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EXHIBIT 10.2

 
SETTLEMENT AGREEMENT

This Settlement Agreement dated as of August 31, 2004, by and between PURE CYCLE
CORPORATION, a Delaware corporation (“Pure Cycle”), Thomas P. Clark (“Clark”)
and LCH, Inc., a Delaware corporation (“LCH”).
 
RECITALS
 
WHEREAS, Pure Cycle and LCH are parties to an Assignment and Assumption
Agreement in February 1991, as amended in April 1996 (the “Rangeview Water
Rights Agreement”), pursuant to which Pure Cycle is obligated to pay to LCH
proceeds of $4,000,000 it will receive from the sale of Export Water, following
payment by Pure Cycle of obligations under the Comprehensive Amendment Agreement
No. 1 (the “CAA”); and
 
WHEREAS, Pure Cycle has issued to LCH (i) a promissory note dated January 31,
1989 in the principal amount of $450,000 and (ii) a promissory note dated
February 23, 1989 in the principal amount of $500,000 (the “Notes”), which Notes
at the date hereof had accrued interest of $1,556,514; and
 
WHEREAS, each of the Notes is secured by a pledge of 1,000,000 shares
(post-split) of Pure Cycle common stock owned by Clark (the “Pledged
Collateral”) pursuant to a Pledge Agreement entered into concurrent with the
issuance by Pure Cycle of the Notes, and is payable through payment of
obligations under the Rangeview Water Rights Agreement; and
 
WHEREAS, LCH has demanded payment on the Notes, and Pure Cycle, LCH and Clark
have agreed that the Notes would be cancelled and obligations in respect of the
Rangeview Water Rights Agreement would be deemed satisfied, all on and subject
to the terms set forth herein.
 
AGREEMENT
 
NOW THEREFORE, in consideration of the mutual promises herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
 
1.  Satisfaction of Obligations under the Rangeview Water Rights Agreement,
Cancellation of Notes and Release of Pledge. Pure Cycle, Clark and LCH hereby
agree that upon payment in full of the consideration identified in Paragraph 2
hereof, (i) all obligations in respect of the Rangeview Water Rights Agreement
will be deemed satisfied in full, (ii) the Notes will be cancelled and all
principal and accrued interest thereon will be deemed fully paid and satisfied
and the Notes will be returned to Pure Cycle, marked “Paid in Full”, and
(iii) 1,693,720 shares comprising a portion of the Pledged Collateral (the
“Returned Collateral”) will be returned to Clark.
 
2.  Amount Paid in Settlement. Pure Cycle and Clark agree that the consideration
for the satisfaction of all obligations under the Rangeview Water Rights
Agreement and for the cancellation of the Notes shall be (i) Nine Hundred Fifty
Thousand Dollars and No Cents ($950,000), payable by Pure Cycle to LCH in cash,
check or wire transfer of immediately payable funds to the bank account
specified on Exhibit A attached hereto and (ii) 306,280 shares of Pure Cycle
common stock comprising a portion of the Pledged Collateral (the “Transferred
Collateral”) will be transferred to LCH by Clark pursuant to foreclosure under
the pledge (collectively, the “Consideration”). The Transferred Collateral will
have the status of restricted stock held by a non-affiliate of Pure Cycle, may
is sold under Rule 144(k) and will be issued free of any legend restricting
transfer.

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3.  Effect of Purchase. Upon payment in full by Pure Cycle of the cash component
of the Consideration and delivery by Clark of any instruments of transfer in
respect of the Transferred Collateral as may be requested by LCH, all rights or
claims of LCH relating in any way to the Notes, the Returned Collateral,
Rangeview Water Rights Agreement, or any rights to receive payments from the
sale of Export Water will be extinguished. As of the closing date, LCH shall
cease to possess any rights or claims with respect to the Notes, the Returned
Collateral or the Rangeview Water Rights Agreement and Clark shall cease to
possess any rights or claims against LCH with respect to the Transferred
Collateral.
 
4.  Representations and Warranties of Pure Cycle and Clark.
 
(a)  Authority. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. Clark has the
requisite capacity to execute, deliver and perform his obligations under this
Agreement. The execution, delivery and performance of this Agreement by the
Company has been duly authorized by the Company’s board of directors and no
other corporate action on the part of the Company or its shareholders is
necessary. This Agreement, when duly executed and delivered by the Company,
Clark and LCH, will constitute a valid and binding obligation of the Company and
Clark enforceable against the Company and Clark in accordance with its terms
except (a) as limited by applicable bankruptcy, insolvency, reorganization, or
similar laws relating to or affecting the enforcement of creditors’ rights
generally and (b) as limited by equitable principles generally.
 
(b)  Consents and Approvals, No Violations. Except for the filings, permits,
authorizations, consents, notices, and approvals as may be required under the
Securities Exchange Act of 1934, as amended (including any rules and regulations
promulgated under it, the “Exchange Act”), state securities or blue sky laws,
the execution, delivery or performance of this Agreement by the Company and
Clark or compliance by the Company and Clark with any of the provisions of this
Agreement shall not (a) conflict with or result in any breach of any provision
of the articles of incorporation, the by-laws or similar organizational
documents of the Company, (b) require any material filing by the Company or
Clark with, or permit, authorization, consent or approval of, any governmental
entity, (c) result in a material violation or breach of, or constitute a default
under, any of the terms, conditions or provisions of any agreement to which the
Company or Clark is a party or by which they may be bound or (d) violate any
order, writ, injunction, decree, or any material statute, rule or regulation
applicable to the Company or Clark or any of their respective material
properties or assets.
 
(c)  Transferred Collateral. The Transferred Collateral has been owned by Clark
since 1987 and has been pledged to LCH to secure obligations under the Notes and
the Rangeview Water Rights Agreement (the “LCH Lien”) since 1989. Clark owns the
Transferred Collateral, free and clear of any lien, encumbrance, pledge, option,
charge or assessment of any kind, other than the LCH Lien. The Transferred
Collateral, when delivered in accordance with the terms of this Agreement, will
be duly and validly issued, fully paid and nonassessable and will be free of
restrictions on transfer, other than restrictions set forth under applicable
federal and state securities laws.

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(d)  Exemption from Registration. Assuming the accuracy of the representations
set forth in Section 6(d) hereof, the transfer of the Transferred Collateral
from Clark to LCH as contemplated hereby is exempt from the registration
requirements of the Securities Act of 1933, as amended (including any rules and
regulations promulgated under it, the “Securities Act”), and the qualification
or registration requirements of applicable blue sky laws. None of the Company,
Clark nor any authorized agent acting on behalf of either of them shall take any
action hereafter that would cause the loss of such exemption.
 
(e)  NASDAQ. The Company is listed and traded on the NASDAQ Small Cap Market of
the National Association of Securities, Dealers, Inc. (the “NASDAQ”). The
Company has received no notice, either oral or written from NASDAQ stating that
the Company has failed to comply with any listing standards of the NASDAQ Small
Cap Market, and the Company has maintained all requirements for the continuation
of listing thereon.
 
5.  Representations and Warranties of LCH.
 
(a)  Authority. LCH has all requisite right, power, authority and capacity to
execute, deliver and perform this Agreement. This Agreement has been duly and
validly executed and delivered by LCH. This Agreement is the valid and binding
obligation of LCH, enforceable against LCH in accordance with its terms, except
as enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent conveyance, redemption,
reinstatement, and other laws affecting the rights or remedies of creditors
generally and (b) general principles of equity.
 
(b)  Ownership. LCH owns the Notes free and clear of any lien, encumbrance,
pledge, option, charge or assessment of any kind. LCH has not taken any action
to sell or otherwise transfer any interest in the Rangeview Water Rights
Agreement or to mortgage, hypothecate or otherwise encumber such contractual
rights, the Notes or the Pledged Collateral, or to grant any lien, pledge,
option, encumbrance, adverse interest or claim of any kind on the incidents of
ownership of the Rangeview Water Rights Agreement, the Notes or the Pledged
Collateral, including any right of first offer or other contractual obligation.
 
(c)  No Conflicts. The execution, delivery and performance by LCH of this
Agreement does not and will not: (a) conflict with, violate, result in a breach
of or constitute a default under any agreement, instrument or obligation to
which LCH is a party or by which LCH is bound; (b) conflict with or violate any
order, judgment, decree, statute, rule or regulation applicable to LCH;
(c) result in the creation or imposition of any lien against or upon the
interests being relinquished hereunder; or (d) require any consent, approval or
authorization of, or filing with, any governmental authority or any other third
party by LCH, except as may be required by U.S. federal or state securities
laws.

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(d)  Investment Matters. LCH understands that the valuation of interests in the
Rangeview Water Rights Agreement and the common stock of Pure Cycle is difficult
and that such value derives significantly from future transactions and
developments that are largely unknown and unknowable. LCH acknowledges that the
Consideration being paid hereunder represents an arms’ length negotiation among
Pure Cycle, Clark and LCH and represents the fair market value of the Rangeview
Water Rights Agreement and all principal and accrued interest due under the
Notes. LCH has read the public filings made by Pure Cycle with the Securities
and Exchange Commission (under the name Pure Cycle Corp.). In addition, LCH has
been given the opportunity to solicit from Pure Cycle all information relevant
to valuation of rights under the Rangeview Water Rights Agreement and the Notes
and regarding Pure Cycle’s business and operations, and has received all the
information requested. LCH has made an investigation of the pertinent facts
related to Pure Cycle, the common stock, and the likelihood of payment under the
Rangeview Water Rights Agreement and the Notes and has reviewed all information
regarding Pure Cycle to the extent it deems necessary in order to be fully
informed with respect thereto. LCH is taking ownership of the common stock
hereunder for its own account for the purpose of investment and not with a view
to or for sale in connection with any distribution thereof. LCH is a
sophisticated investor, knowledgeable and experienced in securities, financial
and business matters and in transactions of this nature, and has made its own
assessment of the value of Pure Cycle, the common stock, and of rights under the
Rangeview Water Rights Agreement. LCH is capable of evaluating the merits and
risks of this transaction and is able to bear a complete loss of the investment
in Pure Cycle common stock included herein. LCH understands that subsequent
events may prove that values of interests in the Rangeview Water Rights
Agreement and the common stock were higher or lower than the valuation indicated
by the Consideration paid hereunder.
 
6.  Release.
 
(a)  LCH, on behalf of itself and its officers, directors, employees,
controlling persons and agents, hereby fully and forever releases and discharges
Pure Cycle and its officers, directors, agents, employees, affiliates,
successors and predecessors from any and all claims, demands, proceedings,
causes of actions, orders, obligations, contracts, agreements, debts,
guarantees, damages, expenses, costs, attorneys’ fees and liabilities
whatsoever, whether known or unknown, suspected or unsuspected, both at law and
in equity, which LCH now has, has ever had or may hereafter have against Pure
Cycle in connection with, related to or arising out of (i) LCH’s interests in or
claims against Pure Cycle, including under the Notes, the Rangeview Water Rights
Agreement, and any interest of LCH in the Rangeview Company L.P., (ii) the
financing transactions pursuant to which LCH acquired its interest in or claim
against Pure Cycle, including in the Notes, the Rangeview Water Rights Agreement
and Rangeview Company L.P. and (iii) the business, operations, management,
financing or other matters relating to Pure Cycle.
 
(b)  Pure Cycle, on behalf of itself and its officers, directors, employees and
agents, hereby fully and forever releases and discharges LCH and its officers,
directors, agents, employees, affiliates, successors and predecessors from any
and all claims, demands, proceedings, causes of actions, orders, obligations,
contracts, agreements, debts, guarantees, damages, expenses, costs, attorneys’
fees and liabilities whatsoever, whether known or unknown, suspected or
unsuspected, both at law and in equity, which Pure Cycle now has, has ever had
or may hereafter have against LCH in connection with, related to or arising out
of (i) the financing transactions pursuant to which Pure Cycle issued the Notes
and entered into the Rangeview Water Rights Agreement and (ii) the business,
operations, management, financing, or other matters relating to Pure Cycle

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7.  Survival. Each of the covenants, representations and warranties of LCH,
Clark and Pure Cycle made herein shall survive the Closing.
 
8.  Entire Agreement; Amendments; Waivers. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or written, with
respect thereto. This Agreement may not be modified orally, but only by an
agreement in writing signed by the party against whom any waiver or amendment
may be sought to be enforced. No action taken pursuant to this Agreement and no
investigation by or on behalf of any party hereto shall be deemed to constitute
a waiver by such party of compliance with any representation, warranty, covenant
or agreement herein. The waiver by any party hereto of any condition or of a
breach of another provision of this Agreement shall not be construed as a waiver
of any other condition or subsequent breach. The waiver by any party of any part
of any condition precedent to its obligations under this Agreement shall not
preclude it from seeking redress for breach of this Agreement other than with
respect to the condition waived.
 
9.  Binding Effect. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns.
 
10.    Headings and Exhibits. The section, exhibit and other headings in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
 
11.    Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same Agreement.
 
12.    Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law of such state.

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IN WITNESS WHEREOF, the parties hereto have executed this Purchase and Sale
Agreement as of the date set forth above.
 

        PURE CYCLE CORPORATION      
   
   
    By:   /s/ Mark Harding  

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  Mark Harding, President

 

          /s/ Thomas P. Clark    

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    Thomas P. Clark               LCH, INC.      
   
   
    By:   /s/ Timothy M. Inglis  

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  Name:   Title:

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