Exhibit 10.1





Lease
Agreement Number SOU121407


Lease
Agreement


 


This Lease Agreement
SOU121407, dated December 14, 2007, by and between FIDELITY NATIONAL CAPITAL, INC. (the “Lessor”)
with an office located at 7701 France Avenue South, Suite 105, Edina, Minnesota
55435-5288 and Southwest Water Company (the “Lessee”) with an office located at
624 South Grand Avenue, Suite 2900, Los Angeles, California 90017.


 


Lessor
hereby leases or grants to the Lessee the right to use, and Lessee hereby rents
and accepts the right to use, the equipment listed by serial number and related
services, and software and related services, on the Lease Schedule(s) attached
hereto or incorporated herein by reference from time to time (collectively, the
equipment, software and services are the “Equipment”), subject to the terms and
conditions hereof, as supplemented with respect to each item of Equipment by
the terms and conditions set forth in the appropriate Lease Schedule. The term “Lease
Agreement” shall include this Lease Agreement and the various Lease Schedule(s) identifying
each item of Equipment or the appropriate Lease Schedule(s) identifying one or
more particular items of Equipment.


 


1.             Term


This Lease Agreement is
effective from the date it is executed by both parties. The term of this Lease
Agreement as to all Equipment designated on any particular Lease Schedule shall
commence on the Installation Date for all Equipment on such Lease Schedule and
shall continue for an initial period ending that number of months from the Commencement
Date as set forth in such Lease Schedule (the “Initial Term”) and shall
automatically continue from twelve month period to twelve month period
thereafter, at the Monthly Charges last in effect, until terminated. The term
of this Lease Agreement as to all Equipment designated on any particular Lease
Schedule may be terminated without cause at the end of the Initial Term or the
end of any twelve month period thereafter by either party mailing written
notice of its termination to the other party not less than one-hundred twenty
(120) days prior to such termination date. All such terminations are effective
only with respect to not less than all Equipment under the applicable Lease
Schedule. Notice of termination by Lessee may not be revoked without Lessor’s
written consent.


 


2.             Credit Review


For each Lease Schedule,
Lessee agrees that Lessor may conduct a credit investigation and review. In
such event, Lessee shall provide, in a timely manner, such financial
information as Lessor may request. Lessee represents and warrants that all such
financial information accurately and completely presents Lessee’s financial
condition as of the date of execution of each Lease Schedule.


 


3.             Licensed Software


Any software listed in a
Lease Schedule will be subject to Lessee’s separate software license agreement
with the owner or distributor (“Licensor”) except as such agreement may
conflict with the terms and conditions of the Lease Schedule. Lessee shall
comply with all non-conflicting terms and look solely to the Licensor for
satisfaction of all claims and warranties relating to the software. Lessee’s
obligations under a Lease Schedule will not be affected by any termination of a
software license agreement or any defect in or loss of the software. Lessee is
responsible for arranging delivery and installation of the software.


 


4.             Commencement Date,
Acceptance and Selection


The Installation Date for
each item of Equipment shall be the day said item of Equipment is installed at
the Location of Installation, is ready for use, and accepted in writing by the
Lessee. The Commencement Date for any Lease Schedule is the first day of the
first month following installation of all the Equipment of the Lease Schedule,
unless the latest Installation Date for any Equipment on the Lease Schedule
falls on the first day of the month, in which case that is the Commencement
Date. Lessee shall complete, execute and deliver a Certificate of Acceptance to
Lessor upon installation of the Equipment.


 


5.             Lease Charge


The lease charges for the
Equipment leased pursuant to this Lease Agreement shall be the aggregate “Monthly
Lease Charge(s)” as set forth on each and every Lease Schedule executed
pursuant hereto (the aggregate “Monthly Lease Charge(s)” are the “Lease Charges”).
Lessee agrees to pay to Lessor the Lease Charges in accordance with the Lease
Schedule(s), and the payments shall be made at Lessor’s address indicated
thereon. The Lease Charges shall be paid by Lessee monthly in advance with the
first full month’s payment due on the Commencement Date. If the Installation
Date does not fall on the first day of a month, then the Lease Charge for the
period from the Installation Date to the Commencement Date (the “Interim Period”)
shall be an amount equal to the “Monthly Lease Charge” divided by thirty (30)
and multiplied by the number of days from and including the Installation Date
to the Commencement Date, and such amount shall be due and payable upon receipt
of an invoice from Lessor (the “Interim Lease Charge”). Charges for taxes made
in accordance with Section 6 below, and all other charges made under any
other provision of this Lease Agreement and payable by Lessee, shall be paid to
Lessor at Lessor’s address specified on the Lease Schedule(s) on the date
specified in invoices delivered to Lessee. If payment as specified above is not
received by Lessor on the due date, Lessee agrees to and shall, to the fullest
extent permitted by law, pay on demand, as a late charge, an amount equal to
five percent (5%), or the maximum percentage allowed by law if less, of the
amount past due (“Late Charges”). Late Charges shall be charged and added to
any past due amount on the date such payment is due and every thirty (30) days
thereafter until all past due amounts are paid in full to Lessor.


 


6.             Taxes


In addition to the Lease
Charges and Late Charges (if any) set forth in Section 5 above, Lessee
shall reimburse Lessor for all license or registration fees, assessments,
charges, sales and use taxes, rental taxes, gross receipts taxes, personal
property taxes and other taxes now or hereafter imposed by any government,
agency, province or otherwise upon the Equipment, the Lease Charges or upon the
ownership, leasing, renting, purchase, possession or use of the Equipment,
whether the same be assessed to Lessor or Lessee (the “Taxes”). Lessor shall
file all property tax returns and pay all Taxes when due. Lessee, upon written
notice to Lessor, may, in Lessee’s own name, contest or protest any Taxes, and
Lessor shall honor any such notice except when in Lessor’s sole opinion such
contest is futile or will cause a levy or lien to arise on the Equipment or
cloud Lessor’s title thereto. In addition, Lessee shall (i) be responsible
to Lessor for the payment and discharge of any penalties or interest as a
result of Lessee’s actions or inactions; and (ii) indemnify Lessor and
hold it harmless from any damages, claims or charges which may result from
contesting or protesting any Taxes. Lessee is hereby appointed attorney-in-fact
of Lessor solely to declare, file and pay all of the Taxes when due and owing
for any period assessed while Lessee is in possession of the Equipment. Nothing
herein shall be construed to require Lessee to be responsible for any federal
or state taxes or payments in lieu thereof, imposed upon or measured by the net
income of Lessor, or state franchise taxes of Lessor, or except as provided
hereinabove, any penalties or interest resulting from Lessor’s failure to
timely remit such tax payments.


 


7. Delivery and Freight Costs


 


All transportation charges upon
the Equipment for delivery to Lessee’s designated Location of Installation
shall be paid by Lessee. In addition, all rigging, drayage charges, structural
alterations, rents of heavy equipment and/or other expense necessary to place
the Equipment at the Location of Installation shall be promptly paid by Lessee.
Lessee shall accept delivery of the Equipment and allow the Equipment to be
installed within five (5) days after delivery.


 


8. Installation


 


Lessee agrees to pay for the
actual installation of the Equipment at the Location of Installation or any
other location authorized under this Agreement. Lessee shall make available and
agrees to pay for all costs associated with providing a suitable place of
installation and necessary electrical power, outlets and air conditions
required for operating the Equipment as defined in the Equipment manufacturer’s
installation manual or instructions, or as otherwise required by the Equipment
manufacturer. All supplies consumed or required by the Equipment shall be furnished
and paid for by Lessee.


 


9. Return to Lessor


 


On the day following the last
day Lessee is entitled or obligated to possess and use the Equipment as set
forth on the applicable Lease Schedule (the “Return Date”), Lessee shall cause
and pay for the Equipment on that Lease Schedule to be deinstalled, packed
(using the manufacturer’s standard packing materials), insured for
transportation at the Casualty Loss Value, and shipped to a location designated
in writing by Lessor (the “Return Location”) in good repair, condition and
working order, ordinary wear and tear alone excepted. In addition, Lessee
shall, at its expense, (i) cause each returned piece of Equipment to be
repaired as necessary to qualify for maintenance by the manufacturer and to
contain all current manufacturer-prescribed engineering changes; and (ii) erase
all software resident in Lessee’s computer memory.


 


If the Equipment on the
applicable Lease Schedule is not at the Return Location within ten (10) days
of the Return Date, or Lessee fails to deinstall the Equipment on the Return
Date, then any written notice of termination delivered by Lessee shall become
void and Lessee shall be treated as a holdover tenant for all of the Equipment
in the Lease Schedule for an additional term of twelve (12) months and shall
continue to pay the Monthly Lease Charges last in effect and continue to
perform all of its other obligations in accordance with this Lease Agreement.
In no event may Lessee avoid the effect of the preceding sentence by returning
less than all of the Equipment listed on the applicable Lease Schedule or by
returning substituted Equipment unless Lessor, in its sole discretion, shall
expressly agree in writing.


 


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The above provisions shall
not derogate from Lessor’s right, to be exercised in its sole discretion, to
obtain return of all Equipment on the Return Date, or to declare an Event of
Default for any failure of Lessee to so return the Equipment. Irrespective of
any other provision hereof, Lessee will bear the risk of damage from fire, the
elements or otherwise, and the risk of loss or theft, until delivery of the
Equipment to the Return Location. At such time as the Equipment is delivered to
the Lessor at the Return Location, the Equipment will be at the risk of Lessor.


 


10.           Maintenance


Lessee, at its sole expense,
shall maintain the Equipment in good repair, condition and working order.
Lessee shall enter into, pay for and maintain in force during the entire term
of any Lease Schedule, a maintenance agreement with the manufacturer of the
Equipment providing for continuous uninterrupted maintenance of the Equipment
(the “Maintenance Agreement”). Lessee will cause the manufacturer to keep the
Equipment in good repair, condition and working order in accordance with the
provisions of the Maintenance Agreement and make all necessary adjustments and
repairs to the Equipment. The manufacturer is hereby authorized to accept the
directions of Lessee with respect thereto. Lessee agrees to allow the
manufacturer full and free access to the Equipment. All maintenance and service
charges, whether under the Maintenance Agreement or otherwise, and all
expenses, if any, of the manufacturer’s customer engineers incurred in
connection with maintenance and repair services, shall be promptly paid by
Lessee. Upon the termination of any Lease Schedule or this Lease Agreement,
Lessee warrants that the Equipment shall be eligible for the manufacturer’s
standard maintenance agreement. Lessee agrees to reimburse Lessor for any costs
it incurs in making the Equipment eligible for such standard maintenance.


 


11.           Location, Ownership and
Use


The Equipment shall, at all
times, be the sole and exclusive property of Lessor, subject to the parties’
rights under any applicable software license agreement. Lessee shall have no
right, title or interest in the Equipment outside of the leasehold interest
created by the Lease Schedule. Lessee shall have no right or property interest
therein, except for the right to use the Equipment in the normal operation of
its business at the Location of Installation or as otherwise authorized herein;
provided, however, that software use shall be in accordance with the terms and
conditions of the applicable software license agreement. Notwithstanding
anything to the contrary above, Lessee (i) shall use the Equipment in a
careful and proper manner, and comply with all of the manufacturer’s
instructions, governmental rules, regulations, requirements and laws, and all
insurance requirements (if any), with regard to the use, operation and
maintenance of the Equipment; and (ii) shall not use or permit the use of
the Equipment for any purpose which, according to the specifications of the
manufacturer, the Equipment is not designed or reasonably suited.


 


The Equipment is and shall
remain personal property of the Lessor even if installed in or attached to real
property. Lessor shall be permitted to display notice of its ownership on the
Equipment by means of a suitable stencil, label or plaque affixed thereto.


 


Lessee shall keep the
Equipment at all times free and clear from all liens, claims, levies,
encumbrances, security interests and processes, of any nature whatsoever.
Lessee shall give Lessor immediate notice of any such attachment or other judicial
process affecting any of the Equipment. Without Lessor’s written permission,
Lessee shall not attempt to or actually: (i) pledge, lend, create a
security interest in, sublet, exchange, trade, assign, swap, use for an
allowance or credit or otherwise; (ii) allow another to use; (iii) part
with possession; (iv) dispose of; or (v) remove from the Location of
Installation, any item of Equipment. If any item of Equipment is exchanged,
assigned, traded, swapped, used for an allowance or credit or otherwise to
acquire new or different equipment (the “New Equipment”) without Lessor’s prior
written consent, then all of the New Equipment shall become Equipment owned by
Lessor subject to this Lease Agreement and the applicable Lease Schedule.


 


Any feature(s) installed
on the Equipment at the time of delivery which are not specified on the Lease
Schedule(s) are and shall remain the sole property of the Lessor. Lessee
shall cause the Equipment to be operated in accordance with the applicable
vendor’s or manufacturer’s manual of instructions by competent and qualified
personnel.


 


12.           Financing Statement


Lessee hereby authorizes
Lessor to execute and file financing statements and/or continuation statements
under the Uniform Commercial Code on Lessee’s behalf and to file such documents
in all places where necessary to perfect Lessor’s interest in the Equipment.
Lessee agrees to execute any such instruments as Lessor may request from time
to time.


 


13.           Alterations and
Attachments


Upon prior written notice to
Lessor, Lessee may, at its own expense, make minor alterations in or add
attachments to the Equipment, provided such alterations and attachments shall
not interfere with the normal operation of the Equipment and do not otherwise
involve the pledge, assignment, exchange, trade or substitution of the
Equipment or any component or part thereof. All such alterations and
attachments to the Equipment shall become part of the Equipment leased to
Lessee and owned by Lessor. If, in Lessor’s sole determination, the alteration
or attachment reduces the value of the Equipment or interferes with the normal
and satisfactory operation or maintenance of any of the Equipment, or creates a
safety hazard, Lessee shall, upon notice from Lessor to that effect, promptly
remove the alteration or attachment at Lessee’s expense and restore the
Equipment to the condition the Equipment was in just prior to the alteration or
attachment.


 


14.           Loss and Damage


Lessee shall assume and bear
the risk of loss, theft and damage (including any government requisition,
condemnation or confiscation) to the Equipment and all component parts hereof
from any and every cause whatsoever, whether or not covered by insurance. No
loss or damage to the Equipment or any component part thereof shall impair any
obligation of Lessee under this Lease Agreement, which shall continue in full
force and effect except as hereinafter expressly provided. Lessee shall repair
or cause to be repaired all damage to the Equipment. In the event that all or
part of the Equipment shall, as a result of any cause whatsoever, become lost,
stolen, destroyed or otherwise rendered irreparably unusable or damaged
(collectively, the “Loss”) then Lessee shall, within five (5) days after
the Loss, fully inform Lessor in regard thereto and shall pay to Lessor the
following amounts: (i) the Monthly Lease Charges (and other amounts) due
and owing under this Lease Agreement at the time of the Loss, plus (ii) one-hundred
twelve (112%) percent of the original cost of the Equipment subject to the Loss
amortized by the Monthly Lease Charges received by Lessor during the Initial
Term using an amortization rate of 350 basis points over the interest rate of
the three (3) year United States Treasury Note as reported by The Wall Street Journal on the
Commencement Date (collectively, the sum of (i) plus (ii) shall be
the “Casualty Loss Value”). Upon receipt by Lessor of the Casualty Loss Value: (i) the
applicable Equipment shall be removed from the Lease Schedule; and (ii) Lessee’s
obligation to pay Lease Charges associated with the applicable Equipment shall
cease. Lessor may request, and Lessee shall complete, an affidavit(s), which
swears out the facts supporting the Loss of any item of Equipment.


 


15.           Insurance


Until the Equipment is
returned to Lessor or as otherwise herein provided, whether or not this Lease
Agreement has terminated as to the Equipment, Lessee at its expense, shall
maintain: (i) property and casualty, fire and extended coverage insurance
against loss, theft, damage or destruction of the Equipment in an amount not
less than the Casualty Loss Value, which insurance shall name Lessor or its
assigns as sole loss payee; and (ii) comprehensive public liability and
third-party property insurance against claims for bodily injury, death and/or
property damage arising out of the use, ownership, possession, operation or
condition of the Equipment, together with such other insurance as may be
required by law, which names Lessor and its assigns as additional loss payees.
The insurance shall cover the interest of both the Lessor and Lessee in the
Equipment, or as the case may be, shall protect both the Lessor and Lessee in
respect to all risks arising out of the condition, delivery, installation
maintenance, use or operation of the Equipment.


 


All such insurance shall (i) provide
for thirty (30) days prior written notice to Lessor of cancellation,
restriction, or reduction of coverage; and (ii) be maintained with an
insurance company which is at least “A” rated by A.M. Best. No such
insurance shall be subject to any co-insurance clause. Lessee hereby
irrevocably appoints Lessor as Lessee’s attorney-in-fact to make claim for,
receive payment of and execute and endorse all documents, checks or drafts for
loss or damage or return premium under any insurance policy issued on the
Equipment. Prior to installation of the Equipment, all policies or certificates
of insurance shall be delivered to Lessor by Lessee. The proceeds of any loss
or damage insurance shall be payable to Lessor, but Lessor shall remit all such
insurance proceeds to Lessee for the purpose of restoring the Equipment to
working order or its condition prior to the loss at such time as Lessee either (i) provides
Lessor satisfactory proof that the damage has been repaired and the Equipment
has been restored to good working order and condition; or (ii) pays to
lessor the Casualty Loss Value. It is understood and agreed that any payments
by the Lessee or its insurance carrier for loss or damage of any kind
whatsoever to the Equipment are not made as accelerated rental payments or
adjustments of rental, but are made solely as indemnity to Lessor for loss or
damage of its Equipment. Lessee shall not make adjustments with insurers except
with Lessor’s prior written consent.


 


16.           Enforcement of
Warranties


Upon receipt of a written
request from Lessee, Lessor shall, so long as this Lease Agreement is in force,
take all reasonable action requested by Lessee to enforce the Equipment
manufacturer’s warranties, expressed or implied, issued on or applicable to the
Equipment, which are enforceable by Lessor in its own name. Lessor shall obtain
for Lessee all service furnished by manufacturer in connection therewith;
provided, however, that Lessor shall not be required to commence any suit or
action or resort to litigation to enforce any such warranty unless Lessee shall
first pay to Lessor in advance all expenses in connection therewith, including
attorneys’ fees.


 


If any such warranty shall be
enforceable by Lessee in its own name, Lessee shall, upon receipt of written
request from Lessor, so long as this Lease Agreement is in force, take all
reasonable action requested by Lessor to enforce any such warranty which is
enforceable by Lessee in its own name; provided, however, that Lessee shall not
be obligated to commence any suit or action or resort to litigation to enforce
any such warranty unless Lessor shall pay for all expenses in connection
therewith.


 


17.           Warranties, Disclaimers
and Indemnity


Lessor warrants that at the
time the Equipment is delivered to Lessee, Lessor will have full right, power
and authority to lease the Equipment to Lessee. EXCEPT FOR THE WARRANTY IN THE
SENTENCE IMMEDIATELY PRECEDING THIS ONE, LESSOR DOES NOT MAKE ANY WARRANTIES OF
ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT


 


 


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LIMITATION: THOSE OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE, OF CONDITION,
PERFORMANCE, SUITABILITY OR DESIGN, OR CONFORMITY TO ANY LAW, RULE, REGULATION,
AGREEMENT OR SPECIFICATION, OR OF INFRINGEMENT OR ANY PATENT, TRADE SECRET,
TRADEMARK, COPYRIGHT OR OTHER INTANGIBLE PROPERTY RIGHT. LESSEE ACKNOWLEDGES
THAT IT IS NOT RELYING ON LESSOR’S SKILL OR JUDGMENT TO SELECT OR FURNISH GOODS
SUITABLE FOR ANY PARTICULAR PURPOSE AND THAT THERE ARE NO WARRANTIES CONTAINED
IN THIS LEASE AGREEMENT. LESSOR SHALL HAVE NO LIABILITY TO LESSEE (OR ANY OTHER
PERSON OR ENTITY), NOR SHALL LESSEE ABATE PAYMENTS, FOR ANY LOSS, CLAIM OR
DAMAGE OF ANY NATURE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY, INDIRECTLY,
INCIDENTALLY OR CONSEQUENTIALLY BY THE EQUIPMENT, ANY INADEQUACY THEREOF,
DEFICIENCY OR DEFECT THEREIN WHETHER KNOWN OR KNOWABLE BY LESSOR), BY ANY
INCIDENT WHATSOEVER ARISING IN CONNECTION THEREWITH, WHETHER IN STICT LIABILITY
OR OTHERWISE, OR IN ANY WAY RELATED TO OR ARISING OUT OF THIS LEASE AGREEMENT
OR ANY LEASE SCHEDULE.


 


LESSEE EXPRESSLY WAIVES ANY
AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE UNDER ARTICLE 2A OF THE UNIFORM COMMERCIAL
CODE AND ANY RIGHTS NOW OR HEREAFTER CONFERRED UPON A LESSEE BY STATUTE OR OTHERWISE
THAT MAY LIMIT OR MODIFY LESSOR’S RIGHTS AS DESCRIBED IN THIS SECTION OR
OTHER SECTIONS OF THIS LEASE AGREEMENT.


 


LESSEE ACKNOWLEDGES AND
AGREES: (A) LESSOR HAS NOT MADE ANY REPRESENTATION, WARRANTY OR PROMISE
MADE BY ANY SUPPLIER; NEITHER SUPPLIER NOR LESSOR IS AN AGENT FOR THE OTHER AND
LESSOR WILL NOT BE BOUND BY OR LIABLE FOR ANY REPRESENTATION, WARRANTY OR
PROMISE MADE BY SUPPLIER; (B) LESSOR WILL NOT BE LIABLE FOR ANY FAILURE OF
ANY EQUIPMENT OR ANY DELAY IN ITS DELIVERY OR INSTALLATION; AND (C) LESSEE
HAS SELECTED ALL EQUIPMENT WITHOUT LESSOR’S ASSISTANCE. NO DEFECT,
UNMERCHANTABILITY OR UNFITNESS OF THE EQUIPMENT SHALL RELIEVE LESSEE OF THE
OBLIGATION TO PAY RENT OR PERFORM OTHER OBLIGATIONS UNDER THIS LEASE.


 


Lessee agrees that Lessor
shall not be liable to Lessee for, and Lessee shall indemnify, defend and hold
Lessor harmless with respect to, any claim from a third party for any
liability, claim, loss, damage, cost or expense of any kind or nature, whether
based upon a theory of strict liability or otherwise, caused, directly or
indirectly, by: (i) the inadequacy of any item of Equipment, including
software, for any purpose; (ii) any deficiency or any latent or other
defects in any Equipment, including software, whether or not detectable by Lessee;
(iii) the selection, manufacture, purchase, acceptance, rejection,
ownership, delivery, installation, lease, possession, maintenance, operation,
use or performance of any item of Equipment, including software; (iv) any
interruption or loss of service, use or performance of any item of Equipment,
including software; (v) patent, trademark, copyright or other intellectual
property infringement; or (vi) any loss of business or other special,
incidental or consequential damages whether or not resulting from any of the
foregoing. Lessee’s duty to defend and indemnify Lessor shall survive the
expiration, termination, cancellation or assignment of this Lease Agreement or
a Lease Schedule and shall be binding upon Lessee’s successors and permitted
assigns.


 


18.           Event of Default


The occurrence of any of the
following events shall constitute an Event of Default under this Lease
Agreement and/or any Lease Schedule:


(1) The nonpayment by
Lessee of any Lease Charges when due, or the nonpayment by Lessee of any other
sum required hereunder to be paid by Lessee which nonpayment continues for a
period of ten (10) days from the date when due;


(2) The failure of
Lessee to perform any other term, covenant or condition of this Lease
Agreement, any Lease Schedule or any other document, agreement or instrument
executed pursuant hereto or in connection herewith which is not cured within
ten (10) days after written notice thereof from Lessor;


(3) Lessee attempts to
or does remove, transfer, sell, swap, assign, sublease, trade, exchange,
encumber, receive an allowance or credit for, or part with possession of, any
item of Equipment;


(4) Lessee ceases doing
business as a going concern, is insolvent, makes an assignment for the benefit
of creditors, fails to pay its debts as they become due, offers a settlement to
creditors or calls a meeting of creditors for any such purposes, files a
voluntary petition in bankruptcy, is subject to an involuntary petition in
bankruptcy, is adjudicated bankrupt or insolvent files or has filed against it
a petition seeking any reorganization, arrangement or composition, under any
present or future statute, law or regulation.


(5) Any of Lessee’s
representations or warranties made herein or on any statement or certificate at
any time given in writing pursuant hereto or in connection herewith shall be
false or misleading in any material respect;


(6) Lessee defaults
under or otherwise has accelerated any material obligation, credit agreement,
loan agreement, conditional sales contract, lease, indenture or debentures; or
Lessee defaults under any other agreement now existing or hereafter made with
Lessor;


(7) The breach or
repudiation by any person or entity of any guaranty, subordination agreement or
other agreement running in favor of Lessor obtained in connection with this
Lease Agreement; or


(8) A change of control
of Lessee, whether by merger, acquisition, asset sale or otherwise, provided
that, in the event of a change of control, Lessor’s written consent shall
constitute a waiver of this restriction and if, but only if, Lessee provides
Lessor with such information as Lessor requests regarding the change of
control, Lessor shall not unreasonably withhold consent. In the event of any
sale of assets by Lessee as part of a change of control, all of Lessee’s assets
sold shall remain available to satisfy a judgment for Lessor arising from a
default under this Lease Agreement of provisions in the asset sale or other
agreement effecting the change of control absolving the purchaser or surviving
entity of such liability.


 


19.           Remedies


Should any Event of Default
occur, Lessor may, in order to protect its interest and reasonably expected
profits, with or without notice or demand upon Lessee, pursue and enforce, alternatively,
successively and/or concurrently, any one or more of the following remedies:


 


(1) Recover
from Lessee all accrued and unpaid Lease Charges and other amounts due and
owing on the date of the default;


(2) Recover
from Lessee from time to time all Lease Charges and other amounts as and when
becoming due hereunder.


(3) Accelerate, cause to
become immediately due and recover the present value of all Lease Charges and
other amounts due and/or likely to become due hereunder from the date of the
default to the end of the lease term using a discount rate of five percent
(5%).


(4) Cause
to become immediately due and payable and recover from Lessee the Casualty Loss
Value of the Equipment;


(5) Terminate any or all
of the Lessee’s rights, but not its obligations, associated with the lease of
the Equipment under this Lease Agreement or any Lease Schedule;


(6) Retake (by Lessor,
independent contractor, or by requiring Lessee to assemble and surrender the
Equipment in accordance with the provisions of Section 9 above) possession
of the Equipment without terminating the Lease Schedule or the Lease Agreement
free from claims by Lessee which claims are hereby expressly waived by Lessee;


(7) Require
Lessee to deliver the Equipment to a location designated by Lessor;


(8) Proceed by court
action to enforce performance by Lessee of its obligations associated with any
Lease Schedule and/or this Lease Agreement; and/or


(9) Pursue any other
remedy lessor may otherwise have under this Agreement, at law, in equity or
otherwise, and recover damages and expenses (including attorney’s fees)
incurred by Lessor by reason of the Event of Default.


 


Upon repossession of the
Equipment, Lessor shall have the right to lease, sell or otherwise dispose of
such Equipment in a commercially reasonable manner, with or without notice, at
a public or private sale, and apply the net proceeds thereof to the amounts
owed by Lessee hereunder. For purposes of this paragraph, net proceeds shall
mean either: (i) the present value of the Monthly Lease Charges to be
received under the new lease using a term not to exceed the remaining number of
months in the Initial Term of the Lease Schedule in default and a discount rate
of twelve percent (12%); or (ii) the amount received in cash upon the sale
of the Equipment, less, in either event, all expenses incurred by or for Lessor
in connection with such lease or sale, including, but not limited to,
reconditioning and removal expenses, repair costs, commissions and attorneys’
fees. If the net proceeds are not enough to satisfy all of the amounts owed by
Lessee hereunder, Lessee shall remain liable to Lessor for any deficiency.
Lessor’s pursuit and enforcement of any one or more remedies shall not be
deemed an election or waiver by Lessor of any other remedy. Lessor shall not be
obligated to sell or re-lease the Equipment. Any sale or re-lease may be held
at such place or places as are selected by Lessor, with or without having the
Equipment present. Any such sale or re-lease, may be at wholesale or retail, in
bulk or in parcels. Time and exactitude of each of the terms and conditions of
this Lease Agreement are hereby declared to be of the essence. Lessor may
accept past due payments without modifying the terms of this Lease Agreement
and without waiving any rights of Lessor hereunder.


 


20.           Costs and Attorneys’
Fees


In the event of any default,
claim, proceeding, including a bankruptcy proceeding, arbitration, mediation,
counter-claim, action (whether legal or equitable), appeal or otherwise,
whether initiated by Lessor or Lessee (or a debtor-in-possession or bankruptcy
trustee), which arises out of, under, or is related in any way to this Lease
Agreement, any Lease Schedule, or any other document, agreement or instrument
executed pursuant thereto or in connection therewith, or any governmental
examination or investigation of Lessee which requires Lessor’s participation
(individually and collectively, the “Claim”), Lessee, in addition to all other
sums which Lessee may be called upon to pay under the provisions of this Lease
Agreement, shall pay to Lessor, on demand, all costs, expenses and fees paid or
payable in connection with the Claim, including, but not limited to, attorneys’
fees and out-of-pocket costs, including travel and related expenses incurred by
Lessor or its attorneys.


 


21.           Lessor’s Performance
Option


Should Lessee fail to make
any payment or to do any act as provided by this Lease Agreement, then Lessor
shall have the right (but not the obligation), without notice to Lessee of its
intention to do so and without releasing Lessee from any obligation hereunder
to make or to do the same, to make advances to preserve the Equipment or Lessor’s
title thereto, and to pay, purchase, contest or compromise any insurance
premium, encumbrance, charge, tax, lien or other sum which in the judgment of
Lessor appears to affect the Equipment, and in exercising any such rights,
Lessor may incur any liability and expend whatever amounts in its absolute
discretion it may deem necessary therefor. All sums so incurred or expended by
Lessor shall be due and payable by Lessee within ten (10) days of notice
thereof.


 


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22. Quiet Possession and Inspection


 


Lessor hereby covenants with
Lessee that Lessee shall quietly possess the Equipment subject to and in
accordance with the provisions hereof so long as Lessee is not in default
hereunder; provided, however, that Lessor or its designated agent may, at any
and all reasonable times during business hours, enter Lessee’s premises for the
purposes of inspecting the Equipment and the manner in which it is being used.


 


23.           Assignments


This Lease Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Lessee, however, shall not assign, transfer,
pledge, mortgage, hypothecate or otherwise dispose of this Lease Agreement, the
Lease Schedule(s), the Equipment, or any interest therein, or sublet any of the
Equipment without first obtaining the prior written consent of Lessor and its
assigns, if any. Lessee acknowledges that the terms and conditions of this
Lease Agreement have been fixed in anticipation of the possible assignment of
Lessor’s rights under this Lease Agreement and in and to the Equipment as
collateral security to a third party (an “Assignee”) which will rely upon and
be entitled to the benefit of the provisions of this Lease Agreement. Lessee
agrees to provide Lessor or its assigns with Lessee’s most recent audited and
its most current financial statements. Lessee agrees with Lessor and such
Assignee to recognize in writing any such assignment within fifteen (15) days
after receipt of written notice thereof and to pay thereafter all sums due to
Lessor hereunder directly to such Assignee if directed by Lessor,
notwithstanding any defense, set-off or counterclaim whatsoever (whether
arising from a breach of this Lease Agreement or not) that Lessee may from time
to time have against Lessor. Upon such assignment, the Lessor shall remain
obligated to perform any obligations it may have under this Lease Agreement and
the Assignee shall (unless otherwise expressly agreed to in writing by the
Assignee) have no obligation to perform such obligations. Any such assignment
shall be subject to Lessee’s rights to use and possession of the Equipment so
long as Lessee is not in default hereunder.


 


24.           Survival of Obligations


All covenants, agreements,
representation, and warranties contained in this Lease Agreement, any Lease
Schedules, or in any document attached thereto, shall be for the benefit of
Lessor and Lessee and their respective successors, any permitted assignee or
secured party and shall survive the execution and delivery of this Lease
Agreement and the expiration or other termination of this Lease Agreement.


 


25.           Corporate Authority


The parties hereto covenant
and warrant that the persons executing this Lease Agreement and each Lease
Schedule on their behalf have been duly authorized to do so, and this Lease
Agreement and any Lease Schedule constitute a valid and binding obligation of
the parties hereto. The Lessee will, if requested by Lessor, provide to Lessor
Certificates of Authority naming the officers of the Lessee who have the
authority to execute this Lease Agreement and any Lease Schedules attached
thereto.


 


26.           Landlords’ and
Mortgagees’ Waiver


If requested, Lessee shall
furnish waivers, in form and substance satisfactory to Lessor, from all
landlords and mortgagees of any premises upon which any Equipment is located.


 


27.           Miscellaneous


This Lease Agreement, the
Lease Schedule(s), attached riders and any documents or instruments issued or
executed pursuant hereto will have been made, executed and delivered in and
shall be governed by the internal laws (as opposed to conflicts of law
provisions) and decisions of the State of Minnesota. Lessee and Lessor consent
to jurisdiction of any local, state or federal court located within Minnesota.
Venue shall be in Minnesota and Lessee hereby waives local venue and any
objection relating to Minnesota being an improper venue to conduct any
proceeding relating to this Lease Agreement. At Lessor’s sole election and
determination, Lessor may select an alternative forum, including arbitration or
mediation, to adjudicate any dispute arising out of this Lease Agreement.


 


This Lease Agreement and
associated Lease Schedule(s) constitute the entire agreement between
Lessor and Lessee with respect to the lease of the Equipment, superseding all
prior or contemporaneous understandings, agreements and correspondence between
the parties. No provision of this Lease Agreement or any Lease Schedule shall
be deemed waived, amended or modified by either party unless such waiver,
amendment or modification is in writing and signed by both of the parties
hereto. If any one or more of the provisions of this Lease Agreement or any
Lease Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Lease Agreement and any such Lease Schedule will
be unimpaired, and the invalid, illegal or unenforceable provisions shall be
replaced by a mutually acceptable valid, legal and enforceable provision that
is closest to the original intention of the parties. Lessee agrees that neither
the manufacturer, nor the supplier, nor any of their salespersons, employees or
agents are agents of Lessor.


 


Any notice provided for
herein shall be in writing and sent by certified or registered mail to he
parties at the addresses stated on page 1 of this Lease Agreement.


 


This Lease Agreement shall
not become effective until executed and delivered by Lessee to Lessor at Lessor’s
offices at Edina, Minnesota and executed by Lessor. If this Lease Agreement
shall be executed by Lessor prior to being executed by Lessee, it shall become
void at Lessor’s option five (5) days after the date of Lessor’s execution
hereof, unless Lessor shall have received by such date a copy of this Lease
Agreement fully executed by a duly authorized representative of Lessee.


 


This Lease Agreement is made
subject to the terms and conditions included herein and Lessee’s acceptance is
effective only to the extent that such terms and conditions are consistent with
the terms and conditions herein. Any acceptance that contains terms and
conditions that are in addition to or inconsistent with the terms and
conditions herein will be a counter-offer and will not be binding unless agreed
to in writing by Lessor.


 


The terms used in this Lease
Agreement, unless otherwise defined, shall have the meanings ascribed to them
in the Lease Schedule(s).


 


28.           REPOSSESSION


 


LESSEE ACKNOWLEDGES THAT,
PURSUANT TO SECTION 19 HEREOF, LESSOR HAS BEEN GIVEN THE RIGHT TO
REPOSSESS THE EQUIPMENT SHOULD LESSEE BECOME IN DEFAULT OF ITS OBLIGATIONS
HEREUNDER. LESSEE HEREBY WAIVES THE RIGHT, IF ANY, TO REQUIRE LESSOR TO GIVE
LESSEE NOTICE AND A JUDICIAL HEARING PRIOR TO EXERCISING SUCH RIGHT OF
REPOSSESSION.


 


29.           Net Lease


This Lease Agreement is a net
lease and Lessee’s obligations to pay all Lease Charges and other amounts
payable hereunder shall be absolute and unconditional and, except as expressly
provided herein, shall not be subject to any: (i) delay, abatement,
reduction, defense, counterclaim, set-off or recoupment; (ii) discontinuance
or termination of any license; (iii) Equipment failure, defect or
deficiency; (iv) damage to or destruction of the Equipment; or (v) dissatisfaction
with the Equipment or otherwise, including any present or future claim against
Lessor or the manufacturer, supplier, reseller, vendor of the Equipment. To the
extent that the Equipment includes intangible (or intellectual) property,
Lessee understands and agrees that: (i) Lessor is not a party to and does
not have any responsibility under any software license and/or other agreement
with respect to any software; and (ii) Lessee will be responsible to pay
all of the Lease Charges and perform all its other obligations under this Lease
Agreement despite any defect, deficiency, failure, termination,
dissatisfaction, damage or destruction of any software or software license.
Except as expressly provided herein, this Lease Agreement shall not terminate
for any reason, including any defect in the Equipment or Lessor’s title thereto
or any destruction or loss of use of any item of Equipment.


 


30.           Headings


 


Section headings herein
are used for convenience only and shall not otherwise affect the provisions of
this Lease Agreement.


 


IN WITNESS
WHEREOF, the parties hereto have caused this Lease Agreement to be signed by
their respective duly authorized representative.


 


	
  Every Term
  Is Agreed to and Accepted:

  	
  Every Term
  is Agreed to and Accepted:

  
	
  FIDELITY
  NATIONAL CAPITAL, INC.

  	
  SOUTHWEST
  WATER COMPANY

  
	
  “LESSOR”

  	
  “LESSEE”

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Print

  Name:

  	
   

  	
   

  	
  Print

  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  



 


4 of 4
















 


	
  

  	
  LEASE
  SCHEDULE NO. SOU121407.A

  



 


 


This Lease Schedule is issued
pursuant to the Lease Agreement No. SOU121407, dated December 14,
2007. The terms and conditions of the Lease Agreement and serial numbers contained
on Certificates of Acceptance are a part hereof and incorporated by reference
herein. Lease Schedule SOU121407.A shall be divided by Lessor into Lease
Schedules SOU121407.A01, SOU121407.A02, and so on.


 


	
  LESSOR:

  	
  LESSEE:

  
	
  Fidelity National
  Capital, Inc.

  	
  Southwest Water Company

  
	
  7701 France Avenue South,
  Suite 105

  	
  624 South Grand Avenue, Suite 2900

  
	
  Edina, MN 55435

  	
  Los Angeles, CA 90017

  
	
   

  	
   

  
	
  SUPPLIER
  OF EQUIPMENT:

  	
  LOCATION
  OF INSTALLATION:

  
	
  Various

  	
  Same As Above

  



 


Anticipated Equipment Cost:
$30,000,000.00


Term of Lease from
Commencement Date: 60 months


Monthly Lease Charge: The
Monthly Lease Charge shall be the Equipment cost multiplied by the Hardware
Lease Rate Factor of 0.01804 and Software Lease Rate Factor of 0.01903.


Anticipated Delivery and
Installation: December 2007 through December 2008 Security Deposit:
Lessee shall deliver a security deposit in the amount of the Monthly Lease Charge.
If no Event of Default has occurred, this security deposit will be applied
toward the Total Lease Charges associated with the last month of this Lease
Schedule.


 


EQUIPMENT:


	
   

  	
   

  	
   

  	
  Equipment

  
	
   

  	
   

  	
   

  	
  Description

  
	
  Manufacturer 

  	
  Quantity 

  	
  Machine/Model

  	
  Including Features

  



 


Lessee shall pay the Interim
Lease Charge on a pro-rata basis until all Equipment is installed and the Lease
Schedule commences. Lessor and Lessee agree that each installation period shall
end on the last day of each 90 day installation period. Lessor and Lessee agree
that the Interim Lease Charge during the installation period will equal, but
not exceed, 1.5 months multiplied by the cost of the Equipment installed and
accepted multiplied by the appropriate lease rate factor. Lessor and Lessee
agree that the installation period will end on the last day of the month. If
Lessee requests to extend the 90 day installation period and upon approval by
Lessor, Lessee agrees to pay rent during any 30 day extension after the initial
90 day installation period equal to the monthly lease rate factor multiplied by
the total cost of the Equipment installed and accepted.


 


	
  Every Term is Agreed to and
  Accepted:

  	
  Every Term is Agreed to and
  Accepted:

  
	
  FIDELITY
  NATIONAL CAPITAL, INC.

  	
  SOUTHWEST
  WATER COMPANY

  
	
  “LESSOR”

  	
  “LESSEE”

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Print

  Name:

  	
   

  	
   

  	
  Print

  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date: