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Exhibit 10.1
 
PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (“Agreement”) is entered into effective as of
the 11th day of March, 2015 (“Effective Date”), by and among Pure Cycle
Corporation, a Colorado corporation (“Pure Cycle”) and PCY Holdings, LLC, a
Colorado limited liability company (“PCY”) (Pure Cycle and PCY collectively,
jointly and severally, “Seller”), and Arkansas River Farms, LLC, a Colorado
limited liability company (“Buyer”), or its assigns.
 
Section 1.  Purchase and Sale. Buyer agrees to purchase from Seller, and Seller
agrees to sell to Buyer, certain real property comprising approximately 14,641
acres of real property, located in the counties of Bent, Otero and Prowers
(collectively, the “Counties”), Colorado, comprised of the Irrigated Acres, the
Additional Pasture Acres and the Additional Owned Acres (as each is identified
in Section 2(b), below), which Land is described on the attached Exhibit A
(collectively, the “Land”), together with all rights, easements, and benefits
appurtenant to the Land, including but not limited to: (a) all improvements
located on the Land, including  but not limited to all irrigation equipment,
buildings, storage bins, houses and other improvements, and any easements,
servitudes, permits, licenses, and leases appurtenant to the real property
(collectively, the “Improvements”); (b) all right, title and interest of Seller
in all rock, limestone, granite, construction aggregate, crushed stone, sand,
gravel, caliche, clay, top soil, or other similar material or substances
appurtenant to the Land, together with any and all surface use, access
easements, and all other rights in connection therewith (collectively, the “Sand
and Gravel”); (c) 25% of all of Seller’s right title and interest in all mineral
rights associated with and/or appurtenant to the Land other than the Sand and
Gravel, including, but not limited to, all right, title, interest, claim and
demand in and to all oil, gas, natural gas and hydrocarbons appurtenant to the
Land, together with any and all surface use, access easements, and all other
rights in connection therewith (the “Minerals”) (d) all right, title and
interest of Seller in personal property located on or attached to the Land (the
“Personal Property”); (e) all right, title and interest of Seller in all water
and water rights, domestic and irrigation wells, well permits, tributary,
non-tributary and not non-tributary water, ditch and ditch rights and easement
and conveyance rights appurtenant to the Land (collectively, the “Water
Rights”), including but not limited to: (i) the following certificated water
interests: (A) 18,448.44 shares of stock in the Fort Lyon Canal Company
(“FLCC”), evidenced by the certificates set forth on Exhibit B (the "FLCC
Shares") and (B) 45 shares of stock in the Lower Arkansas Water Management
Association ("LAWMA" and such shares, evidenced by the certificates set forth on
Exhibit B (the "LAWMA Shares"); (ii) all water taps and rights to acquire water
taps associated with the Land; and (iii) the wells located on the subject
property and described in the well permits listed on Exhibit B; and (f) all
wind, solar, air, mitigation, ecological and conservation rights (the
(“Ecological Rights”).  The Land, the Improvements, the Sand and Gravel, the 25%
interest in the Minerals, the Personal Property, the Ecological Rights and the
Water Rights shall collectively be referred to herein as the “Property.”  If
Buyer has obtained and approved surveys of the Land, the legal description of
the Land as set forth in Exhibit A shall be updated to reflect the legal
description set forth in the approved surveys.  FLCC and LAWMA shall each
hereinafter be referred to as a “Water Company”, collectively as the “Water
Companies”), and those Water Rights derived from shares in the Water Companies
shall be referred to as the “Certificated Water Rights.”  All shares of capital
stock in the Water Companies shall be transferred by special warranty deed and
water stock transfer form.  Additionally, Seller shall convey all of Seller's
right, title and interest in and to all other rights associated with the
structures for the Water Rights, including but not limited to, easements or
rights of way or other rights to use land needed or used to divert, deliver,
store, or apply water to the Land (and all other rights necessary and incidental
to said easements) associated with the Water Rights and for the installation,
reconstruction, maintenance, repair, removal, or other uses associated,
necessary or incidental to operation of the Water Rights, together with all the
diversion or storage structures, including but not limited to, all headgates,
ditches, seep ditches, drainage ditches, laterals, reservoirs, reservoir outlet
works, dams, water tanks, wells, well casings, pipelines or other appurtenances
used in association with the Water Rights.  Seller agrees to cooperate with
Buyer and execute all documents required in order to properly effectuate the
transfer of all of the above described rights (both at Closing and following
Closing).
 
 
 

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Section 2.  Purchase Price; Deposit.
 
(a)           The purchase price for the Property is approximately
$52,958,215.00, to be calculated based upon the Purchase Price Formula (as
defined below), subject to the prorations and credits set forth herein and to
adjustment as set forth in Section 2(c) (the “Purchase Price”).
 
(b)           The Purchase Price shall be calculated based on the following
formula (the “Purchase Price Formula”):
 
Land Valuation
     
Irrigated Acres
    11,464  
Price per Irrigated Acre
       
(including FLCC Shares per Irrigated Acre
 
calculated at 0.9 shares/acre)
  $ 3,400.00  
Total Irrigated Price
  $ 38,977,600.00            
Excess Water Valuation
       
Total FLCC Shares
    18,448.44  
  Shares per Irrigated Acre (0.9 shares/acre)
    (10,317.60 )
Excess Shares
    8,130.84            
Price per Share
  $ 1,625.00  
Total Excess FLCC Price
  $ 13,212,615.00            
Total LAWMA Shares
    45  
Price per Share
  $ 2,500.00  
Total LAWMA Valuation
  $ 112,500.00            
Total Excess Water Valuation
  $ 13,325,115.00            
Additional Pasture Acres
    1,092.50  
Price per Pasture Acre
  $ 600.00  
Total Pasture Valuation
  $ 655,500.00            
Additional Owned Acres
    2,085.00  
  Price per additional acres
  $ 0            
Gross Purchase Price
  $ 52,958,215.00  

 
 
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“Excess Shares” means the (a) the Dry-Up Shares and (b) any FLCC Shares that are
in excess of the 10,317.60 FLCC shares allocated to the Irrigated Acres using a
rate of 0.9 shares per acre of the Irrigated Acres.  “Dry-Up Shares” means any
FLCC Shares that were not historically used to irrigate the Land.
 
(c)           Buyer shall have the right to review all dry-up covenants related
to the Dry-Up Shares (the “Dry-Up Covenants”). To the extent the Dry-Up
Covenants do not provide adequate enforceable dry up of the property on which
the Dry-Up Shares have been historically used in Buyer’s reasonable discretion,
Buyer may elect to not to purchase such portion of the Dry-Up Shares, in which
event the Purchase Price shall be reduced in an amount equal to $1,625.00 for
each Dry-Up Share that Buyer elects not to purchase. Buyer shall provide written
notice to Seller of which Dry-Up Shares it elects not to purchase on or before
the day that is ten (10) business days prior to the Closing Date.
 
(d)           Within three (3) business days following the Effective Date, Buyer
shall deposit earnest money in the sum of $1,000,000.00 (the “Deposit”) with
Fidelity National Title Insurance Company, 4643 South Ulster St. #500, Denver,
CO 80237 (the “Escrow Agent”), provided that the title examiner shall be Tom
Maroney with Fidelity National Title Company, 19751 East Main Street #R14,
Parker, CO 80138.  The Deposit shall be refundable to Buyer until completion of
the Due Diligence Period as provided in Section 4 below.  The Escrow Agent shall
deposit the Deposit funds in an interest-bearing escrow account.  Any interest
earned on the Deposit shall accrue to the benefit of the party entitled to the
Deposit in accordance with this Agreement, and, upon Closing, shall be applied
to the Purchase Price.  If Buyer terminates this Agreement in accordance with
the provisions of this Agreement, the Deposit shall be returned to Buyer.
 
Section 3.  Title Insurance and Surveys.
 
(a)           Within ten (10) days after the Effective Date, Buyer shall order a
commitment for an owner's extended policy of title insurance (the “Commitment”),
issued through and underwritten by Fidelity National Title Insurance Company
(the “Title Company”), committing the Title Company to issue its policy insuring
title to the Property (excluding the Water Rights) in Buyer in the amount of the
Purchase Price (excluding the Excess Water Valuation).  Buyer shall also request
the Title Company deliver current tax certificates for the Property.
 
(b)           Within one (1) business day of the Effective Date, Seller shall
provide Buyer with copies of each existing survey covering any portion of the
Land.  During the Title Review Period (as defined below), Buyer may, at its sole
cost and expense, obtain an update of the existing surveys, or order a new
survey for any Land for which an existing survey is not available (collectively,
the “Survey”). The parties acknowledge that if Buyer seeks to obtain a new
survey for any Land for which there is no existing survey, a time period longer
than the Title Review Period may be required. Therefore, Buyer shall have up to
90 days after the Effective Date to obtain any new Survey required by Buyer (the
“Extended Survey Period”), and shall have until the end of the Extended Survey
Period to deliver a Title Objection Notice (as defined below) with respect to
any Land for which a new Survey is required.
 
 
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(c)           On or before fifty (50) days after the Effective Date (the “Title
Review Period”), Buyer shall deliver to Seller written notice of Buyer's
objections to the Commitment and the Survey, if any (the “Title Objection
Notice”).  Permissible exceptions to title shall include only:  (i) the lien of
general taxes not yet payable; and (ii) title exceptions shown on the Commitment
to which Buyer has not objected or is deemed to have accepted pursuant to
subparagraph (d) below (collectively, the “Permitted Exceptions”).
 
(d)           Seller shall have five (5) business days following Seller’s
receipt of the Title Objection Notice (the “Seller Response Period”) to respond
to any objections raised by Buyer.  If Seller notifies Buyer that it will not
cure or remove any objections raised by Buyer, or if Seller fails to respond to
Buyer's Title Objection Notice during the Seller Response Period, Buyer shall
have the right to terminate this Agreement by providing written notice of
termination to Seller on or before the day that is five (5) days after the
expiration of the Seller Response Period.  If Buyer provides timely written
notice of termination to Seller, the Deposit shall be returned to Buyer and the
parties shall be released from all further obligations hereunder except those
obligations which expressly survive termination.  If Buyer fails to provide a
Title Objection Notice, or does not terminate this Agreement in accordance with
this paragraph, Buyer shall be deemed to have waived such objections (other than
any objections Seller has agreed in writing to cure), and such objections shall
be deemed Permitted Exceptions hereunder.
 
(e)           A title insurance policy in accordance with the Commitment shall
be issued or committed to be issued by the Title Company as of the date of
Closing and shall show no exceptions other than the Permitted Exceptions (the
“Title Policy”).  Notwithstanding anything to the contrary in this Agreement,
Seller shall pay off or obtain releases of all existing mortgages and other lien
indebtedness with respect to the Property at Closing, and such matters shall in
no event be deemed Permitted Exceptions.
 
Section 4.  Shareholder Approval
 
(a)           Buyer acknowledges that Pure Cycle is required to (a) file this
Agreement with the Securities and Exchange Commission (the “SEC Filing”) and (b)
obtain the affirmative vote in favor of this Agreement and the transactions
contemplated herein from the holders of a majority of the issued and outstanding
shares of its common stock in accordance with the Colorado Business Corporation
Act and Pure Cycle’s articles of incorporation and bylaws (“Shareholder
Approval”) in order to consummate the transactions contemplated herein.  Within
five (5) business days after the Effective Date, (i) Seller shall make the SEC
Filing and (ii) Buyer shall enter into voting agreements with those shareholders
of Pure Cycle who are directors of Pure Cycle and those shareholders over whose
shares the directors have sole voting control, in a form reasonably acceptable
to Buyer and such shareholders (each a “Voting Agreement”), pursuant to which
each of such shareholder agrees to (x) vote in favor of  adoption of this
Agreement and the transactions contemplated herein and (y) vote against (1) any
Superior Proposal (as defined below), (2) any action, proposal, transaction or
agreement which could reasonably be expected to result in a breach of any
covenant, representation or warranty of Seller under this Agreement and (3) vote
against any action, proposal, transaction or agreement that could reasonably be
expected to impede, interfere with or adversely affect the timely consummation
of the transactions contemplated herein.  The date on which (i) Seller has
provided written notice to Buyer that Seller has made the SEC Filing, together
with reasonable supporting documentation evidencing satisfaction of such
requirement, or (ii) Buyer has notified Seller that it has obtained executed
Voting Agreements from holders of at least 27% of Pure Cycle’s issued and
outstanding shares of common stock, whichever is later, shall be the “Due
Diligence Kick-Off Date.”
 
 
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(b)           Seller shall take all action necessary to duly call, give notice
of, convene and hold a special meeting of Pure Cycle’s shareholders to consider
this Agreement and the transactions contemplated herein (the “Shareholder
Meeting”) as soon as reasonably practicable after the date of this Agreement,
but in no event later than 75 days after the Effective Date.  Seller shall use
commercially reasonable efforts to (i) solicit proxies from Pure Cycle’s
shareholders in favor of the adoption of this Agreement and the transactions
contemplated herein (the “Proxy Statements”) and (ii) take all other actions
necessary or advisable to secure the Shareholder Approval.  Seller shall provide
regular updates to Buyer regarding the proxy solicitation results.  Once the
Shareholder Meeting has been called and noticed, Seller shall not postpone or
adjourn the meeting without the consent of Buyer (other than to obtain a quorum
or as reasonably determined by Seller to comply with applicable law).
 
(c)           The obligations of the parties to consummate the transactions
contemplated herein are subject to the condition that Pure Cycle shall have
obtained the Shareholder Approval. If Pure Cycle has not obtained Shareholder
Approval on or before the Closing Date, then Seller may terminate this Agreement
by written notice to Buyer on or before the Closing Date, whereupon the Deposit
shall be returned to Buyer and the parties shall be released from all further
obligations hereunder, other than those which specifically survive termination
of this Agreement; provided, that if Seller terminates this Agreement pursuant
to this subsection following the due Diligence Kick-Off Date, Seller shall pay
Buyer a break-up fee of $1,000,000.00 (which obligation shall survive
termination of this Agreement).
 
Section 5.  Due Diligence Period.
 
(a)           As a condition to Buyer's obligation to close the transaction,
Buyer shall have through the date that is sixty (60) days following the Due
Diligence Kick-Off Date (the “Due Diligence Period”) to conduct due diligence of
the Property as Buyer deems appropriate, including but not limited to water,
consumptive use, environmental, legal, financial and other due diligence of the
Property. Following the expiration of the Due Diligence Period, if Buyer has not
terminated this Agreement, Buyer shall have an additional period of thirty (30)
days to complete due diligence investigations (the “Additional Diligence
Period”).  If Buyer is not satisfied with the Property for any reason or no
reason, in Buyer's sole discretion, then Buyer may terminate this Agreement by
written notice to Seller on or before the end of the Additional Diligence
Period, provided, however, that if Buyer elects to terminate during the
Additional Diligence Period, Buyer shall not receive the return of the Deposit,
the Deposit shall be delivered to Seller, and the parties shall be released from
all further obligations hereunder.
 
(b)           Except as required by law, order, rule or regulation, until the
Due Diligence Kick-Off Date, neither Buyer nor Seller shall disclose to any
person publicly or privately the existence of this Agreement or the transactions
contemplated hereby except for disclosures to the parties' respective agents,
contractors, engineers, surveyors, attorneys, and employees (each an “Authorized
Person.” Following the Due Diligence Kick-Off Date, the parties may disclose the
existence of and the parties to this Agreement, but shall continue keep the
specific terms of this Agreement and all information obtained from the other
party concerning this transaction confidential, except as required by law,
order, rule or regulation and except for disclosures to Authorized Persons.  The
obligations of the parties under this subsection shall survive the Closing,
expiration, or termination of this Agreement; provided, however, if the Closing
occurs, this provision shall no longer apply to Buyer.
 
 
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(c)           On or before ten (10) days following the Effective Date, Seller
shall provide Buyer with copies of the following documents, to the extent such
documents are in Seller’s possession or control: (i) all water stock
certificates, water diversion records, well permits and a well pumping history,
(ii) historical farming and yield information, (iii) spraying and fertilization
records for the prior three (3) years, (iv) all existing engineering reports and
crop records, (v) energy bills for the past three (3) years, (vi) all prior
environmental audits and appraisals, (vii) all written leases, licenses or
occupancy agreements affecting the Property (or, if there are any oral leases or
occupancy agreements affecting the Property, a written summary of the relevant
terms of such oral agreements, including the term and the rental amount), (viii)
all permits affecting the Property, (ix) all contracts affecting the Property,
(x) a list of irrigation equipment, (xi) copies of all Dry-Up Covenants related
to the Dry-Up Shares, and (xi) all other reports pertaining to the Property or
the Water Rights.  In addition, within fourteen (14) days following the
Effective Date, Seller shall provide a historical use affidavit with respect to
the Water Rights in a form reasonably acceptable to Seller.  In addition to the
foregoing documents, Seller shall afford Buyer access to such documents and
information regarding the Property in Seller’s possession as Buyer may
reasonably request.  Seller shall also cooperate with and assist Buyer to obtain
records that Buyer reasonably deems necessary for Buyer to evaluate the
quantity, quality and consumptive use of the Water Rights and farming history on
the Property, and shall sign a release on a form prepared by Buyer and
reasonably acceptable to Seller to have such records released to Buyer.
 
(d)           If Buyer is not satisfied with the Property for any reason or no
reason, in Buyer's sole discretion, then Buyer may terminate this Agreement by
written notice to Seller on or before the end of the Due Diligence Period,
whereupon the Deposit shall be returned to Buyer and the parties shall be
released from all further obligations hereunder, other than those which
specifically survive termination of this Agreement.  Upon the expiration of the
Due Diligence Period, if Buyer has not terminated this Agreement in accordance
with this paragraph, the Deposit shall be non-refundable to Buyer except in the
event of a Seller default or as otherwise expressly provided herein.
 
(e)           Following the Effective Date and through the Closing or until
earlier termination of the Agreement, Buyer and Buyer's authorized
representatives may enter upon the Property for any lawful purpose, including
but not limited to surveying, water rights and consumptive use evaluation, soil
testing, engineering studies, and other inspections of the Property; provided,
however, Buyer shall not damage any growing crops on the Property or
unreasonably interfere with Seller’s use and operation of the Property.
 
(f)           Buyer shall not permit claims or liens of any kind against the
Property for inspections, tests, studies or work performed on the Property at
Buyer’s request and Buyer agrees to indemnify, protect and hold Seller harmless
from and against any liability, damage, cost or expense incurred by Seller and
caused by any such inspection, test, study work, claim, or lien. This indemnity
includes Seller’s right to recover all costs and expenses incurred by Seller to
defend against any such liability, damage, cost or expense, or to enforce this
Section 4(g), including Seller’s reasonable attorney fees, legal fees and
expenses. Buyer shall further indemnify, defend and hold Seller harmless against
any claims of any person for personal injuries or property damage caused by the
presence of Buyer, or Buyer’s contractor or agents, on the Property or any work
or service performed by Buyer or by any person acting by, through or under
Buyer; provided however, Buyer shall not be liable for any damages incurred by
Seller resulting from Seller’s negligence or from the mere discovery by Buyer of
a pre-existing condition at or with regard to the Property.  In the event Buyer
does not purchase the Property, Buyer shall promptly correct any adverse
condition or damage to the Property caused by any inspection, test, work or
service performed by Buyer or any person acting by, through or under Buyer.  The
provisions of this Section 4(g) shall survive the termination of this Agreement.
 
 
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(g)           During the Due Diligence Period, Buyer and Seller will agree upon
a form of partial relinquishment of surface rights with respect to Seller’s
reserved Minerals (the “Relinquishment”) providing that, following Closing,
Seller will not (i) impair any structures, improvements or appurtenances located
or to be located on the Property, (ii) impair the lateral or sub-adjacent
support of the Property, or (iii) unreasonably interfere with Grantor's
operations or use of the surface of the Property.  The Relinquishment shall be
recorded in the real property records in each of the Counties at Closing.
 
(h)           During the Due Diligence Period and the Additional Due Diligence
Period, Buyer and Seller shall cooperate and use commercially reasonable efforts
to obtain an estoppel or other documentation from each of the Water Companies in
forms acceptable to Buyer certifying that: (i) all assessments due with respect
to the Certificated Water Rights are paid in full; (ii) the Certificated Water
Rights are validly issued and outstanding in the name of Seller; and (iii) the
Water Companies will permit the transfer of the Certificated Water Rights to
Buyer.
 
Section 6. Closing; Deliveries.
 
(a)           Closing shall occur 15 days after the expiration of the Additional
Diligence Period, or at such other time as mutually agreed upon between Buyer
and Seller (the “Closing Date”).
 
(b)           It shall be a condition of Buyer’s obligation to close that upon
written request from Buyer following the expiration of the Additional Due
Diligence Period, Seller shall have terminated, effective as of the Closing, any
Leases (as defined in Section 10(e) below) that are terminable by Seller without
penalty as landlord under such Lease.
 
(c)           At Closing:
 
(i)           Seller shall deliver or cause to be delivered into escrow with the
Escrow Agent: (A) a fully executed special warranty deed conveying the Property
to Buyer (excluding the Water Rights), a special warranty deed with respect to
the Certificated Water Rights and a quitclaim deed with respect to all Water
Rights other than the Certificated Water Rights, each in a form reasonably
acceptable to Buyer and Seller (collectively, the “Deeds”); (B) a bill of sale,
in a form reasonably acceptable to Buyer and Seller, conveying the Personal
Property; (C) original certificates representing the Certificated Water rights,
to the extent that the Water Companies provide such certificates and do not
already have such certificates in their possession; (D) any forms or documents
reasonably required to transfer all Water Rights to Buyer including assignments
acceptable to the subject Water Companies; (E) assignments of any well permits;
(F) an original executed and notarized counterpart of the Relinquishment; (G) 
possession of the Property subject to the Leases (as defined below); (H) an
assignment transferring all Leases to Buyer, in a form reasonably acceptable to
Buyer and Seller and (I) such affidavits, instruments, agreements or other
documents as may reasonably be required to complete the transactions
contemplated under this Agreement and/or satisfy the requirements of the Title
Company for issuance of the Title Policy and such additional documents as are
customary in such transactions or as may be reasonably requested by Buyer.
 
 
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(ii)           Buyer shall deliver or cause to be delivered into escrow with the
Escrow Agent: (A) the balance of the Purchase Price, calculated and adjusted as
set forth in Section 2, credited for the Deposit, and credited and debited with
applicable prorations and closing costs; (B) an original executed and notarized
counterpart of the Relinquishment; (B) such affidavits, instruments, agreements
or other documents as may reasonably be required to complete the transactions
contemplated under this Agreement and/or satisfy the requirements of the Title
Company for issuance of the Title Policy and such additional documents as are
customary in such transactions or as may be reasonably requested by Seller.
 
Section 7.  Closing Costs.  At Closing, Seller shall pay the following
costs:  (a) the base premium cost for the Title Policy, (b) recording fees for
any release of liens encumbering the Property pursuant to Section 3(e), (c) its
own attorneys' fees, (d) one-half of the transfer fees charged by the Water
Companies, if any, (e) one-half of the escrow fee and closing fee charged by the
Escrow Agent, if any, and (f) any documentary stamps or transfer tax.  At
Closing, Buyer shall pay the following costs: (v) the title insurance premiums
for any endorsements to the Title Policy and for any lender's policy, (w) its
own attorneys' fees, (x) recording fees for the Deeds, (y) one-half of the
transfer fees charged by the Water Companies, if any, (z) one-half of the escrow
fee and closing fee charged by the Escrow Agent, if any.
 
Section 8.  Taxes; Assessments; Rents.  Real and personal property taxes, rents,
water rates and utility charges shall be prorated and adjusted as of the Closing
Date.  If the Closing shall occur before the tax rate is fixed for the
then-current year, the apportionment of taxes shall be upon the basis of the tax
rate for the preceding year applied to the latest assessed valuation which
accounting shall be deemed final.  All assessments levied by the Water
Companies, if any, for the year of Closing shall be prorated and adjusted as of
the Closing Date. Seller shall be responsible for all assessments levied by the
Water Companies for the all years prior to the year of Closing and Buyer shall
be responsible for all assessments levied by the Water Companies, if any, for
the year following Closing and all years thereafter.  The obligations set forth
in this Section 8 shall survive Closing.
 
Section 9.  Default; Remedies; Liability.
 
(a)           If Buyer fails to perform any of its material obligations under
this Agreement for any reason other than default by Seller or the termination of
this Agreement as provided herein, and Buyer fails to cure the default by the
date that is five (5) business days after Seller’s delivery of written notice of
such default to Buyer, Seller may terminate this Agreement and receive the
Deposit from the Title Company as liquidated damages, as its sole and exclusive
remedy, hereby waiving all other remedies. BUYER AND SELLER AGREE THAT BASED
UPON THE CIRCUMSTANCES NOW EXISTING, KNOWN AND UNKNOWN, IT WOULD BE IMPRACTICAL
OR EXTREMELY DIFFICULT TO ESTABLISH SELLER'S DAMAGE BY REASON OF BUYER'S
DEFAULT.  ACCORDINGLY, BUYER AND SELLER AGREE THAT IT WOULD BE REASONABLE AT
SUCH TIME TO AWARD SELLER “LIQUIDATED DAMAGES” EQUAL TO THE AMOUNT OF THE
DEPOSIT.
 
 
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(b)           If Seller fails to perform any of its material obligations under
this Agreement for any reason other than default by Buyer or the termination of
this Agreement as provided for herein, and Seller fails to cure the default by
the date that is five (5) business days after Buyer’s delivery of written notice
of such default to Seller, then Buyer may; (a) enforce specific performance of
this Agreement against Seller; or (b) terminate this Agreement and receive the
Deposit from Title Company, and Seller shall reimburse Buyer for its third-party
out of pocket costs and expenses incurred in connection with this Agreement,
including reasonable attorney’s fees.
 
(c)           In addition to the foregoing remedies, in the event of any action
or litigation related to this Agreement, the prevailing party in such action or
litigation shall be awarded from the non-prevailing party its costs and
reasonable attorneys' fees.
 
(d)           If more than one entity or individual constitutes the Seller, such
parties constituting the Seller shall be jointly and severally liability for any
breach of Seller's obligations under this Agreement, including the Warranties
(as defined below) made hereunder.
 
Section 10.  Seller's Warranties; “AS IS”.  Seller hereby makes the following
representations and warranties as of the Effective Date and again as of the
Closing Date (herein collectively the “Warranties,” and each individually a
“Warranty”).  The following representations and warranties shall survive the
Closing until the date which is one (1) year following the Closing Date.
 
(a)           Seller is duly organized and validly existing under the laws of
the state of its organization.  The execution and performance of this Agreement
has been duly authorized by Seller and will not require the consent of any third
party, other than Shareholder Approval. Neither this Agreement nor the
performance of Seller hereunder shall constitute a violation of any governing
document, contractual commitment or law applicable to Seller.
 
(b)           Seller has not received written notice of, and has no knowledge
of, any pending or threatened condemnation proceedings or administrative actions
relating to the Property.
 
(c)           Seller has not received written notice of, and has no knowledge
of, any pending or threatened litigation with respect to any matter affecting
the Property.
 
(d)           Between the Effective Date and the Closing Date, Seller shall, or,
if applicable, cause its tenant farmers to, maintain the Property in good
condition and repair, and farm and ranch the Property and care for and cultivate
any crops thereon in the ordinary course of business in accordance with the
agricultural practices in the area in which the Property is located, at Seller’s
sole cost.
 
(e)           A complete list of all leases, subleases, licenses or other
occupancy agreements affecting the Property are listed on Exhibit C (the
“Leases”).   Except as disclosed to Buyer in writing, the Leases (i) are in full
force and effect, and there are no modifications or other agreements regarding
the Leases; and (ii) to Seller’s knowledge, there are no defaults by any party
under the Leases.
 
 
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(f)           Except for the Leases and as shown in the Commitment, (i) there
are no leases, subleases, licenses, contracts, or other agreements, written or
oral, regarding the Property, (ii) there are no farming leases reliant on any
diversions of any of the Water Rights, and (iii) there are no parties in
possession of or entitled to possession of the Property. From the Effective Date
through the Closing Date, Seller shall not execute or commit to enter into any
lease or contract with respect to the Property without Buyer’s prior written
approval in its sole discretion.
 
(g)           Seller has received no written notice of noncompliance of the
Property with any  applicable federal, state and local laws, statutes,
ordinances, rules and/or regulations, including, but not limited to,
environmental statutes, ordinances, rules and/or regulations (collectively,
“Applicable Laws”), and Seller has no knowledge of any such noncompliance.
 
(h)           To Seller’s knowledge, and except as may be disclosed in any
environmental report provided by Seller to Buyer, no petroleum products,
hazardous materials, hazardous substances or waste, asbestos, PCB’s and/or other
regulated substances as defined in any Applicable Laws, have been generated,
manufactured, used, disposed of, or stored on or in connection with the
Property, except for gasoline and oil contained in vehicles or above ground
storage tanks or containers and except for typical use of such materials and
chemicals ordinarily used in the operation of a ranch or farm that produces and
includes such products, crops and animals as the Property.  No underground
storage tanks are currently located on or under the Property.
 
(i)           Seller is not a “foreign person,” as defined by applicable
Internal Revenue Service rules and regulations.
 
(j)           Seller is not bankrupt or insolvent, and has not filed for and is
not involved in any voluntary or involuntary proceeding in bankruptcy under
Applicable Laws.
 
(k)           None of the information included or incorporated by reference in
the Proxy Statement or the SEC Filing will contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.  The Proxy Statements will comply as to form in all
material respects with the requirements of the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder
 
(l)           To Seller’s knowledge, except for the Dry-Up Shares, the Water
Rights are appurtenant to the Land, and have been used solely on the Land.  The
Water Rights (other than the Dry-Up Shares) have historically been used to
irrigate the Land and have not been abandoned.
 
(m)           The Certificated Water Rights are authorized to be used upon the
Land.
 
(n)           The real property described on Exhibit D constitutes all of the
real property historically irrigated with the Dry-Up Shares.
 
 
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All references in this Section 9 to “Seller’s knowledge,” or similar phrases
shall mean the actual knowledge of Mark Harding, President of Seller, without
having made, or being under any duty to make, any further inquiry with respect
to such knowledge. Seller agrees to indemnify, defend and hold harmless Buyer
from any damage, costs (including reasonable attorneys' fees), loss or liability
resulting from Seller's breach of any of the foregoing Warranties; which
indemnity shall survive Closing for a period of one (1) year.
 
Except for the Warranties set forth herein or in the documents delivered by
Seller to Buyer at Closing, Seller disclaims the making of any representations
or warranties, express or implied, regarding the Property or matters affecting
the Property, including but not limited to its physical condition, title to or
the boundaries of the Property, soil condition, hazardous waste, toxic substance
or other environmental matters, compliance with building, health, safety, land
use, environmental and zoning laws, regulations and orders, the ability to
develop the Property for any purpose, and all other information pertaining to
the Property.  Buyer, moreover, acknowledges that, except for the Warranties set
forth herein or in the documents delivered by Seller to Buyer at Closing:  (i)
Buyer has entered into this Agreement with the intention of relying upon its own
investigation of the physical, environmental, economic, and legal condition of
the Property; (ii) Buyer is not relying upon any statements, representations, or
warranties made by Seller or anyone acting or claiming to act on Seller's behalf
concerning the Property.  Except for the Warranties set forth herein or in the
documents delivered by Seller to Buyer at Closing, Buyer shall purchase the
Property in its “AS-IS, WHERE-IS” condition as of Closing, and Buyer expressly
acknowledges that, in consideration of the agreements of Seller herein, and
except as otherwise expressly specified herein or in the documents delivered in
connection with Closing, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING BUT NOT LIMITED TO ANY
WARRANTY AS TO TITLE, CONDITION, ZONING, AVAILABILITY OF ACCESS, AVAILABILITY OF
UTILITIES AND GOVERNMENTAL APPROVALS, THE LIKELY SUCCESS OF AN APPLICATION TO
CHANGE THE USE OF THE WATER DERIVED FROM THE WATER RIGHTS HABITABILITY,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY.
 
Section 11.  Condemnation.  In the event any portion of the Property is
condemned or access thereto shall be taken or proceedings or negotiation
therefor are commenced prior to Closing, if Buyer, in Buyer’s sole discretion,
determines that such taking renders the remainder of the Property unsuitable for
Buyer's purposes, and Buyer notifies Seller in writing of such conclusion prior
to Closing, then this Agreement shall terminate and the Deposit shall be
refunded to Buyer.  If this Agreement is not so terminated, the Purchase Price
shall not be affected, and (i) if a condemnation award is paid prior to Closing,
then at Closing, Seller shall assign such award to Buyer, and (ii) at Closing,
Seller shall assign all claims to Buyer, and Buyer shall have the right to
contest the condemnation of the Property and/or the award resulting therefrom.
 
Section 12.  Notice.  Any notice required by this Agreement shall be
hand-delivered, or sent in writing, postage prepaid by U.S. mail, by nationally
recognized overnight courier, by facsimile (receipt confirmed) or by electronic
mail (transmission confirmed by recipient), addressed to Buyer or Seller, to the
address set forth below.  Such notice shall be deemed given upon hand delivery,
three (3) days after mailing by U.S. Mail, upon transmission by facsimile
(receipt confirmed), one (1) day after sending by overnight courier, or upon
receipt if given by electronic mail (transmission confirmed by recipient).  For
purposes of calculating any time periods including notice deadlines under this
Agreement, if the last day therefore falls upon a Saturday, Sunday or legal
holiday, the last day shall be deemed to be the next day which is not a
Saturday, Sunday or legal holiday.  All notices shall be given to the respective
parties at
the following addresses:
 
 
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Buyer:
Arkansas River Farms, LLC
   
c/o C&A Holding Company, Inc.
   
7991 Shaffer Parkway, Suite 200
   
Littleton, CO 80127
   
Attention: Karl Nyquist
   
Fax no. 303-369-5110
   
karl@cacompanies.com
       
 with a copy to:
Brownstein Hyatt Farber Schreck, LLP
   
410 17th Street, Suite 2200
   
Denver, CO 80202
   
Attention: Noelle Riccardella, Esq.
   
Fax no.  303-223-8004
   
nriccardella@bhfs.com
       
Seller:
Pure Cycle Corporation
   
34501 E Quincy Avenue
   
Building 34, Box 10
   
Watkins, Colorado
   
Attention:  Mark W. Harding
   
Fax no.  303-292-3475
   
mharding@purecyclewater.com
         
PCY Holdings, LLC
   
34501 E Quincy Avenue
   
Building 34, Box 10
   
Watkins, Colorado
   
Attention:  Mark W. Harding
   
Fax no.  303-292-3475
   
mharding@purecyclewater.com
       
with a copy to:
Davis Graham & Stubbs LLP
   
1550 17th Street, Suite 500
   
Denver, CO 80202
   
Attention: Wanda Abel
   
Fax No. 303-893-1379
   
Wanda.abel@dgslaw.com

 
 
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Section 13.  Broker's Fees.  Buyer and Seller each represent and warrant that
they did not engage the services of any real estate broker or person that may
claim a commission or finder’s fee with respect to this transaction, and each
agrees to indemnify and hold harmless the other against any and all claims based
in whole or in part on any act of such indemnifying party for commissions, fees,
or other compensation made by any real estate broker, agent, or salesman as the
result of the sale of the Property contemplated hereby.
 
Section 14.  1031 Tax-Deferred Exchange.  The parties understand and agree that
the transaction contemplated under this Agreement may be part of a tax-deferred
exchange by one or both parties.  The parties shall cooperate in taking all
actions reasonably necessary in order to qualify this transaction for such
treatment provided it does not result in any delay or additional expense, damage
or risk to any of the parties and provided that Buyer shall not be required to
take title to any property other than the Property.  Any party desiring to
effect a tax-deferred exchange shall have the right to assign its rights and
obligations hereunder to an entity acting as Qualified Intermediary, as that
term is used in Regulations under Section 1031 of the Internal Revenue Code, for
purposes of completing the contemplated exchange, but no such assignment shall
have the effect of releasing the assignor from continuing liability for
performance of any of its obligations under this Agreement.
 
Section 15.  No Solicitation.
 
(a)           To induce Buyer to enter into this Agreement and to expend funds
conducting its due diligence review of the Property, neither Seller nor any of
its representatives will directly or indirectly execute or negotiate agreements
with or solicit inquiries or proposals from any party other than Buyer with
respect to the sale of the Property (a “Proposed Acquisition”).  Seller will
promptly notify Buyer if Seller or any of its representatives receives such
offers, inquiries or proposals.  Notwithstanding the foregoing, the Seller may,
at any time prior to receipt of Shareholder Approval, furnish information to or
enter into discussions or negotiations with any person or group that has made an
unsolicited bona fide written proposal for a Proposed Acquisition received after
the date hereof to the extent that the board of directors of Pure Cycle
determines in good faith, after consultation with its outside legal
counsel, that the failure to take such action would constitute a breach of its
fiduciary duties to the shareholders of Pure Cycle under applicable law.
 
(b)           This Agreement may be terminated by the Seller at any time prior
to the receipt of Shareholder Approval if, (i) the board of directors of Pure
Cycle has determined that a bona fide, unsolicited, written proposal for a
Proposed Acquisition constitutes a Superior Proposal (as defined in subsection
(c) below), (ii) Seller has provided Buyer with a notice of the Superior
Proposal including the terms and conditions of the Proposed Acquisition (a
“Notice of Superior Proposal”), and (iii) Pure Cycle’s board of directors, after
taking into account any modifications to the terms of this Agreement offered by
Buyer within five (5) business days following receipt of a Notice of Superior
Proposal, continues to believe that such Proposed Acquisition constitutes a
Superior Proposal.  Upon termination pursuant to this Section 14(b), the Deposit
shall immediately be returned to Buyer and Seller shall pay Buyer a break-up fee
of $2,500,000.00 (which obligation shall survive termination of this Agreement).
 
(c)           For purposes of this Agreement, “Superior Proposal” means any
unsolicited, bona fide Proposed Acquisition that the board of directors of the
Pure Cycle has determined in good faith, after consultation with its outside
legal counsel, and after taking into account the legal, financial, financing and
other aspects of such Proposed Acquisition, would result in a transaction that
is (i) more favorable, from a financial point of view, to the shareholders of
Pure Cycle (after taking into account any modifications to the terms of this
Agreement offered by Buyer) and (ii) reasonably likely to be consummated without
unreasonable delay.
 
 
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Section 16.  Miscellaneous.
 
(a)           This Agreement shall be governed by Colorado law and the parties
agree that venue for any dispute involving this Agreement shall be in the
District Court of the City and County of Denver.
 
(b)           Seller shall be responsible for all risks of damage, loss or
injury to the Property and for all property-owner liability prior to
Closing.  In the event any material damage (defined as in excess of 2% of the
Purchase Price) occurs to the Property between the Effective Date and Closing
Date, Buyer may terminate this Agreement and receive a refund of the Deposit.
 
(c)           This Agreement including its exhibits shall constitute the entire
agreement between Seller and Buyer and supersedes any other written or oral
agreements between Seller and Buyer.  This Agreement may be modified only by the
written agreement of both parties.
 
(d)           This Agreement shall be binding upon, and shall inure to the
benefit of, Seller and Buyer and their respective successors and
assigns.  Neither party may assign its interests under this Agreement without
the prior written consent of the other party; provided, however, that Buyer may
assign this Agreement to any entity owned or controlled by, or under common
control with, Buyer or Resource Land Holdings, LLC, without Seller's prior
consent.
 
(e)           This Agreement may be executed in multiple counterparts, including
a pdf or facsimile copies, each of which shall be considered to be an original
thereof.
 
(f)           Time is of the essence of this Agreement.
 
(g)           No representations or warranties pertaining to this Agreement or
any property affected by this Agreement have been made by, or shall be binding
on, any of the parties, except as expressly stated in this Agreement.
 
(h)           From and after the Closing Date, each party shall take all
appropriate action and execute, or cause to be executed, all documents,
instruments or conveyances of any kind that may be reasonably necessary or
advisable to carry out any of the provisions of this Agreement.
 

 
[signatures on following pages]
 
 
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IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the
Effective Date.

BUYER:

ARKANSAS RIVER FARMS, LLC

By: /s/ Aaron M. Patsch                                                       
Name: Aaron M. Patsch
Title:  Authorized Representative

 
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SELLER:

PURE CYCLE CORPORATION,
a Colorado corporation

By: /s/ Mark W. Harding                                                       
    Mark W. Harding, President

PCY HOLDINGS, LLC,
a Colorado limited liability company

By: Pure Cycle Corporation, its sole member

By: /s/ Mark W. Harding                                                       
    Mark W. Harding, President

 
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Exhibit A
Legal Description of the Land

(See attached)

This exhibit consists of legal descriptions of the Registrant’s Arkansas River
Valley properties consisting of approximately 14,641 acres, more or less, in the
counties of Bent, Otero and Prowers, Colorado.
 

 
A-1

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Exhibit B
List of Certificated Shares

FLCC Shares:

A.           FLCC Shares Historically Used on the Land:  See Exhibit B-1
attached.

B.           Dry-Up Shares:  See Exhibit B-2 attached.

LAWMA Shares:

An assignment was submitted to LAWMA on March 5, 2015 to transfer Certificate
339 into the name of Pure Cycle Corporation.  The new certificate number is not
yet available.

Well Permits:  See Exhibit B-3 attached.

 
B-1

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Exhibit B-1
Fort Lyon Canal Company Shares

This exhibit consists of a list of FLCC certificate numbers and the number of
shares represented by each certificate.
 
 
 

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Exhibit B-2
Dry-Up Shares

This exhibit consists of a list of FLCC certificate numbers and the number of
shares represented by each certificate.
 
 
 

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Exhibit B-3
Well Permits

This exhibit consists of a list of well permit numbers issued with respect to
the Registrant’s Property by the Office of the State Engineer of Colorado.
 
 
 

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Exhibit C
List of Leases

(see attached)

This exhibit consists of a list of Registrant’s Leases by property describing
the acreage and FLCC Shares subject to each Lease.
 
 
C-1

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Exhibit D
Legal Description of Real Property Historically
Irrigated with the Dry-Up Share

Legal descriptions for the following properties are attached:

Farm
Number
Farm
15
Farm
61
Farm
  62*
Farm
63
Farm
85
Farm
110
Farm
117
Farm
132

____________________
 
* Only the portion of Farm 62 not owned by Seller is subject to dry-up
covenants.

 
The remainder of this exhibit consists of legal descriptions of properties
historically irrigated with certain of the Registrant’s FLCC shares.
 
D-1

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