MICHAEL WALTON
700 Larkspur Landing Circle, Suite 165
Larkspur, CA 94939
(415) 456-7920
In Propria Persona

SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF MARIN

I, Michael Walton, declare as follows:

1. I am a defendant in this action. I have personal knowledge of the facts set forth below and, if called upon, I could and would competently testify thereto.

2. In the Spring of 1990 Gerald Armstrong and I entered into an agreement whereby I would terminate my law practice in Playa del Rey, California, give up my residence in Playa del Rey and relocate to 707 Fawn Drive, San Anselmo in Marin County; I would commit to a one year time period in which we would live at the Fawn Drive residence. Armstrong and I would be co-owners of the property and would hold our respective interests as tenants in common. We would

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both be responsible as "borrowers" on the mortgage loan used to purchase the property and we would both execute a deed of trust in favor of the mortgage lender. Armstrong would provide the down payment for the residence and would establish a money fund in both our names which would be an amount calculated to cover the mortgage payments, insurance payments, taxes and upkeep of the residence exclusive of any personal expenses for one year (approximately $40,000).

3. We further agreed that during that year we would investigate the possibility of developing certain creative and artistic ideas that Armstrong had already identified and any other creative or artistic projects that may arise. I would handle the "legal" aspects of marketing the creative ideas and would contribute to idea development as able.

4. In addition, I had been and was still Armstrong's legal counsel in Scientology's appeal from a Los Angeles Superior Court decision in Armstrong's favor. We both believed that Armstrong could provide much more effective assistance to me in responding to the appeal if we were in the same location. Considerable document review was necessary in preparation and Armstrong was the main source of explaining the chronology of events that covered more than a dozen years and the complex technical language and structure of Scientology.

5. Pursuant to the agreement, Armstrong and I purchased the Fawn Drive residence in May 1990. We obtained a substantial loan

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for the mortgage and we executed the appropriate deeds of trust and other loan documents. We set up a joint checking account to handle the "house account fund" which was approximately $40,000.

6. We continued to work on Scientology's appeal and on July 9, 1990, I filed Armstrong's Respondents Brief. The Court of Appeal affirmed the lower court's decision.

7. Armstrong and I investigated the potential commercial and artistic impact of a number of Armstrong's projects or would be projects. None were ever brought to market in a commercially viable way.

8. During the summer of 1990, approximately two months into our agreement, Armstrong informed me that he did not want to be bound by our agreement. He told me that he had had a vision from his "God" and that he needed to divest himself and be free to go where he was called.

9. In August 1990, Armstrong turned over full responsibility for managing the house fund to me indicating that he had no intention of handling it in the future. I began to write checks from our joint account to pay the house expenses as they came due as per the original agreement.

10. Finally, in August 1990, Armstrong deeded his one-half interest in the Fawn Drive residence to me. While I did not pay Armstrong directly any money for the transfer, I agreed to assume full responsibility for the mortgage loan and to be fully responsible for all future taxes, upkeep, repairs, insurance and

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any other cost related to the property. Additionally, I released him from the remaining term (approximately 10 months) of our agreement.

11. Originally, Armstrong indicated to me that he was going to deed his interest to a third party. I reminded him of our agreement and told him that I would never have given up my life and law practice in Los Angeles and incurred liability for a substantial mortgage had it not been for our agreement. I told him that a third party transfer was unacceptable to me. When he told me a day or so later that he was going to transfer his 1/2 interest to me, I indicated that his decision was acceptable to me and I wished him well in his new found freedom.

12. Several months later, I refinanced the mortgage loan dropping Armstrong as a borrower and since August 1990, I and my family have been fully responsible for maintaining and improving the property. I encouraged Armstrong to continue to live at the residence for as long as he liked; however, Armstrong moved out in August 1991.

13. I believe that each aspect of my agreement with Armstrong and its subsequent alteration was fair, legal and binding.

14. Armstrong never expressed any intent in divesting himself of property in 1990 or any other time to keep money from any creditor. Given that I had obtained liability for a substantial mortgage and all that I had given up and risked by moving away from my home, friends and business in southern California in order to

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commit a year of my time to helping develop Armstrong's creative ideas, I believe that when Armstrong decided after two months that he could not fulfill the remaining ten months of our agreement and that he must forgo all ownership responsibility on the Fawn Drive residence in order to be able to follow his conscience, the only fair result was for Armstrong to transfer his interest in the property to me- not for the purpose of avoiding a creditor that did not yet exist, but rather in order to mitigate the unjust results and damages to me of his decision not to perform the remainder of our agreement.

I declare under penalty of perjury pursuant to the laws of California that the foregoing is true and correct.

Dated: June 4, 1997

[signed]

Michael Walton

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