental
authority that there is asbestos, lead or other Hazardous Material located at
the Eagle Mountain Property in violation of any law, whether federal, state or
local, and to Seller’s Knowledge, there is no factual basis for such notice. To
Seller’s Knowledge, there are no Hazardous Materials in the Core Garden area,
including but not limited to the barrels, sample sacks and rock cores present
therein. For purposes of this Section 14.5, (a) “Remedial Action” means all
actions required by Environmental Laws to investigate, monitor, clean up,
remove, treat or in any other way remediate any existing release, spill,
disposition, or other transmission or discharge of Hazardous Material;
(b) “Hazardous Material” means: (i) any substance, product, waste or other
material of any nature whatsoever which is or becomes listed or regulated as a
“hazardous waste,” “hazardous substance,” “hazardous material,” “toxic
substance,” “waste,” “pollutant,” “contaminant,” or similar characteristic
pursuant to any federal, state or local statute, law, ordinance, resolution
code, rule, regulation, order or decree as now or at any time hereafter may be
in effect during the term of this Agreement, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. Section 9601, et seq., the Hazardous Materials Transportation Act of
1975, 49 U.S.C. Section 1801

 

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et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Section 6901 et seq., the Toxic Substance Control Act of 1976, 15 U.S.C.
Section 2601 et seq., the Clean Water Act of 1977, 33 U.S.C. Section 1251
et seq., the Hazardous Substance Account Act (California Health and Safety Code
Sections § 25300 et seq.), the Hazardous Waste Control Act (California Health
and Safety Code Sections § 25100 et seq.) and Sections 25117 and 25316 of the
California Health and Safety Code; and (ii) petroleum or crude oil other than
petroleum and petroleum products which are wholly contained within equipment,
regularly operated motor vehicles and approved containers or tanks; and
(c) “Environmental Law” means those Laws that relate to or regulate Hazardous
Materials or relate to or regulate any activity involving Hazardous Materials
relating to pollution, natural resources damages or the environment or the use
or release into the environment of any Hazardous Materials, including without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. Sections 9601 et seq.), the Resource Conservation and Recovery
Act (42 U.S.C. Sections 6901 et seq.), the Clean Air Act (42 U.S.C.
Sections 7401 et seq.), the Clean Water Act (33 U.S.C. Sections 1251 et seq.),
the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801 et seq.),
the Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.), the Safe
Drinking Water Act (42 U.S.C. Sections § 300 et seq.), and the regulations
promulgated pursuant to any of the foregoing and similar state and local laws,
including the Safe Drinking Water and Toxic Enforcement Act of 1986 (California
Health and Safety Code Sections 25249.5 et seq.), the Porter Cologne Water
Quality Control Act (California Water Code, Sections 13000 et seq.) and the
Surface Mining and Reclamation Act (Public Resources Code, Sections 2710 et
seq.), and the Hazardous Substance Account Act (California Health and Safety
Code Sections § 25300 et seq.), and the Hazardous Waste Control Act (California
Health and Safety Code Sections § 25100 et seq.).

14.6 MATERIAL CONTRACTS. Except for (i) contracts and permits under which KEM’s
annual expenditure does not exceed $10,000, (ii) contracts terminable without
penalty upon 60 days’ prior notice, or (iii) those contracts, permits and other
matters described as set forth in Schedule 14.6 attached hereto (the “Material
Contracts”), there are no contracts or leases or permits to which KEM is a
party, or that affect any portion of the KEM Assets or the Eagle Mountain
Property. Except as set forth on Schedule 14.6, on or prior to the date of this
Agreement, Seller has provided or made available to Buyer a true, complete and
correct copy of each of the Material Contracts, and all exhibits, supplements
and schedules thereto, in each case, as amended or otherwise modified. Except as
set forth on Schedule 14.6, KEM is not, and to Seller’s Knowledge, no other
party to a Material Contract is, in material breach or in violation of, or
default under, or has repudiated any material provision of, any Material
Contract and no event has occurred which (after notice or lapse of time or both)
would become a breach or default by KEM under any Material Contract. Except as
provided herein or as otherwise arises in the ordinary course (with notice to
Buyer), KEM has not received or given notice of any intent to terminate, to seek
to renegotiate, amend or modify any Material Contract.

14.7 KEM ASSETS & LIABILITIES. To Seller’s Knowledge and except as disclosed to
Buyer Parties in SCHEDULE 14.7, KEM has no assets other than the KEM Assets, and
KEM has no liabilities, obligations or commitments of any nature whatsoever,
except (a) those which have been incurred in the ordinary course of business
consistent with past practice and which are not, individually or in the
aggregate, material in amount or that cannot be terminated without penalty upon
sixty (60) days prior written notice; and (b) those which have otherwise been
disclosed to a Buyer Party by Seller in connection with the Sale Transaction.

14.8 EMPLOYEES AND EMPLOYEE MATTERS. KEM has no employees. Two individuals work
full-time at the Eagle Mountain Property on behalf of KEM, but are employees of
KSC Recovery, Inc. pursuant to that certain Administrative and Management
Services Agreement dated July 31, 2014, as amended, by and among Seller, KEM,
Lake Tamarisk and KSC Recovery,

 

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Inc. (the “Management Services Agreement”) under which such services and
personnel are made available to KEM. KEM has no employee benefit programs and
KEM has no liability for any claims that may have arisen or otherwise relate to
the employees of KSC Recovery, Inc., Seller, or any of Seller’s Affiliates.

14.9 COMPLIANCE. Except as set forth in SCHEDULE 14.9, neither Seller nor KEM
has received any written notice which remains uncured from any governmental
authority (i) as to the violation by KEM of any applicable law, order, judgment,
permit or regulation, (ii) that KEM does not possess all material permits and
licenses necessary in its own name for it to use, own and operate the KEM Assets
in substantially the same manner as historically conducted by it; or (iii) which
seeks the revocation, cancellation, suspension or adverse modification or any
permit or license described in clause (ii) above.

14.10 INSURANCE. SCHEDULE 14.10 attached hereto contains a true and accurate
list of all current insurance policies maintained by Seller with respect to KEM
or the KEM Assets (the “Insurance Policies”) but specifically does not include
asbestos coverage under historical occurrence-based insurance policies. Seller
has made available to Buyer information regarding all such Insurance Policies,
as well as a claim history for the preceding thirty-six (36) months. As of the
Effective Date, all such Insurance Policies are in full force and effect and
shall remain in effect until the Closing. KEM shall remain as an additional
insured on the Seller’s commercial general liability insurance policy for a
period of one (1) year following the Closing. Buyer or KEM shall reimburse
Seller for any incremental cost associated with retaining KEM as an additional
insured. Additionally, Seller shall have used commercially reasonable efforts to
have KEM named as the primary insured on the pollution liability policy
identified on SCHEDULE 14.10 to KEM as at the Closing with Seller and its
Affiliates named as additional insureds.

14.11 ENTITY DOCUMENTS. Seller has provided Buyer with true and complete copies
of the Certificate of Formation and Limited Liability Company Agreement of KEM,
as amended to date, and there are no other agreements, oral or written, relating
to voting, consent or other rights affecting the KEM Units or the management or
governance of KEM. Except as set forth in the organizational documents provided
to Buyer, there are no voting trusts or agreements, stockholders’ agreements,
pledge agreements, buy-sell agreements, rights of first refusal, preemptive
rights, proxies or other contracts or agreements between Seller and any other
person with respect to the acquisition, disposition or voting of the KEM Units
or any other equity interest in KEM.

14.12 BROKERS. With the exception of certain contingent fee and bonus
arrangements with Rick Stoddard and California Strategies, LLC previously
disclosed to Buyer, Seller has not engaged any broker or finder in connection
with any of the transactions contemplated by this Agreement, including the Sale
Transaction, and to Seller’s Knowledge, no broker or finder is in any way
connected with any of the transactions contemplated by this Agreement, including
the Sale Transaction.

14.13 TAX MATTERS.

(a) For income tax purposes, KEM is treated as an entity whose separate
existence from Seller is disregarded.

(b) KEM has filed all material Tax Returns required to be filed by it with the
appropriate governmental authorities and has timely paid all material Taxes that
are shown as due and owing on such Tax Returns. All such Tax Returns are true,
correct and complete in all material

 

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respects. KEM is not currently the beneficiary of any extension of time within
which to file any Tax Return. No written claim has ever been made by a
governmental authority in a jurisdiction in which KEM does not file a Tax Return
that it is or may be subject to taxation by that jurisdiction.

(c) There are no pending or, to Seller’s Knowledge, threatened disputes, claims,
audits, investigations, notices of deficiency or assessments concerning any Tax
liability of KEM. KEM has not waived any statute of limitations in respect of
Taxes which waiver has not yet expired or agreed to any extension of time with
respect to a Tax assessment or deficiency which extension has not yet run.

(d) There are no liens relating to Taxes on the assets of KEM other than liens
for Taxes not yet due and payable.

(e) None of the assets of KEM (i) is property required to be treated as owned by
another person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (ii) constitutes “tax-exempt use
property” within the meaning of Section 168(h) of the Code, (iii) is “tax-exempt
bond financed property” within the meaning of Section 168(g) of the Code,
(iv) secures any debt the interest of which is tax-exempt under Section 103(a)
of the Code or (v) is subject to a “section 467 rental agreement” within the
meaning of Section 467 of the Code.

(f) None of the transactions contemplated hereby are subject to withholding
under Section 1445 of the Code or otherwise.

(g) For purposes hereof, (i) “Code” means the Internal Revenue Code of 1986, as
amended, (ii) “Tax” or “Taxes” means all federal, provincial, territorial,
state, municipal, local, domestic, foreign or other taxes, imposts, and
assessments, whether disputed or not, including, without limitation, ad valorem,
capital, capital stock, customs and import duties, disability, documentary
stamp, employment, excise, franchise, gains, goods and services, gross income,
gross receipts, income, intangible, inventory, license, mortgage recording, net
income, occupation, payroll, personal property, production, profits, property,
real property, recording, rent, sales, social security, stamp, transfer,
transfer gains, unemployment, use, value added, windfall profits, escheat,
unclaimed property and withholding, together with any interest, additions, fines
or penalties with respect thereto or in respect of any failure to comply with
any requirement regarding Tax Returns and any interest in respect of such
additions, fines or penalties and shall include any transferee liability in
respect of any and all of the above, and (iii) “Tax Return” means any
declaration, estimate, return, report, information return or statement, claim
for refund or other document (including any schedule or attachment thereto, any
amendment thereof, or any related or supporting information) with respect to
Taxes that is required to be filed with any governmental authority.

14.14 EAGLE MOUNTAIN PROPERTY. To Seller’s Knowledge, SCHEDULE 14.14 contains a
true and accurate description (including accessor’s parcel numbers and
approximate acreage) of all real property owned, licensed, leased by, or subject
to an easement or claim (including unpatented mining claims) in favor of, KEM as
of the date of the Effective Date, excluding any such real property included in
the Railroad Assets to be transferred to EMMR pursuant to Railroad Purchase
Agreement (collectively, the “Eagle Mountain Property”) and reflecting the
effect of the unwinding of the 1999 BLM Land Exchange as described in
Section 12.12; provided, however, that Seller’s information on unpatented mining
claims was derived from the BLM database which is known to contain some factual
errors and Seller disclaims any responsibility for the accuracy of the data
obtained from such source. All annual assessments for the mining claims listed
on SCHEDULE 14.14

 

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are current or deemed current pursuant to that certain Final Judgment and Order
of Dismissal dated December 18, 2014, in United States District Court, Central
District California, Donna Charpied, et al., Plaintiffs, v. United States
Department of Interior, et al., Defendants (Civ. No. ED CV 99-0454 RT (Mex)) and
in the case of National Parks Conservation Association, Plaintiff, v. Bureau of
Land Management, et al., Defendants (Civ. No. ED CV 00-0041 RT (Mex)) and the
U.S Bureau of Land Management considers such mining claims to be “active” claims
as stated in its letter of January 30, 2015, to KEM.

14.15 BOOKS & RECORDS. Seller has provided Buyer with reasonable access to
review and inspect the books and records of KEM and its subsidiaries. To
Seller’s Knowledge, neither KEM nor its subsidiaries have established or
maintained any material fund or asset, entered into any material contract, or
incurred any material liability that has not been recorded in their respective
books and records.

14.16 AFFILIATE TRANSACTIONS. Except (a) as set forth on SCHEDULE 14.16,
(b) contracts between or among (i) KEM and its direct and indirect wholly owned
subsidiaries or (ii) KEM and Mine Reclamation, LLC and (c) as disclosed in any
public filing with the Securities and Exchange Commission (the “SEC”), none of
KEM or any of its subsidiaries is or has been in the last three (3) years party
to any material contract or transaction with any (i) officer, director or holder
of equity securities of KEM and its subsidiaries or any other person in such
officer’s, director’s or holder of equity securities’ immediate family or
(ii) any Affiliate of KEM or any other person in such Affiliate’s immediate
family, and no such officer, director, Affiliate, holder of equity securities or
person has any material interest in any material property used by the KEM or its
subsidiaries.

14.17 OPERATIONS OF KEM. Except as otherwise disclosed in any public filing with
the SEC, KEM is not currently and has not engaged in any business other than the
ownership, operation and exploitation of the KEM Assets, the Railroad Assets and
those assets disclosed on SCHEDULE 14.7 attached hereto.

14.18 TOWN SITE LICENSE AGREEMENTS. The KEM Records contain true and accurate
copies of all historical lease and/or license agreements for the use of the
Eagle Mountain town site within the past ten (10) years (the “Town Site License
Agreements”). KEM is a party to each of the Town Site License Agreements, and
any indemnification and clean-up obligations under each of the Town Site License
Agreements shall continue to run to the benefit of KEM after the Closing, to the
extent provided therein.

14.19 RESERVED.

14.20 DISCLOSURE. The Seller Parties have made available to the Buyer all
information reasonably available to the Seller Parties that the Buyer has
requested for deciding whether to acquire the KEM Units.

14.21 NO ADDITIONAL REPRESENTATIONS; KNOWLEDGE DEFINED. Except for the
representations and warranties contained in this Section 14 or in any other
agreement or document delivered by any Seller Party to any Buyer Party in
connection with the Sale Transaction (the “Transaction Documents”), Seller makes
no other express or implied representations or warranties with respect to any of
the Seller Parties, the KEM Units or the KEM Assets, values, properties,
liabilities, contacts, contingencies, prospects, risks, or assets, or the Sale
Transaction, and Seller disclaims any other representations or warranties,
whether made by Seller or any of its Affiliates or

 

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any of their respective agents or representatives. As used in this Section 14,
“Seller’s Knowledge” shall mean the actual knowledge of Terry L. Cook or Rick
Stoddard following reasonable due inquiry. In addition, Seller shall not have
any liability for the breach or inaccuracy of any representation or warranty
under this Section 14 or in any Transaction Document to the extent that a Buyer
Party or its Advisors had actual knowledge at or before the Closing Date that
such representation or warranty had been breached or was inaccurate. For
purposes of this Section 14.21, a Buyer Party’s Advisors are Latham & Watkins
LLP, McGladrey LLP, GEI Consultants, Inc. and Mitchell & Chadwick LLP. An
Advisor shall be deemed to have actual knowledge of only that information
obtained or reviewed during the term such Advisor’s services were retained by
any Buyer Party. “Actual knowledge” includes all due diligence actually
conducted by a Buyer Party or its Advisors and all Due Diligence Information
provided by Seller Party to a Buyer Party or its Advisors for review or
inspection. Due Diligence Information shall be deemed to have been “provided” to
the extent it is contained in a document, file of documents or box of documents
(including electronic mail correspondence) (i) physically or electronically
delivered to a Buyer Party or its Advisors, or (ii) shown or physically made
available to a Buyer Party or its Advisors at the KEM offices at Eagle Mountain
or at Seller’s offices in Ontario, California. Notwithstanding anything to the
contrary contained herein, a Buyer Party or its Advisors shall not be deemed to
have “actual knowledge” of the contents of a document merely through the
inclusion of such document on a list or schedule provided to such Buyer Party or
Advisor.

15. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer, on behalf of the Buyer
Parties, hereby represents and warrants to the Seller Parties as follows:

15.1 ORGANIZATION AND AUTHORIZATION. Buyer and Parent are each a limited
liability company that has been duly formed, is validly existing and is in good
standing under laws of Delaware. Eagle Crest is a corporation, duly formed,
validly existing and in good standing under the laws of California. Each Buyer
Party has the requisite power and authority to execute and deliver this
Agreement and the other agreements referenced herein, to perform its obligations
(or to cause the Shareholders to perform their respective obligations) hereunder
(or under the other agreements referenced herein) and to consummate the
transactions contemplated hereby and thereby, including, without limitation, the
Sale Transaction. Buyer and Parent are duly qualified or licensed to do business
and are in good standing in California. The execution, delivery and performance
of this Agreement and the other agreements referenced herein, the Sale
Transaction and the other transactions contemplated by this Agreement have been
duly authorized by all necessary action on the part of the Buyer Parties (where
applicable). This Agreement has been duly executed and delivered by the Buyer
Parties, and assuming this Agreement constitutes a valid and legally binding
obligation of the Seller Parties (as applicable), constitutes the valid and
legally binding obligation of each of the Buyer Parties, as applicable,
enforceable in accordance with its terms and conditions, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.

15.2 BUYER HAS NO INTEREST IN KEM UNTIL THE PURCHASE PRICE IS PAID. Until the
Purchase Price is paid in the manner provided in Section 3, Buyer acknowledges
and agrees that neither it nor any of its Affiliates shall have any interest
(ownership, voting, economic or otherwise) in KEM or the KEM Assets.

15.3 SECURITIES LAW MATTERS. The KEM Units are being acquired for Buyer’s own
purposes and account, not as a nominee or agent, and not with the view to, or
for resale in connection with, any distribution thereof. Buyer understands that
the Sale Transaction has not

 

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been, and will not be, the subject of a registration statement filed under the
Securities Act of 1933, as amended (the “Securities Act”), or qualified under
applicable state securities laws by reason of a specific exemption from the
registration provisions of the Securities Act and the qualification provisions
of such laws. Buyer understands that the KEM Units may not be resold unless such
resale is registered under the Securities Act and qualified under applicable
state laws or an exemption from such registration or qualification is available.
Buyer agrees that it is a knowledgeable and sophisticated buyer and it has the
requisite knowledge and experience to assess the relative merits and risks of an
acquisition of the KEM Units and the KEM Assets. Buyer has the ability to bear
the economic risk of an investment in KEM.

15.4 DISCHARGE OF IMPLIED WARRANTIES. The Buyer Parties have performed
independent due diligence and will have performed by the Closing Date additional
due diligence and independent investigation with respect to KEM, the KEM Units,
the KEM Assets and the liabilities of KEM with the intention of forming its own
conclusions regarding the condition (financial or otherwise), value, property,
liabilities, contracts, contingencies, prospects, risks, permitting and other
incidents of KEM and the KEM Assets. In making the determination to proceed with
the Sale Transaction, the Buyer Parties have relied solely on the results of
such independent investigation and the representations and warranties of Seller
in Section 14 of this Agreement and the other Transaction Documents. Buyer and
its Affiliates acknowledge that the KEM Assets are subject to all risks and
liabilities associated with the Project and its permitting, construction or
operations of any kind or nature. Buyer and its Affiliates expressly intend and
agree that as of the Closing, the Sale Transaction shall be without
representation or warranty of any kind (express or implied) regarding the KEM
Units, KEM, or the KEM Assets and its liabilities, except as expressly set forth
Section 14 hereof or contained within any other Transaction Document.

16. NATURE AND SURVIVAL OF REPRESENTATIONS. There are no representations,
warranties and covenants made by any of the Parties except as expressly provided
herein. All representations and warranties and covenants made by any Party in
this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby, including, without limitation, the Sale
Transaction for a period of eighteen (18) months following the Closing Date,
except (i) the representations and warranties provided in Section 14.1, 14.2,
14.3, 15.1, 15.3 and 15.4 shall survive indefinitely, and (ii) the
representations and warranties provided in Section 14.13 shall survive until the
applicable statute of limitations with respect to such representations and
warranties. The Parties specifically intend that the statutory statutes of
limitations applicable to each of the representations, warranties and covenants
be superseded and replaced by the foregoing periods.

17. “AS IS, WHERE IS”. EXCEPT AS OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT OR
IN ANY OTHER TRANSACTION DOCUMENT, THE SALE OF THE KEM UNITS AND THE KEM ASSETS
IS AND WILL BE MADE ON AN “AS IS WHERE IS” BASIS AND NO SELLER PARTY HAS MADE,
DOES MAKE, AND EACH SELLER PARTY SPECIFICALLY NEGATES AND DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER,
WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, BY A
SELLER PARTY OR BY ANY OF ITS AGENTS OR REPRESENTATIVES. BUYER ACKNOWLEDGES AND
AGREES THAT, EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT, NO SELLER PARTY OR ANY OF ITS AGENTS OR REPRESENTATIVES
HAVE MADE OR MAKE ANY REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR
CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO THE
HABITABILITY, TENABILITY, OR SUITABILITY FOR COMMERCIAL PURPOSES OF ANY OF THE
KEM ASSETS, ALL OF WHICH WARRANTIES ARE EXPRESSLY DISCLAIMED.

 

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18. FINANCIAL ASSURANCES. KEM and Seller have each provided or accommodated
certain financial assurances for the benefit of KEM as more fully described in
Schedule 18 attached hereto (the “Financial Assurances”). Each of the Financial
Assurances is collateralized by a certificate of deposit or designated bank
account in the name of Seller, also as set forth in Schedule 18. The
certificates of deposit and bank accounts described in Section 1 of Schedule 18
are referred to herein as the “KEM Financial Assurances”. Those amounts KEM
Financial Assurances shall be transferred to an account in the name of KEM prior
to Closing, and KEM shall be responsible for the KEM Financial Assurances after
the Closing. CIL&D shall retain responsibility for the letter of credit
described in Section 2 of Schedule 18 after the Closing.

19. TERMINATION AND REMEDIES.

19.1 [RESERVED]

19.2 TERMINATION AND ABANDONMENT. This Agreement may be terminated and abandoned
prior to the Closing as follows:

(a) Buyer and Seller may terminate this Agreement by mutual written consent at
any time prior to the Closing;

(b) Buyer or Seller may terminate this Agreement if the Closing shall not have
occurred on or before the date which is five (5) business days following the
Effective Date (the “Closing Expiration Date”);

(c) Buyer may terminate this Agreement by giving written notice to the Seller at
any time prior to the Closing (i) in the event Seller has breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, Buyer has notified Seller of the breach, and the breach has
continued without cure for a period of two (2) business days after the notice of
breach or (ii) by reason of the failure of any condition precedent under
Section 12 of this Agreement other than conditions with respect to actions the
respective Parties will take at the Closing itself (unless the failure results
from Buyer breaching any representation, warranty, or covenant contained in this
Agreement);

(d) Seller may terminate this Agreement by giving written notice to the Buyer at
any time prior to the Closing (i) in the event Buyer has breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, Seller has notified Buyer of the breach, and the breach has
continued without cure for a period of two (2) business days after the notice of
breach or (ii) by reason of the failure of any condition precedent under
Section 11 of this Agreement other than conditions with respect to actions the
respective Parties will take at the Closing itself (unless the failure results
from any Seller breaching any representation, warranty, or covenant contained in
this Agreement); or

EXCEPT AS MORE SPECIFICALLY PROVIDED IN THIS SECTION 19.2, ANY TERMINATION OF
THIS AGREEMENT SHALL ONLY BE EFFECTIVE UPON WRITTEN NOTICE, EXECUTED BY BUYER OR
SELLER AS THE CASE MAY BE, AND DELIVERED HEREOF TO ALL OTHER PARTIES IN
ACCORDANCE WITH SECTION 22.11.

19.3 EFFECTS OF TERMINATION. If terminated pursuant to Section 19.2 of this
Agreement, this Agreement shall have no further force and effect without
liability to any Party or any of their respective affiliates, officers,
directors, managers, employees, agents, advisors or other representatives,
except that (i) each Party shall maintain in confidence and not use for any
other purpose any non-public confidential information of any other Party
disclosed in connection with the transactions contemplated hereby, and (ii) the
obligations of the Parties under Section 2.2 and Section 9.3 (unless the
termination was due to an uncured default by Seller) and of this Section 19.2 of
this Agreement shall remain in full force and effect. In addition, Eagle Crest
will cause each of Buyer and Parent to change their company name with the
Secretary of State of the State of Delaware so it does not include the words
“Eagle Mountain” and will not include the word “Kaiser.”

 

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20. ADDITIONAL OBLIGATIONS AND MATTERS.

20.1 RECORDS. At the Closing, Seller shall arrange for Buyer to take possession
of (i) all books, records, documents, correspondence, tax records, minute books,
corporate seals, accounting statements, financial records, check books and other
similar items, engineering plans, surveys, historical documents (including the
Town Site License Agreements) and other similar items of KEM, including all
records relating to the KEM Assets and operations of KEM, and (ii) keys, lock
combinations, passwords and other similar items of KEM (collectively “KEM
Records”), unless otherwise agreed. Seller shall have the right to retain a copy
of any and all KEM Records. Seller shall make available or cause to be made
available to Buyer all records of Seller and its Affiliates pertaining directly
to KEM, the operations of KEM or the KEM Assets. In addition, Buyer shall make
available to either Seller or its designated representatives upon five
(5) business days advance notice the KEM Records for review and copying (at the
Seller’s expense) for tax and audit purposes, regulatory compliance and
cooperation with governmental investigations or legal proceedings to the extent
such Seller did not retain copies thereof. The provisions of this Section 20.1
shall expressly survive the Closing.

20.2 COMMISSION AND FEES PAYABLE BY SELLER. Seller shall indemnify and hold
harmless Buyer from any brokerage commissions, success fees or other similar
items payable to any person retained by Seller in connection with the
transactions contemplated by this Agreement, including, without limitation, the
Sale Transaction.

20.3 COMMISSIONS AND FEES PAYABLE BY BUYER. Buyer shall indemnify and hold
harmless Seller from any brokerage commission, success fees or other similar
items payable to any person retained by Buyer in connection with the
transactions contemplated by this Agreement, including, without limitation, the
Sale Transaction, and in connection with obtaining the financing for the Sale
Transaction.

20.4 COOPERATION. Following Closing, so long as the Buyer Parties are in
material compliance with their respective obligations to Seller and to EMMR
pursuant to this Agreement and the other agreements referenced herein, Seller
shall reasonably cooperate with Buyer and Eagle Crest to resolve outstanding
matters with the U.S. Bureau of Land Management and other regulatory matters
that may arise as suited to the objectives of the Project and provided that such
cooperation does not materially interfere with the rights of Seller or EMMR
under any agreement with the Buyer Parties, KEM, or the Shareholders. Buyer
shall reimburse Seller for any reasonable out-of-pocket expenses Seller may
incur in providing such cooperation.

 

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21. TAX, PRORATION AND OTHER COVENANTS.

21.1 TAXES.

(a) Buyer and Seller acknowledge that KEM is a single member limited liability
company whose existence as an entity separate from Seller is disregarded for
income tax purposes. Buyer shall be responsible for all Taxes levied, assessed
or incurred in any manner in connection with the KEM Units and any of the KEM
Assets for any period, or portion of any period, beginning after the Closing
Date, and Seller shall be responsible for all Taxes levied, assessed or incurred
in any manner in connection with the KEM Units or the KEM Assets for any period,
or portion of any period, ending on or prior to the Closing Date. For the sole
purpose of appropriately apportioning any Taxes relating to a period that
includes (but that does not end on) the Closing Date, the portion of such Tax
that is attributable to the portion of such period that ends on the Closing Date
shall, (i) in the case of income, sales and use Taxes and other
transaction-based Taxes, be deemed to be equal to the amount which would be
payable if such period ended at the close of business on the Closing Date; and
(ii) in the case of real property Taxes, personal property Taxes and similar
recurring Taxes imposed on the KEM Assets, be deemed to be the amount of such
Taxes for the entire period multiplied by a fraction, the numerator of which is
the number of calendar days in the period ending on the Closing Date, and the
denominator of which is the number of calendar days in the entire period. Any
Tax credits or refunds relating to a period that includes (but does not end on
the Closing Date) shall be allocated between Seller and Buyer in the same
proportion as the liability for such Tax to which the refund or credit relates.
Buyer shall promptly pay over to the Seller its portion of such refunds or
credits paid to or credited for the account of Buyer. Buyer will give Seller
prompt notice of any communication from any Taxing authority regarding Taxes
affecting any of the KEM Units or KEM prior to the Closing Date. The
apportionment of taxes pursuant to this Section 21.1 shall be subject to
post-Closing adjustments as necessary to reflect later relevant material
information not available at Closing and to correct any material errors made at
Closing with respect to such apportionments, and such adjustment shall be
performed pursuant to the procedure outlined in Section 21.2, below. The
provisions of this Section 21.1 shall expressly survive the Closing for a period
of eighteen (18) months.

(b) All transfer, documentary, sales, use, value-added, gross receipts, stamp,
occupation, property, ad valorem, excise, registration or other similar transfer
Taxes incurred in connection with the transfer of the KEM Units pursuant to the
terms of this Agreement, including, without limitation, all recording or filing
fees, notarial fees and other similar costs of Closing, that may be imposed,
payable, collectible or incurred shall be split equally between Buyer and
Seller.

(c) The parties acknowledge and agree that Buyer’s acquisition of the KEM Units
will be treated as an acquisition by Buyer of the KEM Assets for U.S. federal
income tax purposes. SCHEDULE 21.1(C) sets forth the allocation of the Purchase
Price among the KEM Assets by Seller and Buyer, prepared in accordance with
section 1060 of the Code. The allocation shall be adjusted consistent with any
post-closing adjustment made pursuant to this Agreement. The Parties agree to
report for all Tax purposes the allocation of the Purchase Price in a manner
consistent with SCHEDULE 21.1(C) and shall take no Tax position inconsistent or
contrary thereto; provided, however, that nothing contained herein shall prevent
Buyer or Seller from settling any proposed deficiency or adjustment by any
taxing authority based upon or arising out of the allocation, and neither Buyer
nor Seller shall be required to litigate before any court any proposed
deficiency or adjustment by any taxing authority challenging such allocation.

21.2 PRORATIONS. Except as otherwise provided herein, rent, receivables, other
amounts due KEM, and all amounts payable by KEM such as property taxes, accounts
payable and

 

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other expenses shall be prorated as of the Closing Date. Seller and/or KEM, as
applicable, shall pay or cause to be paid such amounts or an appropriate
adjustment shall be made in the cash received by Seller at Closing or Seller
and/or KEM shall cause sufficient working capital to remain in the accounts of
KEM to pay such items when due. Any monies held in bank accounts of the KEM as
of the Closing Date in excess of the amounts needed to satisfy Seller’s or KEM’s
obligations under the preceding sentence, will be distributed by KEM to Seller
through Escrow on the Closing Date. Prorations and adjustments contemplated
under this Section 21.2 shall be subject to post-Closing adjustments as
necessary to reflect later relevant material information not available at
Closing (including any material liabilities which were to be prorated hereunder
discovered after Closing but relating to the period prior to or including the
Closing and any material adjustments required pursuant to Section 21.4(f),
below) and to correct any material errors made at Closing with respect to such
apportionments, and the Party receiving more than it was entitled to hereunder
(the “Reimbursing Party”) shall reimburse the other Party (the “Reimbursed
Party”) in the amount of such over payment within thirty (30) days after
receiving written demand thereof from the Reimbursed Party. Such written demand
by the Reimbursed Party shall be accompanied by reasonable proof of the
Reimbursed Party’s right to payment. Both the Reimbursed Party and Reimbursing
Party agree to cooperate in good faith to resolve any disputes regarding such
adjustments. Notwithstanding the foregoing, such apportionments shall be deemed
final and not subject to further post-Closing adjustment if no adjustments have
been requested within six months (6) months after the Closing Date. Buyer and
Seller further agree that (a) all rent prepaid by the County of Riverside under
that certain Communications Tower Site Lease Agreement shall be transferred by
KEM to Seller prior to Closing and will be retained by Seller, (b) the
Settlement Agreement among KEM, Edison Construction, Inc. and Perrault
Corporation, dated January 15, 2015, and the rights thereunder are expressly
excluded from the KEM Assets and shall be assigned and transferred to Seller or
EMMR at Closing pursuant to the Assignment of Contracts, and (c) all rent paid
to KEM by FPN under the FPN Lease shall be retained by KEM at Closing without
proration and not distributed to Seller. For the purposes of Sections 21.2 and
2.4, any information, adjustment, error or liability resulting in an expenditure
or change of more than five thousand dollars ($5,000), individually or in the
aggregate, shall be deemed “material”. Furthermore, the Burn Pit Holdback and
Transformer Holdback shall be retained in Escrow at Closing and distributed
pursuant to the terms of Section 21.11 below. The provisions of this
Section 21.2 shall expressly survive the Closing for a period of eighteen
(18) months.

21.3 INDEMNITY BY KEM. For a period of eighteen (18) months following the
Closing, Buyer agrees to cause KEM (and its successors in interest) to
indemnify, hold harmless and provide for advances of expenses for each
individual who served as a manager or officer of KEM at any time period to the
Closing Date (the “KEM Indemnitees”) against any costs or expenses (including
reasonable attorneys’ fees), judgments, fines, losses, claims, damages,
liabilities or amounts paid in settlement incurred in connection with any claim,
whether civil, criminal, administrative or investigative, arising out of or
pertaining to, matters existing or occurring at or prior to the Closing Date,
whether asserted or claimed prior to, at or after the Closing Date, to the
extent provided by the governing documents of KEM as of the date of this
Agreement. Without limiting the foregoing, this indemnity obligation does not
apply to claims arising under this Agreement against a KEM Indemnitee, if any.
All of such rights to indemnification and to receive expense advances shall be
in accordance with the provisions of the governing documents of KEM, and after
the Closing Date Buyer shall not amend the KEM governing documents to be amended
in such a manner that causes such provisions to be less favorable than the
provisions of the governing documents of KEM as of the date of this Agreement.
Seller will maintain D&O liability insurance policies following the Closing for
at least eighteen (18) months to provide coverage with respect to the KEM
Indemnitees and any indemnification obligation of KEM hereunder will be reduced
by the proceeds of such policies if any. For the avoidance of doubt, if coverage
under such D&O liability insurance policies is available, the KEM Indemnitees
will look to such coverage in the first instance before seeking indemnity under
this Section 21.3.

 

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21.4 AFFIRMATIVE COVENANTS AND AGREEMENTS OF SELLER. From the date hereof until
the earlier of the Closing, the Closing Expiration Date or the termination of
this Agreement pursuant to Section 19.2 hereof, Seller will, and will cause KEM
to:

(a) conduct the business and operations of KEM only in the ordinary course
consistent with past practices so as to continue to preserve and continue to
maintain in all material respects KEM’s and its Affiliates’ present business
organization and relations and goodwill with their respective suppliers,
customers and employees;

(b) maintain and preserve KEM’s rights, assets, permits and properties in their
current state of condition and repair;

(c) maintain KEM’s books and records in a manner consistent with recent past
practices;

(d) pay KEM’s debts, liabilities, taxes and other obligations when due through
the Closing Date or provide sufficient funds to satisfy such debts, liabilities,
taxes and other obligations as prorated in accordance with Section 21.2 above
(it being understood that if Seller fails to provide sufficient funds thereby
creating a deficiency Seller shall promptly pay or cause to be paid to KEM such
amounts to correct such deficiency within ten (10) days’ notice thereof); and

(e) promptly notify Buyer of Seller’s Knowledge of any event or circumstance
which is reasonably likely to have a material adverse effect on KEM or the KEM
Assets, the KEM Units, or which may otherwise constitute a material adverse
change in the condition and prospects (financial or otherwise) of KEM or cause
the representations and warranties of Seller in this Agreement not to be true at
the Closing or which would have a material adverse effect on the ability of
Seller to consummate the Sale Transaction (all such events and circumstances
contained in this sub-clause (e) are referred to herein as a “Material Adverse
Effect”).

21.5 NEGATIVE COVENANTS AND AGREEMENTS OF SELLER. From the date hereof until the
earlier of the Closing Expiration Date or the termination of this Agreement,
without the prior written consent of Buyer, Seller will not, and will cause KEM
not to:

(a) fail to comply in any material respect with any laws, ordinance, regulations
or other governmental restrictions applicable to KEM;

(b) mortgage, pledge or otherwise encumber any of KEM Assets or otherwise cause
KEM to become liable for any obligations or debts of others;

(c) authorize for issuance, issue, grant, sell, deliver, dispose of, pledge or
otherwise encumber any ownership interests (or rights of any kind to acquire any
ownership interest or any instrument that is convertible into or exercisable or
exchangeable for any ownership interest) of KEM;

 

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(d) except in the ordinary course of its business engage in or enter into any
transaction or contract with respect to KEM or the KEM Assets;

(e) except as provided herein, employ any person by KEM or, except in the
ordinary course of its business, allow KEM to become liable for any new
consultant or service provider;

(f) amend any of KEM’s organizational or governing documents;

(g) modify, extend, cancel, amend or terminate any other material contract, or
waive, release, compromise or assign any material rights or claims related to
KEM or the KEM Assets except as contemplated by this Agreement;

(h) liquidate, dissolve or wind up or adopt a plan of complete or partial
liquidation, dissolution or recapitalization with respect to KEM;

(i) make, or declare any dividend or distribution to the stock holders of KEM,
other than as contemplated under this Agreement;

(j) sell, assign, transfer, convey, encumber with any lien, lease, license,
abandon or otherwise dispose of any assets or properties that are material to
the operation of the KEM’s business;

(k) in the case of KEM, acquire by merger or consolidation with, or merge or
consolidate with, or purchase substantially all of the assets of, or otherwise
acquire, any corporation, partnership, association, joint venture or other
business organization or division thereof;

(l) in the case of KEM, make any loans, advances or capital contributions to, or
investments in, any Person;

(m) in the case of KEM, authorize, or make any commitment with respect to, any
capital expenditure that is in excess of $10,000;

(n) (1) make, modify or rescind any material tax election, change its method of
tax accounting or any tax accounting period, amend any material tax return,
settle any claim for material taxes or enter into any tax sharing contract,
enter into any closing agreement with respect to material taxes, surrender any
right to or claim for a refund of material taxes, take any action that would
terminate or alter the application of any tax holiday or similar favorable Tax
arrangement, or consent to any extension or waiver of the statute of limitations
applicable to any material tax claim or assessment relating to the KEM, or
(2) except as (A) required by GAAP or (B) required by any governmental
authority, make any material change to any operating or accounting principles,
methods or practices (including cash management, billing, discounts, credits,
operating expenses, capital expenditures, accounts receivable collection and
accounts payable practices);

(o) except as provided herein, initiate, pay, discharge or settle any litigation
or other legal action, other than any such payment, discharge or settlement in
the ordinary course of business consistent with past practice that involves
solely monetary damages paid prior to the Closing Date; and

(p) make any commitment, enter into any agreement, or otherwise become
obligated, to do any action prohibited under this Section 21.5.

 

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21.6 NEGATIVE COVENANTS AND AGREEMENTS OF BUYER, PARENT AND EAGLE CREST. Buyer,
Parent and Eagle Crest each hereby covenant and agree that neither they nor any
of their respective shareholders (acting in their capacities as such
shareholders) shall, from the date hereof until its respective obligations under
the Security Documents (it being understood that Eagle Crest shall have no
obligations with respect to the $19 Million Note) have been fully satisfied
(a) amend any of the organizational or governing documents of Buyer or Eagle
Crest or enter into any other agreement or instrument that would create or
impose supermajority voting requirements (by the relevant governing body of such
entity or by its equity owners) for any corporate or company action other than
with respect to a vote on the filing of a voluntary bankruptcy (it being
understood and agreed that a voluntary bankruptcy is any bankruptcy filing other
than one made by a third party, unaffiliated creditor of a Buyer Party or an
Affiliate solely because of the non-payment of debt by a Buyer Party or an
Affiliate); (b) enter into any agreement or instrument that would dilute the
ownership interests of the Parent in Buyer, issue additional equity interests of
Buyer of any kind (whether or not convertible) except pursuant to any stock
options vested as of the Closing Date, or incur additional debt unless the
holders of such additional equity interests or additional debt become parties to
the applicable Security Documents; provided, however, that if the proceeds of
any such issuance or incurrence are used to pay, directly or indirectly, all
amounts due with respect to either the $4.25 Million Note or the $19 Million
Note in full, then such issuance and/or incurrence shall be permitted and the
holders of such additional equity interests or debt shall not be required to
become parties to the applicable Security Documents; (c) dilute the ownership
interest of Buyer in KEM in any respect; or (d) take any action that results in
the termination of the existence of Parent, Buyer, Eagle Crest or KEM, whether
by reorganization, winding up, merger, dissolution or otherwise. In addition,
Eagle Crest hereby covenants and agrees that, until the $4.25 Million Note has
been fully satisfied, it will not transfer the License to any other person or
entity other than a wholly-owned subsidiary of Eagle Crest; provided that if
Eagle Crest transfers the FERC License to a wholly-owned subsidiary, a pledge of
the equity interests of that wholly-owned subsidiary pursuant to terms
substantially similar to the Shareholder Pledge Agreement may be substituted for
the pledge of the Securities under the Shareholder Pledge Agreement.

21.7 EXCLUDED LIABILITIES. Notwithstanding anything to the contrary contained
herein, KEM shall not retain, and Buyer shall not acquire (i) any liabilities
associated with the Eagle Mountain Railroad or the Railroad Assets arising prior
to the Closing Date, (ii) any liabilities associated with or set forth within
that certain California Strategies Contract dated January 21, 2014 by and
between California Strategies, LLC and Seller, and (iii) any liabilities of
Seller or its Affiliates other than those directly associated with the ownership
and operation by KEM of the Eagle Mountain Property and KEM Assets (except to
the extent otherwise addressed in this Section 21.7) (collectively, the
“Excluded Liabilities”). The term Excluded Liabilities shall not include
liabilities arising because of the conduct of the Buyer Parties or any of their
respective Affiliates all of which will remain liabilities of Buyer Parties and
their respective Affiliates. All liabilities of KEM existing prior to the
Closing or arising after the Closing, other than the Excluded Liabilities, shall
be referred to herein as the “Assumed Liabilities”.

21.8 COVENANT TO CONVEY THE EAGLE MOUNTAIN PROPERTY. Seller hereby covenants and
agrees that Seller shall execute and deliver, and cause its Affiliates to
execute and deliver, such further instruments of sale, transfer, conveyance and
assignment and to take other such action as may be necessary to vest in KEM
title to all of the Eagle Mountain Property, if any, that might be held in the
name of Seller or its Affiliates. The provisions of this Section 21.8 shall
expressly survive the Closing.

 

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21.9 LEASES.

(a) Seller and Buyer have agreed to a form of office lease substantially in the
form attached here to as Exhibit “DD” (the “Office Lease”) to be entered into if
EMMR, or any permitted assignee of EMMR under the Mining Lease, wishes to occupy
certain office premises at the Eagle Mountain Property after the Closing on the
terms provided therein; provided, however, that entry into the Office Lease is
not a condition of Closing and is not required of EMMR or any other party.

(b) Seller and Buyer have agreed to the form of that certain Warehouse and
Maintenance Lease attached hereto as Exhibit “EE” (the “Warehouse and
Maintenance Lease”) pursuant to which KEM shall lease space within the
Maintenance Building to EMMR and and grant EMMR an option to lease additional
space within the Warehouse on the terms provided therein. As of the date hereof,
the premises to be leased to EMMR under the Warehouse and Maintenance Lease are
currently leased to FPN-USA, Inc. (“FPN”) pursuant to that certain Warehouse and
Maintenance Lease dated June 24, 2015 (the “FPN Lease”), attached hereto as
Exhibit “FF”. Should EMMR’s interest in the Mining Agreement be assigned to FPN
purusant to the terms thereof, (i) the FPN Lease shall terminate, (ii) KEM and
EMMR shall enter into the Warehouse and Maintenance Lease, and (iii) EMMR and
FPN shall enter into a sublease pursuant to a sublease agreement substantially
in the form of the Warehouse and Maintenance Lease or EMMR shall be permitted to
assign its interest in the Warehouse and Maintenance Lease pursuant to the
provisions thereof. Should the FPN Lease expire or be terminated prior to any
permitted assignment of the Mining Lease, EMMR and KEM shall enter into the
Warehouse and Maintenance Lease upon such termination or expiration of the FPN
Lease. The provisions of this Section 21.9 shall survive the Closing.

21.10 INDEMNIFICATION. The Parties shall indemnify each other as set forth
below:

(a) Subject to Section 21.3, the Seller Parties hereby agree to indemnify and
hold harmless the Buyer Parties and their Affiliates and, without duplication,
KEM, and the respective successors and assigns of the foregoing (collectively,
the “Buyer Indemnified Parties”) from, and to reimburse the Buyer Indemnified
Parties for any and all Losses (including any reasonable Legal Expenses) (the
“Buyer Losses”) arising from, relating to or caused by:

(i) any breach of any representation or warranty of the Seller Parties contained
in Article 14 of this Agreement (each, a “Seller Representation” and,
collectively, the “Seller Representations”) (it being understood and agreed that
for purposes of determining whether there has been any breach of any
representation or warranty and for purposes of calculating the amount of any
Buyer Losses arising therefrom under this Section 21.10, the Seller
Representations shall not be deemed to be qualified by any concept of
“material”, “materiality”, “Material Adverse Effect” or similar qualification,
except as explicitly specified therein);

(ii) any breach by any Seller Party of its covenants, undertakings or agreements
contained in this Agreement;

(iii) any of the Excluded Liabilities; or

(iv) the Seller Parties’ performance of the Environmental Covenants;

 

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provided, however, the Seller Parties will have no obligation to indemnify a
Buyer Indemnified Party for any Buyer Losses or group of items of Buyer Losses
arising out of the same event (x) where the total Buyer Losses are less than
Fifty Thousand Dollars ($50,000), (y) to the extent the Buyer Losses are caused
by or attributable to the negligence or willful misconduct of the Buyer
Indemnified Party, or (z) to the extent the Buyer Losses are caused by or
attributable to any breach of this Agreement by the Buyer Parties. Without
limiting the foregoing, until the total of Buyer Losses exceed One Hundred
Thousand Dollars ($100,000) no claim for indemnification may be made by a Buyer
Party hereunder and if the Buyer Losses exceed the One Hundred Thousand Dollars
($100,000) basket, the Buyer Parties may only seek to recover amounts over the
Fifty Thousand Dollars ($50,000) de minimis threshold.

(b) Subject to Section 21.3, the Buyer Parties hereby agrees to indemnify and
hold harmless the Seller Parties from, and to reimburse the Seller Parties for
any Losses (including any reasonable Legal Expenses) (the “Seller Losses”),
arising from, relating to or caused by:

(i) any breach (as of immediately prior to the Closing) of any representation or
warranty of a Buyer Party contained in Article 15 of this Agreement as though
made, as written herein, immediately prior to the Closing (each, a “Buyer
Representation” and, collectively, the “Buyer Representations”) (it being
understood and agreed that for purposes of determining whether there has been
any breach of any representation or warranty and for purposes of calculating the
amount of any Buyer Losses arising therefrom under this Section 21.10, the Buyer
Representations shall not be deemed to be qualified by any concept of
“material”, “materiality”, “Material Adverse Effect” or similar qualification,
except as explicitly specified therein); or

(ii) any breach by a Buyer Party of its covenants, undertakings or agreements
contained in this Agreement; or

(iii) any of the Assumed Liabilities.

provided, however, the Buyer Parties will have no obligation to indemnify a
Seller Party for any Seller Losses or group of items of Seller Losses arising
out of the same event (x) where the total of the Seller Losses are less than
Fifty Thousand Dollars ($50,000), (y) to the extent the Seller Losses are caused
by or attributable to the negligence or willful misconduct of the Seller Party,
or (z) to the extent the Seller Losses are caused by or attributable to any
breach of this Agreement by a Seller Party. Without limiting the forgoing, until
the total of all Seller Losses exceed One Hundred Thousand Dollars ($100,000) no
claim for indemnification may be made by a Seller Party hereunder and if all
Seller Losses exceed the One Hundred Thousand Dollars ($100,000) basket, the
Seller Parties may only seek to recover amounts over the Fifty Thousand Dollars
($50,000) de minimis threshold.

(c) As promptly as practicable, and in any event within thirty (30) days, after
a Party shall receive any notice of, or otherwise become aware of, the
commencement of any action, suit or proceeding, the assertion of any claim, the
occurrence of any event, the existence of any fact or circumstance, or the
incurrence of any Losses, for which indemnification is provided for, by
Section 21.01(a) or 21.10(b) (an “Indemnification Event”), the Party entitled to
such indemnification (an “Indemnified Party”) shall give written notice (an
“Indemnification Claim”) to

 

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the Party from which such indemnification is (or, under such assumption, could
be) sought (an “Indemnifying Party”) describing in reasonable detail the
Indemnification Event and the basis on which indemnification is (or, under such
assumption, could be) sought. If the Indemnifying Party is not so notified by
the Indemnified Party within thirty (30) days after the date of the receipt by
the Indemnified Party or any of its Affiliates of notice of, or of the
Indemnified Party or any of its Affiliates otherwise becoming aware of, any
particular Indemnification Event, to the extent that such Indemnifying Party is
materially prejudiced as a consequence of such failure, the Indemnifying Party
shall be relieved of all liability hereunder in respect of such Indemnification
Event, and in the event that such Indemnifying Party is materially prejudiced or
harmed as a consequence of such failure the Indemnifying Party shall not be
liable for any expenses directly related to the Losses from such Indemnification
Event incurred during the period in which the Indemnified Party was overdue in
giving, and had not given, such notice.

(d) If any Indemnification Event involves the claim of any third party (a
“Third-Party Claim”), the Indemnifying Party (the “Controlling Person”) shall
(whether or not the Indemnified Party is entitled to claim indemnification under
Section 15.1 or 15.2, as the case may be) be entitled to, and the Indemnified
Party shall provide the Controlling Person with the right to, participate in,
and assume sole control over, the defense and settlement of such Third-Party
Claim (with counsel reasonably satisfactory to the Indemnified Party); provided,
however, that (i) the Indemnified Party shall be entitled to participate in the
defense of such Third-Party Claim and to employ counsel at its own expense to
assist in the handling of such Third-Party Claim, and (ii) the Controlling
Person shall obtain the prior written approval of the Indemnified Party before
entering into any settlement of such Third-Party Claim or ceasing to defend
against such Third-Party Claim if (x) as a result of such settlement, consenting
to the entry of any judgment or ceasing to defend, injunctive relief or other
equitable relief would be imposed against the Indemnified Party, (y) in the case
of a settlement or consenting to the entry of any judgment, the Indemnified
Party would not thereby receive from the claimant an unconditional release from
all further liability and obligations in respect of such Third-Party Claim or
(z) as a result of such settlement, consenting to the entry of any judgment or
ceasing to defend, may reasonably be expected to have an adverse effect on the
affected business of the Indemnified Party. After written notice by the
Controlling Person to the Indemnified Party of its election to assume control of
the defense of any such Third-Party Claim, the Indemnifying Party shall not be
liable hereunder to indemnify any Person for any Legal Expenses subsequently
incurred in connection therewith. If the Controlling Person does not assume sole
control over the defense or settlement of such Third-Party Claim as provided in
this Section 21.10(d) within a reasonable period of time, or, after assuming
such control, fails to defend against such Third-Party Claim (it being agreed
that settlement of such Third-Party Claim does not constitute such a failure to
defend), the Indemnified Party shall have the right (as to itself) to defend
and, upon obtaining the written consent of the Controlling Person, settle the
claim in such manner as it may deem appropriate, and the Indemnifying Party
shall promptly reimburse the Indemnified Party therefor in accordance with (and
to the extent provided for in) Section 21.1(a) or 21.10(b), as appropriate.
Notwithstanding the foregoing provisions of this Section 21.10(d), the
Indemnified Party shall have the right at all times to take over and assume the
control (as to itself) of the defense or settlement of any Third-Party Claim;
provided, however, that in such event the Indemnifying Party shall cease to have
any obligation under Section 21.10(a) or 21.10(b), as the case may be, in
respect of such Third-Party Claim. The Indemnifying Party shall not be liable
under this Section 15 for any settlement or compromise effected without its
consent.

(e) The Indemnified Party and the Indemnifying Party shall each cooperate fully
(and shall each cause its Affiliates to cooperate fully) with the other in the
defense or prosecution of any Third-Party Claim pursuant to Section 21.10(d).
Without limiting the generality of the foregoing, each such Person shall furnish
the other such Person (at the expense of the

 

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Indemnifying Party) with such documentary or other evidence as is then in its or
any of its Affiliates’ possession and such other information and testimony, and
attend such conferences, discovery proceedings, hearings, trials or appeals, as
may be reasonably requested in connection therewith as may reasonably be
requested by the other Person for the purpose of defending against any such
Third-Party Claim. The Parties hereby agree to use commercially reasonable
efforts to mitigate any Loss that may be incurred in accordance with applicable
Laws.

(f) Upon payment of any amount pursuant to any Indemnification Claim, the
Indemnifying Party shall be subrogated, to the extent of such payment, to all of
the Indemnified Party’s rights of recovery (and, if Seller is the Indemnifying
Party, the Indemnified Party shall cause Seller to be subrogated to all of
Buyer’s and the KEM’s rights of recovery) against any third party with respect
to the matters to which such Indemnification Claim relates.

(g) If at any time subsequent to the receipt by an Indemnified Party of an
indemnity payment hereunder, such Indemnified Party (or any Affiliate thereof)
receives any recovery, settlement or other similar payment with respect to the
Losses for which it received such indemnity payment (including, without
limitation, under any insurance policy for which a claim is made under
Section 21.10(h) (a “Recovery”), such Indemnified Party shall promptly pay to
the Indemnifying Party an amount equal to the amount of such Recovery, less any
expense incurred by such Indemnified Party (or its Affiliates) in connection
with such Recovery, but in no event shall any such payment exceed the amount of
such indemnity payment.

(h) Nothing in this Section 21.10 shall be deemed to prevent a Party from making
a claim under any available insurance policy, in addition to pursuing
indemnification under this Agreement.

(i) Neither Buyer nor any other Buyer Indemnified Party shall have any
right-of-off set, including, but not limited to, under this Section 21.10,
against any amounts that may now or hereafter by owed to Seller (or its
successors and assigns) by Buyer, any Buyer Indemnified Party and any other
party guarantying of securing any such amounts including, but not limited to,
the $4.25 Million Note and the $19 Million Note.

(j) As used in this Agreement, (A) “Legal Expenses” means the reasonable fees,
costs and expenses of any kind incurred by any Person indemnified under this
Section 21.10 and its counsel in investigating, preparing for, defending
against, prosecuting or providing evidence, providing testimony, producing
documents, negotiating and entering into settlements or taking other action with
respect to any threatened or asserted claim; (B) “Loss” or “Losses” means all
losses, damages, liabilities, fines, penalties and claims, and fees, costs and
expenses of any kind related thereto (including attorneys’ fees).
Notwithstanding anything to the contrary contained in this Agreement, Losses
shall not include lost profits or consequential, special or punitive damages
(other than those required to be paid to a third party pursuant to a Third-Party
Claim); and (C) “Person” means any individual, corporation, partnership, limited
liability company, investment company, joint venture, association, joint stock
company, mutual fund, trust (including any beneficiary thereof), unincorporated
organization or government or any agency or political subdivision thereof.

 

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21.11 ENVIRONMENTAL COVENANTS.

(a) Seller and Buyer hereby covenant and agree to perform the environmental
covenants with respect to certain areas on the Eagle Mountain Property as set
forth in Schedule 21.11 (the “Environmental Covenants”).

22. MISCELLANEOUS PROVISIONS.

22.1 EXPENSES. Except as otherwise provided herein, no Party hereto shall be
responsible for the payment of any other Party’s expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated
hereby, including, without limitation, the Sale Transaction. Notwithstanding
anything to the contrary contained herein, Seller shall be responsible for the
payment of any fees and/or premiums associated with both the Seller Title Policy
and Buyer Title Policy.

22.2 TIME IS OF THE ESSENCE. The Seller Parties and the Buyer Parties hereby
acknowledge and agree that time is strictly of the essence with respect to each
and every term, condition, obligation and provision hereof and that failure to
timely perform any of the terms, conditions, obligations, or provisions hereof
by any Party shall constitute a material breach of, and a non-curable (but
waivable) default under, this Agreement by the Party failing to so perform.

22.3 COMPUTATION OF TIME. All references to “days” shall mean calendar days
unless otherwise specifically set forth herein. If the last day for any period
or any date pursuant to this Agreement is a weekend or a holiday recognized in
California, such last day or date shall automatically be deemed to be the next
succeeding business day. A day shall be construed as a business day if banks are
open for business on that day in Riverside County, California, but a business
day shall not include a Sunday or Saturday.

22.4 THIRD PARTY BENEFICIARIES. Except as expressly provided in this Agreement,
the terms and provisions of this Agreement are intended solely for the benefit
of each Party hereto and its respective successors and assigns, and it is not
the intention of the Parties to confer third party beneficiary rights upon any
other person or entity.

22.5 DEFINITION OF AFFILIATE. For purposes of this Agreement, “Affiliate” shall
mean with respect to any person or entity, another person or entity that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such person or entity. With
respect to Seller, Seller’s Affiliates shall be deemed to include, but are not
limited to, KEM prior to the Closing, EMMR and Lake Tamarisk. With respect to
Buyer, Buyer’s Affiliates shall be deemed to include, Parent, Parent’s owners,
Eagle Crest, the Eagle Crest Shareholders, KEM after the Closing, and their
respective successors and assigns.

22.6 WAIVER. No Party shall be deemed to have waived any right which such Party
has under this Agreement, unless this Agreement expressly provides a period of
time within which such right may be exercised and such time period has expired,
or unless such Party has expressly waived the same in writing or unless this
Agreement specifies that a waiver shall be deemed to have occurred. Any failure
on the part of any Party hereto to comply with any of its obligations,
agreements or conditions hereunder may be waived in writing by the Party to whom
such compliance is owed. The waiver by either Party of a right, claim, default,
by the other Party shall not be deemed a waiver of any other right, claim or
default or any subsequent default of the same kind.

 

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22.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVERS. Each Party hereby
irrevocably and unconditionally:

(a) agrees that this Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of California, without regard to the
conflict of law principles thereof;

(b) (i) agrees that any suit, action or proceeding instituted against it or it
by the other Party with respect to this Agreement or any Transaction Document
may be instituted, and that any suit, action or proceeding by it or it against
the other Party with respect to this Agreement or any such Transaction Document
shall be instituted in such state or federal court with competent jurisdiction
in the State of California as the party instituting such suit, action or
proceeding may in its or its sole discretion elect, (ii) consents and submits,
for itself or itself and its or its property, to the jurisdiction of such courts
for the purpose of any such suit, action or proceeding instituted against it or
it by the other Party and (iii) agrees that a final judgment in any such suit,
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law;

(c) (i) waives any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement or any Transaction Document brought in any court specified in
Section 22.7(b), (ii) waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum and
(iii) agrees not to plead or claim either of the foregoing; and

(d) If any action or proceeding relating to this Agreement or any of the
Transaction Documents or the enforcement of any provision of this Agreement or
any of the Transaction Documents is brought against any party hereto, the
prevailing party shall be entitled to recover from the non-prevailing party
reasonable attorneys’ fees, costs and disbursements in addition to any other
relief to which the prevailing party may be entitled and if any appeal is taken
from such decision, reasonable attorney fees and costs as determined on appeal.

22.8 BINDING EFFECT AND RESTRICTIONS ON ASSIGNMENT BY BUYER. This Agreement
shall be binding upon the Parties hereto and inure to the benefit of the
Parties, their respective successors and permitted assigns. Buyer may not assign
this Agreement, in whole or in part, to any other entity or person without the
prior written consent of Seller which consent shall not be unreasonably
withheld.

22.9 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto, the
Escrow Agreement, the other agreements referenced herein and the Confidentiality
Agreement constitute the entire agreement of the Parties covering everything
agreed upon or understood with respect to this Agreement and the consummation of
the transactions contemplated hereby and thereby, including, without limitation,
the Sale Transaction. The Exhibits and Schedules hereto are a part of this
Agreement and are incorporate herein by their reference. The terms defined in
the Recitals to this Agreement shall also be a part of this Agreement. The
Parties are executing and carrying out this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement. This Agreement may not be amended or modified except by a written
document executed by the Seller Parties and the Buyer Parties. An amendment by
the Buyer Parties or by the Seller Parties shall only be effective if (a) it is
in writing and signed by the Buyer Parties and the Seller Parties, (b) it
specifically refers to this Agreement and (c) it specifically states that the
Buyer Parties and/or the Seller Parties, as the case may be, is amending its
rights hereunder. Any such amendment or modification shall be effective only in
the specific instance and for the purpose for which it was given.

 

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22.10 HEADINGS. The headings in this Agreement are inserted only as a matter of
convenience, and in no way define, limit, extend or interpret the scope of this
Agreement or of any particular paragraph.

22.11 NOTICES. Any notices, demands or other communications required or
permitted to be given by any provision of this Agreement or which any Party may
desire to give the other shall be given in writing, delivered personally or sent
by certified mail, postage pre-paid, facsimile, or by Federal Express or similar
generally recognized delivery service regularly providing proof of delivery,
addressed to a Party, at the addresses set forth below, or to such other address
as said Party may hereafter or from time to time designate by written notice to
the other Party. Notice by United States Postal Service or delivery service as
provided herein shall be considered given on the earlier of the date on which
said notice is actually received by the Party to whom such notice is addressed,
or as of the date of delivery, whether accepted or refused, established by the
United States Postal service return receipt or such overnight carrier’s proof of
delivery, as the case may be. Any such notice given by facsimile shall be deemed
given upon receipt of the same by the Party to which it is addressed; provided,
however, any facsimile sent after 4:00 p.m. (California time) shall be deemed
received on the next succeeding business day.

 

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TO A SELLER PARTY: WITH A COPY TO: CIL&D, LLC CIL&D, LLC 337 N. Vineyard Ave.,
4th Floor 337 N. Vineyard, 4th Floor Ontario, CA 91764 Ontario, CA 91764 Attn.:
Richard E. Stoddard Attn.: Terry Cook Telephone: 909.483.8501 Telephone:
909.483.8511 Facsimile: 909.944.6605 Facsimile: 909.944.6605 TO BUYER: WITH A
COPY TO (which shall not constitute notice): EAGLE MOUNTAIN ACQUISITION LLC
LATHAM & WATKINS LLP c/o Eagle Crest Energy Company 355 S. Grand Ave 3000 Ocean
Park Blvd, Suite 1020 Los Angeles, CA 90071-1560 Santa Monica, CA 90405 Attn:
Kevin Ehrhart Attn.: J. Douglas Divine Telephone: 213.485.1234 Telephone:
310.450.9090 Facsimile: 213.891.8763 Facsimile: 310.450.9494 TO PARENT: WITH A
COPY TO (which shall not constitute notice): EAGLE MOUNTAIN LLC LATHAM & WATKINS
LLP c/o Eagle Crest Energy Company 355 S. Grand Ave 3000 Ocean Park Blvd, Suite
1020 Los Angeles, CA 90071-1560 Santa Monica, CA 90405 Attn: Kevin Ehrhart
Attn.: J. Douglas Divine Telephone: 213.485.1234 Telephone: 310.450.9090
Facsimile: 213.891.8763 Facsimile: 310.450.9494 TO EAGLE CREST: WITH A COPY TO
(which shall not constitute notice): EAGLE CREST ENERGY COMPANY LATHAM & WATKINS
LLP c/o Eagle Crest Energy Company 355 S. Grand Ave 3000 Ocean Park Blvd, Suite
1020 Los Angeles, CA 90071-1560 Santa Monica, CA 90405 Attn: Kevin Ehrhart
Attn.: J. Douglas Divine Telephone: 213.485.1234 Telephone: 310.450.9090
Facsimile: 213.891.8763 Facsimile: 310.450.9494

22.12 COUNTERPARTS. This Agreement may be executed in two counterparts, each of
which when executed shall be deemed an original, but both of which when taken
together shall constitute one and the same instrument. Facsimile signatures on
this Agreement are acceptable, provided that original signatures are presented
to the parties promptly thereafter.

 

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22.13 SEVERABILITY. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to the end that the
transactions completed hereby are fulfilled to the extent possible.

22.14 RESERVED.

22.15 SCHEDULES. All sections of the Schedules referred to herein shall be
construed with and as an integral part of this Agreement to the same extent as
if they were set forth verbatim herein. The Schedules shall be arranged in
sections corresponding to the numbered and lettered sections and subsections
contained in Article 14, and the disclosures in any section or subsection of the
Schedules shall qualify other sections and subsections in Article 14 only to the
extent it is readily apparent from a reading of the disclosure that such
disclosure is applicable to such other sections and subsections. Neither the
specification (directly or indirectly by reference to a defined term hereof) of
any dollar amount in any representation or warranty contained in, or other
provision of, this Agreement shall be deemed to vary the definition of “Material
Adverse Effect” or to imply that such amount, or higher or lower amounts, or the
item so included or other items, are or are not material.

[SIGNATURES ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as
of the day and year first above written.

 

“BUYER” EAGLE MOUNTAIN ACQUISITION LLC, a Delaware limited liability company By:

/s/ Doug Divine

Name:

Doug Divine

Title: Authorized Person

 

[Signatures continue on the following page]

 

(Signature page to KEM Units Purchase Agreement – Eagle Mountain)

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“PARENT”

EAGLE MOUNTAIN LLC,

a Delaware limited liability company

By:

/s/ Doug Divine

Name:

Doug Divine

Title: Authorized Person

 

[Signatures continue on the following page]

 

(Signature page to KEM Units Purchase Agreement – Eagle Mountain)

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“EAGLE CREST”

EAGLE CREST ENERGY COMPANY,

a California corporation

By:

/s/ Doug Divine

Name:

Doug Divine

Title: Authorized Person

 

[Signatures continue on the following page]

 

(Signature page to KEM Units Purchase Agreement – Eagle Mountain)

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“SELLER”

CIL&D, LLC,

a Delaware limited liability company

By:

/s/ Richard E. Stoddard

Name:

Richard E. Stoddard

Title: Managing Liquidation Director

 

[Signatures continue on the following page]

 

(Signature page to KEM Units Purchase Agreement – Eagle Mountain)

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“KEM”

KAISER EAGLE MOUNTAIN, LLC,

a Delaware limited liability company

By:

/s/ Richard E. Stoddard

Name:

Richard E. Stoddard

Title: President

 

[Signatures continue on the following page]

 

(Signature page to KEM Units Purchase Agreement – Eagle Mountain)

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“EMMR”

EAGLE MOUNTAIN MINING & RAILROAD COMPANY, LLC,

a Delaware limited liability company

By:

/s/ Richard E. Stoddard

Name:

Richard E. Stoddard

Title: President

 

(Signature page to KEM Units Purchase Agreement – Eagle Mountain)

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THE EXHIBITS AND/OR SCHEDULES TO THIS AGREEMENT

OR INSTRUMENT ARE NOT BEING FILED BUT WILL BE

FURNISHED TO THE SECURITIES AND EXCHANGE

COMMISSION UPON THE REQUEST OF THE SECURITIES AND

EXCHANGE COMMISSION.