ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT

(CHERRY CREEK ASSETS)

This Asset Purchase Agreement (the “Agreement”) is made as of October 14, 2005 (the “Effective Date”), by and between Western Water Company, a Delaware corporation, as debtor and debtor in possession in the below referenced Bankruptcy Case (“Seller”), with principal offices located at 102 Washington Avenue, Point Richmond, California 94801, and Cherry Creek Project Water Authority, a Colorado Water Authority organized pursuant to Colorado Revised Statutes Section 29-1-204(2) (“Buyer”), with principal offices located at c/o Mulhern MRE, Inc., 2 Inverness Drive East, Suite 101, Englewood, Colorado 80112.

RECITALS

A. Seller has commenced a case under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court (the “Bankruptcy Court”) for the Northern District of California, Oakland Division, Case No. 05-42839 (the “Bankruptcy Case”), thereby creating the estate (the “Bankruptcy Estate”) in accordance with Bankruptcy Code section 541 et seq., and has continued in the possession of its assets and in the management of its business under sections 1107 and 1108 of the Bankruptcy Code.

B. Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, all right, title and interest of Seller and of the Bankruptcy Estate in, to and under the Purchased Assets (as defined in Section 1.1 herein), free and clear of all Liens, Claims and Interests (as defined in Section 1.1 herein), on the terms and conditions set forth in this Agreement, pursuant to sections 363 and 365 of the Bankruptcy Code.

NOW, THEREFORE, in consideration of the above recitals and the mutual covenants hereinafter set forth, Buyer and Seller hereby agree as follows:

AGREEMENT

1.1 Agreement to Sell and Purchase Assets . Subject to, and limited by, the representations, warranties and covenants set forth in this Agreement, Seller agrees to sell, assign, transfer and convey to Buyer, and Buyer agrees to purchase and acquire from Seller at the Closing, free and clear of liens, claims and interests of any party (collectively, and in each case including without limitation all “interests” as such term is defined in section 363(f) of the Bankruptcy Code, the “Liens, Claims and Interests”) except for any Permitted Encumbrances (as defined in Section 5.5 herein), all of Seller’s and all of the Bankruptcy Estate’s right, title, and interest in, to and under all of the following assets, property, rights and claims of the Bankruptcy Estate, wherever located, real, personal or mixed, whether tangible or intangible (collectively, the “Purchased Assets”):

(a) all assets and contracts identified and described in Schedule 1.1(a) attached hereto and, to the extent they relate to such assets and contracts all of the following (the “Cherry Creek Assets”)

(i) any and all rights in, to or under real property on Schedule 1.1(a), as well as all rights and claims appurtenant thereto, including all mineral, water or similar rights, whether held in fee or by lease or other agreement;

(ii) any and all rights under leases and leasehold interests on Schedule 1.1(a), including any and all rights in improvements and fixtures, and any and all rights under all other contracts and agreements, as well as all rights associated therewith;

(iii) any and all accounts receivable, deposits and prepaid assets relating to the assets described in Schedule 1.1(a);

(iv) any and all litigation claims, rights and causes of action, relating to the assets described in Schedule 1.1(a);

(v) any rights to refunds or return of property taxes relating to the assets described in Schedule 1.1(a);

(vi) any business rights, licenses, permits or approvals of Seller or the Bankruptcy Estate, including those used in the operation of Seller’s business or real property, relating to the assets and contracts on Schedule 1.1(a);

(vii) any and all personal property on Schedule 1.1(a), whether tangible or intangible, as well as all rights relating thereto, including warranties;

(viii) all intellectual property on Schedule 1.1(a) and rights thereto,

(ix) to the extent it relates to the assets on Schedule 1.1(a), any and all customer lists (including lists of all past, present and prospective customers), sales and marketing materials (including artwork and collateral materials), mailing lists, marketing lists, employee lists, engineering plans, models and projects, and any and all information related to any of the foregoing;

(x) all goodwill associated with the assets and contracts on Schedule 1.1(a);

(xi) to the extent transferable by applicable law and provided that such inclusion of such rights in the Purchased Assets would not subject Seller to any liabilities or obligations under any contract that is an Excluded Asset, all rights under any contract under which the counterparty or counterparties agree or have agreed not to compete with the operations or property of Seller or of the Bankruptcy Estate associated with the assets on Schedule 1.1(a) or agree or have agreed to keep confidential information regarding Seller or the Bankruptcy Estate relating to the assets on Schedule 1.1(a), without regard to whether any such contract is an Excluded Asset; and

(xii) to the extent they relate to the assets on Schedule 1.1(a), any books of account, ledgers, financial, accounting and tax records and all general and personnel records, files, invoices, customers’ and suppliers’ lists, other distribution and mailing lists, price lists, reports, plans, advertising materials, catalogues, billing records, sales and promotional literature, manuals, and customer and supplier correspondence that pertain to the Cherry Creek Assets (the “Cherry Creek Records”) provided that Buyer shall make such Cherry Creek Records available to Seller upon reasonable request and subject to execution of a confidentiality agreement reasonably acceptable to Buyer; provided that Cherry Creek Records shall not include (i) any confidential or propriety information, or trade secrets, contained in any form or medium, that the Bankruptcy Estate is prohibited from transferring to a third party pursuant to an agreement or confidentiality obligation that is enforceable against Seller, (ii) any and all information and materials relating to the disclosure of which could adversely affect the attorney-client privilege between the Bankruptcy Estate and its counsel with respect to the Excluded Assets or the administration of the Bankruptcy Estate and (iii) any and all communications between Seller and the Official Committee of Unsecured Creditors in the Bankruptcy Case, including communications with their respective counsel (“Confidential Information”).

1.2 Excluded Assets . Notwithstanding anything to the contrary in this Agreement, the Purchased Assets shall not include any assets excluded by the terms of this Section 1.2 (the “Excluded Assets”), such Excluded Assets consisting in their entirety of Seller’s and the Bankruptcy Estate’s right, title and interest in, to and under the following:

(a) the Purchase Price;

(b) all contracts or other assets of Seller or the Bankruptcy Estate otherwise included in the definition of Purchased Assets that may be designated by Buyer, with the reasonable consent of Seller, as Excluded Assets;

(c) any bids and deposits received from any person other than Buyer or its agents or representatives in connection with the proposed sale of any of the Purchased Assets and any analyses prepared by or on behalf of Seller of any bids for the Purchased Assets or any portion thereof, or any materials relating to the negotiations with any potential bidder;

(d) all avoidance actions arising under chapter 5 of the Bankruptcy Code (the “Avoidance Actions”), any litigation claims, rights and causes of action against any current or former directors, officers or employees of Seller, and all other claims, rights, causes of action or litigation unrelated to the Cherry Creek Assets;

(e) all policies of insurance of the Seller or the Bankruptcy Estate and claims and proceeds thereof; including without limitation all directors’ and officers’ insurance policies and claims and proceeds thereof;

(f) any assets of any employee benefit plan of Seller or the Bankruptcy Estate, any rights under any such plan or any contract, agreement or arrangement between any employee or consultant and Seller or the Bankruptcy Estate, and any personnel records, information and material relating to any current or former employee, director, independent contractor or other personnel of Seller not providing services to Buyer after the Closing;

(g) any Confidential Information;

(h) all cash, cash equivalents, marketable securities, bank and other deposit accounts of Seller.

1.3 Assigned Executory Contracts .

(a) Subject to the terms and conditions of this Agreement, and in reliance on the representations, warranties and covenants set forth in this Agreement, Seller agrees, pursuant to section 365 of the Bankruptcy Code, to assume and then to sell, assign, transfer and convey to Buyer all executory contracts of Seller included in the Purchased Assets (collectively, the “Assigned Executory Contracts”), including without limitation all executory contracts included in Schedule 1.1(a). Should Buyer or Seller identify any executory contracts of Seller not identified on Schedule 1.1(a) or not assigned to Buyer pursuant to the Sale Order, at Buyer’s request, provided that such request is made to Seller prior to the confirmation of a plan of reorganization in the Bankruptcy Case, Seller shall take commercially reasonable efforts to assume and assign such executory contract to Buyer pursuant to the terms of this Agreement.

(b) Except as provided in paragraph 1.3(a) above, Seller shall be responsible for any and all cures or other payments or actions required to assume and assign the Assigned Executory Contracts to Buyer, provided that Buyer shall be responsible for providing evidence as to the adequate assurance of future performance required under section 365 of the Bankruptcy Code. The Sale Order (as defined below) shall provide that the assumption and assignment to Buyer of the Assigned Executory Contracts is approved, subject only to (i) payment by Seller of all cures or other payments or actions required to assume and assign the Assigned Executory Contracts to Buyer and (ii) Buyer’s right to exclude any contract from the definition of Assigned Executory Contracts in accordance with the terms of this Section 1.3.

(c) If any non-debtor party to an executory contract objects to the assumption and assignment of such contract, and such party’s consent is required under section 365(c) for the assumption and assignment of such executory contract to Buyer, Buyer agrees that such executory contract shall be deemed an Excluded Asset, without any adjustment to the Purchase Price, unless such consent is obtained. Except as provided in paragraph 1.3(a) above, Seller shall take commercially reasonable efforts to obtain any such consent, provided that Seller shall have no obligation to obtain any such consent.

1.4 Bid Procedures . This Agreement and the obligations of Buyer and Seller hereunder are subject to the terms and provisions the “Bid Procedures for Cherry Creek Assets, Revised October 3, 2005,” a copy of which is attached hereto as Exhibit A (the “Bid Procedures”).

2.1 Purchase Price . In consideration of the sale, transfer, conveyance and assignment of the Purchased Assets to Buyer, Buyer shall (a) assume the Assumed Liabilities; and (b) pay to Seller cash in the amount of Fourteen Million Dollars and 00/100 ($14,000,000.00) or such cash or other consideration offered by Buyer and accepted by Seller as a condition of declaring Buyer the winning bidder at the Auction referenced in the Bid Procedures (the “Purchase Price”).

2.2 Deposit . On or before 5:00 p.m. (Mountain Time) on Tuesday, October 18, 2005, Buyer will deposit in escrow with Seller pursuant to the Bid Procedures, to be held in trust in an interest bearing account, the sum of one million dollars ($1,000,000) (the “Deposit”). At the Closing, the Deposit and all interest earned thereon shall be credited against the Purchase Price to be paid by Buyer pursuant to Section 2.1 herein. If the Closing fails to occur or if this Agreement is terminated pursuant to Section 10.1 herein or by order of a court of competent jurisdiction, then the Deposit shall be immediately returned to Buyer without counterclaim or offset by Seller. Notwithstanding the foregoing, if (a)(i) Buyer is declared the winning bidder at the Auction for the Purchased Assets pursuant to the Bid Procedures, and (ii) Buyer is thereafter is unable or unwilling to close notwithstanding the satisfaction of all conditions to Closing in Article 7 or (b) Buyer repudiates this Agreement, then (x) the Deposit and all interest thereon shall be forfeited to Seller as liquidated damages to compensate Seller for time spent, labor and services performed, and the loss of the bargain set forth in this Agreement, and (y) the retention of the Deposit shall be Seller’s sole and exclusive remedy against Buyer for any breach of this Agreement. Buyer and Seller agree that it would be impracticable and extremely difficult to affix damages incurred by Seller if Buyer defaults as described in this paragraph and that the Deposit and all interest thereon represents a reasonable estimate of Seller’s damages in such circumstances.

2.3 Closing . The closing (the “Closing”) of the sale and purchase of the Purchased Assets, the assignment of the Assigned Executory Contracts, the assumption of the Assumed Liabilities and the other transactions contemplated hereby shall take place within one (1) business day after the satisfaction or waiver of the conditions to closing set forth in Article 7 herein, at the offices of Morrison & Foerster LLP, 5200 Republic Plaza, Denver, Colorado, or at such other place and time as may be agreed upon by the parties hereto (the date on which the Closing occurs, the “Closing Date”). The parties agree to use all commercially reasonable efforts to ensure the satisfaction of the conditions set forth in Article 7 so as to enable the parties to effect the Closing on or prior to November 4, 2005.

2.4 Taxes .

(a) Each party will be responsible for paying its own fees, costs, and expenses in connection with negotiating and performing the due diligence and transactions set forth in this Agreement. Any sales, transfer, use or other taxes imposed as a result of sale of the Assets shall be paid by Seller out of the Purchase Price.

(b) Not later than sixty (60) days after the Closing, Buyer shall provide Seller an allocation of the Purchase Price between and among the Purchased Assets and the Assumed Liabilities, which allocation shall be made in a manner required by Section 1060 of the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder. In addition, it is agreed that such allocation will be binding on Buyer, Seller and the Bankruptcy Estate for federal income tax purposes in connection with the transactions contemplated hereby, and will be consistently reflected by each such party on their respective federal income tax returns. Subject to the other provisions of this Section 2.4(b), the parties agree to prepare and timely file all applicable Internal Revenue Service forms, including Form 8594 (Asset Acquisition Statement), and other governmental forms, to cooperate with each other in the preparation of such forms and to furnish each other with a copy of such forms prepared in draft, within a reasonable period prior to the filing due date thereof.

3.1 Assumed Liabilities . Subject to the terms and conditions of this Agreement, at and as of the Closing Date, Buyer shall assume and agree to pay, perform, discharge and satisfy when due in accordance with their terms the liabilities of Seller and the Bankruptcy Estate arising after the Closing Date under the Assigned Executory Contracts (the “Assumed Liabilities”).

3.2 Excluded Liabilities . Except to the extent expressly included in the Assumed Liabilities, and to the maximum extent permitted by law, Buyer shall not assume, and shall have no liability or obligation for any other liabilities of Seller or the Bankruptcy Estate, as a successor in interest or otherwise, including, without limitation, any liability arising out of, or related to, any (i) employee or consultant of Seller or the Bankruptcy Estate, including any liability with respect to any key employee retention plans, any liability with respect to or arising from any “employee benefit plan” (as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, as amended), any liability with respect to the Worker Adjustment and Retraining Notification (WARN) Act and any liability with respect to COBRA coverage for employees or consultants of Seller or the Bankruptcy Estate terminated prior to or as part of the consummation of the transactions set forth in this Agreement; (ii) any severance payable to any employee or consultant of Seller or the Bankruptcy Estate; (iii) any costs or expenses incurred in connection with, or related to, the administration of the Bankruptcy Case, including without limitation, any accrued professional fees and expenses of attorneys, accountants, financial advisors and other professional advisors related to the Bankruptcy Case; (iv) liabilities under any warranty, guaranty or similar obligation of Seller or the Bankruptcy Estate arising from or relating to any acts or transactions prior to the Closing Date; (v) any amounts due or which may become due or owing under the Assigned Executory Contracts with respect to the period prior to Closing Date (including, without limitation, any cure payments or obligations); (vi) any liabilities or obligations with respect to any litigation or threatened litigation, claim, obligation, damages, costs and expenses relating to or arising out of or relating to any actions or omissions of Seller or the Bankruptcy Estate or any use of any of the Purchased Assets prior to the Closing Date, whether arising under contract, tort, civil or criminal law or otherwise; (vii) liabilities for environmental claims, whether arising under contract or statute, including without limitation any and all laws relating to pollution or the environment, including the Comprehensive Environmental Recovery, Compensation, and Liability Act, as amended, 42 U.S.C. § 9601, et seq. (“CERCLA”); the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 9601, et seq. (“RCRA”), the Clean Air Act, 42 U.S.C. § 7401, the Occupational Safety and Health Act, 29 U.S.C. § 600, et seq. (“OSHA”), and all other laws and regulations relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, chemicals, pesticides, or industrial, infectious, toxic or hazardous substances or wastes into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or otherwise relating to the processing, generation, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, infectious, toxic, or hazardous substances or wastes (collectively, “Environmental Laws”); (vii) all obligations of Seller or the Bankruptcy Estate relating to taxes assessed or due prior to the Closing Date; (viii) all liabilities in respect of all indebtedness of Seller or the Bankruptcy Estate; (ix) any accounts payable of Seller or the Bankruptcy Estate; or (x) liabilities arising under any and all Excluded Assets ((i)-(x), collectively, the “Excluded Liabilities”).

Buyer hereby represents and warrants to Seller that all the following statements are true, accurate and correct:

4.1 Due Organization . Buyer is a Water Authority organized pursuant to Colorado Revised Statutes Section 29-1-204(2), duly organized, validly existing, and in good standing under the laws of Colorado. Buyer has all necessary power and authority to enter into this Agreement and all other documents that Buyer is required to execute and deliver hereunder, and holds or will timely hold all permits, licenses, orders and approvals of all federal, state and local governmental or regulatory bodies necessary and required therefor.

4.2 Power and Authority; No Default . Buyer has all requisite power and authority to enter into and deliver this Agreement and to perform its obligations hereunder, including closing the purchase and sale of the Purchased Assets, on or before the deadlines set forth herein. The signing, delivery and performance by Buyer of this Agreement, and the consummation of all the transactions contemplated hereby, have been duly and validly authorized by Buyer and any governing body whose permission Buyer must obtain prior to entering into this Agreement or consummating the transactions contemplated hereby. Subject to Seller’s representations and warranties in Section 5 herein, this Agreement has been duly and validly executed and delivered by Buyer and constitutes its valid and binding obligation, enforceable against Buyer in accordance with its terms, subject only to the laws relating to bankruptcy, insolvency and relief of debtors, and rules and laws governing specific performance, injunctions, relief and other equitable remedies.

4.3 Authorization for this Agreement . To the best of Buyer’s knowledge, no authorization, approval, consent of, or filing with any governmental body, department, bureau, agency, public board, authority or other third party is required for the consummation by Buyer of the transactions contemplated by this Agreement, which has not been obtained or made.

4.4 Litigation . To the best of Buyer’s knowledge, there is no li