Document:

Exhibit 10.25

 

ASSET PURCHASE AGREEMENT

 

BY AND AMONG

 

PURE CYCLE CORPORATION

 

AND

 

HIGH PLAINS A & M, LLC

 

 

May 10, 2006

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  PURCHASE AND SALE OF ASSETS

  	
  6

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Purchase
  and Sale of Assets

  	
  6

  
	
  2.2

  	
  Excluded
  Assets

  	
  8

  
	
  2.3

  	
  Assumption
  of Obligations and Liabilities

  	
  9

  
	
  2.4

  	
  Excluded
  Indebtedness

  	
  9

  
	
  2.5

  	
  Consideration

  	
  9

  
	
  2.6

  	
  Closing

  	
  15

  
	
  2.7

  	
  Closing
  Deliveries

  	
  15

  
	
  2.8

  	
  Allocation
  of Purchase Price

  	
  17

  
	
  2.9

  	
  Prorations

  	
  17

  
	
  2.10

  	
  Treatment
  of Invoices and Receipts

  	
  18

  
	
  2.11

  	
  Reports
  and Audits

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND WARRANTIES OF SELLER

  	
  20

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Organization

  	
  20

  
	
  3.2

  	
  Ownership
  and Control of Seller

  	
  20

  
	
  3.3

  	
  Authority
  Relative to This Agreement; Non-Contravention

  	
  20

  
	
  3.4

  	
  Litigation

  	
  21

  
	
  3.5

  	
  Broker’s
  or Finder’s Fees

  	
  21

  
	
  3.6

  	
  Compliance
  with Laws

  	
  22

  
	
  3.7

  	
  Environmental
  Matters

  	
  22

  
	
  3.8

  	
  Assumed
  Contracts; Debt Instruments

  	
  23

  
	
  3.9

  	
  Water
  Rights

  	
  23

  
	
  3.10

  	
  Property

  	
  23

  
	
  3.11

  	
  Insurance

  	
  24

  
	
  3.12

  	
  Taxes

  	
  24

  
	
  3.13

  	
  Financial
  Statements

  	
  24

  
	
  3.14

  	
  No
  Other Representations

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND WARRANTIES OF PURE CYCLE

  	
  25

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Organization

  	
  25

  
	
  4.2

  	
  Subsidiaries

  	
  25

  
	
  4.3

  	
  Capitalization

  	
  25

  
	
  4.4

  	
  Authority
  Relative to This Agreement; Non-Contravention

  	
  26

  
	
  4.5

  	
  Litigation

  	
  27

  
	
  4.6

  	
  SEC
  Reports; Financial Statements; Undisclosed Liabilities

  	
  27

  
	
  4.7

  	
  Absence
  of Certain Changes

  	
  28

  
	
  4.8

  	
  Cash
  Flow Projections

  	
  28

  
	
  4.9

  	
  Broker’s
  or Finder’s Fees

  	
  28

  
	
  4.10

  	
  Compliance
  with Laws

  	
  28

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  4.11

  	
  Environmental
  Matters

  	
  28

  
	
  4.12

  	
  No
  Liens or Restrictions on Payments

  	
  29

  
	
  4.13

  	
  Contracts;
  Debt Instruments

  	
  29

  
	
  4.14

  	
  Suppliers
  and Customers

  	
  29

  
	
  4.15

  	
  Capital
  Projects

  	
  30

  
	
  4.16

  	
  Insurance

  	
  30

  
	
  4.17

  	
  Taxes

  	
  30

  
	
  4.18

  	
  Corporate
  Documents

  	
  30

  
	
  4.19

  	
  Colorado
  Supreme Court Case; Use of Water Rights

  	
  31

  
	
  4.20

  	
  Independent
  Investigation

  	
  31

  
	
  4.21

  	
  Affiliate
  Status

  	
  31

  
	
  4.22

  	
  No
  Other Representations

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  SECURITY REPRESENTATIONS OF SELLER

  	
  31

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  SEC
  Reports

  	
  31

  
	
  5.2

  	
  No
  Reliance on Unauthorized Representations

  	
  31

  
	
  5.3

  	
  Investment
  Risk

  	
  31

  
	
  5.4

  	
  Unregistered
  Shares

  	
  32

  
	
  5.5

  	
  Accredited
  Investor

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  SECURITY REPRESENTATIONS OF PURE CYCLE

  	
  32

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  No
  Reliance on Unauthorized Representations

  	
  32

  
	
  6.2

  	
  Investment
  Risk

  	
  32

  
	
  6.3

  	
  Unregistered
  Shares

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  DUE DILIGENCE

  	
  33

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Title
  to Fort Lyon Water Rights

  	
  33

  
	
  7.2

  	
  Water
  Engineering Reports

  	
  34

  
	
  7.3

  	
  Physical
  Facilities Engineering Reports

  	
  34

  
	
  7.4

  	
  Title
  to Property

  	
  34

  
	
  7.5

  	
  Matters
  Not Shown by Public Records

  	
  35

  
	
  7.6

  	
  New
  Surveys

  	
  35

  
	
  7.7

  	
  Contracts

  	
  35

  
	
  7.8

  	
  Objections
  to Title and Survey

  	
  35

  
	
  7.9

  	
  Pure
  Cycle Due Diligence

  	
  36

  
	
  7.10

  	
  Seller
  Due Diligence

  	
  36

  
	
  7.11

  	
  Water
  Rights Diversion

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  COVENANTS AND OTHER AGREEMENTS

  	
  37

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Access

  	
  37

  
	
  8.2

  	
  Cooperation

  	
  37

  
	
  8.3

  	
  Confidentiality

  	
  38

  
	
  8.4

  	
  No
  Solicitation

  	
  38

  

 

ii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  8.5

  	
  Satisfaction
  of Conditions

  	
  38

  
	
  8.6

  	
  Survival;
  Indemnification

  	
  38

  
	
  8.7

  	
  Third
  Party Claim Indemnification Procedures

  	
  40

  
	
  8.8

  	
  Property
  Management Agreement

  	
  41

  
	
  8.9

  	
  Excluded
  Indebtedness

  	
  41

  
	
  8.10

  	
  Right
  of First Offer

  	
  44

  
	
  8.11

  	
  Water
  Service Agreement

  	
  45

  
	
  8.12

  	
  Condemnation

  	
  47

  
	
  8.13

  	
  Nonsolicitation
  Agreements

  	
  47

  
	
  8.14

  	
  Tax
  Matters

  	
  47

  
	
  8.15

  	
  Compliance
  with Securities Laws

  	
  48

  
	
  8.16

  	
  Rule
  144 Reporting

  	
  48

  
	
  8.17

  	
  Board
  Representation and Observation Rights

  	
  48

  
	
  8.18

  	
  Non-Public
  Information

  	
  49

  
	
  8.19

  	
  Common
  Stock Quotation

  	
  49

  
	
  8.20

  	
  Third
  Party Consents

  	
  49

  
	
  8.21

  	
  Public
  Announcements

  	
  50

  
	
  8.22

  	
  Insurance

  	
  50

  
	
  8.23

  	
  Dividends
  and Distributions

  	
  50

  
	
  8.24

  	
  Registration
  Rights Agreement

  	
  51

  
	
  8.25

  	
  Knowledge
  of False Representations

  	
  51

  
	
  8.26

  	
  Delivery
  of Fort Lyon Canal Company Certificates

  	
  51

  
	
  8.27

  	
  Brokers
  Fees

  	
  51

  
	
  8.28

  	
  Consent

  	
  51

  
	
  8.29

  	
  Sale
  of LAWMA Rights and Houses

  	
  52

  
	
  8.30

  	
  Schedules
  and Exhibits

  	
  52

  
	
  8.31

  	
  Wollert
  Enterprises, Inc

  	
  52

  
	
  8.32

  	
  Legal
  Opinions

  	
  53

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  CONDITIONS TO THE CLOSING

  	
  53

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Conditions
  to the Obligations of Each Party

  	
  53

  
	
  9.2

  	
  Additional
  Conditions to the Obligations of Seller

  	
  53

  
	
  9.3

  	
  Additional
  Conditions to the Obligations of Pure Cycle

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  TERMINATION

  	
  57

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Termination
  of Agreement

  	
  57

  
	
  10.2

  	
  Effect
  of Termination

  	
  57

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  GENERAL PROVISIONS

  	
  57

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Interpretation;
  Governing Law

  	
  57

  
	
  11.2

  	
  Construction

  	
  58

  
	
  11.3

  	
  Binding
  Effect; Assignment

  	
  58

  
	
  11.4

  	
  Notices

  	
  59

  

 

iii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  11.5

  	
  Severability

  	
  60

  
	
  11.6

  	
  Third-Party
  Beneficiaries

  	
  60

  
	
  11.7

  	
  Further
  Assurances

  	
  60

  
	
  11.8

  	
  Entire
  Agreement; Modifications

  	
  61

  
	
  11.9

  	
  Headings

  	
  61

  
	
  11.10

  	
  Counterparts

  	
  61

  
	
  11.11

  	
  Form
  1099

  	
  61

  
	
  11.12

  	
  Right
  of Offset

  	
  61

  
	
  11.13

  	
  Disclosure
  Schedules

  	
  61

  
	
  11.14

  	
  Santa
  Fe Trail

  	
  61

  

 

iv

 

LIST OF EXHIBITS AND SCHEDULES

 

	
  Exhibit A

  	
  —

  	
  Form of Seller Pledge Agreement

  
	
  Exhibit B

  	
  —

  	
  Form of Pure Cycle Pledge Agreement

  
	
  Exhibit C

  	
  —

  	
  Form of Lessee Estoppel Certificate

  
	
  Exhibit D

  	
  —

  	
  Property Management Agreement

  
	
  Exhibit E

  	
  —

  	
  Form of Lender Estoppel Certificate

  
	
  Exhibit F

  	
  —

  	
  Form of Nonsolicitation Agreement

  
	
  Exhibit G

  	
  —

  	
  Registration Rights Agreement

  
	
  Exhibit H

  	
  —

  	
  Form of Opinion of Pure Cycle’s Counsel

  
	
  Exhibit I

  	
  —

  	
  Voting Agreement

  
	
  Exhibit J

  	
  —

  	
  Form of Opinion of Seller’s Counsel

  
	
  Exhibit K

  	
  —

  	
  Form of Assignment of Contracts and Leases

  
	
   

  	
   

  	
   

  
	
  Schedule 2.1(a)

  	
  —

  	
  Fort Lyon Canal Company Shares

  
	
  Schedule 2.1(b)

  	
  —

  	
  Property Descriptions

  
	
  Schedule 2.1(e)

  	
  —

  	
  Assumed Contracts and Assumed Contracts
  Requiring Consent

  
	
  Schedule 2.2(n)

  	
  —

  	
  Excluded Assets

  
	
  Schedule 2.4

  	
  —

  	
  Excluded Indebtedness; Permitted Liens

  
	
  Schedule 2.5(b)

  	
  —

  	
  Water Taps Sold Post Execution and Prior to
  Closing

  
	
  Schedule 2.7

  	
  —

  	
  Quit Claim Wells

  
	
  Schedule 2.8

  	
  —

  	
  Purchase Price Allocations

  
	
  Schedule 3.2(a)

  	
  —

  	
  Membership and Voting Interest Ownership

  
	
  Schedule 3.2(b)

  	
  —

  	
  Outstanding Membership and Voting Interest
  Rights

  
	
  Schedule 3.3(b)

  	
  —

  	
  List of Conflicts

  
	
  Schedule
  3.3(d)

  	
  —

  	
  Required Seller Actions

  
	
  Schedule 3.4

  	
  —

  	
  Litigation

  
	
  Schedule 3.7

  	
  —

  	
  Environmental Liens

  
	
  Schedule 3.9

  	
  —

  	
  Water Rights Issues

  
	
  Schedule
  3.10

  	
  —

  	
  Property Liens

  
	
  Schedule 3.12

  	
  —

  	
  Taxes

  
	
  Schedule
  4.3(b)

  	
  —

  	
  Capitalization

  
	
  Schedule 4.5

  	
  —

  	
  Litigation

  
	
  Schedule 4.12

  	
  —

  	
  Liens and Restrictions on Payments

  
	
  Schedule 4.14

  	
  —

  	
  Material Customers and Suppliers

  
	
  Schedule 7.4

  	
  —

  	
  Title Insurance

  
	
  Schedule 8.26

  	
  —

  	
  Pledged FLCC Share Certificates

  
	
  Schedule 8.29

  	
  —

  	
  Homes

  

 

v

 

ASSET PURCHASE AGREEMENT

 

THIS
ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into effective as of the
10th day of May 2006, by and between PURE CYCLE CORPORATION, a Delaware
corporation (“Pure Cycle”); and HIGH PLAINS A & M, LLC, a Colorado limited
liability company (“Seller”).

 

RECITALS

 

A.                                   Seller is the owner of water interests in the Arkansas River and its
tributaries represented by real property interests and shares of stock in the
Fort Lyon Canal Company (the “Water Rights”). Seller also owns certain real
property in Otero, Bent and Prowers Counties, Colorado (the “Property”) which
is subject to lease arrangements permitting the lessees of the Property to farm
the property and to use the Water Rights for irrigation purposes. The Water
Rights and the Property are more particularly described on Schedule 2.1(a)
and Schedule 2.1(b) attached hereto and incorporated herein by
reference.

 

B.                                     Pure Cycle desires to acquire from Seller, and Seller desires to
transfer to Pure Cycle, all of Seller’s right, title and interest in and to the
Assets (as defined in Section 2.1) upon the terms and conditions
set forth below.

 

AGREEMENT

 

In
consideration of the mutual covenants, representations, warranties and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1                                 Definitions.

 

(a)                                  As used in this Agreement, the following terms shall have the meanings
set forth below:

 

“Affiliate”
has the meaning set forth in Rule 12b-2 of the regulations promulgated under
the Exchange Act.

 

“Bankruptcy
Event” means a Person becoming subject (whether voluntarily or involuntarily)
to proceedings as a debtor under the Bankruptcy Code of the United States, or
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

 

“Closing
Price” with respect to a share of Pure Cycle Common Stock on any day means the
daily closing price of a share as quoted on the NASDAQ Capital Market or, if
applicable, on

 

 

the
principal national securities exchange on which the Pure Cycle Common Stock is
listed, or if the Pure Cycle Common Stock is not listed, the last quoted sales
price, or, if not quoted, the average of the high bid and low asked price in
the over-the-counter market as quoted by NASDAQ or any comparable system then
in use.

 

“Code”
means the Internal Revenue Code of 1986, as amended.

 

“Environmental
Laws” means any statute, law, ordinance, regulation, rule, judgment, decree or
order of any Governmental Entity relating to any matter of pollution,
protection of the environment, environmental regulation or control regarding
Hazardous Substances.

 

“EQR”
means the measure of demand placed upon water facilities by a typical and
average single-family detached residence as determined under Rangeview’s Rules
and Regulations or in the case of an Alternative District, the equivalent
measure of demand of such Alternative District.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

“GAAP”
means accounting principles generally accepted in the United States of America.

 

“Governmental
Entity” means any court, administrative agency or commission or other federal,
state or local governmental authority or instrumentality, domestic or foreign.

 

“Hart-Scott-Rodino”
means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, codified at
15 U.S.C. § 18a.

 

“Hazardous
Substance” means any toxic or hazardous materials, wastes or substances,
defined as, or included in the definition of, “hazardous wastes,” “hazardous
materials” or “toxic substances” under any Environmental Law, including, but
not limited to, asbestos, buried contaminants, regulated chemicals, flammable
explosives, radioactive materials, polychlorinated biphenyls, petroleum and
petroleum products.

 

“Indebtedness”
means, with respect to any Person, without duplication, (A) all obligations of
such Person for borrowed money or obligations with respect to deposits or
advances of any kind to such Person, (B) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (C) all
obligations of such Person upon which interest charges are customarily or
periodically paid, (D) all obligations of such Person under conditional sale or
other title retention agreements relating to property purchased by such Person,
(E) all obligations of such Person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such Person to
creditors for raw materials, inventory, services and supplies incurred in the
ordinary course of such Person’s business), (F) all capitalized lease
obligations of such Person, (G) all obligations of others secured by any lien
on property or assets owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (H) all obligations of such
Person under interest rate or currency hedging transactions (valued at the
termination value thereof), (I) all letters of credit issued for the account of
such Person, and (J) all guarantees and arrangements having the economic effect
of a guarantee of such Person of any Indebtedness of any other Person.

 

2

 

“Lien”
means any mortgage, pledge, claim, lien, charge, encumbrance, security interest
or defect in title of any kind or nature other than Permitted Liens.

 

“Materiality
Qualifier” means any “Material Adverse Effect,” “material,” “knowledge” or
similar qualification.

 

“Permitted
Liens” means (i) those Liens listed on Schedule 2.4;
(ii) leases or similar arrangements included in the Assumed Contracts that
would not deprive Pure Cycle of any material right in respect of the Assets
(except for rights customarily granted with respect to such contracts and
arrangements); (iii) statutory liens for taxes or other governmental
charges that are not yet due and payable (whether or not disclosed);
(iv) all applicable laws and rules of any Governmental Entity;
(v) mortgages or deeds of trust filed against the Assets, and security
agreements encumbering the Assets which have been disclosed to Pure Cycle prior
to the end of the Due Diligence Period, which do not contain a “due on sale”
clause or are otherwise assumable and which relate solely to the Excluded
Indebtedness; (vi) the Excluded Indebtedness; (vii) minor
imperfections of title or encumbrances that do not materially impair the value
of use of the Assets (whether or not disclosed); and (viii) all other
items designated as Permitted Liens in this Agreement. With respect to any
Mineral Rights, the term “Permitted Liens” shall include those items set forth
above and include all routine operational agreements entered into in the
ordinary course of business, which routine operational agreements are not such
as to, individually or in the aggregate, interfere materially with the
operation, value or use of the Mineral Rights or the Assets, considered in the
aggregate. “Person” means any individual, corporation, partnership,
association, limited liability company, trust, governmental or
quasi-governmental authority or body or other entity or organization.

 

“Pure
Cycle Common Stock” means the common stock, par value 1/3 of $.01 per share, of
Pure Cycle.

 

“Pure
Cycle’s knowledge” (and words of similar effect) means the actual present and
conscious knowledge of Mark Harding or Kevin McNeill without independent
investigation.

 

“Pure
Cycle Material Adverse Effect” means an effect or effects that individually or
in the aggregate have a material adverse effect on the assets, operations or
financial condition of Pure Cycle; provided, that for purposes of this
Agreement, a Pure Cycle Material Adverse Effect shall not include changes to
the assets, operations or financial condition of Pure Cycle resulting from
(a) changes to the U.S. economy or the global economy or the industry or
markets in which Pure Cycle operates to the extent not disproportionately
affecting Pure Cycle, (b) changes in the financial, banking or securities
market conditions (including any disruption thereof) to the extent not
disproportionately affecting the Shares, (c) the announcement or disclosure
of the transactions contemplated herein, (d) general economic, regulatory
or political conditions or changes thereto in the United States or abroad to
the extent not disproportionately affecting Pure Cycle, (e) military
action or any act of terrorism or any worsening thereof, (f) compliance
with the terms of this Agreement, or (g) changes in GAAP.

 

3

 

“Pure
Cycle SEC Reports” means all forms, reports, schedules, registration
statements, and definitive proxy statements filed by Pure Cycle with the SEC
from August 31, 2005 to the date of this Agreement, but excluding any exhibits
thereto other than audited annual financial statements of Pure Cycle.

 

“Rangeview”
means the Rangeview Metropolitan District, a quasi-municipal corporation and
political subdivision of the State of Colorado.

 

“Rangeview’s
Rules and Regulations” means the rules and regulations as amended from time to
time, adopted by Rangeview acting by and through its Water Activity Enterprise.

 

“Rangeview
Water Tap Fee” means the water system development charge defined and
established in Article 12 of Rangeview’s Rules and Regulations or
equivalent charges of an Alternative District.

 

“Return”
or “Returns” means all returns, declarations of estimated tax payments,
reports, estimates, information returns and statements with respect to Taxes,
including any related or supporting information with respect to any of the
foregoing, filed or required to be filed with any Taxing Authority.

 

“SEC”
means the United States Securities and Exchange Commission.

 

“Securities
Act” means the Securities Act of 1933, as amended.

 

“Seller’s
knowledge” (and words of similar effect) means the actual present and conscious
knowledge of Mark D. Campbell, H. Hunter White III or M. Walker Baus without
independent investigation.

 

“Seller
Material Adverse Effect” means an effect or effects that individually or in the
aggregate have a material adverse effect on the Assets, operations or financial
condition of Seller; provided, that for purposes of this Agreement, a
Seller Material Adverse Effect shall not include changes to the Assets,
operations or financial condition of Seller resulting from (a) changes to
the U.S. economy or the global economy or the industry or markets in which
Seller operates to the extent not disproportionately affecting Seller, (b)
changes in the financial, banking or securities market conditions (including
any disruption thereof) to the extent not disproportionately affecting the
Assets, (c) the announcement or disclosure of the transactions contemplated
herein, (d) general economic, regulatory or political conditions or changes
thereto in the United States or abroad to the extent not disproportionately
affecting Seller, (e) military action or any act of terrorism or any worsening
thereof, or (f) compliance with the terms of this Agreement.

 

“Takeover
Proposal” means any proposal or offer (whether or not in writing) for a merger
or other business combination involving Seller or to acquire in any manner,
directly or indirectly, a material equity interest in, any voting securities
of, or a substantial portion of the assets of Seller, other than the
transaction contemplated by this Agreement.

 

“Tax”
or “Taxes” means all federal, state, local, foreign and other taxes, assessments,
duties or similar charges of any kind, including all property taxes and
payroll, employment and

 

4

 

other
withholding taxes, including any interest, penalties or additions imposed with
respect to such amounts.

 

“Taxing
Authority” means any governmental or any quasi-governmental body (including,
but not limited to, water conservation districts) exercising any taxing
authority or any other authority exercising Tax regulatory authority.

 

“Water
Tap” means the written authorization in the form of sequentially numbered tap
licenses issued by Pure Cycle to connect to water facilities, as governed by
Rangeview’s Rules and Regulations (or a comparable authorization in the case of
an Alternative District).

 

(b)                                 Each of the following terms is defined in the Section set forth
opposite such term:

 

	
  TERM

  	
   

  	
  SECTION

  
	
  Accounting Referee

  	
   

  	
  2.11(c)

  
	
  Agreement

  	
   

  	
  Opening Paragraph

  
	
  Alternative District

  	
   

  	
  2.5(b)(vii)

  
	
  Arkansas Water Rights

  	
   

  	
  8.10

  
	
  Assets

  	
   

  	
  2.1

  
	
  Assumed Contracts

  	
   

  	
  2.1(e)

  
	
  Assumed Liabilities

  	
   

  	
  2.3

  
	
  ATNP

  	
   

  	
  8.11(d)

  
	
  Bulk Sale

  	
   

  	
  2.5(b)(x)

  
	
  Closing

  	
   

  	
  2.6

  
	
  Closing Date

  	
   

  	
  2.6

  
	
  Cure Costs

  	
   

  	
  8.9(c)

  
	
  Deed Claims

  	
   

  	
  8.6(a)

  
	
  Defaulted Indebtedness

  	
   

  	
  8.9(c)

  
	
  Deficiency Notice

  	
   

  	
  2.11(b)

  
	
  Disclosure Schedules

  	
   

  	
  Art. III (First Paragraph)

  
	
  Due Diligence Period

  	
   

  	
  7.9

  
	
  Equity Holder

  	
   

  	
  8.13

  
	
  Excluded Assets

  	
   

  	
  2.2

  
	
  Excluded Indebtedness

  	
   

  	
  2.4

  
	
  Existing Surveys

  	
   

  	
  7.5

  
	
  Existing Title Policies

  	
   

  	
  7.8

  
	
  Fifth Year Purchase Consideration

  	
   

  	
  2.5(b)(iii)

  
	
  FLCC Certificates or Stock Powers

  	
   

  	
  2.7(a)(i)

  
	
  FLCC Diversion Agreement

  	
   

  	
  7.10

  
	
  Indemnified Party

  	
   

  	
  8.7

  
	
  Indemnifying Party

  	
   

  	
  8.7

  
	
  Initial Consideration

  	
   

  	
  2.5(a)

  
	
  Land Company

  	
   

  	
  8.11

  
	
  LAWMA Certificates or Stock Powers

  	
   

  	
  2.7(a)(ii)

  
	
  LAWMA Consideration

  	
   

  	
  8.29

  
	
  LAWMA Rights

  	
   

  	
  2.1(h)

  

 

5

 

	
  TERM

  	
   

  	
  SECTION

  
	
  Lender Estoppel Certificates

  	
   

  	
  8.9(f)

  
	
  Lessee Estoppel Certificate

  	
   

  	
  7.7

  
	
  Market Price

  	
   

  	
  2.5(b)(iii)

  
	
  Mineral Deeds

  	
   

  	
  2.7(a)(v)

  
	
  Mineral Rights

  	
   

  	
  2.1(i)

  
	
  Nonsolicitation Agreement

  	
   

  	
  8.13

  
	
  Post-Closing Period

  	
   

  	
  8.14(b)

  
	
  Pre-Closing Period

  	
   

  	
  8.14(b)

  
	
  Property

  	
   

  	
  Recital A and 2.1(b)

  
	
  Property Deeds

  	
   

  	
  2.7(a)(iv)

  
	
  Property Management Agreement

  	
   

  	
  8.8

  
	
  Pure Cycle

  	
   

  	
  Opening Paragraph

  
	
  Pure Cycle Diligence Notice

  	
   

  	
  7.9

  
	
  Pure Cycle Pledge Agreement

  	
   

  	
  2.5(b)(ix)

  
	
  Quit Claim Wells

  	
   

  	
  2.7(a)(x)

  
	
  Registration Rights Agreement

  	
   

  	
  8.24

  
	
  Sale Notice

  	
   

  	
  2.5(b)(xi)

  
	
  Secured Water Rights

  	
   

  	
  8.9(c)

  
	
  Seller

  	
   

  	
  Opening Paragraph

  
	
  Seller Diligence Notice

  	
   

  	
  7.10

  
	
  Seller Pledge Agreement

  	
   

  	
  2.4

  
	
  Seller’s Water Attorney

  	
   

  	
  7.1

  
	
  Settlement Statement

  	
   

  	
  2.7(a)(iv)

  
	
  Shares

  	
   

  	
  2.5(a)

  
	
  Tap Participation Fee

  	
   

  	
  2.5(b)(i)

  
	
  Title Commitments

  	
   

  	
  7.4

  
	
  Title Company

  	
   

  	
  7.4

  
	
  Title Company Undertaking

  	
   

  	
  2.7(a)(vii)

  
	
  Transaction Taxes

  	
   

  	
  8.14(a)

  
	
  Transfer Agent Letter

  	
   

  	
  2.7(b)(i)

  
	
  Valuation Firm

  	
   

  	
  2.8

  
	
  Water Rights

  	
   

  	
  Recital A and 2.1(a)

  

 

ARTICLE II

PURCHASE AND SALE OF ASSETS

 

2.1                                 Purchase and Sale of Assets. Upon the terms
and subject to the conditions set forth in this Agreement, at the Closing,
Seller agrees to sell, convey, assign, transfer and deliver to Pure Cycle, and
Pure Cycle agrees to acquire and accept from Seller, all of Seller’s right,
title and interest in and to the Water Rights and Property of Seller, free and
clear of all Liens, such Water Rights and Property being referred to herein as
the “Assets,” consisting of the following:

 

(a)                                  Seller’s right, title and interest in and to the Water Rights as
represented by shares of stock in the Fort Lyon Canal Company, all of which
shares are listed on Schedule 2.1(a);

 

6

 

(b)                                 Seller’s right, title and interest in and to all parcels of real
property owned in fee by Seller associated with the Water Rights, all of which
Property is listed on Schedule 2.1(b) attached hereto, including
legal descriptions, and all buildings, structures, fixtures and other
improvements located thereon (other than those owned by the lessees, none of
which are required for use of the Water Rights), and all rights-of-way and
similar authorizations;

 

(c)                                  Seller’s right, title and interest in and to all existing ditches,
diversion works, headgates, laterals, and tangible personal property whether or
not located on the Property used or usable for the exercise of the Water
Rights;

 

(d)                                 Seller’s right, title and interest in and to all tangible personal
property owned or leased by Seller, including all Seller owned or leased
machinery, irrigation equipment (including well motors, well pumps, gated pipe,
pipe adaptors and valves, siphon tubes, dams, and lift pumps), other equipment,
inventory, farm products, crops and livestock, located on the Property;

 

(e)                                  Seller’s right, title and interest in and to all contracts, options,
leases (including oil and gas leases, but subject to the retained 75% interest
of Seller in oil and gas interests), policies of insurance (to the extent
assignable) (other than rights in respect of Seller’s rights as a named
insured, those which are not for casualty or property loss of or related to the
Assets,  and as to claims arising due to
facts occurring on or before the Closing Date) and other agreements (excluding
any agreements related to Indebtedness) related to the Water Rights, the LAWMA
Rights, the Mineral Rights and/or the Property (the “Assumed Contracts”), all
of which are identified in Schedule 2.1(e) attached hereto (which
schedule identifies separately each Assumed Contract that requires consent of a
third-party in order to assign such Assumed Contract to Pure Cycle);

 

(f)                                    All the capital stock and other securities of Wollert Enterprises, Inc.
(for all purposes of this Agreement, the representations, warranties and covenants
of Seller shall include Wollert Enterprises, Inc. and its assets);

 

(g)                                 All shares of the Lower Arkansas Water Management Association and any
interest therein, together with any contracts, rights,  entitlements, obligations and interests
arising from or related thereto (the “LAWMA Rights”);

 

(h)                                 All shares of the Wheat Ridge Mutual Lateral Ditch Company and any
interest therein, together with any contracts, rights,  entitlements, obligations and interests
arising from or related thereto;

 

(i)                                     All shares of May Valley Water Association and any interest therein,
together with any contracts, rights, 
entitlements, obligations and interests arising from or related thereto;
and

 

(j)                                     An undivided twenty-five percent (25%) interest in Seller’s interest as
it may appear in all minerals, oil and gas or other hydrocarbons on or
associated with the Property, including all associated leases, net revenue,
royalty, overriding royalty, production payment or mineral interests covered by
such leases, operating agreements, and assignments, if any (the “Mineral Rights”).

 

7

 

2.2                                 Excluded Assets. All of the property and the
assets of Seller of any type whatsoever other than those specifically referred
to in Section 2.1 are excluded from the sale to Pure Cycle (the “Excluded
Assets”), including, without limitation, the following:

 

(a)                                  Cash and cash equivalents;

 

(b)                                 All securities owned by Seller (except the shares identified on Schedule 2.1(a));

 

(c)                                  All rights of Seller under any claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery, rights of set off and
rights of recoupment (including any such items relating to the payment of Taxes
or the Assets) other than such items related to the Assumed Contracts or the
Assets with respect to periods occurring after the Closing;

 

(d)                                 All accounts, notes or other receivables due to Seller other than any
of the foregoing related to the Assumed Contracts with respect to periods
occurring after the Closing;

 

(e)                                  Seller’s rights under contracts, indentures, guarantees, leases,
commitments and other agreements that are not Assumed Contracts;

 

(f)                                    Seller’s rights under any policies of insurance purchased by Seller, or
any benefits payable or paid thereunder, other than policies of insurance which
are Assumed Contracts;

 

(g)                                 All interests of Seller in any copyrights, patents, trademarks, trade
names and logos, together with pending applications for any of the foregoing;
all interests of Seller in any trade secrets, inventions, know how,
confidential information and other intellectual property; and all goodwill and
other general intangibles of Seller;

 

(h)                                 The charter, qualifications to conduct business as a Colorado limited
liability company, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, general ledgers, Tax
returns, seals, minute books, record books and similar documents of Seller
relating to the organization, maintenance and existence of Seller as a limited
liability company;

 

(i)                                     Any of the rights of Seller under this Agreement or any other agreement
between Seller and Pure Cycle entered into prior to, on or after the date of
this Agreement;

 

(j)                                     The High Plains Water District and any interest therein, together with
any contracts, rights,  entitlements,
obligations and interests arising from or related thereto;

 

(k)                                  Any interests in or related to water reservoirs or water in reservoirs,
other than interests which are appurtenant to the Property or part of the Water
Rights;

 

(l)                                     All rights to indemnification or payments from the lessees of the
Property for debts in existence as of the Closing Date; and

 

8

 

(m)                               An undivided seventy-five percent (75%) percent interest in Seller’s
interest in all minerals, oil and gas or other hydrocarbons on or associated
with the Property, including all associated leases, net revenue, royalty,
overriding royalty, production payment or mineral interests covered by such
leases, operating agreements, and assignments, if any; and

 

(n)                                 Any items described on Schedule 2.2(n) and (for the avoidance of
doubt) shares of FLCC owned or under contract for purchase by SW Lamar, LLC
(none of which are listed on Schedule 2.1(a)).

 

2.3                                 Assumption of Obligations and Liabilities. Upon
the terms and subject to the conditions set forth in this Agreement, at the
Closing, Pure Cycle shall assume and undertake to discharge in full:

 

(a)                                  All of the obligations and liabilities of Seller under the Assumed
Contracts arising with respect to periods from and after the Closing Date; and

 

(b)                                 All obligations and liabilities arising with respect to periods from
and after the Closing Date related to the ownership and operation of the Assets
other than the Excluded Indebtedness.

 

All of
the obligations and liabilities in this Section 2.3 shall be
referred to collectively herein as the “Assumed Liabilities.”  Other than the Assumed Liabilities, Pure
Cycle shall not assume or be bound by any obligations of Seller of any kind or
nature, contingent or otherwise, including, but not limited to, any Tax
liability related to the Assets accruing prior to the Closing, or the transfer
of the Assets (except as provided in Section 8.14(a)) or any litigation
or potential litigation disclosed on Schedule 3.4.

 

2.4                                 Excluded Indebtedness. Schedule 2.4
attached hereto identifies all material Indebtedness related to the Assets. Seller
acknowledges that it shall retain all Indebtedness related to the Assets (the “Excluded
Indebtedness”) in full and that Pure Cycle shall have no obligation with
respect thereto, except such obligations as Pure Cycle may agree to directly
with the holders of the Excluded Indebtedness. Schedule 2.4
identifies those Liens on the Assets securing Excluded Indebtedness which Pure
Cycle has agreed to permit to remain in place following the Closing. At the
Closing, and for so long thereafter as any Excluded Indebtedness is secured by
Liens on the Assets, Seller shall pledge fifty percent (50%) of the Shares to
Pure Cycle as security for Seller’s obligations under such Excluded
Indebtedness in accordance with the terms and conditions of a pledge agreement
by Seller in favor of Pure Cycle in the form attached as Exhibit A (the “Seller
Pledge Agreement”), which includes provisions concerning partial releases,
substitution of collateral, disposition of sales proceeds and other matters.

 

2.5                                 Consideration.

 

(a)                                  The initial consideration (the “Initial Consideration”) payable to
Seller for the Assets shall be the number of duly authorized, validly issued,
fully paid and non-assessable shares of Pure Cycle Common Stock (the “Shares”)
equal to the lesser of (i) the greater of (A) 2,950,000 or (B) the number
of shares of Pure Cycle Common Stock that can be issued without a vote of the
stockholders of Pure Cycle pursuant to NASDAQ Rule 4350(i)(C)(ii), but in any
event not more than 3,000,000 shares, or (ii) $56,000,000 divided by the
average of the

 

9

 

daily
Closing Prices of a share of Pure Cycle Common Stock for the twenty (20)
consecutive trading days ending two (2) business days prior to the Closing Date.
None of Pure Cycle or its officers or directors, or Seller or its Affiliates,
shall engage in any open market purchases and sales of Pure Cycle Common Stock
or derivative securities thereof, and none of Pure Cycle or its officers or
directors shall engage in any purchases (or agreements to purchase) Pure Cycle
Common Stock, during the period commencing thirty (30) trading days prior to
the projected Closing Date which is currently anticipated to be August 31,
2006, or prior to such other projected Closing Date as is agreed upon by the
parties and communicated to the relevant officers, directors and Affiliates prior
to the commencement date of the restricted trading period; provided, however,
that the foregoing shall not preclude any officer or director of Pure Cycle
from exercising stock options to purchase Pure Cycle Common Stock during such
period and further  provided that the foregoing shall not be
applicable to any director of Pure Cycle acting in such director’s fiduciary
capacity on behalf of another Person. All of the Shares to be delivered to
Seller shall be represented by shares of Pure Cycle Common Stock that have not
been registered under the Securities Act and shall not be transferable except
in compliance with SEC Rule 144 or pursuant to another exemption from the
registration requirements of Section 5 of the Securities Act. All Shares
delivered hereunder shall be appropriately adjusted to reflect any
recapitalization, reorganization, reclassification, split-up, or stock dividend
made, declared or effective with respect to the Pure Cycle Common Stock between
the date of this Agreement and the Closing. No fractional shares of Pure Cycle
Common Stock shall be issued to Seller hereunder. Any fractional share to which
Seller would otherwise be entitled shall be rounded up to the nearest whole
share.

 

(b)                                 (i)                                     Pure Cycle shall pay Seller an amount equal to ten percent (10%) of the
gross proceeds (including interest, if any) actually received by Pure Cycle
(without any discount for water credits granted by Pure Cycle), from the sale
of the first forty thousand (40,000) Water Taps issued by Pure Cycle after the
effective date of this Agreement (subject to the Closing) (the “Tap
Participation Fee”). Tap Participation Fees shall be paid by Pure Cycle to
Seller by corporate check for good funds on or before the fifteenth day of the
month following the end of the fiscal quarter in which Pure Cycle receives
payment for Water Taps subject to the Tap Participation Fee, provided that the
Tap Participation Fees in respect of the Water Taps issued by Pure Cycle after
the effective date of this Agreement and prior to the Closing (which Water Taps
shall be described on Schedule 2.5(b) to be delivered at the Closing)
for which Pure Cycle has received payment prior to the Closing shall be paid by
Pure Cycle to Seller at the Closing.

 

(ii)                                  If on the fifth anniversary date of the Closing Date the Fifth Year
Purchase Consideration (as defined below) received by Seller has not equaled or
exceeded Fifty Million Dollars ($50,000,000) for at least six (6) consecutive
months during the two-year period commencing on the third anniversary of the
Closing Date and ending on the fifth anniversary of the Closing Date, then
Seller may elect, by giving written notice of such election to Pure Cycle, to
have the Tap Participation Fee to be paid to Seller accelerated by increasing
the percentage of Water Tap proceeds paid by Pure Cycle from ten percent (10%)
to twenty percent (20%) and decreasing the corresponding remaining number of
Water Taps subject to the Tap Participation Fee by fifty percent (50%). For
example, if Pure Cycle has paid Tap Participation Fees on 10,000 Water Taps
leaving a remaining 30,000 Water Taps subject to the Tap Participation Fee at
ten percent

 

10

 

(10%), the Tap
Participation Fee shall be modified to be twenty percent (20%) of the Water Tap
proceeds for 1⁄2 of 30,000 Water Taps (or twenty percent (20%) of 15,000 Water
Taps). Nothing in this subsection (other than the adjustment set forth in this
subsection if Seller elects to increase the percentage of Water Tap proceeds
paid) shall be deemed to limit Pure Cycle’s obligation to pay the Tap
Participation Fee on the sale of the first forty thousand (40,000) Water Taps
issued by Pure Cycle after the Closing. The parties acknowledge and agree that
the determination of whether or not Seller receives consideration that equals
or exceeds Fifty Million Dollars ($50,000,000) for at least six (6) consecutive
months during the five-year period following the Closing Date affects only the
availability of Seller’s right to accelerate payment of the Tap Participation
Fee and does not constitute a cap on the consideration to which Seller is
entitled hereunder.

 

(iii)                               The term “Fifth Year Purchase Consideration” shall mean the Market
Price (as determined below) of the 2,950,000 Shares (as such number of Shares
may be adjusted pursuant to Section 2.5(a)) plus the dollar
amount of Tap Participation Fees (excluding any late payment interest paid by
Pure Cycle to Seller) paid through the date of determination but no later than
the fifth anniversary of the Closing Date. The “Market Price” of the Shares
shall be determined by taking 2,950,000 (as such number of Shares may be
adjusted pursuant to Section 2.5(a)) times the average of the daily
Closing Prices of a share of Pure Cycle Common Stock on each trading day during
any consecutive six (6) month period between the third anniversary of the
Closing Date and the fifth anniversary of the Closing Date for which the Fifth
Year Purchase Consideration is being determined.

 

(iv)                              In the event (A) of a merger, consolidation, reorganization, or
recapitalization of Pure Cycle (other than a merger, consolidation,
reorganization or recapitalization which results in the voting securities of
Pure Cycle outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) at least eighty (80%) of the combined voting power of
the voting securities of Pure Cycle or such surviving entity outstanding
immediately after such merger, consolidation, reorganization or
recapitalization), (B) all or substantially all of the assets or more than
fifty percent (50%) of the outstanding voting stock of Pure Cycle is acquired
by another Person (other than a conveyance that is solely to cause Pure Cycle to
be a holding company of an entity or entities that conduct the business
formerly conducted by Pure Cycle, and in such case such entities which have any
interest in the Assets shall be jointly and severally liable with Pure Cycle
for all Pure Cycle’s obligations hereunder), or (C) Pure Cycle suffers a
Bankruptcy Event, at a time when the full Tap Participation Fee payable under
this Section 2.5(b) has not been paid, then at the election of
Seller, made by giving written notice of such election to Pure Cycle, the Tap
Participation Fee on any remaining Water Taps shall become due and payable on
the date of any such event. If Seller so elects, the amount of Tap
Participation Fee due on such date shall be determined based on the current
applicable Tap Participation Fee percentage (i.e. 10% or 20%) times the
number of remaining Water Taps subject to the Tap Participation Fee times
the then current Rangeview Water Tap Fee. If Seller does not so elect, then
Pure Cycle shall not proceed with an event described under (A) or (B) above
unless the surviving entity or purchaser, as applicable, acquiring the Water
Rights (1) has a credit quality that is the same or

 

11

 

higher than
that of Pure Cycle and agrees to fully assume the obligations under this
Agreement as if it were Pure Cycle or (2) makes other arrangements for the
obligations hereunder which are reasonably satisfactory to Seller.

 

(v)                                 In the event of any government taking, eminent domain proceeding or
foreclosure affecting more than fifty percent (50%) of the assets of Pure
Cycle, then Seller may elect, by giving written notice of such election to Pure
Cycle, to have the Tap Participation Fee on any remaining Water Taps become due
and payable on the date of any such event. If Seller so elects, the amount of
Tap Participation Fee due on such date shall be determined based on the current
applicable Tap Participation Fee percentage (i.e. 10% or 20%) times the
number of remaining Water Taps subject to the Tap Participation Fee times
the then current Rangeview Water Tap Fee.

 

(vi)                              If Pure Cycle sells Water Taps to any Affiliate of Pure Cycle at a
discount from the Rangeview Water Tap Fee, Pure Cycle shall promptly notify
Seller of such sale and the terms thereof. Within thirty (30) days after
receipt of such notice, Seller shall elect, by giving written notice of such
election to Pure Cycle, to (A) have such sale disregarded for purposes of
aggregating the forty thousand (40,000) Water Taps on which the Tap
Participation Fee is payable, or (B) receive a Tap Participation Fee on such
sale in accordance with Section 2.5(b)(i). In the event Seller elects to
receive a Tap Participation Fee under clause (B) above in connection with Pure
Cycle’s sale of Water Taps to any Affiliate of Pure Cycle, Seller shall be
entitled to receive a Tap Participation Fee based on the then current Rangeview
Water Tap Fee. In the event Seller elects to disregard the sale under
clause (A), Seller shall be entitled to a Tap Participation Fee based on
any subsequent sales of Water Taps by such Affiliate. Such Tap Participation
Fee shall be paid by Pure Cycle unless the Affiliate undertakes such obligation
pursuant to the terms of its sale agreement with Pure Cycle; provided, however,
that Pure Cycle shall remain primarily responsible for the payment of such Tap
Participation Fee notwithstanding such undertaking.

 

(vii)                           If Pure Cycle sells Water Taps as part of a bundle of products or
services, the Tap Participation Fee payable with respect to such sale shall be
the then current Rangeview Water Tap Fee applicable to the Water Taps sold,
without giving effect to any discount on the price of the Water Taps received
by the purchaser by virtue of purchasing the bundle. Seller agrees that if Pure
Cycle provides the Water Tap purchaser financing to the purchase of taps
through installment payments, acceptance of a promissory note or other evidence
of indebtedness from the purchaser or similar seller financing arrangement,
that such a financing transaction will not be considered a sale as part of a
bundle of products or services for purposes of this Agreement. In such
instance, Seller will share in the interest or other financial accommodation
received by Pure Cycle in accordance with Section 2.5(b)(i) above.

 

(viii)                        If, prior to Pure Cycle fully discharging its obligations with respect
to payment of the Tap Participation Fee hereunder, Pure Cycle becomes
authorized to sell water taps by any water district (an “Alternative District”)
other than Rangeview, Pure Cycle shall promptly notify Seller of the receipt of
such authorization and the terms thereof. At any time after receipt of such
notice, Seller shall receive a Tap Participation

 

12

 

Fee with
respect to Pure Cycle’s sale of Water Taps pursuant to whichever district’s
(Rangeview’s or the Alternative District’s) Water Tap Fee is applicable to the
sale, and all references to “Rangeview Metropolitan District” or “Rangeview”
herein shall be deemed to be a reference to such other water district, if
applicable.

 

(ix)                                At the Closing, and until Pure Cycle has fully discharged its
obligations with respect to payment of the Tap Participation Fee hereunder,
Pure Cycle shall pledge fifty percent (50%) of the Fort Lyon Canal Company
shares and the Property associated with those pledged shares acquired from
Seller to Seller as security for Pure Cycle’s obligations with respect to
payment of the Tap Participation Fee in accordance with the terms and
conditions of a pledge agreement by Pure Cycle in favor of Seller in the form
attached as Exhibit B (the “Pure Cycle Pledge Agreement”), which
includes provisions concerning partial releases, substitution of collateral,
disposition of proceeds and other matters.

 

(x)                                   Subject to Section 2.5(b)(xi), if Pure Cycle sells a water right
to a purchaser, rather than Water Taps, for example, a gross volume of water, a
portion of the Water Rights, or shares in a ditch company or other similar
transaction (a “Bulk Sale”), then Seller shall receive a Tap Participation Fee
equal to fifty percent (50%) of Pure Cycle’s after tax net profit on the Bulk
Sale, which shall be determined by taking the total consideration actually paid
to Pure Cycle for the Bulk Sale less taxes paid on the net income associated
with the Bulk Sale and less those costs (including a reasonable overhead
allocation, but excluding the acquisition cost of the water or water right paid
to the seller thereof) which are incurred directly or indirectly to consummate
the Bulk Sale. Seller shall receive such a Tap Participation Fee only at such
time and to the extent that Pure Cycle has received payment and has after tax
net profit for the Bulk Sale. Pure Cycle will be deemed to have paid the Tap
Participation Fee for the number of Water Taps determined by dividing the Tap
Participation Fee paid by Pure Cycle to Seller by the result obtained upon
multiplying the applicable Tap Participation Fee percentage (10% or 20%) times
the then current Rangeview Water Tap Fee. An example of how this provision
shall work is set forth below:

 

(A)      Assumptions:

 

(i)                                     Total consideration paid for Bulk Sale equals $21,000,000;

 

(ii)                                  Taxes and costs incurred by Pure Cycle are $1,000,000;

 

(iii)                               The then-current Rangeview Water Tap Fee is $20,000;

 

(iv)                              The Tap Participation Fee percentage is 10%; and

 

(v)                                 A Tap Participation Fee has been paid by Pure Cycle on 10,000 Water
Taps to date. 30,000 Water Taps remain subject to the fee.

 

13

 

(B)        After tax net profit = $21,000,000 minus $1,000,000 = $20,000,000.

 

(C)        Tap Participation Fee paid pursuant to this Section 2.5(b)(x)
= 50% X $20,000,000 = $10,000,000.

 

(D)       Tap Participation Fee per tap required by Section 2.5(b)(i) =
10% X $20,000 = $2,000.

 

(E)         Number of Water Taps for which Pure Cycle is deemed to have paid the
Tap Participation Fee = Tap Participation Fee paid pursuant to this Section 2.5(b)(x)
divided by the Section 2.5(b)(i) Tap Participation Fee per tap =
$10,000,000 divided by $2,000 = 5,000 Water Taps.

 

(F)         Total Water Taps subject to future Tap Participation Fees = 30,000
minus 5,000 = 25,000.

 

The parties specifically acknowledge that
using a modified profits formula for a particular asset for determining the
payment under this provision does not make the parties partners or constitute
the formation of a partnership.

 

(xi)                                If Pure Cycle proposes to offer certain water rights for sale as a Bulk
Sale for a price per acre foot that is less than one third of the current
Rangeview Water Tap Fee, then Pure Cycle shall first offer Seller the right to
purchase such water rights at the price and on the terms specified in a written
notice (the “Sale Notice”) to Seller. Seller shall have thirty (30) days, or
longer if the parties agree, from the date of receipt of the Sale Notice to
negotiate with Pure Cycle and reach an agreement with respect to the purchase
of the water rights described in the Sale Notice. During such thirty-day (or
longer) period, Pure Cycle shall negotiate with Seller in good faith to reach
agreement on the terms of the sale. If negotiations terminate unsuccessfully,
Pure Cycle may enter into an agreement with another Person in respect of the
proposed Bulk Sale on terms and conditions which, taken as a whole, are not
more favorable to the other party than those offered to Seller; provided,
however, that if Pure Cycle does not enter into an agreement in
principle with another Person regarding the proposed Bulk Sale within one
hundred eighty (180) days and consummate the transaction contemplated by such agreement
within one (1) year after the expiration of the thirty-day period referenced
above, then prior to any subsequent attempts to offer such water rights for
Bulk Sale at a price per acre foot that is less than one third of the then
current Rangeview Tap Fee, Pure Cycle will be required to re-offer such water
rights to Seller in accordance with this Section.

 

(xii)                             If Pure Cycle sells a Water Tap for consideration other than cash, cash
equivalents (e.g., checks or wire transfers), or financing arrangements payable
in cash or cash equivalents, Pure Cycle shall pay Seller the Tap Participation
Fee based on the then current Rangeview Water Tap Fee applicable to the Water
Taps sold.

 

14

 

2.6                                 Closing. Subject to the provisions of Articles
VII, IX and X, the closing (the “Closing”) of the purchase of
the Assets and the assumption of the Assumed Liabilities hereunder shall take
place at the offices of Davis, Graham & Stubbs LLP, Suite 500,
1550 Seventeenth Street, Denver, Colorado 80202, on the second business
day following the satisfaction or waiver of all conditions to the obligations
of the parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective parties will take at the
Closing itself) or such other date as the parties may mutually determine (the “Closing
Date”); provided, however, that the parties shall use reasonable
efforts to cause the Closing Date to be no later than one hundred twenty (120)
days after the date of this Agreement. The transactions contemplated by this
Agreement, including the transfer of the Assets from Seller to Pure Cycle,
shall be deemed to have occurred at 12:01 a.m. (Denver time) on the Closing
Date.

 

2.7                                 Closing Deliveries.

 

(a)                                  At the Closing, Seller shall deliver to Pure Cycle the following
documents or instruments properly executed, and, where necessary, acknowledged
by a notary:

 

(i)                                     The certificate or certificates for the shares of Fort Lyon Canal
Company representing the Water Rights or if certificates cannot reasonably be
provided as of the Closing Date, then stock powers for such shares (the “FLCC
Certificates or Stock Powers”);

 

(ii)                                  The certificate or certificates for the shares representing the LAWMA
Rights or if certificates cannot reasonably be provided as of the Closing Date,
then stock powers for such shares (the “LAWMA Certificates or Stock Powers”);

 

(iii)                               The certificate or certificates or, if applicable, other appropriate
instruments representing the Wheat Ridge Mutual Ditch Company shares or if
certificates cannot reasonably be provided as of the Closing Date, then stock
powers for such shares;

 

(iv)                              The certificate or certificates or other appropriate instruments, if
applicable, representing the May Valley Water Association shares or if
certificates cannot reasonably be provided as of the Closing Date, then stock
powers for such shares;

 

(v)                                 The Seller Pledge Agreement and stock transfer powers with respect to
the pledged Shares;

 

(vi)                              Special warranty deeds (the “Property Deeds”) conveying the Property
(other than water wells and the Mineral Rights) to Pure Cycle and warranting
title subject only to Permitted Liens and Liens otherwise accepted by Pure
Cycle in writing;

 

(vii)                           Special warranty deeds (the “Mineral Deeds”) conveying the Mineral
Rights to Pure Cycle and warranting title subject only to Permitted Liens and
Liens otherwise accepted by Pure Cycle in accordance with Section 7.8;

 

15

 

(viii)                        A settlement statement prepared by the Title Company (the “Settlement
Statement”);

 

(ix)                                The Title Company’s unconditional written undertaking to issue the
owner’s title policy, insuring fee simple title to the Property in Pure Cycle
in accordance with the Title Commitments, subject only to the Permitted Liens
and Liens otherwise accepted by Pure Cycle in accordance with Section 7.8
(the “Title Company Undertaking”);

 

(x)                                   The Pure Cycle Pledge Agreement;

 

(xi)                                Certificates representing the shares of capital stock of Wollert
Enterprises, Inc. and stock powers transferring such shares to Pure Cycle;

 

(xii)                             Quit claim deeds to the water wells listed on Schedule 2.7 (the “Quit
Claim Wells”) (each of which was acquired by Seller by quit claim deed); and

 

(xiii)                          Such assignments, consents, instruments and agreements as are required
or contemplated herein, or as Pure Cycle or the Title Company may reasonably
require to effect the transactions contemplated hereby, including without
limitation those affidavits and agreements sufficient to enable the Title
Company to delete the standard exceptions (to the extent contemplated by
Article VII) from the Title Commitments.

 

(b)                                 At the Closing, Pure Cycle shall deliver to Seller the following
documents or instruments properly executed, and, where necessary, acknowledged
by a notary:

 

(i)                                     A letter of transmittal issued by Pure Cycle to Pure Cycle’s transfer
agent dated as of the Closing Date directing the issuance of the Shares in the
name of the Seller in two certificates, each representing one-half of the
Shares (the “Transfer Agent Letter”);

 

(ii)                                  The Settlement Statement;

 

(iii)                               Such consents, instruments and agreements as are required or
contemplated herein, or as Seller or the Title Company may reasonably require
to effect the transactions contemplated hereby, including without limitation
those affidavits and agreements sufficient to enable the Title Company to
delete the standard exceptions (to the extent contemplated by Article VII)
from the Title Commitments;

 

(iv)                              The certificate or certificates representing the Fort Lyon Canal
Company shares pledged pursuant to the Pure Cycle Pledge Agreement;

 

(v)                                 The Pure Cycle Pledge Agreement;

 

(vi)                              The Seller Pledge Agreement; and

 

(vii)                           The Tap Participation Fees in respect of the Water Taps described on Schedule
2.5(b) for which Pure Cycle has received payment prior to the Closing.

 

16

 

(c)                                  Pure Cycle shall pay all recording fees and documentary fees required
in connection with the delivery and recording of the Deeds. Seller shall pay
all recording fees required in connection with the recording of releases of any
existing encumbrances. The parties shall each pay one-half of any Title Company
escrow or closing fees, and the parties shall pay the other costs of title
insurance premiums and expenses in accordance with Section 7.4. Pure
Cycle shall pay the transfer fees imposed by the Fort Lyon Canal Company in
connection with the transfer of the Water Rights.

 

2.8                                 Allocation of Purchase Price. The parties
shall negotiate in good faith to reach an agreement with respect to how the
Initial Consideration paid pursuant to this Agreement and the Tap Participation
Fees to be paid shall be allocated among the Assets (giving effect to the value
of the Shares taking into account appropriate discounts for illiquidity,
transfer restrictions and other applicable factors) pursuant to
Section 1060 of the Code and as to the content of the IRS Form 8594 to be
filed by each of them with their next income Tax Returns within ten (10) days
following the execution date of this Agreement. If the parties are not able to
reach agreement on such matters within such ten (10) day period, Seller, after
consultation with Pure Cycle as to the firm which Seller will select, may engage
an independent business valuation firm (the “Valuation Firm”) to render its
report or opinion, for tax purposes, as to an appropriate discount from the
trading price of the Shares as of the Closing and each party agrees to
cooperate reasonably and in good faith with the Valuation Firm. Seller will be
solely responsible for the fees and expenses of the Valuation Firm. The
Valuation Firm will complete its determination of the discount within
forty-five (45) days after the execution date of this Agreement. Seller will
cause a copy of the Valuation Firm’s report or opinion to be delivered to Pure
Cycle promptly after completion of the valuation. Seller or Pure Cycle may
terminate this Agreement upon written notice to the other party given not more
than five (5) days after such party’s receipt of the Valuation Firm’s report or
opinion. If the parties are not able to agree upon the allocation of the
Initial Consideration and the Tap Participation Fees or the discount to be
applied to the value of the Shares even though an opinion or report has been
received from the Valuation Firm, either party may terminate this Agreement
upon written notice to the other party given not more than:  (i) five (5) days after the expiration
of the ten (10) day period provided in the first sentence of this Section
2.8 if no Valuation Firm is retained or (ii) as provided in the preceding
sentence. Seller and Pure Cycle agree to report the federal, state and local
income and other Tax consequences of the transactions contemplated hereby, and
in particular to report the information required by Section 1060(b) of the
Code, in a manner consistent with the agreed upon allocation, and to file all
other applicable Returns to reflect such purchase price allocation, and further
agree that neither of them will take any position inconsistent therewith upon
examination of any Return, in any refund claim, in any litigation,
investigation or otherwise.

 

2.9                                 Prorations. All Taxes and Liens with respect
to the Assets which are due as of the Closing shall be paid by Seller. All real
estate Taxes and other assessments for the year of Closing which are due and
payable in the year following the year of Closing shall be prorated as of the
Closing Date on the basis of the prior year’s real estate Taxes and other
assessments payable in the year of Closing, and such prorations shall be
considered final. Notwithstanding the foregoing, Seller shall remain
responsible for real estate Taxes and assessments (but not water allocation
expenses or water assessments) for the period set forth in the Property
Management Agreement. However, Seller shall not be liable for any increase in
those Taxes in the circumstances provided for in Section 8.14(c) and
Seller’s obligations for assessments for

 

17

 

long lived governmental or quasi-governmental
improvements to the Properties shall be as set forth in the Property Management
Agreement.

 

2.10                           Treatment of Invoices and Receipts. From and
after the Closing Date, (a) Pure Cycle agrees to (i) pay over promptly to
Seller any and all proceeds received by Pure Cycle that are attributable to (x)
the Excluded Assets or (y) the ownership and operation of the Assets prior to
the Closing Date, and (ii) forward to Seller all unpaid invoices received by
Pure Cycle that are attributable to (x) the Excluded Assets, (y) the Excluded
Indebtedness or (z) the ownership and operation of the Assets prior to the
Closing Date; and (b) Seller agrees to, except as provided in the Property
Management Agreement (i) pay over promptly to Pure Cycle any and all proceeds
that are attributable to the ownership and operation of the Assets from and
after the Closing Date, and (ii) forward all unpaid invoices received by Seller
that are attributable to the ownership and operation of the Assets or the
Assumed Liabilities from and after the Closing Date. Each party agrees to
promptly pay any invoices so received, subject to such party’s right to
reasonably dispute any such invoices.

 

2.11                           Reports and Audits.

 

(a)                                  Reports. Within fifteen (15) days after the
end of each Pure Cycle fiscal quarter in which Pure Cycle sells Water Taps or
makes a Bulk Sale, Pure Cycle shall deliver a status report to Seller that sets
forth the following information relating to the immediately preceding quarter,
on a per quarter, and a cumulative basis: (i) the number of Water Taps
actually or deemed to be sold by Pure Cycle, (ii) a description including
dollar amounts and volume of any Bulk Sale, and (iii) the Tap
Participation Fees including any Bulk Sale related amounts due to Seller. The
foregoing reports shall be delivered to Seller until such time as Seller has
received all Tap Participation Fees to which it is entitled hereunder.

 

(b)                                 Audits. Pure Cycle shall prepare and keep
full, complete and proper books, records and accounts of all Water Taps and Tap
Participation Fees (including any discounts or credits granted by Pure Cycle
and any interest on Water Tap proceeds received by Pure Cycle) and shall
document such transactions as may be required by applicable law. At any time
prior to the payment of all Tap Participation Fees to which Seller is entitled
hereunder and for six (6) months thereafter, said books, records and accounts
of Pure Cycle related to sales of water rights shall be open at Pure Cycle’s
offices during normal business hours, upon ten (10) days prior written notice,
to the inspection of Seller and its representatives, who may, at Seller’s
expense, copy or extract all or a portion of said books, records, and accounts.
In addition, Seller and its representatives may physically inspect Pure Cycle’s
facilities from time to time on reasonable prior notice to Pure Cycle in
connection with Seller’s review of such books, records and accounts and in
connection with an audit as provided below. Seller may, upon no less than
thirty (30) days prior written notice to Pure Cycle, cause a partial or
complete audit of all the records and operations of Pure Cycle related to the
Water Taps and Tap Participation Fees to be made at Seller’s expense by an
auditor selected by Seller. Within thirty (30) days following Seller’s notice,
Pure Cycle shall make available to Seller’s auditor at Pure Cycle’s offices
during normal business hours, the books, records, and accounts the auditor
reasonably deems necessary or desirable for the purpose of performing the audit.
Following completion of the audit, Seller shall submit a written report to Pure
Cycle detailing any deficiencies in the payments determined upon such
inspection or audit, if any (a “Deficiency Notice”), and such deficiency shall
be

 

18

 

immediately
due and payable by Pure Cycle together with interest thereon at the rate of ten
percent (10%) per annum from the date or dates such amounts should have been paid.
If inaccuracies resulted in a deficiency to Seller in excess of five percent
(5%) of the Tap Participation Fees previously computed by Pure Cycle for the
period covered by the audit, then Pure Cycle shall pay Seller the actual cost
of the audit. Such inspection right and audit right may be exercised no more
than one time each per fiscal year of Pure Cycle, except if the prior
inspection showed a deficiency in excess of five percent (5%), in which case an
additional inspection may commence at any time prior to the end of the third
fiscal quarter of Pure Cycle in the year following the audit period showing
such deficiency.

 

(c)                                  Disputes. If Pure Cycle disagrees with the
Deficiency Notice described in Section 2.11(b) above, then Pure Cycle
shall deliver written notice to Seller of its disagreement within thirty (30)
days of receipt of the Deficiency Notice. During the fifteen (15) days
following delivery by Pure Cycle to Seller of such notice of disagreement, Pure
Cycle and Seller shall use their reasonable efforts to reach agreement on the
disputed items or amounts in order to determine the amount of such deficiency. If
during such period, Pure Cycle and Seller are unable to reach such agreement,
they shall promptly thereafter select an independent accounting firm of
recognized national or regional standing (or if the parties cannot agree upon a
selection, they shall select such accounting firm by lot from four (4) randomly
selected accounting firms with offices in the Denver, Colorado metropolitan
area with more than 40 certified public accountants; provided that such
selected accounting firm shall not at the time of selection or the three (3)
years preceding such selection be performing services for either Pure Cycle or
Seller) (the “Accounting Referee”) to review this Agreement and the disputed
items or amounts for the purpose of calculating the deficiency (it being
understood that in making such calculation, the Accounting Referee shall be
functioning as an expert and not as an arbitrator). The Accounting Referee
shall deliver to Pure Cycle and Seller, as promptly as practicable, a report
setting forth such calculation. Such report shall be final and binding upon
Pure Cycle and Seller. The cost of such review and report shall be borne by
Pure Cycle and Seller in the same proportion that the dollar amount of the
disputed items or amounts that are not resolved in favor of Pure Cycle or
Seller (as applicable) bears to the total dollar amount of items or amounts in
dispute resolved by the Accounting Referee. For illustration purposes only, (i)
if the total amount of disputed items by Seller is $100,000 and Seller is
awarded $50,000 by the Accounting Referee, then Seller and Pure Cycle shall
bear the Accounting Referee’s fees and expenses equally; or (ii) if the total
amount of disputed items by Seller is $100,000 and Seller is awarded $25,000 by
the Accounting Referee, then Seller shall bear 75% and Pure Cycle shall bear
25% of the Accounting Referee’s fees and expenses. Each of Pure Cycle and
Seller shall bear all of its other expenses incurred in connection with matters
contemplated by this Section 2.11(c).

 

(d)                                 Audited Financial Statements. Within one
hundred twenty (120) days after the end of each fiscal year, Pure Cycle shall
deliver to Seller (i) audited financial statements of Pure Cycle (on a
consolidated basis) certified by an independent registered public accounting
firm, and (ii) a report of the chief financial officer of Pure Cycle certifying
the accuracy of items described in Section 2.11(a)(i) and (iii). This
obligation shall terminate at such time as all Tap Participation Fees have been
paid in full to Seller.

 

19

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Except
as otherwise set forth in the disclosure schedules delivered by Seller to Pure
Cycle concurrently with the execution and delivery of this Agreement (together
with the disclosure schedules delivered by Pure Cycle to Seller, the “Disclosure
Schedules”), Seller represents and warrants to Pure Cycle and agrees as
follows:

 

3.1                                 Organization. Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Colorado and has the power to own its property and to carry on its
business as now being conducted. Seller is duly qualified and in good standing
in Colorado. Seller has delivered to Pure Cycle complete and correct copies of
its articles of organization and operating agreement, each as amended to the
date of this Agreement.

 

3.2                                 Ownership and Control of Seller.

 

(a)                                  At the date hereof one hundred percent (100%) of the membership
interests and voting interests of Seller are held by the Persons and in the
amounts as set forth on Schedule 3.2(a).

 

(b)                                 Except as set forth on Schedule 3.2(b), there are not
outstanding as of the date hereof (i) membership or voting interests of
Seller, (ii) securities or other interests of Seller convertible into or
exchangeable for membership or voting interests of Seller, or
(iii) options or other rights to acquire from Seller, or other obligations
of Seller to issue, any membership or voting interests or rights convertible
into or exchangeable for membership or voting interests of Seller.

 

3.3                                 Authority Relative to This Agreement; Non-Contravention.

 

(a)                                  Seller has the requisite limited liability company power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by Seller, the performance by Seller
of its obligations hereunder and the consummation by Seller of the transactions
contemplated herein have been duly authorized by the managers and members of
Seller, and no additional proceedings on the part of Seller are necessary to
authorize the execution and delivery of this Agreement, the performance by
Seller of its obligations hereunder and the consummation by Seller of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller and constitutes a valid and binding obligation of Seller,
enforceable against it in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, reorganization or similar laws affecting the rights of
creditors generally or by general principles of equity.

 

(b)                                 Except as set forth in Schedule 3.3(b), the execution and
delivery of this Agreement by Seller, the consummation and performance by
Seller of the transactions contemplated herein, and compliance by Seller with
any of the provisions hereof will not (i) conflict with or result in any
breach of the articles of organization or operating agreement of Seller,
(ii) result in a violation or breach of any provisions of, or constitute a
default (or an event

 

20

 

which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the creation
of any Lien upon any of the Assets under, or result in the loss of a material
benefit under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, contract, lease, agreement or
other instrument or obligation of any kind to which Seller is a party or by
which Seller or any of the Assets may be bound, or any permit, concession,
franchise or license applicable to it or the Assets or (iii) conflict with
or violate any judgment, ruling, order, writ, injunction, decree, law, statute,
rule or regulation applicable to Seller or any of the Assets, other than any
such event described in items (ii) or (iii) which could not reasonably be
expected (x) to prevent the consummation of the transactions contemplated hereby
or (y) to have a Seller Material Adverse Effect.

 

(c)                                  Except for requisite filings and approvals pursuant to the
Hart-Scott-Rodino Act, no action by any Governmental Entity is necessary for
Seller’s execution and delivery of this Agreement or the consummation by Seller
of the transactions contemplated hereby, except where the failure to obtain or
take such action would not reasonably be expected (i) to prevent the
consummation of the transactions contemplated hereby or (ii) to have a Seller
Material Adverse Effect.

 

(d)                                 Except for any Hart-Scott-Rodino Act filings and approvals contemplated
by subsection (c) above or as set forth on Schedule 3.3(d), no
consents, approvals, orders, registrations, declarations, filings or
authorizations are required on the part of Seller for or in connection with the
execution and delivery of this Agreement or the consummation by Seller of the
transactions contemplated on its part hereby which could reasonably be expected
(i) to prevent the consummation of the transactions contemplated hereby or (ii)
to have a Seller Material Adverse Effect.

 

3.4                                 Litigation. Except as set forth in Schedule 3.4,
there is no suit, action, or legal, administrative, arbitration or other
proceeding or governmental investigation or review pending or, to the knowledge
of Seller, threatened, to which Seller is, or would be, a party or by which it
is or would be affected (and Seller is not aware of any basis for any such
action, suit, dispute or proceeding that has a reasonable likelihood of being brought)
which, considered individually or in the aggregate, if determined adversely to
Seller, is reasonably likely (a) to have a Seller Material Adverse Effect, (b)
to impair the ability of Seller to perform its obligations under this Agreement
or (c) to prevent the consummation of any of the transactions contemplated by
this Agreement, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against Seller having, or
which, insofar as reasonably can be foreseen, in the future would have, any
such effect. Without limiting the generality of the foregoing, except as set
forth in Schedule 3.4, there is no suit, action, dispute or legal,
administrative, arbitration or other proceeding or governmental investigation
or review pending naming Seller as a party, or, to the knowledge of Seller
threatened, which does or would affect the Assets in any material fashion (and
Seller is not aware of any basis for any such action, suit, dispute or
proceeding that has a reasonable likelihood of being brought).

 

3.5                                 Broker’s or Finder’s Fees. To Seller’s
knowledge, no agent, broker, Person or firm acting on behalf of Seller or under
Seller’s authority is or will be entitled to any advisor’s (other than lawyers,
accountants, water engineers and other similar professionals’ fees that are

 

21

 

not based on the dollar amount or outcome of
the transaction) or broker’s commission or finder’s fee from Pure Cycle or
Seller in connection with any of the transactions contemplated herein.

 

3.6                                 Compliance with Laws. Except as described in High
Plains A & M, LLC v. Southeastern Colorado Water Conservancy District,
120 P. 3d 710 (Colo. 2005), Seller has not violated or failed to comply with
any statute, law, ordinance, regulation, rule, judgment, decree or order of any
Governmental Entity applicable to its business or operations, except for
violations and failures to comply that are not, individually or in the
aggregate, reasonably expected to result in a Seller Material Adverse Effect. Seller
has not received any written communication during the past two (2) years from a
Governmental Entity that alleges that it is not in material compliance with any
applicable law.

 

3.7                                 Environmental Matters.

 

(a)                                  Except as set forth in any Phase I environmental assessments delivered
to Pure Cycle pursuant to Article VII or as set forth on Schedule 3.7,
Seller has not (i) placed or disposed of any Hazardous Substances on,
under, from or at the Property, in violation of any applicable Environmental
Laws, except for violations that could not, in all such cases, taken
individually or in the aggregate, reasonably be expected to result in a Seller
Material Adverse Effect, (ii) any knowledge of the presence of any Hazardous
Substances on, under or at any of the Property or any other property but
arising from the Property, in violation of any applicable Environmental Laws,
except for violations that could not, in all such cases taken individually or
in the aggregate, reasonably be expected to result in a Seller Material Adverse
Effect, or (iii) received any written notice (A) during the preceding five
(5) years from a Governmental Entity that Seller is in violation of, or has
failed to obtain any necessary permit or authorization under, any Environmental
Laws, (B) of the institution or pendency of any suit, action, claim, proceeding
or investigation by any Governmental Entity or any third party in connection
with any such violation or in connection with a release or threatened release
of hazardous substances at the Property or any other properties for which
Seller may be responsible, (C) requiring the response to or remediation of a
release or threatened release of Hazardous Substances at or arising from any of
the Property or any other properties for which Seller may be responsible, or
(D) demanding payment by Seller for response to or remediation of a release or
threatened release of Hazardous Substances at or arising from any of the
Property or other properties.

 

(b)                                 Except as set forth on Schedule 3.7, to Seller’s knowledge,
no Environmental Law imposes any obligation upon Seller arising out of or as a
condition to transferring the Assets to Pure Cycle, including, without
limitation, any requirement to modify or to transfer any permit or license, any
requirement to file any notice or other submission with any Governmental
Entity, the placement of any notice, acknowledgment or covenant in any land
records, or the modification of or provision of notice under any agreement,
consent order or consent decree. No Lien has been placed upon the Property
under any Environmental Law.

 

(c)                                  This Section 3.7 contains the sole and exclusive representations
and warranties of Seller with respect to any environmental, health, or safety
matters, including, but not limited to, any arising under any Environmental
Laws.

 

22

 

3.8                                 Assumed Contracts; Debt Instruments. The
Assumed Contracts constitute all of the contracts or agreements to which Seller
is a party that are material to the ownership and operation of the Assets. Each
Assumed Contract is in full force and effect and is a legal, valid and binding
agreement of Seller and, to the knowledge of Seller, of each other party
thereto, enforceable in accordance with its terms except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws affecting the rights of
creditors generally and subject to general principles of equity. Seller is not
in violation of or in default under (nor does there exist any condition which
upon the passage of time or the giving of notice would cause such a violation
of or default under) any loan or credit agreement, note, bond, mortgage, indenture,
lease, permit, concession, franchise, license or any other contract to which it
is a party or by which it or any of the Assets is bound, nor to the knowledge
of Seller is any other party to such contracts in violation of or in default
under (nor does there exist any condition which upon the passage of time or the
giving of notice would cause such a violation of or default under) any such
contracts, except for violations or defaults that could not reasonably be
expected (i) to result in a Seller Material Adverse Effect, (ii) to materially
impair the ability of Seller to perform its obligations under this Agreement or
(iii) to prevent the consummation of any of the transactions contemplated by
this Agreement.

 

3.9                                 Water Rights. Seller represents and warrants
that, except as set forth on Schedule 3.9, (a) the Water Rights are
now utilized through, within or for the benefit of the Property or related
property; (b) the Water Rights are represented by shares of stock in the Fort
Lyon Canal Company; (c) such shares are owned by Seller free and clear of Liens
other than those of the governing documents of the Fort Lyon Canal Company or
associated with Permitted Liens; (d) to Seller’s knowledge such shares are
shown by the records of the Fort Lyon Canal Company as owned by Seller; (e) the
ownership of such shares may be transferred to Pure Cycle without consent,
condition or limitation; (f) that such transfer to Pure Cycle of such shares is
not barred, limited, restricted or conditioned by any requirements imposed by
the Fort Lyon Canal Company other than the requirements of its bylaws as
applied by the board of directors of the Fort Lyon Canal Company; (g) such
shares are fully paid for (except that Seller owes sums to the transferor of
such shares to it pursuant to the Excluded Indebtedness); (h) Seller is not
indebted to the Fort Lyon Canal Company upon any past due debt, either as
principal, surety or otherwise; and (i) any assessments on any such shares of
stock have been fully paid.

 

3.10                           Property.

 

(a)                                  Seller has good and marketable title to the Property and the Mineral
Rights (provided that as to the Quit Claim Wells Seller only represents that it
has not transferred title to the Quit Claim Wells). Except as set forth on Schedule 2.4
and Schedule 3.10, the Property and the Mineral Rights are free and
clear of all Liens.

 

(b)                                 Seller has good and marketable title to, or valid leasehold interests
in, all tangible personal property owned or leased by Seller and located on the
Property (other than any tangible personal property owned or leased by the
lessees of the Property) or used
in connection with the Water Rights. All such tangible personal property, other
than tangible personal property in which Seller has a leasehold interest, is
free and clear of all Liens. The tangible personal property that has a value,
in the case of each item, of $20,000 or more is in good operating condition and
repair, ordinary wear and tear excepted, and all tangible personal property
leased

 

23

 

by
Seller is in the condition required of such property by the terms of the lease
applicable thereto during the term of such lease and upon the expiration
thereof except for such variances in the condition thereof as could not
reasonably be expected to result in a Seller Material Adverse Effect. Notwithstanding
the foregoing, Pure Cycle takes the tangible personal property subject to any
defects which would be revealed by a reasonable visual inspection conducted on
or prior to the end of the Due Diligence Period provided for in Section 7.9.

 

3.11                           Insurance. All of the policies of fire,
liability and other forms of insurance in effect as of the Closing Date with
respect to the Assets are valid and outstanding policies and provide insurance
coverage for the Assets in scope and amount customary and reasonable for the
business in which Seller is engaged and as necessary to comply, in all material
respects, with applicable laws, the Assumed Liabilities and the Excluded
Indebtedness. No notice of cancellation or termination has been received with
respect to any such policy. The activities and operations of Seller have been
conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies.

 

3.12                           Taxes.

 

(a)                                  Except as set forth in Schedule 3.12, (i) Seller has
timely filed with the appropriate Taxing Authority all Returns required to be
filed on or prior to the date hereof and each such Return was properly
completed and correct in all material respects at the time of filing, and
(ii) all Taxes including Taxes, if any, for which no Returns are required
to be filed (A) of Seller, (B) for which Seller is or could otherwise be held
liable, or (C) which are or could otherwise become chargeable as an encumbrance
upon the Assets, have been duly and timely paid, except for Taxes not yet due
and payable that are disclosed on Schedule 3.12 and except when the
failure to file Returns or pay Taxes would not reasonably be expected to have a
Seller Material Adverse Effect.

 

(b)                                 Except as set forth in Schedule 3.12, no Liens for Taxes
exist with respect to any of the Assets.

 

3.13                           Financial Statements. Seller has delivered to
Pure Cycle its financial statements for the year ended December 31, 2005 and
for the quarter ended March 31, 2006, and prior to Closing Seller shall deliver
its financial statement for the quarter ended June 30, 2006, and such
financial statements present or shall present fairly in all material respects
the financial position of Seller as of the dates thereof and the results of its
operations for the periods then ended and were or will be prepared in
accordance with GAAP applied on a consistent basis for prior periods presented.

 

3.14                           No Other Representations.

 

(a)                                  Except for the representations and warranties of Seller expressly set
forth in this Agreement, neither Seller nor any other Person makes any other
express or implied representation or warranty on behalf of Seller, in respect
of Seller, the Assets or otherwise.

 

(b)                                 EXCEPT AS SET FORTH IN THIS ARTICLE III, SELLER MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED (INCLUDING THOSE REFERRED TO IN
THE UNIFORM COMMERCIAL CODE), AND THE ASSETS SHALL

 

24

 

BE
DEEMED TO BE “AS IS, WHERE IS” ON THE CLOSING DATE, AND IN THEIR THEN PRESENT
CONDITION. IN ANY EVENT, EFFECTIVE AS OF THE CLOSING DATE, SELLER MAKES NO
WARRANTY OF MERCHANTABILITY, SUITABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
QUALITY, WITH RESPECT TO ANY OF THE TANGIBLE ASSETS INCLUDED IN THE ASSETS, OR
AS TO THE CONDITION OR WORKMANSHIP THEREOF OR THE ABSENCE OF ANY DEFECTS
THEREIN, WHETHER LATENT OR PATENT.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF PURE CYCLE

 

Except
as otherwise set forth in the Disclosure Schedules delivered by Pure Cycle to
Seller concurrently with the execution and delivery of this Agreement, Pure
Cycle represents and warrants to Seller and agrees as follows:

 

4.1                                 Organization. Pure Cycle is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Pure Cycle has the corporate power and authority to own its
property and to carry on its business as now being conducted. Pure Cycle is
duly qualified and/or licensed, as may be required, and in good standing in each
of the jurisdictions in which the nature of the business conducted by it or the
character of the property owned, leased or used by it makes such qualification
and/or licensing necessary, except in such jurisdictions where the failure to
be so qualified and/or licensed would not individually or in the aggregate have
a Pure Cycle Material Adverse Effect.

 

4.2                                 Subsidiaries. Pure Cycle does not have any
subsidiaries or an equity interest in excess of five percent (5%) in any other
corporation, partnership, joint venture, association, trust or other business
association or entity.

 

4.3                                 Capitalization.

 

(a)                                  At April 30, 2006, the authorized capital stock of Pure Cycle
consisted of (i) 40,000,000 shares of Pure Cycle Common Stock, of which
14,863,766 shares were issued and outstanding, and (ii) 25,000,000 shares of
preferred stock, par value $.01 per share, of which 432,513 shares were issued
and outstanding.

 

(b)                                 Except as set forth on Schedule 4.3(b), there are no outstanding
subscriptions, options, warrants, calls, rights or other agreements,
arrangements or commitments under which Pure Cycle is or may become obligated
to issue, sell, transfer, or otherwise dispose of, or purchase, redeem, or
otherwise acquire, any shares of capital stock of, or other equity or voting
interests in, Pure Cycle, and there are no outstanding securities convertible
into or exchangeable for any such capital stock or other equity or voting
interests.

 

(c)                                  The Shares are duly authorized and, when issued to Seller in accordance
with this Agreement, will be validly issued, fully paid and non-assessable and
will be free and clear of all Liens, and are not subject to preemptive rights
created by statute, Pure Cycle’s

 

25

 

certificate
of incorporation or by-laws or any agreement to which Pure Cycle is a party or
by which it is bound.

 

4.4                                 Authority Relative to This Agreement; Non-Contravention.

 

(a)                                  Pure Cycle has the requisite corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement by Pure Cycle, the performance by Pure Cycle of
its obligations hereunder and the consummation by Pure Cycle of the
transactions contemplated herein have been duly authorized by the board of
directors of Pure Cycle, and no other corporate proceedings on the part of Pure
Cycle are necessary to authorize the execution and delivery of this Agreement,
the performance by Pure Cycle of its obligations hereunder and the consummation
by Pure Cycle of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Pure Cycle and constitutes a valid and binding
obligation of Pure Cycle, enforceable against it in accordance with its terms,
except to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization or similar laws
affecting the rights of creditors generally or by general principles of equity.

 

(b)                                 The execution and delivery of this Agreement by Pure Cycle, the
consummation and performance by Pure Cycle of the transactions contemplated
herein, and the compliance by Pure Cycle with any of the provisions hereof will
not (i) conflict with or result in any breach of the certificate of incorporation
or by-laws of Pure Cycle, (ii) result in a violation or breach of any
provisions of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation of any Lien
upon any of the properties or assets of Pure Cycle under, or result in the loss
of a material benefit under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, contract, lease,
agreement or other instrument or obligation of any kind to which Pure Cycle is
a party or by which Pure Cycle or any of its properties or assets may be bound,
or any permit, concession, franchise or license applicable to it or its
properties or assets or (iii) subject to compliance with the statutes and
regulations referred to in subsection (d) below, conflict with or violate any
judgment, ruling, order, writ, injunction, decree, law, statute, rule or
regulation applicable to Pure Cycle or any of its properties or assets, other
than any such event described in items (ii) or (iii) that would not reasonably
be expected (x) to prevent the consummation of the transactions contemplated
hereby or (y) to have a Pure Cycle Material Adverse Effect.

 

(c)                                  Except for requisite filings and approvals pursuant to the
Hart-Scott-Rodino Act, if any, no action by any Governmental Entity is
necessary for Pure Cycle’s execution and delivery of this Agreement or the
consummation by Pure Cycle of the transactions contemplated hereby, except
where the failure to obtain or take such action would not reasonably be
expected (i) to prevent the consummation of the transactions contemplated hereby
or (ii) to have a Pure Cycle Material Adverse Effect.

 

(d)                                 Except for any Hart-Scott-Rodino Act filings and approvals contemplated
by subsection (c) above, no consents, approvals, orders, registrations,
declarations, filings or authorizations with any Governmental Entity or any
other Person are required on the part of Pure

 

26

 

Cycle
for or in connection with the execution and delivery of this Agreement or the
consummation by Pure Cycle of the transactions contemplated on its part hereby
except (i) for such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws or (ii) which could not reasonably be expected (x) to prevent
the consummation of the transactions contemplated hereby or (y) to have a Pure
Cycle Material Adverse Effect.

 

4.5                                 Litigation. Except as set forth on Schedule 4.5,
there is no suit, action, or legal, administrative, arbitration or other proceeding
or governmental investigation or review pending or, to the knowledge of Pure
Cycle, threatened, to which Pure Cycle is, or would be, a party or by which it
is or would be affected (and Pure Cycle is not aware of any basis for any such
action, suit, dispute, or proceeding that has a reasonable likelihood of being
brought) which, considered individually or in the aggregate, if determined
adversely to Pure Cycle, is reasonably likely (a) to have a Pure Cycle
Material Adverse Effect, (b) to impair the ability of Pure Cycle to
perform its obligations under this Agreement or (c) to prevent the
consummation of any of the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against Pure Cycle having, or which, insofar as
reasonably can be foreseen, in the future would have, any such effect. Without
limiting the generality of the foregoing, except as set forth on Schedule 4.5,
there is no suit, action, dispute or legal, administrative, arbitration or
other proceeding or governmental investigation or review pending naming Pure
Cycle as a party or, to the knowledge of Pure Cycle, threatened, which does or
would affect Pure Cycle’s water rights, whether owned, leased or otherwise
acquired, in any material fashion (and Pure Cycle is not aware of any basis for
any such action, suit, dispute or proceeding that has a reasonable likelihood
of being brought).

 

4.6                                 SEC Reports; Financial Statements; Undisclosed Liabilities.

 

(a)                                  Since August 31, 2004, Pure Cycle has filed all forms, reports and
other documents required to be filed by Pure Cycle with the SEC. As of their
respective dates, the Pure Cycle SEC Reports complied in all material respects
with the applicable requirements of the Securities Act, the Exchange Act and
the rules and regulations promulgated thereunder applicable to such Pure Cycle
SEC Reports and, except to the extent that information contained in any Pure
Cycle SEC Report has been revised or superseded by a later Pure Cycle SEC
Report filed and publicly available prior to the date of this Agreement, none
of the Pure Cycle SEC Reports contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

(b)                                 The financial statements of Pure Cycle included or incorporated by
reference in the Pure Cycle SEC Reports complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by the SEC) applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto) and presented fairly in all material respects the
financial position of Pure Cycle as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal closing adjustments).

 

27

 

(c)                                  Except as set forth in the financial statements included or
incorporated by reference in the Pure Cycle SEC Reports, Pure Cycle does not
have any debts, liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) other than liabilities incurred in the
ordinary course of business subsequent to February 28, 2006, and
liabilities of the type not required under GAAP to be reflected in such
financial statements, except for such items which in either case are not, in
the aggregate, material to the financial condition or operating results of Pure
Cycle.

 

4.7                                 Absence of Certain Changes. Except as set
forth in the Pure Cycle SEC Reports filed with the SEC prior to the date
hereof, since February 28, 2006, (a) no change in the business, financial
condition, properties, operating results, assets or customer base of Pure Cycle
or other event, or incident, other than the decision of Pure Cycle to purchase
the Assets, has occurred that has had or would be reasonably likely to have a
Pure Cycle Material Adverse Effect; (b) other than the decision of Pure
Cycle to purchase the Assets, Pure Cycle has operated only in the ordinary
course of business in all material respects; and (c) there has not been any
material change in any method of accounting utilized by Pure Cycle, except as
required by GAAP.

 

4.8                                 Cash Flow Projections. Pure Cycle has
delivered to Seller certain cash flow projections dated April 4, 2006
which are the same projections utilized by Pure Cycle’s management for internal
purposes. Seller acknowledges that such cash flow projections are inherently
subject to risks, uncertainties and assumptions. Pure Cycle makes no
representations or warranties as to the accuracy of such projections or that
such projections will be realized.

 

4.9                                 Broker’s or Finder’s Fees. There is no
investment banker, broker, finder or other intermediary which has been retained
by or authorized to act on behalf of Pure Cycle who might be entitled to any
fee or commission from Seller or Pure Cycle in connection with the transactions
contemplated by this Agreement.

 

4.10                           Compliance with Laws. Pure Cycle has not
violated or failed to comply with any statute, law, ordinance, regulation,
rule, judgment, decree or order of any Governmental Entity applicable to its
business or operations, except for violations and failures to comply that are
not, individually or in the aggregate, reasonably expected to result in a Pure
Cycle Material Adverse Effect. Pure Cycle has not received any written
communication during the past two (2) years from a Governmental Entity that
alleges that it is not in compliance with any applicable law, except as would
not reasonably be expected to result in a Pure Cycle Material Adverse Effect.

 

4.11                           Environmental Matters.

 

(a)                                  Pure Cycle has not (i) placed or disposed of any Hazardous Substances
on, under, from or at any of its properties in violation of any applicable
Environmental Laws, except for violations that could not, in all such cases,
taken individually or in the aggregate, reasonably be expected to result in a
Pure Cycle Material Adverse Effect, (ii) any knowledge of the presence of
any Hazardous Substances on, under or at any of its properties in violation of
any applicable Environmental Laws, except for violations that could not, in all
such cases taken individually or in the aggregate, reasonably be expected to
result in a Pure Cycle Material Adverse Effect, or (iii) received any
written notice (A) during the preceding five (5) years from a Governmental

 

28

 

Entity that Pure Cycle is in violation of, or
has failed to obtain any necessary permit or authorization under, any
Environmental Laws, (B) of the institution or pendency of any suit,
action, claim, proceeding or investigation by any Governmental Entity or any
third party in connection with any such violation or in connection with a
release or threatened release of hazardous substances at any of its properties,
(C) requiring the response to or remediation of a release or threatened
release of Hazardous Substances at or arising from any of its properties, or
(D) demanding payment by Pure Cycle for response to or remediation of a
release or threatened release of Hazardous Substances at or arising from any of
its properties. No Lien has been placed upon any of Pure Cycle’s properties
under any Environmental Law.

 

(b)                                 This Section 4.10 contains the sole and exclusive
representations and warranties of Pure Cycle with respect to any environmental,
health, or safety matters, including, but not limited to, any arising under any
Environmental Laws.

 

4.12                           No Liens or Restrictions on Payments. Except
as set forth on Schedule 4.12, Pure Cycle owns or leases, or will
own following the consummation of the transactions contemplated by this
Agreement, all water rights associated with sales of Water Taps free and clear
of all Liens, subject to no rights of others, including under any mortgages,
leases, conditional sales agreements, title retention agreements or any other
document, instrument, agreement or obligation of any type whatsoever, that
would prevent or restrict or give any Person priority over Seller with respect
to payment of the Tap Participation Fee to Seller hereunder.

 

4.13                           Contracts; Debt Instruments. The contracts
filed as exhibits to the Pure Cycle SEC Reports (by virtue of being “material
contracts” of Pure Cycle as such term is used in the rules and regulations of
the SEC) constitute all of the contracts or agreements to which Pure Cycle is a
party that are material to its business. Each such contract is in full force
and effect and is a legal, valid and binding agreement of Pure Cycle and, to
the knowledge of Pure Cycle, of each other party thereto, enforceable in
accordance with its terms except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally and
subject to general principles of equity. Pure Cycle is not in violation of or
in default under (nor does there exist any condition which upon the passage of
time or the giving of notice would cause such a violation of or default under)
any loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other contract to which it is a party or
by which it or any of its assets is bound, nor to the knowledge of Pure Cycle
is any other party to such contracts in violation of or in default under (nor
does there exist any condition which upon the passage of time or the giving of
notice would cause such a violation of or default under) any such contracts,
except for violations or defaults that could not reasonably be expected (i) to
result in a Pure Cycle Material Adverse Effect, (ii) to impair the ability of
Pure Cycle to perform its obligations under this Agreement or (iii) to prevent
the consummation of any of the transactions contemplated by this Agreement.

 

4.14                           Suppliers and Customers. Schedule 4.14
identifies each material customer and supplier of Pure Cycle. No material
customer or supplier of Pure Cycle has canceled or otherwise terminated, or
threatened, verbally or in writing, to cancel or otherwise terminate, its
relationship with Pure Cycle during the last twelve (12) months or has during
the last twelve (12) months decreased materially, or threatened to decrease or
limit materially, its services, supplies

 

29

 

or material to Pure Cycle or its usage or
purchase of the services or products from Pure Cycle, as the case may be. Pure
Cycle has not received any notification of any material change in its
arrangements with its customers or suppliers. There are no disputes between
Pure Cycle and any of its material customers or suppliers. Schedule 4.14
lists every Water Tap sold by Pure Cycle on which Seller will not receive a Tap
Participation Fee.

 

4.15                           Capital Projects. Pure Cycle has no
construction or other capital projects in progress with an estimated cost in
excess of $3,000,000, and, except as required pursuant to the contracts filed
as exhibits to the Pure Cycle SEC Reports, Pure Cycle is not required to
commence any such construction or capital projects by applicable law or
regulation or contract to which Pure Cycle is a party or by which it or its
assets are bound. Pure Cycle has no construction or other capital project
obligations under the contracts filed as exhibits to the Pure Cycle SEC Reports
other than in connection with fulfilling orders for Water Taps upon payment for
such Water Taps by the customers who are parties to such contracts.

 

4.16                           Insurance. Pure Cycle maintains policies of
fire, liability and other forms of insurance with respect to its assets, which
policies are valid and outstanding policies and provide insurance coverage for
Pure Cycle’s business and assets in scope and amount customary and reasonable
for the business in which Pure Cycle is engaged and as necessary to comply, in
all material respects, with applicable laws. No notice of cancellation or
termination has been received with respect to any such policy. The activities
and operations of Pure Cycle have been conducted in a manner so as to conform
in all material respects to all applicable provisions of such insurance
policies.

 

4.17                           Taxes.

 

(a)                                  Pure Cycle has timely filed with the appropriate Taxing Authority all
Returns required to be filed on or prior to the date hereof and each such
Return was properly completed and correct in all material respects at the time
of filing, and all Taxes including Taxes, if any, for which no Returns are
required to be filed (i) of Pure Cycle, (ii) for which Pure Cycle is or could
otherwise be held liable, or (iii) which are or could otherwise become
chargeable as an encumbrance upon any property or assets of Pure Cycle, have
been duly and timely paid, except for Taxes not yet due and payable and except
when the failure to file Returns or pay Taxes would not reasonably be expected
to have a Pure Cycle Material Adverse Effect or involve unpaid Taxes which are
due and payable as of the date hereof in the aggregate in an amount in excess
of $100,000.

 

(b)                                 No Liens for Taxes exist with respect to any of Pure Cycle’s assets
other than Taxes not yet due and payable.

 

4.18                           Corporate Documents. Pure Cycle has furnished
or made available to Seller or its representatives (a) true and correct
copies of its certificate of incorporation and by-laws, as amended to date;
(b) true and correct copies of its Code of Ethics, Audit Committee
Charter, Nominating and Corporate Governance Committee Charter, Insider Trading
Policy, Whistleblower Policy, and Stockholder Communication Policy, each as
amended to date, and (c) its minute book containing consents, actions, and
meetings of the stockholders, the board of

 

30

 

directors and any committees thereof for the
period commencing five (5) years before the date hereof.

 

4.19                           Colorado Supreme Court Case; Use of Water Rights. Pure Cycle is familiar with and has informed itself concerning (a)
the decision of the Colorado Supreme Court in High Plains A & M, LLC v.
Southeastern Colorado Water Conservancy District, 120 P. 3d 710 (Colo.
2005), and the related lower court proceedings in such matter and (b)
limitations on use of the Water Rights as a result of such decision and other
applicable law and has not relied on Seller’s information or statements on such
matters.

 

4.20                           Independent Investigation. In making the
decision to enter into this Agreement and to consummate the transactions
contemplated hereby, other than reliance on the representations, warranties, covenants
and obligations of Seller set forth in this Agreement, Pure Cycle will rely
solely on its own independent investigation, analysis and evaluation of the
Assets (including Pure Cycle’s own estimate and appraisal of the value of the
Assets). Pure Cycle confirms to Seller that Pure Cycle is sophisticated and
knowledgeable in the business in which the Assets are used and is capable of
evaluating the matters set forth above.

 

4.21                           Affiliate Status. If, on the date of this
Agreement, Seller (a) held less than ten percent (10%) of the issued and
outstanding shares of Pure Cycle Common Stock, (b) did not have an Affiliate
that was a member of Pure Cycle’s board of directors or an officer of Pure
Cycle, and (c) did not have direct or indirect control of any other capital
stock of Pure Cycle or other relationship with Pure Cycle except for the fact
that it was entering into this Agreement, Pure Cycle would not take the
position that Seller is an “affiliate” of Pure Cycle as such term is used in
SEC Rule 144.

 

4.22                           No Other Representations. Except for the
representations and warranties of Pure Cycle expressly set forth in this
Agreement, neither Pure Cycle nor any other Person makes any other express or
implied representation or warranty on behalf of Pure Cycle, in respect of the
Shares or otherwise.

 

ARTICLE V

SECURITY REPRESENTATIONS OF SELLER

 

5.1                                 SEC Reports. Seller represents that it has
received and carefully reviewed the Pure Cycle SEC Reports, and except for the
Pure Cycle SEC Reports, this Agreement and the documents described herein,
Seller has not been furnished with any materials or literature relating to the
offer and sale of Pure Cycle Common Stock.

 

5.2                                 No Reliance on Unauthorized Representations. Seller
represents that, except as set forth in this Agreement, no representations or
warranties have been made to Seller by Pure Cycle, or any agent, employee or
representative of Pure Cycle; and in entering into this transaction Seller is
not relying upon any information other than that contained in the Pure Cycle
SEC Reports, this Agreement and the results of independent investigations, if
any, by Seller.

 

5.3                                 Investment Risk. Seller represents that
(a) it is aware that no federal or state agency has made any findings or
determination as to the fairness of its investment hereunder nor

 

31

 

any recommendation or endorsement with
respect to its investment hereunder; (b) by virtue of its own investment
acumen and business experience Seller is, or together with its advisor is,
capable of evaluating the hazards and merits of participating in the investment
made by it pursuant to this Agreement; and (c) it can bear the economic
risk of its investment hereunder. Seller represents that it is acquiring the
Shares for its own account and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act.

 

5.4                                 Unregistered Shares.

 

(a)                                  Seller understands that (i) the Shares acquired hereunder have not
been registered under the Securities Act or any state securities law,
(ii) such Shares must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act and under applicable state
securities laws or is exempt from such registration, (iii) certificates
representing the Shares will bear a legend to such effect, and (iv) Pure
Cycle will cause its transfer agent to make a notation on its transfer books to
such effect.

 

(b)                                 It is understood that any legend on a certificate pursuant to Section 5.4(a)
shall be removed, and Pure Cycle shall have a certificate issued without such
legend to the holder thereof, if such legend may be properly removed under the
terms of Rule 144 promulgated under the Securities Act, or if the holder
of the certificate provides Pure Cycle with an opinion of counsel for such
holder, reasonably satisfactory to legal counsel for Pure Cycle to the effect
that a sale, transfer or assignment of such securities may be made and that the
legend is no longer required.

 

5.5                                 Accredited Investor. Seller represents that it
is an “accredited investor” as such term is defined in Rule 501(a) of the
Securities Act and that it was not organized for the specific purpose of
acquiring the Shares to be issued hereunder.

 

ARTICLE VI

SECURITY REPRESENTATIONS OF PURE CYCLE

 

6.1                                 No Reliance on Unauthorized Representations. Pure
Cycle represents that, except as set forth in this Agreement, no
representations or warranties have been made to Pure Cycle by Seller or any
agent, employee or representative of Seller; and in entering into this
transaction Pure Cycle is not relying upon any information other than that
contained in or provided pursuant to the terms of this Agreement and the
results of independent investigations, if any, by Pure Cycle.

 

6.2                                 Investment Risk. Pure Cycle represents that
(a) it is aware that no federal or state agency has made any findings or
determination as to the fairness of its investment in the Water Rights nor any
recommendation or endorsement with respect to its investment hereunder;
(b) by virtue of its own investment acumen and business experience Pure
Cycle is, or together with its advisors is, capable of evaluating the hazards
and merits of participating in the investment in the Water Rights made by it
pursuant to this Agreement; and (c) it can bear the economic risk of its
investment in the Water Rights hereunder.

 

32

 

6.3                                 Unregistered Shares.

 

(a)                                  Pure Cycle understands that (i) the Water Rights acquired
hereunder have not been registered under the Securities Act or any state
securities law, (ii) such Water Rights must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and under
applicable state securities laws or is exempt from such registration, and
(iii) certificates representing the Water Rights may bear a legend to such
effect. Pure Cycle represents that it is acquiring the Water Rights for its own
account, for investment and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act.

 

(b)                                 Pure Cycle further understands that the Water Rights are “restricted
securities” as defined in SEC Rule 144. Pure Cycle understands the resale
limitations imposed by the Securities Act and is familiar with SEC Rule 144 as
presently in effect and the conditions that must be met in order for SEC Rule
144 to be available for resale of “restricted securities,” including the
requirement that the securities must generally be held for at least one (1)
year after purchase thereof prior to resale (or two (2) years in the absence of
publicly available information about the issuer) and the condition that there
be available to the public current information about the issuer under certain
circumstances. Pure Cycle understands that Fort Lyon Canal Company may not make
such information available to the public.

 

ARTICLE VII

DUE DILIGENCE

 

7.1                                 Title to Fort Lyon Water Rights. Within ten
(10) days after the effective date of this Agreement, Seller shall furnish to
Pure Cycle, at Seller’s cost and expense, all of the documents in Seller’s
possession or control pertaining to or affecting title to the Water Rights,
together with (a) a preliminary abstract of title pertaining to the Water
Rights (if obtainable by Seller’s best efforts) (which abstract shall be
certified to recent date and shall be certified to the Closing Date) and
(b) to Seller’s knowledge, a current copy of the articles of incorporation
and bylaws of Fort Lyon Canal Company and any resolutions, conditions or other
documents adopted by Fort Lyon Canal Company applicable to the Water Rights, as
well as any agreements between Seller and Fort Lyon Canal Company. Seller will
use good faith efforts to furnish to Pure Cycle within forty-five (45) days
after the effective date of this Agreement, at Seller’s cost and expense, a
current title opinion with respect to the Water Rights by a water attorney
employed by Seller, which may be, at Seller’s election, Harvey W. Curtis &
Associates or another attorney of Seller’s choice reasonably acceptable to Pure
Cycle (“Seller’s Water Attorney”), which opinion shall be updated and
redelivered as of the Closing Date and copies of all documents not appearing in
the abstract(s) which were utilized or relied upon by Seller’s Water Attorney
in preparing this opinion. If Pure Cycle receives the original opinion of
Seller’s Water Attorney (rather than the updated opinion to be redelivered as
of the Closing Date) fewer than twenty (20) days prior to the expiration of the
Due Diligence Period, Pure Cycle shall have twenty (20) days after receipt of
the opinion to review and object solely thereto (without regard for the
expiration of the Due Diligence Period). Pure Cycle shall notify Seller in
writing of any objection to the opinion of Seller’s Water Attorney within such
twenty (20) day period, provided that Pure Cycle shall use reasonable efforts
to notify Seller of any such objections prior to the expiration to the

 

33

 

Due Diligence Period. If Seller receives
timely written notice of objections to Seller’s Water Attorney’s opinion from
Pure Cycle, it shall within fifteen (15) days of receipt of such notice, either
(i) notify Pure Cycle in writing that Seller is unable or unwilling to remove
or satisfy the matters raised in Pure Cycle’s written objection, in which case
Pure Cycle shall elect by written notice to Seller within ten (10) days of
receipt of Seller’s notice to terminate this Agreement or be deemed to have
waived such objection (and in the case of such waiver, those matters shall
become Permitted Liens); or (ii) notify Pure Cycle of Seller’s intent to remove
or satisfy the objection within such time as may be reasonably required by
Seller to effect the removal or satisfaction, in which case Seller shall be
entitled to an appropriate extension of the Closing Date, but in no event
longer than sixty (60) days. Pure Cycle shall be deemed to have consented to
such extension of time to cure in favor of Seller. If Seller fails to remove or
satisfy the objection within the time specified (and Pure Cycle does not waive
its objection thereto), this Agreement shall terminate and the provisions of Section 10.2
shall apply.

 

7.2                                 Water Engineering Reports. Seller has provided
to Pure Cycle, and Pure Cycle hereby acknowledges receipt thereof, the
appendices to a preliminary draft of a water engineering report dated
August 13, 2003 prepared by Leonard Rice Engineers, Inc., Martin and Wood
Water Consultants, Inc. and Hajj Water Engineers, Inc. Within ten (10) days
after the effective date of this Agreement, Seller shall furnish to Pure Cycle,
at Seller’s cost and expense, the preliminary draft engineering report that
accompanies the previously delivered appendices and any other water engineering
reports in Seller’s possession with respect to the Water Rights.

 

7.3                                 Physical Facilities Engineering Reports. Within
ten (10) days after the effective date of this Agreement, Seller shall furnish
to Pure Cycle, at Seller’s cost and expense, any engineering reports in Seller’s
possession related to physical facilities and transportation systems to deliver
the Water Rights to alternative markets including the Denver metropolitan area.

 

7.4                                 Title to Property. Within ten (10) days after
the effective date of this Agreement, Seller shall furnish to Pure Cycle, at
Seller’s cost and expense, copies of all title insurance policies received by
Seller in connection with its purchase of the Property and copies of all
recorded documents listed as exceptions to those title policies to the extent
the same are in Seller’s possession. Within forty (40) days after the effective
date of this Agreement, Seller shall furnish to Pure Cycle, at Seller’s cost
and expense, a current commitment or commitments for an ALTA-1992 form owner’s
policy of title insurance (the “Title Commitments”) to be issued by Stewart
Title (the “Title Company”) committing to insure in Pure Cycle, in amounts
equal to the amounts of title insurance that High Plains obtained when it purchased
the Property, which amounts are set forth on Schedule 7.4, good and
marketable fee simple title to the Property upon Closing subject only to
Permitted Liens. Seller shall also cause Title Company to furnish Pure Cycle
with copies of all recorded documents listed as exceptions on Schedule B-2
of the Title Commitments and with a current certificate of taxes due. Seller
shall use reasonable efforts to cause the Title Company to begin delivering
Title Commitments and exception documents prior to the end of the forty (40)
day period specified above. The costs of the Title Commitments and owner’s
policy shall be paid by Seller, excluding the cost of deletion of the standard
printed exceptions (to the extent Pure Cycle elects to have them deleted), any
insured closing letter or any charges for additional title endorsements
requested by Pure Cycle, all of which shall be paid by Pure Cycle.

 

34

 

7.5                                 Matters Not Shown by Public Records. Within
ten (10) days after the effective date of this Agreement, Seller shall furnish
to Pure Cycle, at Seller’s cost and expense, (a) copies of those plans,
drawings, reports, appraisals, evaluations and surveys pertaining to the
Property in Seller’s possession, including copies of each of the land survey
plats obtained by Seller in connection with Seller’s acquisition of the
Property (the “Existing Surveys”), and (b) copies of all easements, liens
and other title matters that are not shown by the public record of which Seller
has documented evidence in its possession. In addition, Seller shall disclose
to Pure Cycle any title matters of which Seller has knowledge that are not
shown by the public record and that are not evidenced by documents in Seller’s
possession.

 

7.6                                 New Surveys. Pure Cycle, at its election,
cost, and expense, may engage a professional land surveyor licensed in the
State of Colorado to prepare and deliver an ALTA/ASCM land title survey of the
Property. Seller agrees to cooperate and use its reasonable efforts to cause
its lessees to cooperate with any surveyor engaged by Pure Cycle pursuant to
this provision.

 

7.7                                 Contracts. Within ten (10) days after the
effective date of this Agreement, Seller shall furnish to Pure Cycle, at Seller’s
cost and expense, a copy of each Assumed Contract. Seller shall use reasonable
efforts to obtain an estoppel certificate, dated within thirty (30) days prior
to the Closing Date, substantially in the form attached hereto as Exhibit C
(the “Lessee Estoppel Certificate”), from each lessee of the Property.

 

7.8                                 Objections to Title and Survey. On or before
the expiration of the Due Diligence Period, Pure Cycle shall notify Seller in
writing of any unsatisfactory title or survey condition of the Property. Pure
Cycle shall be deemed to have accepted all matters concerning the title or
survey condition of the Property of which it has not notified Seller in writing
by such date and such items shall become Permitted Liens, except for any
matters disclosed in any revisions on endorsements to the Title Commitments
received by Pure Cycle less than ten (10) days prior to the expiration of the
Due Diligence Period. Pure Cycle shall notify Seller in writing of any
unsatisfactory title condition disclosed in any such revision or endorsement to
the Title Commitments within ten (10) days of the receipt of such revision or
endorsement, provided that Pure Cycle shall use reasonable efforts to notify
Seller of any unsatisfactory title or survey condition prior to the expiration to
the Due Diligence Period. Title exceptions pertaining to Liens of a definite or
ascertainable amount that may be removed by the payment of money at the time of
Closing shall not be deemed to make title unacceptable, provided Seller
satisfies such Liens at Closing. If Seller receives timely written notice of
unsatisfactory title or survey conditions from Pure Cycle, it shall within
fifteen (15) days of receipt of such notice, either (a) notify Pure Cycle in
writing that Seller is unable or unwilling to remove or satisfy the matters
raised in Pure Cycle’s written objection, in which case Pure Cycle shall elect
by written notice to Seller within ten (10) days of receipt of Seller’s notice
to terminate this Agreement or be deemed to have waived such objection (and in
the case of such waiver, those matters shall become Permitted Liens); or (b)
notify Pure Cycle of Seller’s intent to remove or satisfy the objection within
such time as may be reasonably required by Seller to effect the removal or
satisfaction, in which case Seller shall be entitled to an appropriate
extension of the Closing Date, but in no event longer than sixty (60) days. Pure
Cycle shall be deemed to have consented to such extension of time to cure in
favor of Seller. If Seller fails to remove or satisfy the objection

 

35

 

within the time specified (and Pure Cycle
does not waive its objection thereto), this Agreement shall terminate and the
provisions of Section 10.2 shall apply.

 

7.9                                 Pure Cycle Due Diligence. Pure Cycle shall
have the right to conduct a due diligence review of the Assets and other
matters provided for herein during the period beginning on the date hereof and
ending at 5:00 p.m. Denver, Colorado time ninety (90) days after the date hereof
(the “Due Diligence Period”). During the Due Diligence Period, Pure
Cycle, at its sole cost and expense, 
shall have the right to review and approve the title to and quality and
quantity of the Water Rights, title to and physical condition of the Property,
and all other matters relative to the transactions contemplated by this
Agreement, including Pure Cycle’s purchase of the Assets, and including, but
not limited to: (a) conducting such investigations and tests of the Assets
as Pure Cycle deems necessary; (b) determining all matters relative to
environmental concerns affecting the Assets; (c) determining the effect of
zoning and land use ordinances affecting the Assets; and (d) determining
all other matters relative to Pure Cycle’s use of the Assets. All
investigations and tests shall be conducted in a reasonable manner, shall be
coordinated with the lessee of the property and Seller, shall be at the sole
cost of Pure Cycle (including any cost of damage to the property), shall be
pursuant to standard industry practices, and Pure Cycle shall fully indemnify,
defend and hold harmless Seller and the lessee of the property, and each other
person suffering damage, injury or death, for any damage or injury to any
property including crops and fencing, or any injury or death to any person, in
connection with such activities. To the extent any property is altered as a
result of such investigation or test, Pure Cycle shall return all property to
the condition it was in prior to such investigations and tests in the event
this Agreement is terminated prior to the consummation of the purchase and sale
of the Assets. On or before the expiration of the Due Diligence Period, Pure
Cycle shall deliver written notice (the “Pure Cycle Diligence Notice”)
to Seller stating either: (x) that Pure Cycle elects to terminate this
Agreement (which it may if it finds any matter discovered in its due diligence
investigation unacceptable in its sole discretion), in which event the
provisions of Section 10.1(b) of this Agreement shall apply to such
termination; or (y) that Pure Cycle elects not to terminate this Agreement, in
which event Pure Cycle shall thereupon be deemed to have waived any right to
terminate this Agreement pursuant to (A) the provisions of this
Article VII, except with respect to any right pursuant to Section 7.1
or Section 7.8 which exists and has not yet expired, or
(B) any other provision of this Agreement that provides a “due diligence
out” or condition, and this Agreement shall continue in full force and effect
in accordance with its terms. If Pure Cycle fails to deliver either notice it
is deemed to have delivered the notice under clause (y). Time shall be of the
essence with respect to Pure Cycle’s right and obligation to deliver the Pure
Cycle Diligence Notice. This Section does not extend the time period of any
shorter due diligence period set forth in this Agreement.

 

7.10                           Seller Due Diligence. Seller shall have the
right to conduct a due diligence review of Pure Cycle and other matters
provided for herein during the Due Diligence Period. During the Due Diligence
Period, Seller shall, at its sole cost and expense, have the right to review
and approve the assets, operations and financial condition of Pure Cycle and
all other matters relative to the transactions contemplated by this Agreement,
including Seller’s acquisition of the Shares and future receipt of the Tap
Participation Fee. On or before the expiration of the Due Diligence Period,
Seller shall deliver a written notice (the “Seller Diligence Notice”) to Pure
Cycle stating either: (a) that Seller elects to terminate this Agreement (which
it may do so if it finds any matter discovered in its due diligence
investigation unacceptable in its

 

36

 

sole discretion), in which event the
provisions of Section 10.1(b) of this Agreement shall apply to such
termination; or (b) that Seller elects not to terminate this Agreement, in
which event Seller shall thereupon be deemed to have waived any right to
terminate this Agreement pursuant to the provisions of this Section or any
other provision of this Agreement that provides a “due diligence out” or
condition, and this Agreement shall continue in full force and effect in
accordance with its terms. If Seller fails to deliver either notice it is
deemed to have delivered the notice under clause (b). Time shall be of the
essence with respect to Seller’s right and obligation to deliver the Seller
Diligence Notice. This Section does not extend the time period of any shorter
due diligence period set forth in this Agreement.

 

7.11                           Water Rights Diversion. As a condition to
Closing, Pure Cycle shall be reasonably satisfied that it will be able to
divert the Water Rights from a single point of diversion for all parcels of
Property. However, if Pure Cycle has not exercised its right to terminate this
Agreement pursuant to Section 7.9 prior to the expiration of the Due
Diligence Period, this condition is deemed satisfied. Such satisfaction may be
achieved in the following ways:

 

(a)                                  Seller may obtain the consent of Fort Lyon Canal Company to assign
Seller’s agreement with Fort Lyon Canal Company related to a single point of
diversion for all parcels of Property to Pure Cycle (the “FLCC Diversion
Agreement”), in which case the FLCC Diversion Agreement will become an Assumed
Contract hereunder.

 

(b)                                 Pure Cycle may enter into a new agreement with Fort Lyon Canal Company
with respect to this issue.

 

(c)                                  Seller may exercise its rights under the FLCC Diversion Agreement on
Pure Cycle’s behalf as Pure Cycle’s agent under the Property Management
Agreement or otherwise; provided, however, that Pure Cycle is
reasonably satisfied that this procedure will not violate the terms of the FLCC
Agreement or otherwise put Pure Cycle at risk of losing the right to use a
single point of diversion for all parcels of Property.

 

ARTICLE VIII

COVENANTS AND OTHER AGREEMENTS

 

8.1                                 Access. Prior to the Closing, each party shall
provide the other, its counsel, financial advisors, auditors and other
authorized representatives, with such information as the other from time to
time reasonably may request. Each party shall permit the other party and its
representatives reasonable access, during regular business hours and upon
reasonable notice, to its offices, properties, books and records as the other
party from time to time may reasonably request, and will instruct its officers,
counsel and financial advisors to cooperate with such investigation; provided,
that any such investigation shall be conducted in such a manner so as not to
interfere with the other party’s business operations or the operations of any
lessee of the Property.

 

8.2                                 Cooperation. Each of the parties will use its
reasonable efforts to cause the consummation of the transactions contemplated
hereby in accordance with the terms and conditions hereof and applicable law. Each
of the parties will use its reasonable efforts to obtain

 

37

 

all consents and approvals of Governmental
Entities necessary to consummate the transactions contemplated by this
Agreement and to cause the Closing to occur. Each party shall use its
reasonable efforts to obtain the consent or approval of any third party to the
transactions contemplated hereby with respect to the Assumed Contracts, but shall
not be required to make any payments, other than incurring customary costs, to
obtain such consents and approvals.

 

8.3                                 Confidentiality. Pure Cycle, on the one hand,
and Seller, on the other hand, shall hold all information provided to each by
the other in strict confidence, and shall not disclose or disseminate such
information to anyone other than its members, directors, employees, lenders and
professional advisors (such as financial consultants, accountants and counsel)
with a need to know or as required by applicable law. Seller acknowledges that
Pure Cycle has obligations under state and federal securities laws to make
public announcements regarding this Agreement and the transactions contemplated
hereby upon the occurrence of certain events, including if information about
the transaction becomes known to unauthorized Persons. Therefore, except as
required by law as set forth in Section 8.20, Seller shall not issue a
press release or disclose to any Person publicly or privately the existence of
this Agreement or the transactions contemplated hereby except as required to
consummate the transactions contemplated hereby. In the event the transactions
contemplated herein are not consummated, each party shall promptly return all
information in whatever form received to the other. Any information held by a
recipient in electronic form shall be deleted.

 

8.4                                 No Solicitation. Until the Closing or the
termination of this Agreement, Seller and its respective officers, directors,
employees, agents and representatives shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any Takeover Proposal, and will not enter into any discussions with
third parties regarding a Takeover Proposal.

 

8.5                                 Satisfaction of Conditions. Subject to the
terms and conditions of this Agreement, Pure Cycle and Seller will use
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things reasonably necessary or desirable to satisfy the
conditions to the other party’s obligation to consummate this Agreement;
provided, that neither party shall be required to incur any expense for
satisfying the other party’s obligations hereunder other than ordinary overhead
expenses associated with its employees and expenses associated with obtaining
professional review of the actions or documents requested by the other party. The
parties each agree to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be
reasonably necessary or desirable in order to consummate or implement
expeditiously the transaction contemplated hereby in accordance with this
Agreement.

 

8.6                                 Survival; Indemnification.

 

(a)                                  The representations and warranties contained in this Agreement shall
survive the Closing as follows:

 

(i)                                     None of the representations and warranties of Seller contained in Section 3.10(a)
(Property) or the covenant in the last sentence of Section 7.5 shall
survive the Closing; and

 

38

 

(ii)                                  All of the other representations and warranties of Seller and Pure
Cycle contained in this Agreement shall survive the Closing and continue in
full force and effect for a period of five (5) years thereafter (unless Pure
Cycle or Seller knew of any misrepresentation or breach of any such
representation or warranty at the time of the Closing);

 

provided, that claims of breach of any representation or warranty based on
fraud shall survive until the expiration of the applicable statute of
limitations. The obligations of Seller with respect to claims under the
warranties contained in the Property Deeds and the Mineral Deeds (the “Deed
Claims”) shall survive the Closing as provided in the Property Deeds and the
Mineral Deeds.

 

(b)                                 Seller agrees to indemnify Pure Cycle from and against any loss, cost,
liability or expense (including reasonable attorneys’ fees) reasonably incurred
by Pure Cycle, including, without limitation, both third-party and direct
claims, arising out of or in connection with (i) any breach by it of any
representation, warranty, covenant or agreement made by it contained in this
Agreement or the Property Deeds or the Mineral Deeds (subject to the survival
periods set forth in Section 8.6(a)); (ii) the ownership, operation or
control of the Assets prior to the Closing Date (subject to the survival
periods set forth in Section 8.6(a));; (iii) the Excluded Indebtedness;
or (iv) the Excluded Assets.

 

(c)                                  Pure Cycle agrees to indemnify Seller from and against any loss, cost,
liability or expense (including reasonable attorneys’ fees) reasonably incurred
by it, including without limitation, both third-party and direct claims,
arising out of or in connection with (i) any breach by Pure Cycle of any
representation, warranty, covenant or agreement made by Pure Cycle contained in
this Agreement (subject to the survival periods set forth in Section 8.6(a));
(ii) subject to the provisions of the Property Management Agreement, the
ownership, operation or control of the Assets from and after the Closing Date;
or (iii) the Assumed Liabilities.

 

(d)                                 Except with respect to the matters described in Section 8.27,
neither Seller nor Pure Cycle shall have any liability under this Section
8.6 for breaches of representations and warranties contained in this
Agreement of the types described in Section 8.6(a)(ii) or any such party’s
covenants or agreements to be performed by such party prior to the Closing
until the aggregate amount of all such claims asserted against them in respect
of such breaches exceeds One Hundred Fifty Thousand Dollars ($150,000), at
which time the indemnifying party shall be liable for the full amount of the
claims.

 

(e)                                  In the event of a breach by any party of a representation or warranty
that gives rise to a claim for indemnification hereunder (after giving effect
to any Materiality Qualifier applicable to such representation or warranty),
the amount of any loss, cost, liability or expense for which indemnification
may be sought shall be determined without regard to any Materiality Qualifier
applicable to such representation or warranty.

 

(f)                                    Except in the case of fraud, the maximum liability of Seller to Pure
Cycle under this Section 8.6 or of Pure Cycle to Seller under this Section 8.6
shall be the portion of the Initial Consideration for the Assets (based on the
value of the Shares using the Closing Price of the Pure Cycle Common Stock on
the Closing Date) plus the value of any Tap Participation Fees

 

39

 

paid to the date of indemnity. For the
avoidance of doubt, the prior sentence does not limit the liability of Pure
Cycle for a failure to pay any portion of the Initial Consideration or Tap
Participation Fee, or Seller’s failure to pay the Excluded Indebtedness or the
Taxes Seller is required to pay pursuant to the Property Management Agreement.

 

(g)                                 No indemnifiable losses shall be deemed to have been sustained by a
party to the extent of any proceeds received by the party from any third party
in respect of the loss, including any insurance carrier, except to the extent
that such third party may be subrogated to the rights of a party against the
other party.

 

(h)                                 To the extent Seller shall become obligated to pay any amount to Pure
Cycle pursuant to Seller’s indemnification obligations hereunder or for a claim
of fraud, Seller may pay all or any portion of such amount in cash or in
Shares, at Seller’s election. If Seller elects to pay all or any portion of
such amount in Shares, the number of Shares necessary to satisfy the amount
Seller elects to pay in Shares shall be determined by dividing (i) the
dollar amount of obligations Seller elects to pay in Shares by (ii) the
average Closing Price of a share of Pure Cycle Common Stock on the ten (10)
trading days before the Closing (after giving effect to any recapitalization,
reorganization, reclassification, split-up, or stock dividend made, declared or
effective with respect to the Pure Cycle Common Stock between the Closing and
the date of the indemnification payment). Seller shall make any such payment in
Shares by returning such number of Shares to Pure Cycle together with such
stock powers and other documents reasonably requested by Pure Cycle to effect
such transfer of Shares.

 

(i)                                     Neither Seller nor Pure Cycle shall in any event be liable to the other
on account of any breach of this Agreement, including in respect of any Deed
Claim, for any indirect, consequential, special, incidental or punitive damages
(including lost profits, loss of use, damage to goodwill or loss of business)
except in connection with a third party claim for which Seller or Pure Cycle
becomes obligated to indemnify the other hereunder.

 

(j)                                     Upon making any payment in respect of any indemnification claim
hereunder, the party making such payment shall, to the extent of such payment,
be subrogated to all rights of the indemnified party against any third party
(including without limitation any Person who transferred any of the Property to
Seller) in respect of the losses to which such payment relates. Such
indemnified party and indemnifying party shall execute upon request all
instruments reasonably necessary to evidence or further perfect such
subrogation rights.

 

(k)                                  In the absence of fraud and claims for post-closing breaches of
covenants contained in this Agreement, the indemnification provisions set forth
in this Section 8.6 shall provide the exclusive remedy for any breach of
this Agreement. Without limiting the generality of the foregoing, Pure Cycle
acknowledges and agrees that it shall not have any remedy after the Closing for
any breach of the representations and warranties contained in Section 3.10(a).

 

8.7                                 Third Party Claim Indemnification Procedures. If
a claim arises as to which Pure Cycle is entitled to indemnification from Seller
hereunder or if a claim arises as to which Seller is entitled to
indemnification from Pure Cycle, the party entitled to indemnification (the “Indemnified
Party”) shall endeavor to advise the other party (the “Indemnifying Party”) of
the claim within five (5) business days after receipt of a summons, or within
twenty (20) business

 

40

 

days after receipt of other written
communication giving information as to the nature of the claim, by the
Indemnified Party, provided that failure to so notify shall not limit
the Indemnified Party’s right to indemnification under Section 8.6
unless such failure materially prejudices the ability of the Indemnifying Party
to defend such third party claim and then only to such extent. The Indemnifying
Party shall not be liable or responsible for any expenses which are incurred by
the Indemnified Party before such notice has been given to the Indemnifying
Party, nor bound by any settlements made by the Indemnified Party before such
notice. The Indemnifying Party shall, within the lesser of twenty (20) days
after receipt of notification of the claim from the Indemnified Party or five
(5) days before an answer is required to be filed, advise the Indemnified Party
whether the Indemnifying Party will undertake the defense of such claim on
behalf of the Indemnified Party and, if so, shall specify the name of the
attorney who will handle the matter, which attorney shall be reasonably
satisfactory to the Indemnified Party and shall not have any present or
potential conflict in representing the interests of both parties. If the
Indemnifying Party timely notifies the Indemnified Party that it will undertake
the defense of such claim and agrees that it is legally obligated to indemnify
the Indemnified Party hereunder and shall thereafter diligently provide such
defense, such counsel shall have control of the defense, but the Indemnified
Party may participate in the defense with its own counsel paid for by the
Indemnified Party, and the Indemnified Party shall not settle or compromise
such claim without the prior consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. If the Indemnifying Party fails timely to
advise the Indemnified Party that it will undertake the defense of such claim
on behalf of the Indemnified Party, fails to agree that it is legally obligated
to indemnify the Indemnified Party hereunder or fails diligently to pursue such
defense, the Indemnified Party may undertake the defense of such claim with its
own counsel and may settle or compromise such claim in its sole discretion, all
at the expense of the Indemnifying Party.

 

8.8                                 Property Management Agreement. Effective as of
the Closing Date, Seller and Pure Cycle shall enter into a Property Management
Agreement, substantially in the form attached hereto as Exhibit D
(the “Property Management Agreement”), pursuant to which Seller will continue
to manage the farm leases on the Property until Pure Cycle’s obligations to pay
the Tap Participation Fee hereunder is discharged in full. In connection with
the Property Management Agreement, Seller shall name Pure Cycle, or if
applicable, Seller shall use reasonable efforts to cause each lessee to name
Pure Cycle, as an additional insured with respect to each outstanding insurance
policy related to (a) the Property; (b) each building, structure,
fixture and other improvement located on the Property; and (c) all
tangible personal property owned or leased by Seller located on the Property or
used in connection with the Property and/or the Water Rights. Costs of naming
Pure Cycle as an additional insured not paid by lessees pursuant to their
leases shall be paid by Pure Cycle. The Property Management shall further
provide that if the term of such agreement is extended beyond five (5) years,
that net revenues from the Property shall be applied to reduce Tap
Participation Fees owed by Pure Cycle under this Agreement.

 

8.9                                 Excluded Indebtedness.

 

(a)                                  Seller shall continue to be responsible for the Excluded Indebtedness
following the Closing. Seller agrees to notify Pure Cycle immediately upon the
occurrence of any of the following specified events:  (i) any failure by Seller to make any
payment when due under the Excluded Indebtedness; (ii) any default by
Seller in the observance or performance of

 

41

 

any other covenant, term or provision to be
performed under the Excluded Indebtedness; (iii) the failure or inability
of Seller to pay its debts generally as they become due; (iv) the
concealment, removal or transfer of any of Seller’s assets and properties in
violation or evasion of any bankruptcy, fraudulent conveyance or similar law;
(v) the making of a general assignment by Seller for the benefit of
creditors; (vi) the appointment of a receiver for Seller’s assets and
properties; (vii) the filing of any petition or the commencement of any
proceeding by or against Seller for any relief under bankruptcy or insolvency
laws or any laws relating to the relief of debtors, readjustment of debts,
reorganization, dissolution or liquidation, which proceeding is not dismissed
within sixty (60) days; (viii) any merger in which control of Seller is no
longer held by the members of Seller as of the date hereof, sale or other
distribution of all or substantially all of the assets of Seller, distribution
of substantially all of the assets of Seller to its members, or transfer of
control or reorganization of Seller; (ix) the dissolution or termination
of Seller’s existence; (x) the suspension of the usual business of Seller
(except that the sale of Assets hereunder shall not constitute a suspension of
the usual business of Seller); or (xi) the falsity, when made, of any
warranty or representation made by Seller to Pure Cycle or a holder of an instrument
governing the Excluded Indebtedness.

 

(b)                                 Seller shall use reasonable efforts to obtain an agreement from each
holder of the Excluded Indebtedness (i) to deliver a copy to Pure Cycle of
each notice sent to Seller under the instruments governing the Excluded
Indebtedness and (ii) permitting Pure Cycle to exercise any rights of
Seller to cure any defaults under the Excluded Indebtedness. Between the date
hereof and the Closing, Seller shall deliver copies of such agreements to Pure
Cycle within ten (10) days after their receipt by Seller. At Closing, Seller
shall provide Pure Cycle with written documentation from each holder of
Excluded Indebtedness who has executed such an agreement of such holder’s
agreement to this provision.

 

(c)                                  If any event described in Section 8.9(a) above (other than
clause (viii) thereof) occurs or if Pure Cycle receives a default notice
pursuant to Section 8.9(b) and such default is not timely cured, an
event of default shall be triggered under the Seller Pledge Agreement and Seller
agrees that, in addition to exercising any rights it has under the Seller
Pledge Agreement, Pure Cycle may, but shall not be obligated to, take any and
all actions Pure Cycle deems reasonably necessary to cure any default under the
Excluded Indebtedness and/or to protect Pure Cycle’s right and title to the
Assets. Pure Cycle shall be entitled to be reimbursed by Seller upon demand for
all costs and expenses, including reasonable attorneys’ fees, incurred by Pure
Cycle in curing any such default and protecting Pure Cycle’s right and title to
the Assets plus interest at the rate of ten percent (10%) per annum to the date
of payment (the “Cure Costs”). In addition to Pure Cycle’s rights under the
Seller Pledge Agreement,  if Seller is in
default on any of the Excluded Indebtedness, which default is not timely cured
by Seller in accordance with the terms of the notes, deeds of trust or other
agreements applicable to such Excluded Indebtedness (the “Defaulted
Indebtedness”), and such default could reasonably be expected to result in a
material loss of rights of Pure Cycle and:

 

(i)                                     results in a foreclosure sale of any of the Property or Water Rights
(and Seller does not on behalf of Pure Cycle redeem such property after sale or
acquire such Property or Water Rights at the foreclosure sale and immediately
convey them to Pure Cycle); or

 

42

 

(ii)                                  Pure Cycle, after at least five (5) days advance notice to Seller if
practicable without risking loss of any of Pure Cycle’s rights to the Assets or
additional defaults, is required to make one or more payments which are both
(a) in excess of $50,000 when added to all other similar payments for any
Property which has not been reimbursed by Seller and (b) not able to be offset
by Pure Cycle withholding from Seller Tap Participation Fees which are then or
will be within thirty (30) days after the end of the current calendar quarter
due and payable, to discharge or cure the Defaulted Indebtedness in respect of
such default;

 

then Seller shall forfeit the right to
receive future Tap Participation Fees (A) in the case of clause (c)(i) based on
the percentage of Water Rights that (i) secure the Defaulted Indebtedness
or (ii) are utilized by the Property secured by the Defaulted Indebtedness
(the “Secured Water Rights”) and (B) in the case of clause (c)(ii) for the
number of Water Taps determined by dividing twice the amount so paid by Pure
Cycle by the result obtained by multiplying the applicable Tap Participation
Fee percentage (10% or 20%) times the then current Rangeview Water Tap Fee. In
the case of clause (c)(i), for each percentage of the total Water Rights
represented by the Secured Water Rights (based on the number of Fort Lyon Canal
Company shares of stock representing the Secured Water Rights divided by the
total number of Fort Lyon Canal Company shares of stock listed on Schedule 2.1(a)),
Seller shall forfeit the right to receive two (2) times that percentage of the
40,000 Water Taps subject to the Tap Participation Fee. The Tap Participation
Fees forfeited under this paragraph shall be the last Tap Participation Fees to
be paid (e.g., if 35,000 Taps were still not sold, and the Tap Participation
Fees for 1,000 Water Taps were forfeited, the Tap Participation Fees would be
paid on the next 34,000 Taps sold) and shall not delay the payment of any other
Tap Participation Fee. An example of how the provisions of (c)(i) of this
paragraph shall work is set forth below:

 

(i)                                     Assumptions:

 

(A)                              The Defaulted Indebtedness is in the amount of $5,000,000 and is
secured by ten percent (10%) of the Fort Lyon Canal Company shares of stock
listed on Schedule 2.1(a) and by twenty (20) farms making up a
portion of the Property;

 

(B)                                The twenty (20) farms collectively utilize fifteen percent (15%) of the
Fort Lyon Canal Company shares of stock listed on Schedule 2.1(a),
above and beyond the shares securing the Excluded Indebtedness; and

 

(C)                                A Tap Participation Fee has been paid by Pure Cycle on 8,000 Water Taps
to date; so 32,000 Water Taps remain subject to the fee.

 

(ii)                                  The Secured Water Rights = 15% + 10% = 25% of the Water Rights.

 

43

 

(iii)                               The forfeited Water Taps = 25% x 40,000 = 10,000 x 2 = 20,000.

 

(iv)                              Total Water Taps subject to future Tap Participation Fees =
32,000 – 20,000 = 12,000.

 

(d)                                 If an event described in Section 8.9(a)(viii) occurs,
Seller shall immediately pay all Excluded Indebtedness in full or make
arrangements to pay the Excluded Indebtedness on terms consented to by Pure
Cycle. Failure to comply with the prior sentence shall constitute an event of
default under the Seller Pledge Agreement.

 

(e)                                  The foregoing notwithstanding, if Pure Cycle takes any action (or fails
to take any action it is required to take pursuant to the terms of this
Agreement) that causes or permits the acceleration of the maturity date of, or
payment schedule for any or all of the payments in respect of, any Excluded
Indebtedness, Pure Cycle shall make any such payments when due at maturity or
otherwise, and Seller’s sole obligation under this Section 8.9 shall be
to pay to Pure Cycle the amounts representing the Excluded Indebtedness so
accelerated according to the payment schedule and maturity date of such
Excluded Indebtedness in effect prior to such acceleration.

 

(f)                                    Seller shall use reasonable efforts to obtain an estoppel certificate,
dated as of the Closing Date, substantially in the form attached hereto as Exhibit E
(the “Lender Estoppel Certificates”), from each holder of a Lien secured by the
Assets as identified on Schedule 2.4.

 

(g)                                 If Seller sells more than fifty percent (50%) of the Shares received as
Initial Consideration when any Excluded Indebtedness remains outstanding,
Seller agrees to apply all proceeds (after deducting taxes and brokerage
commissions due because of the sale) received by Seller from the sale of those
Shares in excess of the fifty percent (50%) threshold towards paying down the
Excluded Indebtedness. Pure Cycle shall have the right to prevent the transfer
of the Shares subject to this provision until Seller provides Pure Cycle with
adequate assurances that the proceeds shall be used to pay down the Excluded
Indebtedness.

 

8.10                           Right of First Offer. If Seller proposes to
consummate an acquisition of any decreed tributary surface water rights below
Pueblo Reservoir in the Arkansas River or its tributaries that are subject to
the jurisdiction of Division 2 of the Colorado Water Court or additional shares
of stock in Fort Lyon Canal Company (collectively, “Arkansas Water Rights”),
Seller shall promptly, and in any event not fewer than thirty (30) days prior
to the Closing of any such acquisition, give Pure Cycle written notice of the
proposed acquisition, which notice shall describe in reasonable detail the
terms on which Seller believes the acquisition can be consummated and the
Arkansas Water Rights to be acquired. Seller shall also deliver to Pure Cycle
all due diligence materials it has with respect to the proposed acquisition. Pure
Cycle shall have twenty (20) days to determine whether it is interested in
pursuing the proposed acquisition. If Pure Cycle determines to pursue the
acquisition, Seller shall fully cooperate with and assist (at no charge to
Seller other than its normal overhead expenditures) Pure Cycle in consummating
the acquisition. If Pure Cycle is unwilling to pursue the acquisition or unable
to negotiate a definitive agreement with the owner(s) of the water rights which
are the subject of the proposed acquisition within three (3) months, then
Seller may pursue such proposed acquisition on its own behalf; provided,
however, that if Seller acquires the subject water rights within six (6)
months

 

44

 

after the expiration of the three (3) month
period referenced above on terms and conditions which, taken as a whole, are
comparable to or more favorable to the Seller than the terms that Pure Cycle
offered the owner(s) of the subject water rights, then at Pure Cycle’s request
made within thirty (30) days after Seller notifies Pure Cycle of such purchase
by Seller, Seller shall sell the subject water rights to Pure Cycle on the same
terms and conditions as Seller acquired the subject water rights plus
reasonable costs and expenses, including attorneys’ fees and carrying costs,
incurred by Seller to complete the acquisition. If Seller does not enter into
an agreement in principle with the owner(s) of the subject water rights, within
six (6) months after the expiration of the three-month period referenced above,
then Seller prior to any subsequent attempt to acquire the subject water rights
will be required to notify Pure Cycle regarding any future proposed acquisition
of the subject water rights in accordance with this Section. If Seller
determines that its or Pure Cycle’s ability to acquire any Arkansas Water
Rights that would otherwise be subject to the Right of First Offer set forth in
this Section would be impaired by compliance with the timing provisions of this
Section, Seller may acquire the subject water rights without first complying
with this Section, provided that Seller shall promptly offer to sell the
subject water rights to Pure Cycle in accordance with the foregoing procedures
(as if Pure Cycle had been offered the right to purchase the subject water
rights from a third-party seller). If Pure Cycle elects to purchase the subject
water rights from Seller, it will do so on the same terms and conditions as
Seller acquired the subject water rights plus reasonable costs and expenses,
including attorneys’ fees and carrying costs, incurred by Seller to complete
the acquisition of the subject rights and the sale of such rights to Pure Cycle
hereunder. All obligations under this Section shall terminate three (3) years
after the Closing Date plus any additional period required in order for either
party to have the full benefit of its rights set forth above, which in any
event shall not be more than six (6) months.

 

8.11                           Water Service Agreement. If, during the
five-year period following the Closing Date, Seller, or any other entity which
H. Hunter White, Mark Campbell, or Walker Baus individually or collectively
control and which Seller in writing authorizes Pure Cycle to treat as subject
to this Section (collectively a “Land Company”), acquires real property in the
State of Colorado, which requires water service, Land Company may request Pure
Cycle to provide such water service. Pure Cycle agrees to provide water service
to Land Company’s real property subject to the following conditions:

 

(a)                                  Land Company’s real property must be in a location Pure Cycle is
willing and reasonably able to service pursuant to the then applicable
Rangeview Rules and Regulations (which term includes an Alternative District).

 

(b)                                 Pure Cycle must have sufficient available water resources to service
the number of taps (or a portion thereof) required by Land Company.

 

(c)                                  Land Company shall be responsible for paying all applicable Rangeview
Water Tap Fees, special facilities charges, and any other charges applicable to
the water service as determined pursuant to the then applicable Rangeview Rules
and Regulations.

 

(d)                                 For each Water Tap purchased by Land Company pursuant to this Section,
Seller, instead of receiving a Tap Participation Fee from Pure Cycle of ten
percent (10%) or twenty percent (20%) of the Rangeview Water Tap Fee paid by
Seller as required by

 

45

 

Section 2.5(b), Seller shall receive an accelerated payment of the Tap Participation
Fee equal to Pure Cycle’s after tax net profit on the Water Taps purchased by
Land Company. Pure Cycle’s after tax net profit (“ATNP”) shall be determined by
taking the total Rangeview Water Tap Fees actually paid by Land Company less
taxes paid on the net income associated with the Rangeview Water Tap Fees and less
those costs (including a reasonable overhead allocation) that are incurred
directly or indirectly to withdraw, treat and deliver the water to the real
property for which the Water Taps were purchased. ATNP will not include any
deduction for the cost of the acquisition of the water or water rights
associated with such Water Tap. Pure Cycle will be deemed to have paid the Tap
Participation Fee for the number of Water Taps determined by dividing ATNP by
the result obtained upon multiplying the applicable Tap Participation Fee
percentage (10% or 20%) times the then current Rangeview Water Tap Fee.

 

(e)                                  An example of how this provision shall work is set forth below:

 

(i)                                     Assumptions:

 

(A)                              Land Company purchases 1,000 Water Taps;

 

(B)                                The then current Rangeview Water Tap Fee is $20,000;

 

(C)                                The Tap Participation Fee percentage is 10%;

 

(D)                               Taxes associated with the Rangeview Water Tap Fees and costs to
withdraw, treat and deliver water are $11,000,000; and

 

(E)                                 A Tap Participation Fee has been paid by Pure Cycle on 10,000 Water
Taps to date. 30,000 Water Taps remain subject to the fee.

 

(ii)                                  Total Rangeview Water Tap Fees paid by Land Company = 1,000 Water Taps
X current Rangeview Water Tap Fee of $20,000 = 1,000 X $20,000 = $20,000,000.

 

(iii)                               Tap Participation Fee per tap required by Section 2.5(b) = 10% X
20,000 = $2,000. Total Section 2.5(b) Tap Participation Fee = 1,000
Water Taps times $2,000 = $2,000,000.

 

(iv)                              ATNP = Total Rangeview Water Tap Fees less Taxes and Costs =
$20,000,000 -$11,000,000 = $9,000,000.

 

(v)                                 Tap Participation Fee paid pursuant to Section 8.11 =
$9,000,000.

 

46

 

(vi)                              Number of Water Taps for which Pure Cycle is deemed to have paid the
Tap Participation Fee = ATNP divided by Section 2.5(b) Tap Participation
Fee per tap = $9,000,000 divided by $2,000 = 4,500 Water Taps.

 

(vii)                           Total Water Taps subject to future Tap Participation Fees = 30,000
minus 4,500 = 25,500.

 

(f)                                    Without limiting the foregoing, Pure Cycle will not charge Land Company
for any water services provided hereunder at prices higher than the price (i)
Pure Cycle charges to any third party purchasing similar volumes of such
services under similar circumstances, or (ii) Pure Cycle charges its own
Affiliates, subsidiaries or divisions, or otherwise attributes to any wholesale
or equivalent pricing if Pure Cycle provides such services itself. If within
one (1) year of the effective date of a water service agreement between
Land Company and Pure Cycle, Pure Cycle offers to any such party similar
services at similar (or lesser) volumes and at a price lower or a discount
greater than the applicable fees charged to Land Company (other than as
required by any Governmental Entity or quasi-Governmental Entity), then such
fees shall simultaneously be lowered by Pure Cycle to the extent necessary to
match such lower price or greater discount (or, to the extent such fees have
already been paid, Pure Cycle shall promptly refund to Land Company the
difference between the fees already paid and the lower price for the time
period during which such lower price has been in effect). Pure Cycle shall
notify Land Company of the occurrence of such a lower price or greater discount
as described in this subsection within thirty (30) days after Pure Cycle offers
or provides such lower price or greater discount to such other customer within
the one (1) year period described above.

 

8.12                           Condemnation. In case the Property, or any
part thereof, shall have been condemned or shall be in the process of
condemnation on the Closing Date (including a temporary taking), Pure Cycle
shall have the option (a) to receive the award resulting from the condemnation,
in which event such award shall be paid (or if not then received, the right to
the same shall be assigned) to Pure Cycle, and this transaction shall be closed
in the same manner as if no such condemnation or other taking shall have
occurred; (b) to reject title to the Property and terminate this Agreement (if
the value of the part of the Property being condemned exceeds ten percent (10%)
of the Initial Consideration) in which event both Pure Cycle and Seller shall
be relieved of all further obligations under this Agreement, except the
confidentiality obligations set forth in Section 8.3; or (iii) to
elect to purchase the residue of the Property with a reduction in the Initial
Consideration equal to the amount of any award resulting from the condemnation
received by Seller.

 

8.13                           Nonsolicitation Agreements. Effective as of
the Closing Date, each of M. Walker Baus, Mark D. Campbell and H. Hunter White
III (each, an “Equity Holder”) shall enter into a Nonsolicitation Agreement
with Pure Cycle substantially in the form attached hereto as Exhibit F
(the “Nonsolicitation Agreements”).

 

8.14                           Tax Matters.

 

(a)                                  Except as provided in Section 2.7(c), Pure Cycle shall be
responsible for any and all excise, value added, registration, stamp, property,
documentary, transfer, sales, use and similar Taxes, levies, charges and fees
(including all real estate transfer Taxes) incurred, or

 

47

 

that may be payable to any Taxing Authority,
in connection with the transactions (including the sale, transfer, and delivery
of the Assets) contemplated by this Agreement (collectively, “Transaction Taxes”).
Notwithstanding the foregoing, each party shall be responsible for its own
income, capital gain or other similar Taxes due in connection with the
transactions (including the sale, transfer, and delivery of the Assets)
contemplated by this Agreement.

 

(b)                                 Except as provided in Section 8.14(a), Seller is, and shall
remain, solely responsible for all Taxes arising from or relating to the Assets
and related businesses on or prior to the Closing Date (the “Pre-Closing Period”).
Except as provided in the Property Management Agreement, Pure Cycle shall be
solely responsible for all Taxes arising from or relating to the Assets and
related businesses beginning after the Closing Date (the “Post-Closing Period”).
Seller shall indemnify and hold harmless Pure Cycle from any liability for, or
arising out of or based upon, or relating to any Taxes arising from the Assets
and related businesses during the Pre-Closing Period. Pure Cycle shall
indemnify and hold harmless Seller from any liability for, or arising out of or
based upon, or relating to any Taxes (other than those Taxes to be paid by
Seller under the Property Management Agreement) arising from the Assets and
related businesses during the Post-Closing Period. Seller and Pure Cycle shall
cooperate concerning all Tax matters relating to this division of
responsibility, including the filing of Returns and other governmental filings
associated therewith.

 

(c)                                  If Pure Cycle takes any action (or fails to take any action it is
required to take pursuant to the terms of this Agreement) that causes or
permits an increase in the Taxes (other than failure of Pure Cycle to appeal
regular reassessments of the Property by a Governmental Entity absent a
manifest error affecting any such assessment) for which Seller is responsible
pursuant to the Property Management Agreement, Pure Cycle shall thereafter be
responsible for paying all such Taxes to the appropriate Taxing Authority, and
Seller’s sole obligation in respect of such Taxes shall be to pay to Pure Cycle
the amount of Taxes for which Seller would have been responsible had Pure Cycle
not caused or permitted such increase, and Pure Cycle shall be solely
responsible for the amount of such increase.

 

8.15                           Compliance with Securities Laws. Pure Cycle
shall take such steps as may be necessary to comply with all federal and state
securities laws applicable to the issuance of the Shares. Seller shall use
reasonable efforts to assist Pure Cycle as may be necessary to comply with such
laws.

 

8.16                           Rule 144 Reporting. For a period of five (5)
years after the Closing, or until Seller no longer owns the Shares, whichever
is earlier, Pure Cycle shall file on a timely basis all reports required to be
filed by it pursuant to Section 13 or 15(d) of the Exchange Act, referred to in
paragraph (c)(1) of Rule 144 under the Securities Act (or, if applicable, Pure
Cycle shall use reasonable efforts to make publicly available the information
regarding itself referred to in paragraph (c)(2) of Rule 144).

 

8.17                           Board Representation and Observation Rights. Subject
to the conditions set forth below, simultaneous with the Closing, Pure Cycle
shall increase the size of its board of directors and appoint Mark D. Campbell
(or other Person designated by Seller) as a director of Pure Cycle. Pure Cycle
shall continue to nominate and solicit proxies for re-election of Mark D.
Campbell (or other Person designated by Seller) through the earlier of (a) the
annual meeting of Pure

 

48

 

Cycle’s stockholders held following the
fiscal year ended August 31, 2010 or (b) the date on which Pure Cycle
fully discharges its obligations to pay the Tap Participation Fee hereunder. If
a Seller designee resigns or is deceased, the vacancy resulting therefrom will
be filled by a designee of Seller. Pure Cycle’s obligations under this Section 8.17
are subject to the condition that any Person designated by Seller to be elected
as a director of Pure Cycle, including Mark D. Campbell, must satisfy all
applicable requirements for service as a director of Pure Cycle, including the
requirements of the SEC, NASDAQ (or any other quotation system or exchange on
which Pure Cycle securities are listed), and Pure Cycle’s Corporate Governance
Guidelines, Pure Cycle’s Nominating and Corporate Governance Committee Charter
and other similar policies reasonably adopted by Pure Cycle’s board of
directors from time to time. To the extent the board of directors of Pure Cycle
determines to maintain directors and officers insurance, Pure Cycle shall
maintain directors and officers insurance that names Mark D. Campbell (or
such other Person serving as Seller’s director designee) as an insured that
provides coverage in the same types and amounts as it provides for all other
directors and officers of Pure Cycle. In lieu of designating a Person to sit on
Pure Cycle’s board of directors and for the additional period set forth in this
sentence, Seller may designate a Person to attend Pure Cycle’s board of
directors meetings as an observer until the earlier of (a) the date of the
annual meeting of Pure Cycle’s stockholders held following the fiscal year
ended August 31, 2010 or (b) the date on which Pure Cycle fully discharges
its obligations to pay the Tap Participation Fee hereunder. Seller’s designee
shall obtain an SEC EDGAR identification number and shall prepare an SEC
Form 3 prior to Closing. Pure Cycle will provide Mark D. Campbell with a
questionnaire within five (5) days of the effective date of this Agreement. Pure
Cycle agrees to notify Seller within ten (10) days of receipt by Pure Cycle of
Mr. Campbell’s questionnaire if for any reason Mr. Campbell does not
meet the requirements to be a director of Pure Cycle, and Seller shall have the
right to designate another individual to be appointed in his stead. None of the
foregoing withstanding, Seller may elect, in its sole discretion and at any
time, not to appoint a member of Pure Cycle’s board of directors or not to
utilize its board observer rights. Any such election will not constitute a
waiver of Seller’s rights set forth in this Section 8.17. Notwithstanding
the foregoing, all of the rights of Seller to appoint an observer or director
shall terminate on August 31, 2011, and no person appointed by Seller shall
have any right to be a director or observer after that date.

 

8.18                           Non-Public Information. Seller may request, in
its sole discretion and at any time, that Pure Cycle not provide Seller with
any material nonpublic information concerning Pure Cycle other than that which
Seller requires to fulfill its duties under the Property Management Agreement,
in which case Pure Cycle will provide such information only to those Persons
whom High Plains designates. Pure Cycle will use reasonable best efforts to
accommodate Seller’s requests hereunder.

 

8.19                           Common Stock Quotation. From and after the
Closing Date, Pure Cycle shall use reasonable efforts to maintain the listing
of the Pure Cycle Common Stock on the NASDAQ Capital Market or, if not so
listed, to cause the Pure Cycle Common Stock to be listed on the NASDAQ National
Market or on a national securities exchange (as defined in the Exchange Act).

 

8.20                           Third Party Consents. If any Assumed Contract
is not capable of being assigned to Pure Cycle without the consent or approval
of another party thereto and such consent or approval has not been obtained
prior to the Closing, then Pure Cycle shall not be required to

 

49

 

assume that contract, and such contract will
be deemed to be an Excluded Asset. For any such contract, Pure Cycle shall
assume Seller’s obligations thereunder (but not the contract itself) accruing
from and after the Closing Date, and the rights and benefits of Seller
thereunder arising from and after the Closing Date shall be included in the
Assets. If, after the Closing, the parties obtain the required consent to
assign any such contract to Pure Cycle, then such contract shall be deemed to
be an Assumed Contract and the post-assignment liabilities and obligations
relating thereto shall be deemed to be Assumed Liabilities without any further
action by any party.

 

8.21                           Public Announcements. None of the parties to
this Agreement shall issue or cause the publication of any press release or
other announcement with respect to this Agreement or the transactions contemplated
hereby except as may be required by applicable law or by the rules of NASDAQ or
a national securities exchange applicable to a party. If so required at any
time prior to the first anniversary of the Closing Date, the party to issue or
cause the publication of such release or announcement shall, prior to such
issuance or publication if practicable, provide copies of such release or other
announcement to Seller or Pure Cycle, as applicable, and, if practicable, shall
use reasonable efforts to consult with Seller or Pure Cycle, as applicable, and
give due consideration to any comments that Seller or Pure Cycle, as
applicable, may have. Seller acknowledges and agrees that Pure Cycle shall,
subject to complying with the immediately preceding two sentences, be permitted
to (a) issue a press release regarding this Agreement and the transactions
contemplated hereby immediately following the execution of this Agreement and
immediately following the Closing, (b) discuss this Agreement and the
transactions contemplated hereby in its filings with the SEC and in
correspondence with its stockholders and (c) discuss this Agreement and the
transactions contemplated hereby with stockholders and analysts; provided,
however, that nothing herein shall limit Pure Cycle’s confidentiality
obligations set forth in Section 8.3.

 

8.22                           Insurance. From and after the Closing Date
until Pure Cycle has fully discharged its obligations with respect to payment
of Tap Participation Fees under Section 2.5(b), Pure Cycle shall
maintain policies of fire, liability and other forms of insurance with respect
to its assets and business, which policies shall be valid and outstanding
policies and provide insurance coverage for Pure Cycle’s assets in scope and
amount customary and reasonable for the business in which Pure Cycle is engaged
and as necessary to comply, in all material respects, with applicable laws and
the Assumed Liabilities. Pure Cycle shall promptly notify Seller of any notice
of cancellation or termination received with respect to any such policy. From
and after the Closing Date until Pure Cycle has fully discharged its
obligations with respect to payment of Tap Participation Fees under Section
2.5(b), the activities and operations of the Pure Cycle Parties shall be
conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies.

 

8.23                           Dividends and Distributions. From the date of
this Agreement until immediately after the Closing, Pure Cycle shall not
declare, pay or make any dividend or distribution (in cash, property or
obligations) on any shares of any class of its capital stock (now or hereafter
outstanding) or on any warrants, options or other rights with respect to any
shares of any class of its capital stock (now or hereafter outstanding) (other
than split-ups or stock dividends made, declared or effective with respect to
the Pure Cycle Common Stock) or apply any of its funds, property or assets to
the purchase, redemption, sinking fund or other retirement of, or agree to purchase
or redeem, any shares of any class of its capital stock (now or hereafter
outstanding) of,

 

50

 

or warrants, options or other rights with
respect to any shares of any class of its capital stock (now or hereafter
outstanding), unless Pure Cycle shall pay to Seller at the Closing an amount
equal to the amount of such dividend or distribution, or payment in respect of
the purchase, redemption, sinking fund or other retirement of, any shares of
any class of its capital stock, to which Seller would have been entitled had it
held the Shares on the record date for any such action. Notwithstanding the
foregoing, Pure Cycle may redeem any or all shares of its outstanding
Series B Preferred Stock.

 

8.24                           Registration Rights Agreement. Effective as of
the Closing Date, Seller and Pure Cycle shall enter into a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit G
(the “Registration Rights Agreement”), pursuant to which Pure Cycle will grant
Seller certain registration rights with respect to the Shares.

 

8.25                           Knowledge of False Representations. Until the
fifth anniversary of the Closing date, each party agrees to notify the other
promptly upon learning of the falsity, when made, of any warranty or
representation made by such party to the other hereunder.

 

8.26                           Delivery of Fort Lyon Canal Company Certificates. The parties acknowledge that some of the physical stock certificates
for shares representing Water Rights are pledged to the persons who sold such
shares to Seller. Schedule 8.26 lists the pledgees of such shares and
whether the share certificates are physically held by the pledgee. In lieu of
delivery of such share certificates Seller shall deliver adequate assurance to
Pure Cycle of its ownership of such shares and right to receipt of such share
certificates. Adequate assurance shall include evidence from the records of the
Fort Lyon Canal Company that Seller is the record holder of such shares. Seller
shall use reasonable efforts to have such shares reissued in Pure Cycle’s name
and, if not, to cause the Fort Lyon Canal Company to note Pure Cycle as the
owner of such shares in its record books. Following the Closing, except as
provided in the Pure Cycle Pledge Agreement, Seller shall vote all such shares
in accordance with Pure Cycle’s instructions and promptly provide Pure Cycle
with any notices or other items it receives with respect to such shares.

 

8.27                           Brokers Fees. Seller will remain liable for
any commission or finders fee that is owing to any agent, broker, Person or
firm acting on behalf of Seller or under Seller’s authority in connection with
any of the transactions contemplated herein, and Seller shall fully indemnify
Pure Cycle from and against any loss, cost, liability or expense (including
reasonable attorneys’ fees) incurred by Pure Cycle arising out of or in
connection with any claim for any commission, finder’s fee or similar fee owing
to a Person purporting to be acting on behalf of Seller or under Seller’s
authority without regard to the threshold specified in Section 8.6(d).

 

8.28                           Consent. Seller consents to Pure Cycle
engaging, after the Closing, such engineers, water rights counsel, and other
consultants as Seller may have engaged with respect to the Assets to assist
Pure Cycle with respect to issues related to the Assets and agrees to execute
such documents or consent forms as such professionals may require in order for
them to so assist Pure Cycle; provided, however, that in the
event of a dispute or other adverse situation between Pure Cycle and Seller
that would prevent any such Person from representing Pure Cycle and Seller,
Pure Cycle shall consent to such Person’s representation of Seller and shall
not engage such Person to represent Pure Cycle in connection with such matter.

 

51

 

8.29                           Sale of LAWMA Rights and Houses. Seller shall
have the right to sell the LAWMA Rights and the homes and associated properties
described on Schedule 8.29 (“Homes”) located on the Property, on
behalf of Pure Cycle, at any time after the effective date of this Agreement
subject to the prior written consent of Pure Cycle, which consent shall not be
unreasonably withheld; provided that Seller shall not sell any Homes hereunder
if such sale would have the effect of reducing the amount of water associated
with the Property that could be used off-site (including because of the
existence of a dry-up covenant). Seller shall be entitled to rely on a water
engineer’s report as to such matters at the time of sale. If such a sale occurs
after the Closing Date, Pure Cycle shall execute such stock powers and other
documents as are reasonably required to convey the LAWMA Rights or Homes to the
purchaser designated by Seller and shall be deemed (subject to the following
sentence) to have been made by Pure Cycle for Pure Cycle’s account. Subject to
Section 8.31, the total consideration actually paid to Seller or Pure
Cycle, as applicable, for the sale of the LAWMA Rights or Homes (the “LAWMA and
Homes Consideration”) shall be retained by Seller, if paid prior to the
Closing, or paid to Seller by Pure Cycle if paid after the Closing; provided,
in either case that Pure Cycle shall be deemed to have paid Seller the Tap
Participation Fee for the number of Water Taps determined by dividing the LAWMA
and Homes Consideration (less any amount paid to or retained by Pure Cycle
pursuant to Section 8.31) by the result obtained upon multiplying the
applicable Tap Participation Fee percentage (10% or 20%) times the then current
Rangeview Water Tap Fee, which deemed payment shall have the effect of
decreasing the remaining number of Water Taps subject to the Tap Participation
Fee by such number of Water Taps deemed to have been paid. The reduction shall
be applied to the last Tap Participation Fees owing and shall not delay the
payment of any other Tap Participation Fee.

 

8.30                           Schedules and Exhibits. Within five (5) days
after the date of this Agreement, the parties shall prepare and deliver the
disclosure schedules and exhibits which are not attached hereto and correct any
misstatements in such schedules if attached hereto. If either party is not
reasonably satisfied with the form and substance of such disclosure schedules
and exhibits, such party may, with five (5) days after the expiration of such
five (5) day period, terminate this Agreement by giving written notice thereof
to the other party.

 

8.31                           Wollert Enterprises, Inc. The tax basis of the
assets of Wollert Enterprises, Inc. is believed by Seller to be less than the
fair market value of the assets of Wollert Enterprises, Inc. so that upon
liquidation of such company taxable income will result. The parties agree that
Seller is not responsible for that income tax. However, so long as the
dissolution of Wollert Enterprises, Inc. occurs within six months of the
Closing, Seller will pay Pure Cycle, solely out of proceeds received by Seller
pursuant to Section 8.29, one half of thirty five percent (i.e. 17.5%) of
the amount of taxable income to Pure Cycle (taking into account any taxable
income of Wollert Enterprises, Inc.) whether such tax is paid by Pure Cycle or
offset by net operating losses. For example, if the amount of taxable income to
Pure Cycle is $400,000, then Pure Cycle shall retain or Seller shall pay to
Pure Cycle $70,000 ($400,000 times 17.5%) out of LAWMA and Homes Consideration,
on the later of (i) the date when such consideration is received by Seller
or (ii) the date of the event triggering the tax. If Seller is required to
make a payment pursuant to this Section 8.31 after Pure Cycle has reduced
the number of Water Taps subject to the Tap Participation Fee under
Section 8.29, then Pure Cycle shall increase the number of Water Taps due
to Seller based on the amount of Seller’s payment to Pure Cycle hereunder.

 

52

 

8.32                           Legal Opinions. The legal opinion Exhibits
hereto are not in final form and are subject to negotiation. The forms of
opinions, including expected exceptions and qualifications, will be negotiated
and finalized within twenty five (25) days after the date hereof. If either
party or its counsel is not reasonably satisfied with the form and substance of
such opinions, such party, within five (5) days after delivery of the final
form of opinion which the other party’s counsel is prepared to render (subject
to subsequent diligence and changes in facts), may terminate this Agreement by
giving written notice thereof to the other party.

 

ARTICLE IX

CONDITIONS TO THE CLOSING

 

9.1                                 Conditions to the Obligations of Each Party. Unless
these conditions are waived in writing by the parties, the obligations of
Seller and Pure Cycle to effect the transactions contemplated by this Agreement
shall be subject to the fulfillment at or prior to the Closing Date of the following
conditions:

 

(a)                                  No preliminary or permanent injunction or other order, decree or ruling
issued by a Governmental Entity, nor any statute, rule, regulation or executive
order promulgated or enacted by any Governmental Entity, shall be in effect that
would make the transactions contemplated by this Agreement, including the
holding, directly or indirectly, by Pure Cycle of any of the Assets, illegal or
otherwise prevent the consummation of the transactions among the parties
contemplated by this Agreement;

 

(b)                                 All waivers, consents, approvals and actions or non-actions of any
Governmental Entity and of any other third party required to consummate the
transactions among the parties contemplated by this Agreement (including the
consent of the Fort Lyon Canal Company to the transfer of the FLCC Certificates
and associated stock) shall have been obtained and shall not have been
reversed, stayed, enjoined, set aside, annulled or suspended, except for such
failures to obtain such waiver, consent, approval or action which would not be
reasonably likely (x) to prevent the consummation of the transactions
contemplated hereby or (y) to have a Seller Material Adverse Effect or a Pure
Cycle Material Adverse Effect; and

 

(c)                                  If applicable, the waiting period applicable to the consummation of the
transactions contemplated by this Agreement under the Hart-Scott-Rodino Act
shall have expired or been terminated.

 

9.2                                 Additional Conditions to the Obligations of Seller. The obligations of Seller to effect the transactions contemplated by
this Agreement are also subject to the fulfillment at or prior to the Closing
Date of the following conditions, unless such conditions are waived in writing
by Seller:

 

(a)                                  Pure Cycle shall have performed or complied, in all material respects,
with each obligation, agreement and covenant to be performed or complied with
by it hereunder at or prior to the Closing Date;

 

(b)                                 The representations and warranties of Pure Cycle in this Agreement
shall be true and correct in all material respects (except for representations
and warranties that include

 

53

 

a “material” or “Material Adverse Effect”
qualifier, which shall be true and correct in all respects) on the date of this
Agreement and on the Closing Date;

 

(c)                                  Since the date of this Agreement, no change in the business, financial
condition, properties, operating results, assets or customer base of Pure Cycle
or other event, or incident, other than the decision of Pure Cycle to purchase
the Assets, shall have occurred that has had or would be reasonably likely to
have a Pure Cycle Material Adverse Effect;

 

(d)                                 Pure Cycle shall have filed on a timely basis (after giving effect to
any extensions granted by the SEC) all reports required to be filed by it
pursuant to Section 13 or 15(d) of the Exchange Act through the Closing Date
and, except to the extent that information contained in any Pure Cycle SEC
Report has been revised or superseded by a later Pure Cycle SEC Report filed
and publicly available prior to the Closing Date, none of the Pure Cycle SEC
Reports contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading;

 

(e)                                  Pure Cycle Common Stock shall be approved for quotation and quoted on
the NASDAQ Capital Market or the NASDAQ National Market or listed and traded on
a national securities exchange (as defined in the Exchange Act);

 

(f)                                    Seller shall have received a certificate signed by an executive officer
of Pure Cycle certifying to the matters set forth in Sections 9.2(a) and
(b) and certifying the certificate of incorporation, by-laws and
resolutions of Pure Cycle’s board of directors approving this Agreement and the
transactions contemplated hereby;

 

(g)                                 Pure Cycle shall have delivered to Seller the Transfer Agent Letter or
if practicable, certificates representing the Shares;

 

(h)                                 Pure Cycle shall have executed and delivered to Seller the Property
Management Agreement;

 

(i)                                     Pure Cycle shall have executed and delivered to Seller the Settlement
Statement;

 

(j)                                     Pure Cycle shall have executed and delivered to Seller the Registration
Rights Agreement;

 

(k)                                  Seller shall have received the opinion of Davis, Graham & Stubbs
LLP, dated as of the Closing Date, covering the matters set forth in Exhibit H
and in form and substance reasonably satisfactory to Seller and its counsel;

 

(l)                                     Mark W. Harding shall have executed and delivered to Seller the
Voting Agreement, dated as of the Closing Date, in substantially the form
attached hereto as Exhibit I; and

 

54

 

(m)                               Seller shall have received from Pure Cycle Schedule 2.5(b)
and the Tap Participation Fees in respect of the Water Taps described on Schedule
2.5(b) for which Pure Cycle has received payment prior to the Closing.

 

9.3                                 Additional Conditions to the Obligations of Pure Cycle. The obligations of Pure Cycle to effect the transactions contemplated
by this Agreement are also subject to the fulfillment at or prior to the
Closing Date of the following conditions, unless such conditions are waived in
writing by Pure Cycle:

 

(a)                                  Seller shall have performed or complied, in all material respects, with
each obligation, agreement and covenant to be performed and complied with by it
hereunder at or prior to the Closing Date;

 

(b)                                 The representations and warranties of Seller set forth in this
Agreement shall be true and correct in all material respects (except for
representations and warranties that include a “material” or “Material Adverse
Effect” qualifier, which shall be true and correct in all respects) on the date
of this Agreement and on the Closing Date;

 

(c)                                  Pure Cycle shall have received a certificate signed by an authorized
representative of Seller, dated as of the Closing Date, (i) certifying to
the matters set forth in Sections 9.3(a) and (b), and
(ii) certifying the articles of organization, operating agreement and
resolutions of Seller’s managers and members approving this Agreement and the
transactions contemplated hereby;

 

(d)                                 Pure Cycle shall have received the opinion of Seller’s Water Attorney
referenced in Section 7.1, dated as of the Closing Date;

 

(e)                                  If obtainable, Pure Cycle shall have received the abstract of title
pertaining to the Water Rights referenced in Section 7.1 certified
as of the Closing Date;

 

(f)                                    Pure Cycle shall have received the opinions of Faegre & Benson LLP
and Lawlis & Bruce, LLC, dated as of the Closing Date, covering the matters
set forth in Exhibit J and in form and substance reasonably
satisfactory to Seller and its counsel;

 

(g)                                 Pure Cycle shall have received the Title Company Undertaking;

 

(h)                                 Seller shall have executed and delivered to Pure Cycle the Property
Deeds and the Mineral Deeds;

 

(i)                                     Seller shall have executed and delivered to Pure Cycle the FLCC
Certificates or Stock Powers;

 

(j)                                     Seller shall have executed and delivered to Pure Cycle the LAWMA
Certificates or Stock Powers;

 

(k)                                  Seller shall have executed and delivered to Pure Cycle certificates or
stock powers representing the Wheat Ridge Mutual Lateral Ditch Company shares;

 

55

 

(l)                                     Seller shall have executed and delivered to Pure Cycle certificates or
stock powers representing the May Valley Water shares;

 

(m)                               Seller shall have executed and delivered to Pure Cycle the Settlement
Statement;

 

(n)                                 Seller shall have executed and delivered to Pure Cycle the Property
Management Agreement;

 

(o)                                 Seller shall have executed and delivered to Pure Cycle the Seller
Pledge Agreement;

 

(p)                                 Seller shall have executed and delivered to Pure Cycle the assignments
substantially in the form attached hereto as Exhibit K conveying
all of Seller’s rights under the Assumed Contracts, including any rights of
Seller as lessor of the Property;

 

(q)                                 Each Equity Holder shall have executed and delivered to Pure Cycle the
Nonsolicitation Agreement;

 

(r)                                    Since the date of this Agreement, no change in the business, financial
condition, properties, operating results or assets of Seller or other event, or
incident, other than the decision of Seller to sell the Assets, shall have
occurred that has had or would be reasonably likely to have a Seller Material
Adverse Effect or a material adverse effect on the Assets;

 

(s)                                  An authorized representative of Seller, on Seller’s behalf, shall have
delivered to Pure Cycle a certificate of non-foreign status under
Section 1445 of the Code;

 

(t)                                    Pure Cycle shall have received the Lessee Estoppel Certificates from
the lessees of at least sixty percent (60%) of the Property by value and sixty
percent (60%) of the Water Rights based on the total number of shares of stock
of Fort Lyon Canal Company representing the Water Rights being acquired by Pure
Cycle hereunder (solely for purposes of this subsection (t) and subsection (u)
below, the value of a parcel of Property is the value as set forth in the title
insurance policy issued to Pure Cycle hereunder for such parcel of Property);
and

 

(u)                                 Pure Cycle shall have received every third party consent identified on Schedule 2.1(e)
and Schedule 3.3(d), except for such consents as would not reasonably be
expected to have a Seller Material Adverse Effect and except, with respect to
the Excluded Indebtedness, Pure Cycle shall have received the Lender Estoppel
Certificates or other agreements from the holders of at least sixty percent
(60%) of the Excluded Indebtedness which is secured by at least sixty percent
(60%) of the Property by value and sixty percent (60%) of the Water Rights
(based on the total number of shares of Fort Lyon Canal Company representing
the Water Rights being acquired by Pure Cycle hereunder) subject to Permitted
Liens regarding Pure Cycle’s right to notice and right to cure as required by Section 8.9.

 

56

 

ARTICLE X

TERMINATION

 

10.1                           Termination of Agreement. This Agreement may
be terminated as follows:

 

(a)                                  Seller or Pure Cycle may terminate this Agreement by mutual written
consent at any time prior to the Closing.

 

(b)                                 Seller may terminate this Agreement by giving written notice to Pure
Cycle in accordance with the provisions of Section 7.10.

 

(c)                                  Pure Cycle may terminate this Agreement by giving written notice to
Seller in accordance with the provisions of Sections 7.1, 7.8 or 7.9.

 

(d)                                 Pure Cycle may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing (i) in the event Seller has breached
any material representation, warranty, or covenant contained in this Agreement
in any material respect, Pure Cycle has notified Seller of the breach, and the
breach has continued without cure for a period of thirty (30) days after the
notice of breach; or (ii) if the Closing shall not have occurred on or before
five (5) months from the date hereof by reason of the failure of any condition
precedent under Section 9.1 or 9.3 hereof (unless the failure
results primarily from Pure Cycle itself breaching any representation,
warranty, or covenant contained in this Agreement).

 

(e)                                  Seller may terminate this Agreement by giving written notice to Pure
Cycle at any time prior to the Closing (i) in the event Pure Cycle has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, Seller has notified Pure Cycle of the
breach, and the breach has continued without cure for a period of thirty (30)
days after the notice of breach; (ii) if the number of Shares to be
delivered as Initial Consideration pursuant to Section 2.5(a) is
less than 2,950,000; or (iii) if the Closing shall not have occurred on or
before five (5) months from the date of this Agreement by reason of the failure
of any condition precedent under Section 9.1 or 9.2 hereof
(unless the failure results primarily from Seller itself breaching any
representation, warranty, or covenant contained in this Agreement).

 

10.2                           Effect of Termination. If either Seller or
Pure Cycle terminates this Agreement pursuant to Section 10.1, all
rights and obligations of the parties hereunder shall terminate without any
liability of any party to any other party (except for any liability of the
party then in breach); provided, however, that the
confidentiality provisions contained in Section 8.3 shall survive for
four (4) years following the date of termination.

 

ARTICLE XI

GENERAL PROVISIONS

 

11.1                           Interpretation; Governing Law. This Agreement
shall be construed as though prepared by all parties hereto and shall be
construed without regard to any presumption or other rule requiring
construction against the party causing an agreement to be drafted. This
Agreement

 

57

 

shall be construed and governed by the laws
of the State of Colorado (without giving effect to its principles of conflicts
of laws). Any action or proceeding seeking to enforce any provision of, or
based on any right arising out of, this Agreement must be brought against the
applicable party in the courts of the State of Colorado located in the City of
Denver, Colorado, or, if it has or can obtain jurisdiction, in the United
States District Court for such state, and each party hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein. Process
in any action or proceeding referred to in this Section may be served on any
party anywhere in the world, whether within or without the State of Colorado,
and may also be served upon any party in the manner provided for giving notices
to it or him in Section 11.4 below.

 

11.2                           Construction.

 

(a)                                  All references in this Agreement to sections, subsections and other
subdivisions refer to corresponding sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise.

 

(b)                                 A reference to any “applicable law” or words of similar import means,
unless specifically provided otherwise, any federal, state, local or foreign
law, statute, ordinance, regulation, rule, code, decree, judgment, order or
other requirement or rule of law, as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect from time to time, including
rules and regulations promulgated thereunder.

 

(c)                                  The words “this Agreement”, “herein”, “hereof”, “hereby”, “hereunder”
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited.

 

(d)                                 Words in the singular form shall be construed to include the plural and
vice versa, unless the context otherwise requires. Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender.

 

(e)                                  Unless the context otherwise requires or unless otherwise provided
herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments or restatements of such agreement,
instrument or document, provided, that nothing contained in this
subsection shall be construed to authorize such renewal, extension,
modification, amendment or restatement.

 

(f)                                    The word “includes” and its derivatives means “includes, but is not
limited to” and corresponding derivative expressions.

 

(g)                                 The Disclosure Schedules and any other exhibits and schedules attached
hereto are incorporated herein by reference for all purposes and references to
this Agreement unless the context in which used shall otherwise require. All
references to “Schedule” are to sections of the Disclosure Schedules unless the
context in which used shall otherwise require.

 

11.3                           Binding Effect; Assignment. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, legal representatives,

 

58

 

successors and assigns; provided, however,
that Seller may not assign its rights or obligations under this Agreement
without the prior written consent of Pure Cycle, which consent shall not be
unreasonably withheld, and Pure Cycle may not assign its rights or obligations
under this Agreement without the prior written consent of Seller, which consent
shall not be unreasonably withheld; and, provided  further, that
any such assignment will not relieve the assigning party of its obligations
hereunder.

 

11.4                           Notices. All notices and other communications
under this Agreement shall be in writing and shall be given by hand delivery,
or first-class mail, certified or registered with return receipt requested, or
by commercial overnight courier and shall be deemed to have been duly given
upon hand delivery, delivery by commercial overnight courier to the address
specified below, or three days after deposit in the U.S. mail as provided
above, addressed as follows:

 

(a)                                  If to Seller:

 

High Plains A & M, LLC

333 W. Hampden Avenue

Suite 810

Englewood, Colorado 80110

Attention:                                         Mark D. Campbell

Telephone:                                    (303) 534-1040

Telecopy:                                           (303) 534-6700

 

with a copy to (which shall not constitute
notice):

 

Faegre & Benson LLP

1900 Fifteenth Street

Boulder, Colorado 80302

Attention:  G. James Williams, Jr.

Telephone:                                    (303) 447-7700

Telecopy:                                           (303) 447-7800

 

and

 

H. Hunter White III

9800 Walzer Court

Windermere, Florida 34783

Telephone:                                    (407) 876-8915

Telecopy:                                           (407) 264-6487

 

and

 

Harvey W. Curtis & Associates

8310 South Valley Highway, Suite 230

Englewood, Colorado 80112

Attention: Harvey Curtis

Telephone:                                    (303) 292-1144

Telecopy:                                           (303) 292-1764

 

59

 

(b)                                 If to Pure Cycle or Mark W. Harding:

 

Pure Cycle Corporation

8451 Delaware Street

Thornton, Colorado 80260

Attention:                                         President

Telephone:                                    (303) 292-3456

Telecopy:                                           (303) 292-3475

 

with a copy to (which shall not constitute
notice):

 

Davis, Graham & Stubbs LLP

1550 Seventeenth Street, Suite 500

Denver, Colorado 80202

Attention:                                         Wanda J. Abel, Esq.

Telephone:                                    (303) 892-7314

Telecopy:                                           (303) 893-1379

 

and

 

Petrock and Fendel, P.C.

700 Seventeenth Street, Suite 1800

Denver, Colorado 80202

Attention:                                         Rick Fendel

Telephone:                                    (303) 534-0702

Telecopy:                                           (303) 534-0310

 

(c)                                  To such other address as to which notice is provided in accordance with
this Section.

 

11.5                           Severability. Should a court or other body of
competent jurisdiction determine that any provision of this Agreement is
excessive in scope or otherwise invalid or unenforceable, such provision shall
be adjusted rather than voided, if possible, so that it is enforceable to the
maximum extent possible, and all other provisions of this Agreement shall be
deemed valid and enforceable to the extent possible.

 

11.6                           Third-Party Beneficiaries. Each party hereto
intends that this Agreement shall not benefit nor confer any rights or remedies
on any Person other than the parties hereto and their respective heirs,
successors and legal representatives.

 

11.7                           Further Assurances. From time to time after
the Closing Date, Seller shall execute all such instruments as Pure Cycle shall
reasonably request in order more effectively to convey and transfer the Assets
to Pure Cycle. The parties shall also execute and deliver to the appropriate
other party such other instruments as may be reasonably required in connection
with the performance of this Agreement and each shall take all further actions
as may be reasonably required to carry out the transactions contemplated by
this Agreement.

 

60

 

11.8                           Entire Agreement; Modifications. This
Agreement represents the entire understanding between the parties with respect
to the subject matter hereof and supersedes any and all prior understandings,
agreements, plans and negotiations, whether written or oral, with respect to
the subject matter hereof. All modifications to this Agreement must be in
writing and signed by the party against whom enforcement of such modification
is sought.

 

11.9                           Headings. The Section headings herein are
intended for reference and shall not by themselves determine the construction
or interpretation of this Agreement.

 

11.10                     Counterparts. This Agreement may be executed
in one or more counterparts, in original or by facsimile, any of which shall be
deemed an original and all of which taken together shall constitute one and the
same Agreement.

 

11.11                     Form 1099. The parties agree that the Title
Company is to be designated as the entity responsible for filing a
Form 1099 with the Internal Revenue Service promptly after Closing as
required under the Code.

 

11.12                     Right of Offset. Seller agrees that Pure Cycle
shall have the right to offset any amounts due to Pure Cycle from Seller in
connection with any Cure Costs incurred pursuant to Section 8.9 and
in connection with indemnification claims made pursuant Sections 8.6 or 8.7
from any amounts payable by Pure Cycle to Seller pursuant to Section 2.5(b),
but with respect to indemnification claims only to the extent that Seller has
not timely paid its indemnification obligations in accordance with Sections
8.6 and 8.7. Any such amounts withheld shall be deemed to be a
reduction in the consideration for the purchase and sale of the Assets
hereunder for federal income tax purposes.

 

11.13                     Disclosure Schedules. Matters reflected in the
Disclosure Schedules are not necessarily limited to matters required by this
Agreement to be reflected therein. Such additional matters are set forth for
informational purposes and do not necessarily include other matters of a
similar nature that are not required to be reflected therein. A disclosure made
by any party in any section of its Disclosure Schedules that is sufficient to
reasonably inform the other parties of information required to be disclosed in
another section of its Disclosure Schedules in order to avoid a
misrepresentation thereunder shall be deemed to have been made with respect to
such other section of its Disclosure Schedules.

 

11.14                     Santa Fe Trail. For the avoidance of doubt, it
is noted that Seller has not retained an easement on the Property for the “Santa
Fe Trail”.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY
LEFT BLANK]

 

61

 

IN
WITNESS WHEREOF, the parties have executed and delivered this Asset Purchase
Agreement as of the date first above written.

 

	
   

  	
  PURE CYCLE CORPORATION, a Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Mark W. Harding

  	
   

  
	
   

  	
   

  	
  Mark W. Harding, President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HIGH PLAINS A & M, LLC, a Colorado
  limited

  liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark D. Campbell

  	
   

  
	
   

  	
  Name:

  	
  Mark D. Cambell

  	
   

  
	
   

  	
  Title:

  	
  Manager

  	
   

  
						

 

62

 

EXHIBIT A

 

HIGH PLAINS PLEDGE AGREEMENT

 

THIS HIGH
PLAINS PLEDGE AGREEMENT (this “Agreement”) is made this          
day of                   ,
2006, between High Plains A & M, LLC, a Colorado limited liability company
(“High Plains”), and Pure Cycle Corporation, a Delaware corporation (“Pure
Cycle”).

 

RECITALS

 

A.                                   Contemporaneously herewith, Pure Cycle has acquired (i) certain
property from High Plains, including water interests in the Arkansas River and
its tributaries represented by real property interests and shares of stock in
the Fort Lyon Canal Company (the “FLCC Shares”) and (ii) real property in
Otero, Bent and Prowers Counties, Colorado (the “Acquisition”), pursuant to the
Asset Purchase Agreement between Pure Cycle and High Plains dated as of May 10,
2006 (the “Acquisition Agreement”). Terms used herein that are defined in the
Acquisition Agreement have the meanings given to such terms in the Acquisition
Agreement.

 

B.                                     Notwithstanding the Acquisition, Pure Cycle did not assume (and High
Plains has expressly retained and agreed to pay, perform and discharge in full)
the Excluded Indebtedness.

 

C.                                     High Plains pledged certain of the FLCC Shares to the sellers of such
shares (the “Landowner Pledgees”) as security for its payment, performance and
discharge of certain of the Excluded Indebtedness (the “Pledged FLCC Shares”).

 

D.                                    High Plains has agreed to grant to Pure Cycle a security interest in
and lien on certain of the shares of Pure Cycle Common Stock issued to High
Plains under the Acquisition Agreement to secure the payment, performance and
discharge in full of the Excluded Indebtedness.

 

AGREEMENT

 

In
consideration of the premises and intending to be legally bound thereby, High
Plains and Pure Cycle hereby agree as follows:

 

1.                                       Pledge of Collateral. High Plains hereby pledges, transfers, assigns and grants to Pure Cycle
a security interest in and to (a) [1,475,000] shares of common stock in
Pure Cycle, evidenced by Stock Certificate No.          ,
CUSIP No. 746228 30 3, (b) all shares of Pure Cycle capital
stock hereafter issued to High Plains by means of any dividend or distribution
in respect of the shares pledged hereunder (together with the shares identified
in subsection (a), the “Pledged Shares”), (c) the certificates
representing the Pledged Shares, and (d) all rights to money or property
which High Plains now has or hereafter acquires in respect of the Pledged
Shares, including, without limitation, (i) any proceeds from a sale by or
on behalf of High Plains of any of the Pledged Shares, and (ii) any
distributions, dividends, cash, instruments and other property from time to
time received or otherwise distributed in respect of the Pledged Shares,
whether regular, special or made in connection with the partial or total
liquidation of the issuer and whether attributable to profits, the return of
any contribution or investment or otherwise attributable to the Pledged Shares
or the ownership thereof (all of the foregoing is herein collectively referred
to as the “Collateral”) to secure the following which hereafter are referred to
as the “Obligations”: (i) the payment, performance and discharge of all
Excluded Indebtedness in

 

 

accordance with its respective terms,
(ii) the performance of all of the terms, conditions and provisions of
this Agreement, (iii) the performance of all the covenants and agreements
of High Plains in the Acquisition Agreement, the Registration Rights Agreement,
and the Property Management Agreement (collectively, the “Transaction Documents”),
and (iv) all costs and expenses (including reasonable attorneys’ and
expert witness fees) incurred by Pure Cycle in connection with the enforcement
of any of the foregoing.

 

2.                                       Representations and Warranties. High Plains represents and warrants to Pure Cycle that:  (a) High Plains has limited liability
company power and authority to enter into and perform this Agreement;
(b) any consent or approval which is required as a condition to the
validity or performance of this Agreement has been obtained; (c) High
Plains has duly authorized by all necessary and proper limited liability
company action the execution, delivery and performance of this Agreement;
(d) this Agreement constitutes the valid and legally binding agreement of
High Plains, enforceable against it in accordance with its terms, except to the
extent that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting the rights of creditors
generally or by general principles of equity; (e) the Collateral is owned
free and clear of liens and encumbrances created by, through or under High
Plains, except Permitted Liens (as defined below) and except as created hereby;
and (f) the name of High Plains as it appears in official filings in the
state of its formation, all prior names of High Plains during the past five
years, the type of entity of High Plains, the organizational number issued by
High Plains’ state of formation and the name of the sole jurisdiction of High
Plains’ formation are set forth on Schedule 1. As used in this Agreement, “Permitted
Liens” means (x) statutory liens for taxes or other governmental charges that
are not yet due and payable (whether or not disclosed) and (y) all applicable
laws and rules of any Governmental Entity.

 

3.                                       Other Documents. High
Plains will execute and deliver to Pure Cycle all assignments, endorsements and
other documents reasonably required at any time and from time to time by Pure
Cycle with respect to the Collateral. High Plains authorizes Pure Cycle to file
financing statements and continuation statements covering the Collateral as
necessary to perfect Pure Cycle’s interest in the Collateral. Any expenses
incurred by Pure Cycle in connection with the preparation and recordation of
any such instruments, including, but not limited to reasonable attorneys’ fees,
shall become additional Obligations secured by this Agreement. Unless High
Plains and Pure Cycle agree in writing to other terms of repayment, such
amounts shall be immediately due and payable, and shall bear interest from five
(5) business days after the date of demand at the rate of ten percent (10%) per
annum, unless collecting of interest at such rate would be contrary to
applicable law, in which event such amounts shall bear interest at the highest
rate which may be collected under applicable law. High Plains shall not file
any amendments, correction statements or termination statements concerning the
Collateral without the prior written consent of Pure Cycle.

 

4.                                       Continued Possession of Collateral; Voting. Subject to Section 8 hereof, Pure Cycle shall have the right to
hold possession of the Pledged Shares which remain subject to the lien hereof
so long as any of the Obligations are outstanding. Upon the satisfaction in
full of all of the Obligations, Pure Cycle shall, within thirty (30) days of a
written request therefor, release any remaining Collateral to High Plains and
terminate or send High Plains appropriate documentation to terminate any
financing statements filed by Pure Cycle with respect to the

 

2

 

Collateral. Except during the continuance of
an Event of Default, High Plains retains all voting, dissenters and appraisal
rights in respect of the Collateral.

 

5.                                       Covenants of High Plains. High Plains agrees that, so long as Pure Cycle holds a security
interest in or lien on the Collateral, High Plains will not, without Pure Cycle’s
prior written consent, sell, assign, transfer, pledge or otherwise encumber the
Collateral or any part thereof, or amend, modify or waive any of its rights or
obligations under the Excluded Indebtedness unless the effect of such
amendment, modification or waiver creates more beneficial or favorable terms to
High Plains and Pure Cycle (such as, for example, though the reduction of any
interest rate or other reduction of debt, without, however, increasing the
outstanding amount of the Excluded Indebtedness). High Plains will immediately
notify Pure Cycle in writing of any event which materially adversely affects
the rights and remedies of Pure Cycle in relation to the Collateral. If High
Plains at any time becomes entitled to receive any cash, stock or other
property as additions to, in substitution of or in exchange for any of the
Collateral, High Plains shall accept the same as Pure Cycle’s agent and shall
promptly deliver them to Pure Cycle in the exact form received, with all
necessary transfer instruments or stock powers, to be held as further security
for the Obligations, provided however that, except during the continuance of an
Event of Default (i) High Plains shall be entitled to retain (and take free of
the lien of this Agreement) forty percent (40%) of any distribution, dividend
or other matter described in clause (d)(ii) of Section 1 that results in
federal taxable income to High Plains or its owners and (ii) any cash or cash
equivalent dividend or distribution which is subject to the lien hereof shall
be promptly made available by Pure Cycle to make a prepayment on the Excluded
Indebtedness (and Pure Cycle may direct which Excluded Indebtedness the prepayment
is to applied to).

 

6.                                       Care of Collateral. High
Plains shall have all risk of loss of the Collateral. Pure Cycle shall have no
liability or duty, either before or after the occurrence of an Event of
Default, on account of loss of or damage to, to collect or enforce any of its
rights against, the Collateral, to collect any income accruing on the
Collateral, or to preserve rights against other parties. Pure Cycle shall
exercise the same procedures to protect the safekeeping of Collateral as it
exercises to protect similar other assets it holds. If Pure Cycle actually
receives any notices requiring action with respect to Collateral in Pure Cycle’s
possession, Pure Cycle shall take reasonable steps to forward such notices to
High Plains. High Plains is responsible for responding to notices concerning
the Collateral, voting the Pledged Shares (subject to Section 10 hereof),
and exercising rights and options, calls and conversions of the Pledged Shares.
Pure Cycle’s sole responsibility in connection with exercising rights and
options, calls and conversions of Pledged Shares is to take such action as is
reasonably requested by High Plains in writing, provided, however, that Pure
Cycle is not responsible to take any action that, in Pure Cycle’s sole
judgment, would materially adversely affect the value of the Collateral as
security for the Obligations. While Pure Cycle is not required to take certain
actions, if action is needed, in Pure Cycle’s sole discretion, to preserve and
maintain the Collateral, High Plains authorizes Pure Cycle to take such
actions.

 

7.                                       Assignment. Neither
party may assign or transfer this Agreement or its rights and obligations
hereunder without the prior written consent of the other.

 

3

 

8.                                       Partial Release of Collateral.

 

(a)                                  High Plains is obligated to pay, perform and discharge the Excluded
Indebtedness under the terms of the agreements, instruments and other documents
giving rise thereto. Following the payment, performance and discharge of a
portion of the Excluded Indebtedness in any calendar year, High Plains may
request in writing that Pure Cycle release from its security interest hereunder
any number of Pledged Shares up to the then-current Proportionate Share (as
defined below) of such Collateral (the “Release Notice”), provided, that
in no event shall the aggregate number of Pledged Shares that have been
released hereunder be, at any time, greater than the then-current Proportionate
Share of such Collateral.

 

(b)                                 The Release Notice shall (i) be given within sixty (60) days after
the end of a calendar year and no more frequently than once per calendar year,
(ii) identify the amount of Excluded Indebtedness paid by High Plains
since the date hereof and during the calendar year immediately prior to the
calendar year in which the Request Notice is given, (iii) identify in
reasonable detail the real property and the specific Pledged FLCC Shares
securing the Excluded Indebtedness that has been paid down in whole or in part,
(iv) contain the certification of the Chief Executive Officer of High Plains
that all information set forth in the Request Notice is complete and correct,
(v) set forth the Proportionate Share of Collateral to be released, and
(vi) contain such other information regarding the payment, performance and
discharge of the Obligations as Pure Cycle has theretofore reasonably
requested.

 

(c)                                  Within thirty (30) days after Pure Cycle receives a complete Request
Notice and accompanying documentation as required herein, Pure Cycle shall
terminate its security interest in the validly requested Proportionate Share of
the Pledged Shares.

 

(d)                                 “Proportionate Share” shall mean, on any date of determination, that
number of shares of Pledged Shares which is equal to (x) [1,475,000] (as adjusted
for any stock splits, stock combinations, stock dividends or reorganization)
(y) multiplied by the “FLCC Proportion” (z) divided by the total number of FLCC
Shares originally pledged to all Landowner Pledgees. The FLCC Share Proportion
is an amount equal to (i) the number of FLCC shares pledged to a Landowner
Pledgee (ii)  multiplied by a fraction,
the numerator of which is the reduction in the Excluded Indebtedness owed to
such Landowner Pledgee (as of the end of such calendar year as compared to the end
of the prior calendar year) and the denominator of which is the unpaid
principal amount and accrued interest of such Excluded Indebtedness owed to
such Landowner Pledgee as of the date hereof as shown on Schedule 2 hereto.
The FLCC Share Proportion calculation shall be performed as to each Landowner
Pledgee and cumulated to determine the Proportionate Share. If any Collateral
is other than Pledged Shares, a proportionate release of such other Collateral
shall also occur. In no event shall a reduction in Excluded Indebtedness which
is not secured by a pledge of FLCC Shares to a Landowner Pledgee result in the
release of any Pledged Shares or other Collateral. An example of the formula is
as follows:  If there are 1,475,000 Pure
Cycle shares pledged and 100 FLCC shares are pledged to a particular farmer,
the farmer is owed $100,000 at the end of 2006 and at the end of 2007 that
amount has been reduced by $10,000, and there are a total of 1,000 FLCC shares
pledged to all farmers, then the calculation is 1,475,000 x (100 x
$10,000/$100,000) ÷ 1,000 = 14,750 Pure Cycle shares would be released. This is
1% of the Pure Cycle shares, which is the

 

4

 

same as the proportionate paydown on the
Excluded Indebtedness which is secured by FLCC shares.

 

9.                                       Event of Default. The
occurrence of any one or more of the following events shall constitute an event
of default (an “Event of Default”) under this Agreement: (a) the failure
to pay, perform and discharge the Excluded Indebtedness in accordance with it
terms (other than a failure for which Pure Cycle is directly and primarily
responsible); (b) the failure of High Plains to perform, observe or comply
with any of the provisions of this Agreement in any material respect after the
passage of any applicable cure periods; (c) the failure of High Plains to
perform, observe or comply with in any material respect its obligations under
the Transaction Documents after the passage of any applicable cure periods; or
(d) the failure to pay any Obligations not set forth above in (a) through
(c) when due.

 

10.                                 Remedies.

 

(a)                                  Upon the occurrence of an Event of Default hereunder, Pure Cycle may,
at its option, proceed to enforce this Agreement and in connection therewith
may (i) sell or otherwise dispose of all or any portion of the Collateral
and apply such Collateral or the proceeds thereof against the Obligations,
(ii) exercise any remedies available to it under this Agreement or the
Transaction Documents, and (iii) otherwise exercise all of the rights and
remedies of a secured party under the Colorado Uniform Commercial Code (the “UCC”)
and under other applicable laws. Without limiting the foregoing, Pure Cycle
shall have the right (x) to transfer the whole or any part of the
Collateral into the name of Pure Cycle or its nominee, (y) to notify any
person obligated on any of the Collateral to make payment directly to Pure
Cycle or its nominee of any amounts due or to become due thereon and (z) to
vote the Pledged Shares on High Plains’ behalf; provided, however, that Pure
Cycle may only proceed to exercise the remedies hereunder with respect to
Obligations then due and payable whether by acceleration or otherwise.

 

(b)                                 Any written notice of the sale, disposition or other intended action by
Pure Cycle with respect to the Collateral which is sent by certified mail,
return receipt requested or by overnight courier to High Plains at High Plains’s
address specified pursuant to the Acquisition Agreement at least ten (10) days
prior to such sale, disposition or action, shall constitute reasonable notice
to High Plains, unless applicable law requires a longer period. This provision
shall not be construed to impose any obligation on Pure Cycle to notify High
Plains of Pure Cycle’s intent to sell, dispose of or take other action with
respect to the Collateral, except to the extent applicable law requires such
notice.

 

(c)                                  High Plains recognizes that Pure Cycle may be unable to effect a public
sale of all or a part of the Pledged Shares by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, but may be compelled to resort to one or more private sales to
a restricted group of purchasers who will be obliged to agree, among other
things, to acquire all or a part of the Pledged Shares for their own account,
for investment and not with a view to the distribution or resale thereof. High
Plains acknowledges and agrees that any private sale so made may be at prices
and on other terms less favorable to the seller than if such Collateral were
sold at public sale, and that Pure Cycle has no obligation to delay the sale of
such Collateral for the period of time necessary to permit

 

5

 

registration of such Collateral for public
sale under any securities laws. High Plains agrees that a private sale or sales
made under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner. If any consent, approval or authorization of any
federal, state, municipal or other governmental department, agency or authority
should be necessary to effectuate any sale or other disposition of the Pledged
Shares, or any partial sale or other disposition of such Collateral, High
Plains will execute all such applications and other instruments as may be
required in connection with securing any such consent, approval or
authorization, and will reasonably cooperate to secure the same.

 

(d)                                 All costs and expenses, including, without limitation, attorneys’ and
expert witness fees and expenses incurred by or on behalf of Pure Cycle in
connection with the taking, holding, preparing for sale or other disposition,
selling, managing, collecting or otherwise disposing of the Collateral,
together with interest thereon at a per annum rate of interest of ten percent
(10%) from the date of such payment until repaid in full (the “Liquidation
Costs”), shall be paid by High Plains to Pure Cycle on demand and shall
constitute and become a part of the Obligations secured hereby. Any retained
Collateral and any proceeds of sale or other disposition of the Collateral will
be applied by Pure Cycle to the payment of the Liquidation Costs, and the
balance of such proceeds (if any) will be applied by Pure Cycle toward the
payment of the Obligations (which are then due) at such time or times and in
such order and manner of application as Pure Cycle may from time to time in its
sole discretion determine. Except as may be otherwise specifically provided in
this Agreement, during the continuance of an Event of Default all Collateral
and proceeds of Collateral coming into Pure Cycle’s possession may be applied
by Pure Cycle to any of the Obligations, whether matured or unmatured, as Pure
Cycle shall determine in its sole but reasonable discretion. Any surplus of
Collateral or proceeds of Collateral held by Pure Cycle and remaining after
payment in full of all the Obligations shall be paid over to High Plains or to
whomsoever may be legally entitled to receive such surplus.

 

(e)                                  Each right, power and remedy of Pure Cycle as provided for in this
Agreement, in the Transaction Documents or now or hereafter existing at law or
in equity or by statute or otherwise shall be cumulative and concurrent and
shall be in addition to every other right, power or remedy provided for in this
Agreement or in any Transaction Documents or now or hereafter existing at law
or in equity or by statute or otherwise, and the exercise or beginning of the
exercise by Pure Cycle of any one or more such rights, powers or remedies shall
not preclude the simultaneous or later exercise by Pure Cycle of any or all
such other rights, powers or remedies.

 

(f)                                    No failure or delay by Pure Cycle to insist upon the strict performance
of any term, condition, covenant or agreement of this Agreement or any of the
Transaction Documents, or to exercise any right, power or remedy consequent
upon a breach thereof, shall constitute or be deemed to constitute a waiver of
any such term, condition, covenant or agreement or of any such breach, or
preclude Pure Cycle from exercising any such right, power or remedy at any
later time or times.

 

11.                                 Power of Attorney. High
Plains hereby appoints and constitutes Pure Cycle its true and lawful attorney,
with full power of substitution, with full power and authority to
(i) prepare, execute and deliver on behalf of High Plains any and all such
instruments,

 

6

 

assignments, stock powers, financing
statements, certificates and other documents as Pure Cycle deems necessary in
order to perfect and protect its interests in the Collateral and
(ii) immediately, upon and during the continuance of an Event of Default
hereunder, to take such actions with respect to the Collateral as Pure Cycle,
in its sole discretion, shall deem necessary or appropriate in order to protect
its interest in the Collateral. This power of attorney is made pursuant to this
Agreement, is coupled with an interest and may not be revoked or cancelled
before all of the Obligations have been paid or otherwise satisfied.

 

12.                                 Miscellaneous. Neither
this Agreement nor any term, condition, covenant, or agreement hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. This Agreement shall be governed by the
internal laws of the State of Colorado and shall be binding upon, and inure to
the benefit of, the successors and assigns of High Plains and Pure Cycle. As
used herein the singular number shall include the plural, the plural the
singular, and the use of the masculine, feminine or neuter gender shall include
all genders as the context may require, and the term “person” shall include an
individual, a corporation, an association, a partnership, a trust, a limited
liability company, an organization, a government or political subdivision
thereof and a governmental agency. Unless varied by this Agreement, all terms
used herein which are defined by the UCC shall have the same meanings hereunder
as assigned to them by the UCC, as in effect on the date hereof.

 

13.                                 Performance for High Plains. High Plains agrees and hereby authorizes Pure Cycle, in Pure Cycle’s
sole discretion, but Pure Cycle shall not be obligated to, upon an Event of
Default, to advance funds on behalf of High Plains, in order to insure High
Plains’ compliance with any covenant, warranty, representation or agreement of
High Plains made in or pursuant to this Agreement or the Transaction Documents,
to pay, perform and discharge the Excluded Indebtedness in accordance with its
respective terms of payment, or to preserve or protect any right or interest of
Pure Cycle in the Collateral or under or pursuant to this Agreement, including,
without limitation, the payment of any taxes and the satisfaction or discharge
of any judgment or any lien upon the Collateral; provided, however, that the
making of any such advance by Pure Cycle shall not constitute a waiver by Pure
Cycle of any Event of Default with respect to which such advance is made nor
relieve High Plains of any such Event of Default. High Plains shall pay to Pure
Cycle upon demand all such advances made by Pure Cycle with interest thereon
from the date of advance at the rate of ten percent (10%) per year. All such
advances shall be deemed to be included in the Obligations and secured by the
security interest granted Pure Cycle hereunder.

 

14.                                 Substitution of Collateral. Upon written notice by High Plains to Pure Cycle at any time prior to
the payment in full of the Obligations, the Collateral may be substituted (in
whole, but not in part) at any time with any combination of Substitute
Collateral (herein so called) (whether owned by High Plains or others)
consisting of any of the following:

 

(a)                                  Cash or cash equivalents (including certificates of deposit having a
maturity of one year or less or a letter of credit, in each case issued by a
financial institution that is a member of the Federal Reserve System having a
combined capital and surplus of at least $100 million) in an amount equal to or
greater than 120% of the outstanding and unpaid Excluded Indebtedness, which is
free and clear of any other lien or encumbrance;

 

7

 

(b)                                 Marketable Securities equal to or greater than 200% of the outstanding
and unpaid Excluded Indebtedness, which is free and clear of any other lien or
encumbrance; or

 

(c)                                  Real property located in the United States acceptable to Pure Cycle in
the exercise of its reasonable judgment where such property has an appraised
value (from a recognized qualified appraiser) of at least 175% of the
outstanding and unpaid Excluded Indebtedness and is free and clear of any
monetary lien or encumbrance for borrowed money or deferred purchase price or a
guarantee thereof.

 

For purposes of clause (b), “Marketable
Securities” means common stock of a corporation with a market capitalization of
at least $1 billion which is listed on the New York Stock Exchange, the
American Stock Exchange, or NASDAQ. If the market price of the pledged
Marketable Securities decreases such that value thereof is less than 150% of
the then outstanding and unpaid Excluded Indebtedness, High Plains must provide
additional substitute collateral valued as provided in this Section 14
(including the 120%, 200% or 175% coverage ratios, as applicable).

 

Upon Pure Cycle obtaining a first lien
perfected security interest in such Substitute Collateral, Pure Cycle will
promptly release the remaining Collateral, and shall execute and deliver to
High Plains such instruments of transfer assignment, release, discharge,
termination and satisfaction as may be reasonably requested by High Plains to
remove the lien of this Agreement from any such Collateral substituted and
withdrawn pursuant thereto, and to vest in High Plains any such withdrawn
Collateral and to evidence properly such action..

 

15.                                 Termination. Except
for High Plains’ obligation to pay Liquidation Costs, this Agreement shall
terminate when all the Collateral
is released from the lien hereof or the Excluded Indebtedness is paid in full,
whichever happens later.

 

8

 

IN WITNESS
WHEREOF, an authorized representative of each of High Plains and Pure Cycle has
duly executed and delivered this High Plains Pledge Agreement as of the date
first written above.

 

	
   

  	
  HIGH PLAINS:

  
	
   

  	
   

  
	
   

  	
  HIGH PLAINS A & M, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURE CYCLE:

  
	
   

  	
   

  
	
   

  	
  PURE CYCLE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Mark W. Harding, President

  
							

 

9

 

SCHEDULE 1

 

Current Name; Prior Names; Entity
Type; Organizational Number; Jurisdiction

 

Current Name: 
High Plains A & M, LLC, a Colorado limited liability company CO organizational Number 20011211734

 

Other names held in the past 5 years:

*  Bayou Land Co., LLC (name
changed in 2004 to High Plains A & M, LLC)

 

Note that Bayou Land Co., LLC previously merged with the following
entities:

*                                         High Plains A & M, LLC, a Nevada
limited liability company in 2004

*                                         136th and Colorado, LLC in
2004

*                                         Magro, L.L.C. in 2004

 

 

SCHEDULE 2

 

Excluded Indebtedness Owed to
Landowner Pledgees

 

 

EXHIBIT
B

 

Recording Requested,

and when recorded, return to:

Gretchen Miller Busch, Esq.

Faegre & Benson LLP

3200 Wells Fargo Center

1700 Lincoln Street

Denver, CO 80203

 

COMBINATION
DEED OF TRUST AND PLEDGE AND SECURITY AGREEMENT

 

THIS DEED OF
TRUST SECURES FUTURE ADVANCES AND SHALL BE EFFECTIVE TO SECURE PAYMENT OF ALL
ADVANCES, BOTH OBLIGATORY AND OPTIONAL, UP TO THE STATED MAXIMUM PRINCIPAL
AMOUNT SET FORTH HEREIN TO THE SAME EXTENT AND WITH THE SAME EFFECT AND
PRIORITY AS IF SUCH TOTAL MAXIMUM PRINCIPAL AMOUNT HAD BEEN FULLY DISBURSED ON
OR BEFORE THE DATE THIS DEED OF TRUST IS RECORDED; AND INCLUDES ADVANCES MADE
PURSUANT TO A REVOLVING CREDIT ARRANGEMENT AS PROVIDED IN C.R.S.
§ 38-39-106

 

This Agreement (also referred to herein as
this “Deed of Trust”) is made this          
day of                   ,
2006 by and between PURE CYCLE CORPORATION, A DELAWARE CORPORATION (hereinafter
called “Grantor”), with an address of 8451 Delaware Street, Thornton, Colorado
80260, attn: President,  and the Public
Trustee of the County of                           ,
Colorado (hereinafter called “Trustee”) for the benefit of HIGH PLAINS A &
M, LLC, A COLORADO LIMITED LIABILITY COMPANY (hereinafter called “Beneficiary”),
with an address of 333 West Hampden Avenue, Suite 801, Englewood, CO 80110.

 

Grantor, in consideration of the obligations
hereinafter described, has granted, bargained, sold, transferred, assigned and
conveyed, and by these presents does pledge, grant, bargain, sell, transfer,
assign and convey to Trustee in trust with power of sale:  (a) the real property located in the
County of                   ,
Colorado, which is described on Schedule 1 attached hereto, and all
buildings, structures, fixtures and other improvements located thereon to the
extent owned by Grantor (the “Property”), but excluding all
tangible personal property (other than the below described Stock
Certificates of the Canal Company) which is already pledged by Beneficiary to
prior owners of real or personal property to repay to said sellers a portion of
the Excluded Indebtedness and if pledged hereunder would constitute a breach
of, or default under, the security agreements with said prior owners;
(b) (1) 10,653.2 shares of common stock in The Fort Lyon Canal
Company, a Colorado nonprofit corporation (the “Canal Company”), evidenced by
the Stock Certificates described on Schedule 2 attached hereto,
(2) all shares of the Canal Company hereafter issued to Grantor by means
of any dividend or distribution in respect of the shares pledged hereunder
(together with the shares identified in subparagraph (1), the “Pledged

 

 

Shares”),
(3) the certificates representing the Pledged Shares, and (4) all
rights to money or property which Grantor now has or hereafter acquires in
respect of the Pledged Shares, including, without limitation, (i) any
proceeds from a sale by or on behalf of Grantor of any of the Pledged Shares,
and (ii) any distributions, dividends, cash, instruments and other
property from time to time received or otherwise distributed in respect of the
Pledged Shares, whether regular, special or made in connection with the partial
or total liquidation of the issuer of the Pledge Shares and whether
attributable to profits, the return of any contribution or investment or
otherwise attributable to the Pledged Shares or the ownership thereof, together
with (c) all water rights and conditional water rights that are
appurtenant to, represented by, or that have been used or are intended for use
in connection with the Pledged Shares, including, but not limited to, water
rights associated with the Property and including, but not limited to (i) all
water interests in the Arkansas River and its tributaries represented by real
property interests and shares of stock in the Canal Company; (ii) all ditch, well,
pipeline, spring and reservoir rights, whether or not adjudicated or evidenced
by any well or other permit, related to or used in conjunction with the
foregoing; (iii) all groundwater that is subject to the provisions of Colorado
Revised Statutes Section 37-90-137(4) or the corresponding provisions of any
successor statute underlying said Property, but only to the extent related to
or used in conjunction with the foregoing; (iv) any permit to construct any
water well, water from which is intended to be used in connection with such
land, but only to the extent related to or used in conjunction with the
foregoing; and (v) all of Grantor’s right, title and interest under any decreed
or pending plan of augmentation or water exchange plan, but only to the extent
related to or used in conjunction with the foregoing, and (d) the proceeds
of any of the above; provided, however, that with respect to any proceeds
arising from the sale of Water Taps subject to that certain Asset Purchase
Agreement dated as of May 10, 2006, as amended from time to time, by and
between Grantor and Beneficiary (the “Asset Purchase Agreement”) such proceeds
shall only be subject to this Agreement to the extent of the Tap Participation
Fee (as defined in the Asset Purchase Agreement) owed to Beneficiary from such
sale of Water Taps (all the foregoing, together with any additional property
from time to time added to the foregoing, are hereinafter referred to as the “Collateral”).

 

This conveyance is made in trust and to
secure the following Obligations (herein so called):  (i) the payment, performance and
discharge of the Tap Participation Fee in accordance with the Asset Purchase
Agreement; (ii) the performance of all of the terms, conditions and
provisions of this Agreement, and (iii)  the payment of all other sums
with interest thereon as may be advanced or expended by Beneficiary in
accordance with this Deed of Trust or any other instrument or agreement now or
hereafter securing the obligations evidenced by the Asset Purchase Agreement,
including attorney fees and expert witness fees, costs and expenses incurred by
Beneficiary as provided for herein ; and (iv) the performance of all the
covenants and agreements of Grantor contained herein or in any other instrument
or agreement now or hereafter securing the Obligations or relating thereto and
(v) the performance of all the covenants and agreements of Grantor in the Asset
Purchase Agreement, the Registration Rights Agreement dated                   ,
2006, by and between Grantor and Beneficiary (the “Registration Rights
Agreement”), and the Property Management Agreement dated                   ,
2006, by and between Grantor and Beneficiary (the “Property Management
Agreement”) (collectively, the “Transaction Documents”).

 

To the extent that the Collateral may be
determined under applicable law to be personal property or fixtures, Grantor as
debtor hereby grants Beneficiary and Trustee as secured party a security
interest in all such Collateral, to secure payment and performance of the
Obligations.

 

2

 

This Deed of
Trust constitutes a security agreement and financing statement under the
Uniform Commercial Code of the State of Colorado (the “UCC”), covering all such
Collateral.

 

Grantor further covenants and agrees with
Beneficiary and Trustee as follows:

 

1.                                       Representations and Warranties. Grantor represents and warrants to Beneficiary that:  (a) Grantor has corporate power and
authority to enter into and perform this Agreement; (b) any consent or approval
which is required as a condition to the validity or performance of this
Agreement has been obtained; (c) Grantor has duly authorized by all
necessary and proper corporate action the execution, delivery and performance
of this Agreement; (d) this Agreement constitutes the valid and legally
binding agreement of Grantor, enforceable against it in accordance with its
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally or by general principles of equity; (e) the
Collateral is owned free and clear of liens and encumbrances created by,
through or under Grantor, except Permitted Liens (as defined below) and as
created hereby; and (f) the name of Grantor as it appears in official
filings in the state of its formation, all prior names of Grantor during the
past five years, the type of entity of Grantor, the organizational number
issued by Grantor’s state of formation and the name of the sole jurisdiction of
Grantor’s formation are set forth on Schedule 3. As used in this
Agreement, “Permitted Liens” means (i) those Liens accepted by Grantor
upon purchase of the Property by Grantor from Beneficiary pursuant to the Asset
Purchase Agreement; (ii) leases or similar arrangements included in the
Assumed Contracts; (iii) statutory liens for taxes, special assessments or
other governmental charges that are not yet due and payable (whether or not
disclosed); (iv) all applicable laws and rules of any Governmental Entity;
and (v) the Excluded Indebtedness (as such term is defined in the Asset
Purchase Agreement).

 

2.                                       Other Documents. Grantor
will execute and deliver to Beneficiary all assignments, endorsements and other
documents reasonably required at any time and from time to time by Beneficiary
with respect to the Collateral. Grantor authorizes Beneficiary to file
financing statements and continuation statements covering the Collateral as
necessary to perfect Beneficiary’s interest in the Collateral. Grantor shall
not file any amendments, correction statements or termination statements
concerning the Collateral without the prior written consent of Beneficiary. Any
expenses incurred by Beneficiary in connection with the preparation and
recordation of any such instruments, including, but not limited to reasonable
attorneys’ fees, shall become additional Obligations secured by this Deed of
Trust. Unless Grantor and Beneficiary agree in writing to other terms of
repayment, such amounts shall be immediately due and payable, and shall bear
interest from five (5) business days after the date of demand at the rate of
ten percent (10%) per annum, unless collecting of interest at such rate would
be contrary to applicable law, in which event such amounts shall bear interest
at the highest rate which may be collected under applicable law.

 

3.                                       Continued Possession of Collateral.

 

(a)                                  Subject to paragraph 7 hereof, Beneficiary shall have the right to hold
possession of the Pledged Shares, or to otherwise effectuate “control” of the
Pledge Shares, as such term is defined in Articles 8 and 9 of the UCC, so long
as any of the Obligations are outstanding. Upon the satisfaction in full of all
of the Obligations or termination of this Deed of

 

3

 

Trust,
Beneficiary shall, within thirty (30) days of a written request therefor,
release any remaining Collateral to Grantor, release this Deed of Trust and the
estate hereby granted, and terminate or send Grantor appropriate documentation
to terminate any financing statements filed by Beneficiary with respect to the
Collateral.

 

(b)                                 If at any time after the fifth anniversary of the effective date of
this Agreement, the Acquisition Consideration (as defined below) received by
Beneficiary pursuant to the Asset Purchase Agreement has equaled or exceeded
One Hundred Million Dollars ($100,000,000) for at least six (6) consecutive
months, then Beneficiary shall, within thirty (30) days of a written request
therefor, release any remaining Collateral to Grantor, release the Deed of
Trust and the estate hereby granted, and terminate or send Grantor appropriate
documentation to terminate any financing statements filed by Beneficiary with
respect to the Collateral. The term “Acquisition Consideration” shall mean the
Market Price (as determined below) of the shares of Grantor Common Stock
received by Beneficiary as Initial Consideration in the Asset Purchase
Agreement (the “Stock Consideration”) plus the dollar amount of Tap
Participation Fees paid through the date of determination. The “Market Price”
of the Stock Consideration shall be determined by taking the number of shares
of Grantor Common Stock making up the Stock Consideration times the
average of the daily Closing Prices (as defined in the Asset Purchase
Agreement) of a share of Grantor Common Stock on each trading day during any
consecutive six (6) month period occurring after the fifth anniversary of the
effective date of this Agreement.

 

4.                                       Covenants of Grantor. Grantor agrees that, so long as Beneficiary holds a security interest
in or lien on Collateral, Grantor will not, without Beneficiary’ prior written
consent, sell, assign, transfer, pledge or otherwise encumber the Collateral or
any part thereof; provided, however, that Grantor may sell Water Taps as
contemplated by the Asset Purchase Agreement without prior consent. Grantor
will immediately notify Beneficiary in writing of any event which materially
adversely affects the rights and remedies of Beneficiary in relation to the
Collateral. If Grantor at any time becomes entitled to receive any cash, stock
or other property as additions to, in substitution of or in exchange for any of
the Collateral, Grantor shall accept the same as Beneficiary’ agent and shall
promptly deliver them to Beneficiary in the exact form received, with all
necessary transfer instruments or stock powers, to be held as further security
for the Obligations.

 

5.                                       Care of Collateral. Grantor
shall have all risk of loss of the Collateral. Beneficiary shall have no liability
or duty, either before or after the occurrence of an Event of Default, on
account of loss of or damage to, to collect or enforce any of its rights
against, the Collateral, to collect any income accruing on the Collateral, or
to preserve rights against other parties. Beneficiary shall exercise the same
procedures to protect the safekeeping of Collateral as it exercises to protect
similar other assets it holds. If Beneficiary actually receives any notices
requiring action with respect to Collateral in Beneficiary’ possession,
Beneficiary shall take reasonable steps to forward such notices to Grantor. Grantor
is responsible for responding to notices concerning the Collateral, voting the
Pledged Shares (subject to paragraph 21 hereof), and exercising rights and
options, calls and conversions of the Pledged Shares. Beneficiary’ sole
responsibility in connection with exercising rights and options, calls and
conversions of the Pledged Shares is to take such action as is reasonably
requested by Grantor in writing, provided, however, that Beneficiary is not
responsible to take any action that, in Beneficiary’ sole

 

4

 

judgment,
would materially adversely affect the value of the Collateral as security for
the Obligations. While Beneficiary is not required to take certain actions, if
action is needed, in Beneficiary’ sole discretion, to preserve and maintain the
Collateral, Grantor authorizes Beneficiary to take such actions.

 

6.                                       Assignment. Neither
Grantor nor Beneficiary may assign or transfer this Agreement or its rights and
obligations hereunder without the prior written consent of the other party.

 

7.                                       Partial Release of Collateral.

 

(a)                                  Following the payment of a portion of the Tap Participation Fee in any
calendar year, Grantor may request in writing that Beneficiary release from its
security interest hereunder any number of Pledged Shares up to the then-current
Proportionate Share (as defined below) of such Collateral (the “Release Notice”),
provided, that in no event shall the aggregate number of Pledged Shares
that have been released hereunder be, at any time, greater than the
then-current Proportionate Share of such Collateral.

 

(b)                                 The Release Notice shall (i) be given within sixty (60) days after
the end of Grantor’s fiscal year and no more frequently than once per fiscal
year, (ii) identify the amount of Tap Participation Fee paid by Grantor
since the date hereof and during the calendar year immediately prior to the
calendar year in which the Request Notice is given, (iii) identify in
reasonable detail the Collateral requested to be released from the security
interests, liens and the encumbrances securing the Obligations,
(iv) contain the certification of the Chief Executive Officer of Grantor
that all information set forth in the Request Notice is complete and correct,
(v) set forth the Proportionate Share of Collateral to be released, and
(vi) contain such other information regarding the payment, performance and
discharge of the Obligations as Beneficiary has theretofore reasonably
requested.

 

(c)                                  Within thirty (30) days after Beneficiary receives a complete Request
Notice and accompanying documentation as required herein, Beneficiary shall
terminate its security interest in the then-current Proportionate Share of the
Pledged Shares.

 

(d)                                 “Proportionate Share” shall mean, on any date of determination, that
number of shares of Pledged Shares which is equal to (x) 10,653.2 (as
adjusted, whether by increase or decrease in the number of Pledged Shares by
reason of a distribution, division or consolidation or combination of such
shares at any time or from time to time after the date hereof such that the
holders of shares of common stock of the Canal Company shall have had an
adjustment made, without payment therefor, in the number of shares of common
stock owned by them or, on or after any record date fixed for the determination
of eligible holders, shall have become entitled or required to have had an
adjustment made in the number of common stock owned by them, without payment
therefor, in which case there shall be a corresponding adjustment as to the
number of shares of common stock stated herein as 10,653.2 shares),
(y) times a fraction, the numerator is the cumulative number of Water Taps
deemed issued by Grantor after the Closing Date for which a Tap Participation
Fee has been paid (all as calculated pursuant to the Asset Purchase Agreement)
and the denominator of which is 40,000. For purposes of determining the
numerator and denominator, appropriate adjustment will be made

 

5

 

based upon a
decrease in the number of required Water Taps due to an increase in the Tap
Participation Fee pursuant to Section 2.5 of the Asset Purchase Agreement.

 

(e)                                  Pledged Shares released pursuant to this paragraph 7 shall be
released in reverse order from that listing on Schedule 2.

 

8.                                       Power of Attorney. Grantor
hereby appoints and constitutes Beneficiary its true and lawful attorney, with
full power of substitution, with full power and authority to (i) prepare,
execute and deliver on behalf of Grantor any and all such instruments,
assignments, stock powers, financing statements, certificates and other
documents as Beneficiary deems necessary in order to perfect and protect its
interests in the Collateral and (ii) immediately, upon and during the
continuance of an Event of Default hereunder, to take such actions with respect
to the Collateral as Beneficiary, in its sole discretion, shall deem necessary
or appropriate in order to protect its interest in the Collateral, including,
but not limited to the right to enter any land associated with the Collateral
as Grantor’s agent in Grantor’s name to perform any and all covenants and
agreements to be performed by Grantor as herein provided. This power of
attorney is made pursuant to this Agreement, is coupled with an interest and
may not be revoked or cancelled before all of the Obligations have been paid or
otherwise satisfied.

 

9.                                       Performance for Pure Cycle. Pure Cycle agrees and hereby authorizes High Plains, in High Plains’
sole discretion, but High Plains shall not be obligated to, upon an Event of
Default, to advance funds on behalf of Pure Cycle, in order to insure Pure
Cycle’s compliance with any covenant, warranty, representation or agreement of
Pure Cycle made in or pursuant to this Agreement or the Transaction Documents,
or to preserve or protect any right or interest of Beneficiary in the
Collateral or under or pursuant to this Agreement, including, without
limitation, the payment of any taxes and the satisfaction or discharge of any
judgment or any lien upon the Collateral; provided, however, that the making of
any such advance by High Plains shall not constitute a waiver by High Plains of
any Event of Default with respect to which such advance is made nor relieve
Pure Cycle of any such Event of Default. Pure Cycle shall pay to High Plains
upon demand all such advances made by High Plains with interest thereon from
the date of advance at the rate of ten percent (10%) per year. All such advances
shall be deemed to be included in the Obligations and secured by the security
interest granted High Plains hereunder.

 

10.                                 Asset Purchase Agreement. Grantor will duly and punctually pay any and all amounts described in
the Asset Purchase Agreement in accordance with the terms of the Asset Purchase
Agreement and all other Obligations, when and as due and payable. The
provisions of the Asset Purchase Agreement, Registration Rights Agreement and
Property Management Agreement are hereby incorporated by reference into this
Deed of Trust as fully as if set forth at length herein.

 

11.                                 Payment of Taxes, Assessments and Other
Charges. Subject to paragraph 15 relating to contests,
Grantor shall pay before a penalty might attach for nonpayment thereof, all
taxes and assessments and all other charges whatsoever levied upon or assessed
or placed against the Collateral, except that assessments may be paid in
installments so long as no fine or penalty is added to any installment for the
nonpayment thereof. Grantor shall likewise pay any and all governmental levies
or assessments of any kind which create, may create or appear to create a

 

6

 

lien upon the
Collateral, or any part thereof. Grantor shall likewise pay all taxes,
assessments and other charges levied upon or assessed, placed or made against,
or measured by, this Deed of Trust, or the recordation hereof, or the
Obligations secured hereby. In the event of any legislative action or judicial
decision after the date of this Deed of Trust, imposing upon Beneficiary the
obligation to pay any such taxes, assessments or other charges, or deducting
the amount secured by this Deed of Trust from the value of the Collateral for
the purpose of taxation, or changing in any way the laws now in force for the
taxation of mortgages, deeds of trust or debts secured thereby, or the manner
of the operation of any such taxes so as to affect the interests of
Beneficiary, then, and in such event, Grantor shall bear and pay the full amount
of such taxes, assessments or other charges. Grantor shall promptly furnish to
Beneficiary all notices received by Grantor of amounts due under this paragraph
and shall promptly furnish to Beneficiary receipts evidencing such payments. Notwithstanding
the foregoing, Beneficiary is responsible for the foregoing matters to the
extent provided in the Property Management Agreement while that agreement is in
effect. and for all such matters which exist prior to the date hereof.

 

12.                                 Liens. Subject to
paragraph 15 hereof relating to contests, subsequent to the date of this Deed
of Trust, Grantor shall not create, incur or suffer to exist any lien, security
interest, encumbrance or charge on the Collateral or any part thereof, other
than the lien of current real estate taxes and installments of special
assessments with respect to which no penalty is yet payable.

 

13.                                 Mechanics’ Liens.
Grantor shall pay, when due, the claims of all persons supplying labor,
materials or equipment to or in connection with the Collateral, and Grantor
will keep the Collateral free and clear of all liens and claims of liens by
contractors, subcontractors, mechanics, laborers, materialmen and other such
persons arising out of the work, construction, development, operation or
maintenance of the Collateral (collectively, “Mechanic’s Lien(s)”). In the
event that any Mechanic’s Liens are filed against the Collateral or any portion
thereof, Grantor shall, within thirty (30) days of receiving written notice of
any such lien, discharge the same of record by payment, deposit, bond, court
order or otherwise, or, with the prior written consent of Beneficiary, obtain
title insurance insuring the priority of the lien of this Deed of Trust to be
superior to such Mechanic’s Lien. If Grantor fails to cause any such Mechanic’s
Liens to be so discharged within the thirty (30) day period, then, in addition
to any other right or remedy provided to Beneficiary hereunder, Beneficiary
may, but shall not be obligated to, discharge the same either by paying the amount
claimed to be due or by procuring the discharge of such Mechanic’s Lien by
deposit or by bonding proceedings. If any suit or proceeding shall be brought
to foreclose or enforce any such Mechanic’s Lien, Grantor shall, at its sole
cost and expense, promptly pay, satisfy and discharge any final judgment
entered therein, and if Grantor fails to do so, then Beneficiary, at its
option, may do so. All amounts charges, costs, expenses, fees and sums incurred
or disbursed by Beneficiary in connection with the foregoing shall be a demand
obligation owing by Grantor to Beneficiary pursuant to this Deed of Trust and
shall become a part of the Obligations hereunder. Notwithstanding the
foregoing, Beneficiary is responsible for the foregoing matters to the extent
provided in the Property Management Agreement while that agreement is in effect
and for all such matters which exist prior to the date hereof.

 

7

 

14.                                 Compliance with Laws. Subject to paragraph 15 relating to contests, Grantor shall comply with
all present and future statutes, laws, rules, orders, regulations and
ordinances, and any easements, protective covenants or other private
restrictions affecting the Collateral, any part thereof or the use thereof.

 

15.                                 Permitted Contests. Grantor
shall not be required to (i) pay any tax, assessment or other charge referred
to in paragraph 11 hereof, (ii) discharge or remove any lien, encumbrance or
charge referred to in paragraph 12 hereof, or (iii) comply with any
statute, law, rule, regulation or ordinance referred to in paragraph 14 hereof,
so long as Grantor shall (a) contest, in good faith, the existence, amount or
the validity thereof, the amount of damages caused thereby or the extent of its
liability therefor, by appropriate proceedings which shall operate during the
pendency thereof to prevent (A) the collection of, or other realization
upon, the tax, assessment, charge or lien, encumbrance or charge so contested,
(B) the sale, forfeiture or loss of the Collateral or any part thereof, and (C)
any interference with the use of the Collateral or any part thereof, and (b)
shall give such security to Beneficiary as it may reasonably demand to insure
compliance with the foregoing provisions of this paragraph 15. Grantor shall
give prompt written notice to Beneficiary of the commencement of any contest
referred to in this paragraph 15.

 

16.                                 Preservation and Maintenance of Collateral. Grantor (i) shall keep the Collateral in safe and good repair and
condition; (ii) shall not commit waste of the Collateral, and (iii) shall, at
its sole cost and expense, maintain insurance of the types and amounts
customary relating to the Collateral. Notwithstanding the foregoing,
Beneficiary is responsible for the foregoing matters to the extent provided in
the Property Management Agreement while that agreement is in effect.

 

17.                                 Inspection. Grantor
shall permit Beneficiary or its agents to enter upon the Collateral at all
reasonable times for the purposes of inspecting the Collateral or any part
thereof, subject to the rights of any tenants under their leases. Beneficiary
shall, however, have no duty to make such inspection.

 

18.                                 Protection of Beneficiary’s Security. Subject to the rights of Grantor under paragraph 15 hereof, if Grantor
fails to perform or comply with any of the covenants and agreements contained
in this Deed of Trust or if any action or proceeding is commenced which affects
the Collateral or the interest of Trustee or Beneficiary therein, or the title
thereto, then Beneficiary, at Beneficiary’s option, may perform such covenants
and agreements, defend against and/or investigate such action or proceeding,
and/or take such other action as Beneficiary reasonably deems necessary to
protect its interests in the exercise of its judgment, including without
limitation, advancing funds for the payment of taxes, levies or insurance costs
with respect to the Collateral or to protect the Collateral from waste, damage
or abuse. Beneficiary shall be entitled to rely on an opinion of counsel as to
the legality, validity and priority of any claim, lien, encumbrance, tax,
assessment, charge and premium paid by it and shall be the sole reasonable
judge of the amount necessary to be paid in satisfaction thereof. Any
reasonable amounts or expenses disbursed or incurred by Beneficiary pursuant to
this paragraph 18, or to otherwise enforce any provisions of this Deed of
Trust,  to preserve any of the rights,
powers or privileges of Beneficiary granted or created hereby, or otherwise in
order to protect the Collateral from waste, damage, or abuse, including,
without limitation, reasonable attorney’s fees

 

8

 

(including
fees and costs incurred in any appeal), with interest thereon as hereinafter
stated, shall become additional Obligations secured by this Deed of Trust with
same effect and priority as if disbursed on or before the date this Deed of
Trust is recorded. Unless Grantor and Beneficiary agree in writing to other
terms of repayment, such amounts shall be due and payable upon ten days’
written notice from Beneficiary, and shall bear interest from the date of
disbursement at a rate of ten (10%) per annum, unless collection of interest at
such rate would be contrary to applicable law, in which event such amounts
shall bear interest at the highest rate which may be collected under applicable
law. Beneficiary shall, at its option, be subrogated to the lien of any
mortgage or other lien discharged in whole or in part by the Obligations or by
Beneficiary under the provisions hereof, and any such subrogation rights shall
be additional and cumulative security for this Deed of Trust. Nothing contained
in this paragraph 18 shall require Beneficiary to incur any expense or do any
act hereunder, and Beneficiary shall not be liable to Grantor for any damages
or claims arising out of action taken by Beneficiary in accordance with the
provisions of this paragraph 18.

 

19.                                 Condemnation. Grantor
hereby irrevocably assigns to Beneficiary any award or payment which becomes payable
by reason of any taking of the Collateral, or any part thereof, whether
directly or indirectly or temporarily or permanently, in or by condemnation or
other eminent domain proceedings or the settlement thereof (hereinafter called “Taking”).
Forthwith upon receipt by Grantor of notice of the institution of any
proceedings or negotiations for a Taking, Grantor shall give notice thereof to
Beneficiary. Beneficiary may appear in any such proceedings and participate in
any such negotiations and may be represented by counsel. Notwithstanding that
Beneficiary may not be a party to any such proceeding, Grantor will promptly
give to Beneficiary copies of all notices, pleadings, judgments, determinations
and other papers received by Grantor therein. Grantor will not enter into any
agreement permitting or consenting to the taking of the Collateral, or any part
thereof, or providing for the conveyance thereof in lieu of condemnation, with
anyone authorized to acquire the same in condemnation or by eminent domain unless
Beneficiary shall first have consented thereto in writing which consent shall
not be unreasonably withheld or delayed. All Taking awards or payments shall be
adjusted jointly by Grantor and Beneficiary. All awards or payments payable as
a result of a Taking shall be paid to Beneficiary, who shall apply them (after
first deducting Beneficiary’s expenses incurred in the collection thereof
including, but not limited to reasonable attorney fees) to the reduction of the
Obligations then due and payable. With respect to any remaining award or
payment, Grantor shall be deemed to have paid Beneficiary the Tap Participation
Fee for the number of Water Taps determined by dividing the amount of the
remaining award or payment by the then current Rangeview Water Tap Fee (as
defined in the Asset Purchase Agreement).

 

20.                                 Events of Default. Each
of the following occurrences shall constitute an event of default hereunder
(herein called an “Event of Default”):

 

(a)                                  the failure of Grantor to pay the Tap Participation Fees in accordance
with the terms of the Asset Purchase Agreement;

 

(b)                                 the failure of Grantor to perform, observe or comply with any of the
provisions of this Agreement in any material respect after the passage of any
applicable cure periods;

 

9

 

(c)                                  the failure of Grantor to perform, observe or comply in any material
respect with its obligations under the Transaction Documents after the passage
of any applicable cure periods; and

 

(d)                                 Grantor shall fail to pay any Obligations not set forth above in (a)
through (c) when due.

 

21.                                 Power of Sale, Remedies. If an Event of Default shall occur hereunder, Grantor hereby authorizes
and empowers Trustee and/or Beneficiary as follows:

 

(a)                                  All Obligations due and payable. Beneficiary
may by written notice to Grantor declare all Obligations (other than Tap
Participation Fees for Water Taps not yet sold unless the same may be
accelerated pursuant to the terms of the Asset Purchase Agreement; and
regarding those that may not be accelerated pursuant to the terms of the Asset
Purchase Agreement, they will continue to be due and payable as they accrue) to
be immediately due and payable and the same shall be immediately due and
payable without further notice or demand of any kind.

 

(b)                                 Beneficiary Sale of the Collateral.

 

(i)                                       Upon the occurrence of an Event of Default hereunder, Beneficiary may,
at its option, proceed to enforce this Agreement and in connection therewith
may (i) sell or otherwise dispose of all or any portion of the Collateral
and apply such Collateral or the proceeds thereof against the Obligations,
(ii) exercise any remedies available to it under this Agreement or the
Transaction Documents, and (iii) otherwise exercise all of the rights and
remedies of a secured party under the UCC and under other applicable laws. Without
limiting the foregoing, Beneficiary shall have the right (x) to transfer
the whole or any part of the Collateral into the name of Beneficiary or its
nominee, (y) to notify any person obligated on any of the Collateral to
make payment directly to Beneficiary or its nominee of any amounts due or to
become due thereon and (z) to vote the Pledged Shares on Grantor’s behalf;
provided, however, that Beneficiary may only proceed to exercise the remedies hereunder
with respect to Obligations then due and payable, whether by acceleration or
otherwise.

 

(ii)                                    Any written notice of the sale, disposition or other intended action by
Beneficiary with respect to the Collateral which is sent by certified mail,
return receipt requested or by overnight courier to Grantor at Grantor’s
address specified pursuant to the Asset Purchase Agreement, at least ten (10)
days prior to such sale, disposition or action, shall constitute reasonable
notice to Grantor, unless applicable law requires a longer period. This
provision shall not be construed to impose any obligation on Beneficiary to
notify Grantor of Beneficiary’ intent to sell, dispose of or take other action
with respect to the Collateral, except to the extent applicable law requires
such notice.

 

(iii)                                 Grantor recognizes that Beneficiary may be unable to effect a public
sale of all or a part of the Pledged Shares by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state securities
laws, but may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among other
things, to acquire all or a part of the Pledged Shares for their own

 

10

 

account, for
investment and not with a view to the distribution or resale thereof. Grantor
acknowledges and agrees that any private sale so made may be at prices and on
other terms less favorable to the seller than if such Collateral were sold at
public sale, and that Beneficiary has no obligation to delay the sale of such
Collateral for the period of time necessary to permit registration of such
Collateral for public sale under any securities laws. Grantor agrees that a
private sale or sales made under the foregoing circumstances shall be deemed to
have been made in a commercially reasonable manner. If any consent, approval or
authorization of any federal, state, municipal or other governmental
department, agency or authority should be necessary to effectuate any sale or
other disposition of the Pledged Shares, or any partial sale or other
disposition of such Collateral, Grantor will execute all such applications and
other instruments as may be required in connection with securing any such
consent, approval or authorization, and will otherwise use its best efforts to
secure the same.

 

(iv)                                All costs and expenses, including, without limitation, attorneys’ and
expert witness fees and expenses incurred by or on behalf of Beneficiary in
connection with the taking, holding, preparing for sale or other disposition,
selling, managing, collecting or otherwise disposing of the Collateral,
together with interest thereon at a per annum rate of interest of ten percent
(10%) from the date of such payment until repaid in full (the “Liquidation
Costs”), shall be paid by Grantor to Beneficiary on demand and shall constitute
and become a part of the Obligations secured hereby. Any retained Collateral
and any proceeds of sale or other disposition of the Collateral will be applied
by Beneficiary to the payment of the Liquidation Costs, and the balance of such
proceeds (if any) will be applied by Beneficiary toward the payment of the
Obligations then due and payable at such time or times and in such order and manner
of application as Beneficiary may from time to time in its sole discretion
determine. Except as may be otherwise specifically provided in this Agreement,
all Collateral and proceeds of Collateral coming into Beneficiary’ possession
may be applied by Beneficiary to any of the Obligations which are due and
payable as Beneficiary shall determine in its sole but reasonable discretion. Any
surplus of Collateral or proceeds of Collateral held by Beneficiary and
remaining after payment in full of all the Obligations which are currently due
and payable shall be paid over to Grantor or to whomsoever may be legally
entitled to receive such surplus.

 

(v)                                   Each right, power and remedy of Beneficiary as provided for in this
Agreement, in the Transaction Documents or now or hereafter existing at law or
in equity or by statute or otherwise shall be cumulative and concurrent and
shall be in addition to every other right, power or remedy provided for in this
Agreement or in any other Transaction Documents or now or hereafter existing at
law or in equity or by statute or otherwise, and the exercise or beginning of
the exercise by Beneficiary of any one or more such rights, powers or remedies
shall not preclude the simultaneous or later exercise by Beneficiary of any or
all such other rights, powers or remedies.

 

(vi)                                No failure or delay by Beneficiary to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement or
any of the Transaction Documents, or to exercise any right, power or remedy
consequent upon a breach thereof, shall constitute or be deemed to constitute a
waiver of any such term, condition, covenant or agreement or of any such
breach, or preclude Beneficiary from exercising any such right, power or remedy
at any later time or times.

 

11

 

(c)                                  Sale by Beneficiary.

 

(i)                                       Beneficiary is authorized and empowered, without further notice, to
file a written Notice of Election and Demand for Sale with Trustee, as provided
by law, who shall upon receipt of such notice cause a copy of the same to be
recorded in the Office of the Clerk and Recorder of the County of                   ,
it being then lawful for said Trustee to foreclose, and Trustee shall foreclose
this Deed of Trust, and sell and dispose of the Collateral (en masse or in
separate parcels, as Beneficiary in its sole discretion may elect) and all the
right, title and interest of Grantor, its successors and assigns, therein, at
public auction at the office of the Public Trustee, County of                ,
State of Colorado, or at the main entrance to any courthouse in and for said
County of                   ,
or on the Collateral, or any part thereof, or such other place as may be
authorized or permitted by law, all as may be specified in the notice of such
sale, for the highest and best price the same will bring in cash, after giving
and/or publishing such notice to such parties, in the form, by such means and
for such length of time (but in any event not less than thirty (30) days’
notice) as shall comply with the applicable statutory requirements in effect at
the time such foreclosure proceedings are commenced. Beneficiary may bid for
and acquire the Collateral or any part thereof at such sale and in lieu of
paying cash therefor may make settlement for the purchase price by crediting
the Obligations upon the net sales price after deducting therefrom the expenses
of the sale and the costs of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust. Trustee shall apply the proceeds
of the sale in the following order: (i) to all reasonable costs and expenses of
the sale, including, without limitation, reasonable Trustee’s and attorneys’
fees and costs of evidence of title, (ii) to the Obligations, and (iii) the
excess, if any, to the person or persons legally entitled thereto.

 

(ii)                                    If any of the Obligations hereby secured shall become due and payable,
Trustee or Beneficiary shall have the right and power to proceed by a suit or
suits in equity or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution of any power herein
granted, or for any foreclosure hereunder or for the sale of the Collateral
under the judgment or decree of any court or courts of competent jurisdiction,
or for the appointment of a receiver pending any foreclosure hereunder or the
sale of the Collateral under the order of a court or courts of competent
jurisdiction or under executory or other legal process, or for the enforcement
of any other appropriate legal or equitable remedy. Grantor agrees, to the full
extent that it lawfully may, that in case one or more of the defaults hereunder
shall have occurred and shall not have been remedied, then, and in every such
case, Beneficiary shall have the right and power to enter into and upon and
take possession of all or any part of the Collateral in the possession of
Grantor, its successors or assigns, or its or their agents or servants, and may
exclude Grantor, its successors or assigns, and all persons claiming under
Grantor (other than tenants under leases existing prior to the date of this
Agreement, entered into during the term of the Property Management Agreement,
or otherwise approved by Beneficiary), and its or their agents or servants,
wholly or partly therefrom; and, holding the same, Beneficiary may use,
administer, manage, operate and control the Collateral and conduct the business
thereof to the same extent as Grantor, its successors or assigns, might at the
time do and may exercise all rights and powers of Grantor, in the name, place
and stead of Grantor, or otherwise as Beneficiary shall deem best; and in the
exercise of any of the foregoing rights and powers Beneficiary shall not be
liable to Grantor for any loss or

 

12

 

damage thereby
sustained unless due solely to the willful misconduct or gross negligence of
Beneficiary.

 

(iii)                                 Beneficiary shall have and may exercise with respect to all fixtures
and personal property which are part of the Collateral, all the rights and
remedies accorded upon default to a secured party under the UCC. If notice to
Grantor of intended disposition of such property is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given to Grantor (in the manner specified in paragraph 24) at least ten (10)
calendar days prior to the date of intended disposition.

 

(iv)                                To the fullest extent permitted by law, Beneficiary may request, and
Grantor agrees that Beneficiary shall as a matter of right be entitled to, the
appointment of a receiver or receivers for all or any part of the Collateral,
whether such receivership be incident to a proposed sale of the Collateral or
otherwise, and Grantor does hereby consent to the appointment of such receiver
or receivers without notice to Grantor and Grantor further agrees not to oppose
any application therefor by Beneficiary.

 

(v)                                   Grantor shall pay on demand all costs and expenses incurred by
Beneficiary in exercising such rights and remedies, and in the collection of
the Obligations or foreclosure of this Deed of Trust, including without
limitation, reasonable attorneys’ fees, costs and legal expenses. All such
costs expenses, with interest thereon as hereinafter stated, shall become
additional Obligations of Grantor secured by this Deed of Trust with same
effect and priority as if disbursed on or before the date this Deed of Trust is
recorded. Unless Grantor and Beneficiary agree in writing to other terms of
repayment, such amounts shall bear interest from the date of disbursement at
the rate of ten percent (10%) per annum, unless collection from Grantor of
interest at such rate would be contrary to applicable law, in which event such
amounts shall bear interest at the highest rate which may be collected from
Grantor under applicable law.

 

22.                                 Forbearance Not a Waiver; Rights and Remedies
Cumulative. No delay by Trustee or Beneficiary in
exercising any right or remedy provided herein or otherwise afforded by law or
equity shall be deemed a waiver of or preclude the exercise of such right or
remedy, and no waiver by Trustee or Beneficiary of any particular provision of
this Deed of Trust shall be deemed effective unless in writing signed by the
party making such waiver. All such rights and remedies provided for herein or
which Trustee or Beneficiary may have otherwise, at law or in equity, shall be
distinct, separate and cumulative and may be exercised concurrently,
independently or successively in any order whatsoever, and as often as the
occasion therefor arises. Beneficiary’s taking action pursuant to paragraph 18,
receiving proceeds, awards or damages pursuant to paragraph 19, or collecting
rents directly or receiving payments through a receiver, shall not impair any
right or remedy available to Trustee or Beneficiary under paragraph 21 hereof. Acceleration
of maturity of any payment due as permitted under the Asset Purchase Agreement,
once claimed hereunder by Beneficiary, may, at the option of Beneficiary, be
rescinded to the extent contemplated by the Asset Purchase Agreement by written
acknowledgment to that effect by Beneficiary, but the tender and acceptance of
partial payments alone shall not in any way affect or rescind such acceleration
of the maturity of the Obligations, except as otherwise provided by law.

 

13

 

23.                                 Successors and Assigns Bound; Captions. The covenants and agreements herein contained shall bind, and the
rights hereunder shall inure to the benefit of, the respective permitted
successors and assigns of Beneficiary and Grantor. References herein to Grantor
or Beneficiary are deemed to include such successors and assigns. The captions
and headings of the paragraphs of this Deed of Trust are for convenience only
and are not to be used to interpret or define the provisions hereof.

 

24.                                 Notice. Any notices
and other communications under this Deed of Trust shall be in writing and shall
be given by hand delivery, or first-class mail, certified or registered with return
receipt requested, or by commercial overnight courier and shall be deemed to
have been duly given upon hand delivery, delivery by commercial overnight
courier to the address specified herein, or three days after deposit in the
U.S. mail as provided above, addressed to Grantor or Beneficiary, as the case
may be, at the address set out in the first paragraph of this Deed of Trust,
with copies to the persons set forth below:

 

(a)                                  If to Beneficiary a copy shall be sent to (which shall not constitute
notice):

 

Faegre & Benson LLP

1900 Fifteenth Street

Boulder, Colorado 80302

Attention:  G. James Williams, Jr.

Telephone:  (303) 447-7700

Telecopy:  (303) 447-7800

 

and

 

H. Hunter White

9800 Walzer Court

Windermere, Florida 34786

Telephone:  (407) 876-8915

Telecopy:  (407) 264-6487

 

(b)                                 If to Debtor a copy shall be sent to (which shall not constitute
notice):

 

Davis Graham & Stubbs LLP

1550 Seventeenth Street, Suite 500

Denver, Colorado 80202

Attention:  Wanda J. Abel, Esq.

Telephone:  (303) 892-7314

Telecopy:  (303) 893-1379

 

(c)                                  Any party may change its address for notice hereunder by providing
written notice in accordance with this paragraph.

 

25.                                 Governing Law; Severability. This Deed of Trust shall be governed by the substantive laws of the
State of Colorado. In the event that any provision or clause of this Deed of
Trust conflicts with applicable law or the application thereof under any
particular circumstance to any particular person or entity conflicts with
applicable law, such conflict shall

 

14

 

not affect
other provisions of this Deed of Trust which can be given effect without the
conflicting provisions or the applicability of such provisions to other persons
or entities or to such persons or entities under other circumstances and to
this end the provisions of the Deed of Trust are declared to be severable.

 

26.                                 Miscellaneous. Neither
this Agreement nor any term, condition, covenant, or agreement hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. As used herein the singular number shall
include the plural, the plural the singular, and the use of the masculine,
feminine or neuter gender shall include all genders as the context may require,
and the term “person” shall include an individual, a corporation, an
association, a partnership, a trust, a limited liability company, an
organization, a government or political subdivision thereof and a governmental
agency. Unless varied by this Agreement, all terms used herein which are
defined by the UCC shall have the same meanings hereunder as assigned to them
by the UCC, as in effect on the date hereof.

 

27.                                 Waiver of Marshalling. Grantor, any party who consents to this Deed of Trust and any party who
now or hereafter acquires a lien on the Collateral and who has actual or
constructive notice of this Deed of Trust, hereby waives any and all right to
require the marshalling of assets in connection with the exercise of any of the
remedies permitted by applicable law or provided herein.

 

28.                                 Waiver of Homestead. Grantor
hereby waives all right of homestead and any other exemption in the Collateral
under state or federal law presently existing or hereafter enacted.

 

29.                                 Maximum Principal Amount. The maximum principal amount secured by this Deed of Trust within the
meaning of C.R.S. § 38-39-106, shall be One Hundred Million Dollars
($100,000,000.00), consisting of a good faith estimate of sums due pursuant to
the Asset Purchase Agreement plus interest, attorneys’ fees and costs, and
other additional amounts which may be due and payable thereunder, and any
amounts which may be disbursed by Beneficiary in accordance with this Deed of
Trust and which are not included within the provisions of C.R.S.
§ 38-39-106(2). Notwithstanding any provision hereof which may be
interpreted to the contrary,  the
disbursement of any amount is at the sole option and sole discretion of
Beneficiary, except as expressly provided in the Asset Purchase Agreement.

 

IN WITNESS WHEREOF, Grantor has caused this
Deed of Trust to be duly executed as of the day and year first above written.

 

	
   

  	
   

  	
  PURE CYCLE CORPORATION

  
	
   

  	
   

  	
  A DELAWARE CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Mark W. Harding, President

  

 

15

 

	
  STATE OF                   

  	
  )

  	
   

  
	
   

  	
  ) ss.

  	
   

  
	
  COUNTY OF
                    

  	
  )

  	
   

  

 

The foregoing instrument was acknowledged
before me this           day of                   ,
2006, by Mark W. Harding in his capacity as President of PURE CYCLE
CORPORATION, a Delaware corporation.

 

Witness my hand and official seal.

 

My commission expires:                           .

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public

  
				

 

16

 

SCHEDULE
1

TO

COMBINATION DEED OF TRUST AND PLEDGE AND SECURITY AGREEMENT

 

[Insert Legal
Descriptions of Property corresponding to Pledged Shares – by county]

 

17

 

SCHEDULE
2

TO

COMBINATION DEED OF TRUST AND PLEDGE AND SECURITY AGREEMENT

 

[List Stock
Certificates – Stock Certificates listed shall consist 

first of shares that do not secure farm debt and then shares held by farmers to
secure Excluded Indebtedness that secure the least amount of farm debt.]

 

18

 

SCHEDULE 3

TO

COMBINATION DEED OF TRUST AND PLEDGE AND SECURITY AGREEMENT

 

Pure Cycle Corporation is a Delaware
corporation. Its organizational number with the Delaware Secretary of State is
822906. It has had no prior names.

 

19

 

EXHIBIT C

 

LESSEE (TENANT) ESTOPPEL CERTIFICATE

 

TO:                          Pure Cycle Corporation, and its successors and
assigns (the “Buyer”)

 

RE:                            Property located at [insert address and
city], Colorado

 

The undersigned Tenant acknowledges that Buyer intends to purchase the above
listed property, and hereby certifies to Buyer as follows:

 

1.             Tenant is the tenant under the leases checked
below between Lessee and High Plains A&M, LLC (“Landlord”), for the
property at the address listed above (the “Leases”):

 

	
  o

  	
   

  	
  Farm Lease

  	
   

  
	
  o

  	
   

  	
  Water Share Lease

  	
   

  
	
  o

  	
   

  	
  Gross Pasture Lease

  	
   

  

 

2.             The Leases are in full force and effect and
have not been amended, modified or supplemented.

 

3.             Tenant does not have any options to purchase
the above property or any interest therein.

 

4.             To Tenant’s knowledge, Landlord is not in
default under the Leases.

 

5.             Tenant is not in default under the Leases.

 

6.             The term of each Lease is set forth below:  

 

	
  Lease

  	
   

  	
  Commencement Date

  	
   

  	
  Expiration Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Farm

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Water Share

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Grass Pasture

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Tenant has no rights to extend the term of the Leases.

 

7.             The current rent under each of the Leases is
set forth below:  

 

	
  Farm

  	
   

  	
  $

  	
             
  

  	
   

  	
  per            

  	
   

  
	
  Water Share

  	
   

  	
  $

  	
             
  

  	
   

  	
  per            

  	
   

  
	
  Grass Pasture

  	
   

  	
  $

  	
             
  

  	
   

  	
  per            

  	
   

  

 

 

Rent and all other charges under the Leases have been paid through the
most recent payment period.

 

8.             The security deposits under the Leases are as
follows:

 

	
  Farm Lease

  	
   

  	
  $

  	
              
  

  	
   

  
	
  Water Share Lease

  	
   

  	
  $

  	
              
  

  	
   

  
	
  Grass Pasture Lease

  	
   

  	
  $

  	
              
  

  	
   

  

 

9.             Tenant is in sole possession of the above
property and has not assigned, sublet, pledged, mortgaged, transferred or
otherwise conveyed all or any portion of its interest in such property or the
Leases.

 

	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  

 

2

 

EXHIBIT D

PROPERTY
MANAGEMENT AGREEMENT

THIS PROPERTY MANAGEMENT AGREEMENT (this “Agreement”), is made and
entered into as of the       day of           ,
2006 by and between PURE CYCLE CORPORATION, a Delaware corporation (herein referred to as “Pure Cycle”), and
HIGH PLAINS A&M, LLC, a Colorado limited liability company (herein referred
to as “Manager”).

RECITALS

A.            Contemporaneously
herewith, Pure Cycle has acquired (i) certain property from Manager,
including water interests in the Arkansas River and its tributaries represented
by real property interests and shares of stock in the Fort Lyon Canal Company
and (ii) real property in Otero, Bent and Prowers Counties, Colorado,
(together, the “Property”) pursuant to the Asset Purchase Agreement between
Pure Cycle and Manager dated May 10, 2006 (the “Acquisition Agreement”).  Capitalized terms used herein without
definition shall have the meanings set forth in the Acquisition Agreement.

B.            Pure Cycle desires
to engage Manager to manage, maintain and operate the Property, and Manager
desires to accept such engagement.

AGREEMENT

In consideration of the mutual covenants, representations, warranties
and agreements herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

ARTICLE
I

APPOINTMENT AND AUTHORITY OF MANAGER

1.1           Appointment.

(a)           Pure Cycle hereby appoints Manager as the managing and
leasing agent for the Property more fully described in Schedule 2.1 (b) to the
Acquisition Agreement, including all legal descriptions and all buildings,
structures and other improvements located thereon, and all rights-of-way and
similar authorizations, (said items and any personal property including
irrigation equipment of Pure Cycle on such Property or in such improvements
being herein called the “Premises”), and which is subject to lease arrangements
(the “Leases” or a “Lease”) with lessees (the “tenants” or a “tenant”), all of
which are set forth on Schedule 1.1 attached hereto, permitting the tenants of
the Property to farm the Property, use the Property for grazing and use the
Water Rights for irrigation purposes. 
Pure Cycle hereby authorizes Manager to exercise such powers with respect
to the Premises as may be necessary for the performance of Manager’s
obligations under the terms of this Agreement, and Manager accepts such
appointment under the terms and conditions hereinafter set forth. It is
understood that Manager is only managing the Premises as farm property and is
not managing 

 

 

the water and water rights associated therewith
except as to the use of the water by the tenant or to the extent necessary in
connection with oil and gas activities as described below and except as
otherwise provided herein.

(b)           Manager will manage oil and gas exploration, drilling,
leasing, remediation and production matters including access, crop damage,
rights of the third party to locate production facilities on the Premises,
surface easements, use of minor amounts of water consistent with normal
exploration, remediation, drilling and production activities, and the
like.  Manager will deal with collection
of royalties, lease payments and the like in respect of oil and gas matters in
the same fashion as it deals with such matters in respect of the leases with
tenants, however, rather than the amounts collected from royalties, oil and gas
leases or the like being treated as Gross Revenue or Net Revenue, Manager shall
remit twenty five percent of the Net Oil and Gas Proceeds to Pure Cycle or its
assign (which will be Pure Cycle revenue), and Manager shall retain (or remit
to its assignee) seventy five percent of the Net Oil and Gas Proceeds (which
will be Manager revenue) (such percentages being the respective interests of
the parties in the oil and gas rights of the Premises where another person does
not hold an interest in those oil and gas rights).  Net Oil and Gas Proceeds means the gross
amount received in respect of Pure Cycle’s and Manager’s interest in the oil
and gas rights for the Premises, from oil and gas activities, less: (i) out of
pocket costs of Manager in performing these activities; (ii) a fair allocation
of the cost of Manager employees (at fully loaded cost) spent on oil and gas
activities; (iii) all amounts received which are compensation for damage to the
Premises (which shall be remitted to Pure Cycle or the tenant, as appropriate);
and (iv) an amount equal to the decrease in lease payments which are paid by
tenants due to oil and gas activities (which amounts shall be treated hereunder
as though rent paid by a tenant).  Pure
Cycle will not unreasonably withhold its consent to agreements with third
parties in respect of oil and gas activities. 
In other respects the provisions of this Agreement shall apply to oil
and gas activities as they apply to farming related lease activities.  However, in the event of an irreconcilable
conflict between the terms of this Agreement and the rights of Pure Cycle or
Manager under Colorado and Federal law as an owner of an interest in oil and
gas resources, the rights under Colorado and Federal law shall prevail.  Manager shall consult with Pure Cycle
regarding all material oil and gas matters.

(c)           Manager shall have no right or authority, expressed or
implied, to commit or otherwise obligate Pure Cycle in any manner whatsoever
except to the extent specifically provided herein.

ARTICLE
II

MANAGER’S AGREEMENTS

2.1           General
Responsibility.  Manager, on behalf
of Pure Cycle, shall implement, or cause to be implemented the decisions of
Pure Cycle with respect to the Premises and shall conduct the ordinary and
usual business affairs of Pure Cycle with respect to the Premises as 

 

2

 

provided in this Agreement. 
Manager agrees to use all reasonable efforts in the management,
operation and leasing of the Premises and to comply with such instructions and
policies as Pure Cycle may reasonably request. 
Pure Cycle agrees the conduct of the farm leasing business as previously
conducted by Manager is reasonable.  In
making such decisions and decisions as to the terms of the Leases (and
amendments, waivers, modifications, non-renewals and terminations thereof),
Pure Cycle shall take into account that a reduction in the rent or other
economic benefits to the lessor under the Leases for the Premises (an “Adverse
Decision”) adversely impacts the amounts received by Manager hereunder and if
Pure Cycle makes an Adverse Decision that is not justified by objective
business considerations, or makes an Adverse Decision that nevertheless
benefits Pure Cycle (such as a rent reduction to a tenant in exchange for other
benefit to Pure Cycle), the consideration to Manager under this Agreement shall
be adjusted so that Manager does not suffer an adverse economic impact in such
consideration.  Pure Cycle shall not
terminate, amend, modify, or waive compliance with any term of, any Lease
without prior consultation with Manager.

2.2           Independent
Contractor.  Manager covenants and
agrees to perform the services and assume the obligations and liabilities
covered under this Agreement, and Pure Cycle authorizes Manager to perform such
services and assume such obligations and liabilities. Manager, in performance
of its duties under this Agreement, is an independent contractor, and it is
expressly understood and agreed that any payments for Manager’s services
hereunder shall be payments by Pure Cycle to Manager as an independent
contractor and not as an employee, partner or joint venturer of Pure Cycle.

2.3           Liability
for Pure Cycle’s Decisions.  Except
to the extent Pure Cycle can show that a decision made by Pure Cycle was made
primarily and directly because of inaccurate information provided to it by
Manager, Pure Cycle shall bear all responsibility for, and the consequences of,
any adverse affect on Pure Cycle as a result of those decisions, including any
loss of water rights, shares of Fort Lyon Canal Company, or acceleration of or
default under any Excluded Indebtedness.

2.4           Water
Management Services.  From time to
time, Manager may, but shall have no obligation to, upon Pure Cycle’s written
request, assist Pure Cycle in the management of the water and water rights
associated with the Premises.  If Pure
Cycle requests that Manager provide such services and Manager agrees to provide
such services, Pure Cycle shall compensate Manager for such services on a time
and materials basis and on such pricing and rate terms as the parties
agree.  In addition, Pure Cycle shall
reimburse Manager for a portion of the general, administrative or overhead
costs of Manager’s office in Las Animas, Colorado (or other office from with
such services are provided) based on the percentage of time (on a full time
equivalent basis) that Manager’s personnel devote to the provision of water
management services hereunder.  Pure
Cycle shall reimburse Manager for the time devoted by Manager’s personnel to
the provision of water management services hereunder based upon the hourly
rates for such personnel established by Manager from time to time as provided
above.

 

3

 

ARTICLE
III

MANAGER’S COMPENSATION

3.1           Management Fee.

(a)           All payments by tenants pursuant to the Leases is revenue
of Pure Cycle.

(b)           During the Primary Period (as defined below), as
compensation for Manager’s services pursuant to this Agreement, Manager shall
receive payment equal to all Gross Revenues associated with the Premises
remaining after Manager pays the expenses of maintaining and operating the Premises
(including reimbursable expenses of Manager to the extent permitted hereunder)
as required by the terms of this Agreement (“Net Revenue”).  “Gross Revenues” shall mean the total
collections received from the Premises for rental periods during the Term (as
defined in Section 7.1), including but not limited to:  all rents paid by any tenants at the
Premises; income from operating expense reimbursements; payment for Lease
cancellations; proceeds from rental interruption or abatement insurance;
property tax or assessments refunds, rebates or returns or other tax or
assessment refunds, rebates or returns for taxes paid by Manager hereunder
which are not the property of or returnable to the tenant; security deposits
applied to the payment of rent after tenant defaults or applied to the Lease
for any rent and any other income derived from the utilization or operation of
the Premises; refunds, rebates or returns of any other sums paid by Manager
from Gross Revenues; and condemnation proceeds to the extent attributable to
the loss of rental income.  Gross Revenues
shall exclude all other sources of revenue including, but not limited to:  (a) reductions in the security deposits
returned to tenants due to damage resulting from tenant misuse of or damage to
the Premises; provided, however, that Manager may use the security deposits to
repair such damage; and (b) receipts arising out of the sale of assets,
settlement of fire losses or liability claims, condemnation proceeds (to the
extent not attributable to the loss of rental income) or items of a similar nature.

(c)           During
the Extended Period, the Manager shall continue to have expenses which are to
be paid from Gross Revenue hereunder, and shall have the direct proportionate
(based on time spent on activities hereunder) cost of employees of Manager used
to provide the services of Manager hereunder, and the proportionate amount of
reasonable rent for the premises used by the employee (which is currently an
office in Las Animas, Colorado) paid from Gross Revenue (hence reducing Net
Revenue), and shall be deemed for tax and accounting purposes to receive the
Net Revenue as a management fee. 
However, the Net Revenue shall be applied by Pure Cycle to promptly
prepay Excluded Indebtedness (as defined in the Acquisition Agreement).  Pure Cycle will apply such prepayments as
near as possible proportionately to all Excluded Indebtedness.  In addition, Pure Cycle shall be deemed to
have paid the Seller the Tap Participation Fee for the number of Water Taps
determined by multiplying 

 

4

 

the Net Revenue times the Ratio (as defined below)
and dividing that number by the result obtained upon multiplying the applicable
Tap Participation Fee percentage (10% or 20%) times the then current Rangeview
Water Tap Fee, which deemed payment shall have the effect of decreasing the
remaining number of Water Taps subject to the Tap Participation Fee deemed to
have been paid.  The reduction shall be
applied to the last Tap Participation Fees owing and shall not delay the
payment of any other Tap Participation Fee. 
The Ratio shall be equal to the lesser of (i) the Fifth Year Purchase
Consideration (as defined in the Acquisition Agreement) divided by
 $50,000,000 or (ii) one.

ARTICLE
IV

SERVICES OF MANAGER

4.1           For
Pure Cycle’s Account; Standards.  The
services of Manager in performing its duties and providing services pursuant to
this Agreement shall be for the account of Pure Cycle.  Manager shall manage the leasing of and lease
the Premises in a manner normally associated with the management as lessor of
farm and agricultural operations, which shall include taking those actions a
lessor would normally take to cause a tenant to maintain the Premises in a
safe, operable condition comparable to similar properties in the area unless
otherwise directed by Pure Cycle. 
Manager shall also act with reasonable prudence and care with respect to
the proper protection of and accounting for Pure Cycle’s assets in respect to
the Premises of which Manager or a tenant is in possession or which are subject
to the control and management of Manager pursuant to the terms of this
Agreement.  Except as agreed to pursuant
to Section 2.4, Manager is not managing or maintaining any aspect of the
Premises dealing with water or the water system, or enhancements, reuse
enhancements, monitoring of water rights, quantities, qualities or usage, or
other matters related to water and water rights.

4.2           Financial
Reports And Records.  Manager shall
maintain separate, complete and accurate books and records for the leasing
activities to farmers at the Premises.. 
Manager need not make any decisions of an accounting nature, and shall
merely: (i) record receipts and disbursements concerning the Premises; and (ii)
maintain asset listings as required to allow Pure Cycle to apply expense, depreciation,
amortization and similar records. Pure Cycle shall be responsible for all
determinations of write downs or write offs of assets.  Manager shall not decide the expense,
depreciation or amortization treatment or period of any asset or expenditure.
Manager need not maintain such books and records in accordance with the
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) unless Pure Cycle pays all the
direct and indirect costs of doing so. 
All books and records shall be maintained for the duration of the
Agreement and be returned to Pure Cycle at the expiration or termination of
this Agreement.  Manager shall insure
that controls over financial reporting and significant processes are properly
designed as to Manager’s activities hereunder to capture and report all
receipts and disbursements, and additions to assets and removal of assets,
owned by Pure Cycle and for which Manager conducted the addition or removal.
..Within twenty (20) days of each calendar month end, Manager shall prepare and
provide to Pure Cycle, in a format agreed upon by both parties, the Standard
Reports as detailed under Exhibit A attached hereto (the “Standard
Reports”).  The Standard Reports may be
changed from time to time by mutual agreement of the parties. Manager shall
provide, at Pure 

 

5

 

Cycle’s cost and expense, special “customized” reports, which Pure
Cycle may reasonably request in writing from Manager.  Within thirty (30) days of receipt of a
request by Pure Cycle for a customized report, Manager shall respond by written
proposal showing the proposed format of such report and Manager’s cost
(including those of any third party service providers or vendors) to produce
the report.  Pure Cycle or its
representatives may conduct examinations, during normal business hours and upon
prior notice, which may be given verbally, of the books and records maintained
for Pure Cycle by Manager.  Pure Cycle or
its representatives also may perform any and all additional tests or procedures
relating to Manager’s activities, either at the Premises or at the office of
Manager; provided such tests or procedures are related to those activities
performed by Manager for Pure Cycle.  Any
and all such tests and procedures shall be at the sole expense of Pure Cycle
except if the results of such tests and procedures reveal a more than five
percent (5%) over or understatement in receipts or a more than five percent
(5%) over or understatement of disbursements or material violations of the
terms of this Agreement, in which case the reasonable cost of such tests and
procedures and any additional tests and procedures required to confirm Manager
has remedied such practices or violations shall be borne exclusively by
Manager.

4.3           Bank
Accounts.  Manager shall open and
maintain separate bank accounts in such bank or banks as may be approved from
time to time by Pure Cycle at Pure Cycle’s expense, in Manager’s name as “Manager
for Pure Cycle” (the “Operating Accounts”). 
If any Gross Revenue is received in a form other than cash or other
payment that may be deposited into the Operating Account, such Gross Revenue is
deemed deposited into an “Other Account”. 
All transactions relating to the Premises involving cash, including all
rents and other funds collected from operational activities of the Premises and
all expenses related to the operations of the Premises, shall be transacted
through the Operating Accounts.  The
Operating Accounts shall not be commingled with the funds of Manager or any
third party.  In accordance with Section
4.2 above, all Operating Accounts shall be reconciled at least monthly and such
reconciliations provided to Pure Cycle. 
At the end of each calendar month, upon proper closing of the books and
records of the Premises, the Manager shall be paid the Net Revenue as its
management fee pursuant to Article III from the Operating Accounts and the
Other Accounts and may withdraw all expense amounts properly reimbursable to
Manager as provided herein from the Operating Account and Other Account.  Except in the event of a material default by
Manager under the terms of this Agreement, the Acquisition Agreement, the
Registration Rights Agreement or the Seller Pledge Agreement that remains
uncured thirty (30) days after receiving notice thereof from Pure Cycle or upon
the occurrence of a Bankruptcy Event, Pure Cycle may not withdraw any amounts
from the Operating Account or the Other Account without Manager’s approval.

4.4           Employment of Personnel.

(a)           Manager shall have the duty to hire, pay, supervise and
discharge the personnel necessary to perform its obligations hereunder in the
manner in which it has generally devoted to leasing activities for the Premises
in the past.  Such personnel shall in
every instance be employees of Manager and not of Pure Cycle.  Manager shall be responsible for the
compensation and fringe benefits for such employees and for all payroll taxes,
F.I.C.A. and similar items with respect to such employees.  Manager shall obtain and maintain throughout
the term of this Agreement worker’s compensation insurance covering all
employees of Manager 

 

6

 

to provide statutory benefits as required by
law.  Manager shall directly control the
time and manner of the work and services to be performed by the employees of
Manager and Manager shall comply with all applicable federal, state and local
laws, ordinances and regulations applicable to such employees.  Manager shall make all necessary payroll
deductions for disability and unemployment insurance, social security,
withholding taxes and other applicable taxes, and prepare, maintain and file
all necessary reports with respect to such taxes or deductions, and all other
necessary statements and reports pertaining to its employees.

(b)           Notwithstanding the foregoing, Manager shall have the
right to engage independent contractors and/or agents to perform the services
required hereunder.  If Manager elects to
engage any such third parties, Manager shall cause such third parties to comply
with this Section 4.4 to the extent applicable.

(c)           During the Primary Period, no general administrative or
overhead costs of Manager’s office shall be charged to Pure Cycle.

(d)           During the Extended Period, no general, administrative or
overhead costs of Manager’s office shall be charged to Pure Cycle other than
(i) a proportionate amount of office charges as provided herein and (ii) the
direct cost (including the costs under Section 4.4(a) and (b)) of personnel and
contractors utilized to conduct the activities of Manager hereunder.   Costs of Manager’s general liability
insurance and income taxes shall not be charged to Pure Cycle.  Costs of special insurance (including
premiums) required by Pure Cycle attributable to Manager’s activities hereunder
shall be charged to Pure Cycle.  Salaries
of Manager’s personnel (proportionalized to the amount of work performed
hereunder), and direct out of pocket expenses for all activities hereunder,
shall be passed through to Pure Cycle. 
Provided, however, that in no case may Manager make any claim against
Pure Cycle out of any funds of Pure Cycle other than the Operating Account and
Other Account except for: (i) claims under the indemnification provisions
hereof and (ii) claims in an amount equal to any amounts withdrawn at any time
by Pure Cycle in violation of the terms of this Agreement from the Operating
Account or the Other Account.

4.5           Collection
Of Rents And Other Income.  Manager
shall use diligent efforts to timely collect all rents and other charges that
may become due from any tenant or from others in connection with the use of the
Premises.  All monies so collected shall
be deposited in the Operating Account. 
Manager will not engage in any activities related to the reduction,
return, refund or rebate of any taxes or similar charges, such as income tax,
based on the income of Pure Cycle.

4.6           Lease
Defaults.  The Manager may, with
prior Pure Cycle approval (which shall not be unreasonably withheld), employ counsel
and/or collection agencies to enforce any right or remedy against any tenant
who is in default in the performance of its obligation under its Lease.  The cost of such counsel and collection
agencies will be paid from Gross Revenues.

 

7

 

4.7           Termination
of Lease.  Manager may prepare, sign
and serve in the name of Pure Cycle, such notices as are necessary and
appropriate to evict tenants and recover rents and other sums due and, when
expedient in Pure Cycle’s judgment (which shall be reasonable), to settle,
compromise and release such actions or suits or reinstate such tenancies,
provided, however, that the engagement of counsel or any other representative
to appear in a court of law or before any government agency on behalf of Pure
Cycle, as owner of the Property, shall first be approved in writing by Pure
Cycle, which approval shall not be unreasonably denied.  Expenses actually incurred by Manager in
bringing such approved suit or proceeding will be paid from the Operating
Accounts or Other Account.  Manager shall
not “write off” or forgive any delinquent accounts without the prior approval
of Pure Cycle.  Whenever Manager deems it
necessary to write off a delinquent account, Manager shall provide Pure Cycle
with the information set forth in Exhibit B attached hereto.

4.8           Maintenance,
Repairs, Alterations.  Manager shall
take reasonable steps to attempt to ensure the tenants conduct maintenance,
repairs and alterations in accordance with their Lease, to the extent
applicable.

4.9           Compliance
With Laws.  Manager shall not in the
performance of its services hereunder violate any federal, state, municipal or
other governmental law, ordinance, rule or regulation; provided, however that
immaterial violations shall not be considered events of default hereunder.  Manager shall promptly notify Pure Cycle of
any known violation of any federal, state, municipal or other governmental law,
ordinance, rule or regulation due to the structure or condition of the Premises
or the use made thereof by any tenant, occupant or employee or otherwise
related to the Premises; provided, however, that failure to give notice of
immaterial violations shall not be considered an event of default hereunder.

4.10         Compliance
With Applicable Agreements.  Manager
shall not in performance of its services hereunder violate, and shall comply in
all material respects with the terms of any ground Lease, space Lease,
mortgage, deed of trust or other security instrument binding on or affecting
any of the Premises, provided that true and complete copies of such documents
have been delivered to Manager or Pure Cycle has otherwise disclosed such terms
to Manager in writing.  Pure Cycle’s
obligation to deliver and disclose such documents and terms shall not apply to
any such instrument in effect as of the date of the Acquisition Agreement.  In the event of a conflict between the terms
of any such document and the terms of this Agreement, Manager shall not take
any action except to promptly notify Pure Cycle and await Pure Cycle’s written
instructions.

4.11         Notification
Of Litigation.  If Manager shall be
apprised of any claim, demand, suit or other legal proceeding made or
instituted against Pure Cycle on account of any matter connected with the
Premises, then Manager shall immediately notify Pure Cycle thereof and give
Pure Cycle all information in its possession in respect thereof, and shall
assist and cooperate with Pure Cycle, at Pure Cycle’s expense, in all
reasonable respects in the defense of any such suit or other legal proceeding.

4.12         Leasing.  Manager may select a licensed real estate
broker to offer for Pure Cycle’s account, for rental, all Premises that are
available for lease.  Manager is
authorized to advertise the Premises, to prepare and secure marketing plans,
descriptive material and other 

 

8

 

forms of advertising, and to advertise to brokers who shall be paid
from the Operating Account in accordance with a commission or brokerage
agreement entered into by Manager prior to the leasing of any such Premises.

(a)           All inquiries concerning Leases, renewals, expansions,
extensions or continuations of tenancy, for property in the Premises or any
part thereof, shall be referred to the Manager. 
Manager will provide Pure Cycle with annual reports of all property
available for leasing and subleasing and will provide Pure Cycle with more
frequent updates upon Pure Cycle’s request.

(b)           Without the prior written consent of Pure Cycle (which
shall not be unreasonably withheld if Manager requests such consent be
granted), no Lease will be entered into for property in the Premises that does
not comply with the Leasing Parameters (defined below).  Upon execution by any tenant of any new
Lease, Lease modification, Lease renewal, etc., Manager shall forward all
documents related thereto to Pure Cycle for approval and execution.  Such Leases, if accepted by Pure Cycle (which
acceptance shall not be unreasonably withheld if Manager requests such consent
be granted), shall be executed and returned to Manager within five (5)
business days (excluding national holidays and weekends) of receipt.  If such Leases are rejected, Pure Cycle shall
reject it and inform Manager of the reasons for rejecting it within
five (5) business days of receipt. 
If Pure Cycle does not notify Manager of Pure Cycle’s acceptance of such
Leases within said five (5) business day period, they will be deemed rejected.

(c)           Parameters:  The
Leasing Parameters, attached hereto as Exhibit B (the “Leasing Parameters”),
may, from time to time, be changed and/or amended by Pure Cycle in the exercise
of its reasonable business judgment after consultation with the Manager, upon
written notice to Manager.  Leases within
the Leasing Parameters shall be drawn by Manager on the lease form which is
typical of similar leases used for similar property in the area of the Premises
and approved by Pure Cycle.  All other
Leases shall be negotiated on a case-by-case basis with the cooperation and
involvement of both Pure Cycle and Manager but in all events subject to Pure
Cycle’s prior approval.  The Adverse
Decision provisions of Section 2.1 apply to Pure Cycle’s decisions under this
Section.

ARTICLE
V

INSURANCE

5.1           Manager’s
Insurance.  Unless Pure Cycle advises
Manager in writing that it is maintaining such insurance on its own behalf,
Manager, at Pure Cycle’s expense (other than the expense of insurance on farm
equipment (or a fair allocation in respect of farm equipment of total insurance
expense if the cost of insurance on farm equipment is not separately broken out
by the insurer), which shall be paid from Gross Revenue), shall use its best
efforts to maintain (a) fire and
extended coverage and machinery insurance insuring against physical damage to
any of the Premises in amounts sufficient to replace any damaged structures,
improvements, 

 

9

 

irrigation equipment or other personal property owned by Pure Cycle on
the Premises (Manager may satisfy this obligation by having tenants maintain
such insurance); and, (b) comprehensive general liability insurance
insuring against loss, damage or injury to property or persons which might
arise out of the occupancy, management, operation, leasing or maintenance of
the Premises with bodily injury of no less than One Million
Dollars ($1,000,000) per person and property damage not less than One
Million Dollars ($1,000,000) per occurrence.  Such insurance shall be maintained in Pure
Cycle’s name except to the extent maintained by tenants, in which case Manager
shall name, or cause to be named, Pure Cycle as an additional insured on all
policies of fire, liability and other forms of insurance with respect to the
Water Rights, Property, and/or Premises. 
Manager shall secure and maintain with one or more insurance companies,
at Manager’s expense, worker’s compensation and employer’s liability insurance (provided, that
employer’s liability insurance is only required if similar companies in the
area typically have such insurance) covering all employees of Manager in
accordance with state law.  Manager shall
furnish satisfactory evidence of the foregoing insurance to Pure Cycle.  All insurance policies shall be cancelable
only upon thirty (30) days prior written notice to Pure Cycle.  Manager shall be responsible for maintaining
such general liability and automobile liability insurance as it deems necessary
for its business operations, including its operations pursuant to this
Agreement.  Pure Cycle shall not be
responsible for (i) such expenses either directly or out of Gross
Revenues, or (ii) any loss due to Manager’s failure to maintain adequate
levels of such insurance.

5.2           Certificates
of Insurance.  Manager shall provide
to Pure Cycle a certificate evidencing the workers’ compensation, general
liability, errors and omissions and automobile insurance coverage that Manager
has in effect upon written request.

5.3           Tenant
Liability Insurance.  Manager shall
use its best efforts to collect and maintain evidence of all insurance required
of tenants under Leases of the Premises.

ARTICLE
VI

TAXES

6.1           Real
Property, Ad Valorem Or Other Taxes. 
Manager shall pay on Pure Cycle’s behalf any and all real property, ad
valorem or other taxes and assessments, other than water assessments or state
or federal income taxes levied against any or all of the Premises.  The cost thereof shall be borne and paid by
Manager from the Operating Account.  At
Pure Cycle’s written request and expense, Manager will retain an independent
property tax consultant to negotiate the property value to obtain the most
favorable assessments.  However, if a
special tax or assessment is for a governmental or quasi-governmental
improvement where the useful life of the improvement is more than twice the
special tax or assessment period in respect of such improvement, and the useful
life of the improvement is less than the actual term of this Agreement, the
Manager and Pure Cycle shall agree on a reasonable adjustment in the amount of
the special tax or assessment to be paid from the Operating Account or Other
Account, and the amount to be paid at the expense of Pure Cycle, taking into
account the portion of the useful life of the improvement that falls within and
without the term of this Agreement.  However,
no such pro ration shall be done unless the aggregate amount of such special
taxes or assessments is reasonably expected to exceed $50,000.

 

10

 

ARTICLE
VII

TERM AND TERMINATION

7.1           Term.  This Primary Period of this Agreement shall
commence on the later of (i) the date first set forth above or
(ii) on the day title to the Property is conveyed to Pure Cycle (the “Commencement
Date”) and shall continue for a period of five (5) years (the “Primary
Period”).  If at the end of the Primary
Period the Fifth Year Purchase Consideration is less than $50,000,000, then the
term of this Agreement shall continue after the Primary Period until the
earlier of (i) sixty days after the time the Excluded Indebtedness is paid in
full or (ii) September 23, 2014 (the “Extended Period”).  During the Extended Period, the Manager may
terminate this Agreement upon one hundred twenty (120) days advance notice to
Pure Cycle.  After the Term this
Agreement may be renewed on a continuing basis for successive one-year periods
if mutually agreed by the Manager and Pure Cycle.  The Primary Period and, if applicable, the
Extended Period, constitute the “Term”.

7.2           Termination
By Sale.  Anytime that Pure Cycle
shall sell, transfer or convey title to all or substantially all of the
Premises, Pure Cycle shall make adequate arrangements so that this Agreement is
binding on the transferee as to the transferred portion of the Premises.  The Parties prefer that be done by Manager
and the transferee entering into a new, separate, agreement on substantially
the terms hereof.  However, Manager may
elect in writing not to have this Agreement binding upon any transferee or
otherwise apply to transferred Premises.

7.3           Termination
By Default.  Notwithstanding anything
to the contrary set forth herein, in the event Pure Cycle or Manager shall
default with respect to any material covenant, term or provision of this
Agreement or the Acquisition Agreement, which default does not constitute Cause
as defined in Section 7.4 below, and the same shall not be cured or
corrected within thirty (30) days following the receipt of the written
notice from the non-defaulting party specifying the nature of such default,
then the party not in default may terminate this Agreement.

7.4           Termination For Cause.  Upon the occurrence of an event constituting “Cause,”
the other party may immediately terminate this Agreement upon notice to the
other party.  For purposes of this
Agreement “Cause” shall mean the occurrence of any of the following:

(a)           A party becoming subject to a Bankruptcy Event.

(b)           With respect to Manager, if Pure Cycle, acting reasonably,
shall determine or have good faith reason to believe, that Manager has
misappropriated funds, engaged in an act of fraud, or Manager has been charged
or convicted of any illegal act constituting a felony; provided, however, that
Manager’s having been charged, but not convicted, of a felony will not
constitute an event of default.

7.5           Termination
Without Cause.  In addition to any
other rights to terminate that Pure Cycle may have hereunder, after the Term
may terminate this Agreement for any reason or for no reason, and no reason
need be given, by delivering notice of such election to terminate to Manager
not less than sixty (60) days prior to the effective date of such termination.

 

11

 

7.6           Manager’s
Obligations After Termination. 
Immediately upon the termination of this Agreement, Manager shall:

(a)           Manager shall deliver to Pure Cycle, or such other person
or persons designated by Pure Cycle, all books and records of the Premises
(provided Manager may keep copies thereof at Manager’s own expense), all funds
in the possession of Manager belonging to Pure Cycle which are not management
fees to Manager (other than reasonable reserves which shall remain in the
Operating Account to reconcile any amounts owed Manager as expense
reimbursement), and all keys or combinations to locks then in Manager’s
possession;

(b)           At Pure Cycle’s expense, assign, transfer or convey to
such person or persons as may be designated by Pure Cycle, all service
contracts and personal property relating to or used in the operation and
maintenance of the Premises, except any personal property which was paid for
and is owned by Manager or is owned by a tenant of the Premises, and provided
that where Manager is signatory to a vendor service contract, Manager shall
have the right to terminate said service contract in accordance with the terms
thereof; and

(c)           At Pure Cycle’s expense cooperate in the transition to new
management of the Premises by participating in such meetings, document review,
and other transition activities as and to the extent reasonably requested by
Pure Cycle.

Manager’s obligations hereunder shall survive the termination or
expiration of this Agreement for a period of 12 months.

7.7           Final Accounting.

(a)           Manager shall, within thirty (30) days after the date
of expiration or termination of this Agreement, deliver to Pure Cycle the
following (however, Manager at its own expense may keep copies thereof for its
own purpose):

(i)            All Standard Reports, as of the date of expiration or
termination of this Agreement;

(ii)           Any balance of monies or deposits in the Operating Account
or Other Account of Pure Cycle then held by Manager except to the extent such
holdings represent Net Revenue payable to Manager; and

(iii)          All executed Leases, receipts for security deposits,
insurance policies, unpaid bills, correspondence and other documents, books and
records which are the property of Pure Cycle in the possession of Manager.

 

12

 

(b)           Pure Cycle shall have ninety (90) days from the date
Manager delivers the foregoing to Pure Cycle within which to deliver to Manager
a written statement approving or disapproving, as the case may be, the
foregoing as:

(i)            A correct accounting of the financial condition, income
and expenses of the Premises;

(ii)           The correct balance of monies of Pure Cycle then held by
Manager; and

(iii)          Receipt of all executed Leases, receipts of deposits,
insurance policies, unpaid bills, correspondence and other documents, books and
records which are the property of Pure Cycle.

In the event of a
disapproval, Pure Cycle shall set forth in reasonable detail why such approval
cannot be given, including any inaccuracy in said accounting.

ARTICLE
VIII

INDEMNIFICATION

8.1           Indemnification
by Pure Cycle.  Pure Cycle agrees to
indemnify and hold harmless Manager from and against any loss, cost, liability
or expense (including reasonable attorneys’ fees) reasonably incurred by
Manager (and its owners, managers or employees), including, without limitation,
both third-party and direct claims, arising out of or caused by (a) Pure
Cycle’s failure to comply with or perform its obligations set forth in this
Agreement (b) the negligence, willful misconduct, wrongdoing or fraud of Pure
Cycle, its officers, directors, employees or agents (other than Manager) or (c)
arising primarily as a result of Manager following instructions of Pure Cycle
given under this Agreement.  Pure Cycle
agrees to defend promptly and diligently, at Pure Cycle’s sole expense, any
claim, action or proceeding brought against Manager (and it owners, managers or
employees) and/or Manager and Pure Cycle, jointly or severally, arising out of
or connected with any of the foregoing, and to hold harmless and fully
indemnify Manager (and it owners, managers or employees) from any judgment,
loss or settlement on account thereof. 
The indemnity herein set forth is for the sole and exclusive benefit of
Manager (and it owners, managers or employees) 
and is not assignable to, nor shall inure to the benefit of, by
subrogation or otherwise, any third party, including but not limited to, any
party providing insurance coverage to either Pure Cycle or Manager.

8.2           Indemnification
by Manager.  Manager agrees to
indemnify and hold harmless Pure Cycle (and its employees and directors) from
and against any loss, cost, liability or expense (including reasonable
attorneys’ fees) reasonably incurred by Pure Cycle (and its employees and
directors), including without limitation, both third-party and direct claims,
arising out of or caused by (a) Manager’s failure to comply with or
perform its obligations set forth in this Agreement, or (b) the
negligence, willful misconduct, wrongdoing or fraud of Manager, its managers,
employees or agents.

 

13

 

8.3           Third
Party Claim Indemnification Procedures. 
The parties shall follow the procedures set forth in Section 8.7 of the
Acquisition Agreement for indemnification for claims brought by third parties.

8.4           Insurance.  The amount of any indemnification claim under
this Article VIII shall be reduced by the amount of insurance proceeds
recovered by the indemnified party after reasonable efforts to collect such
amounts.

ARTICLE
IX

MISCELLANEOUS

9.1           Notices.  All notices and other communications under
this Agreement shall be in writing and shall be given by hand delivery, or
first-class mail, certified or registered with return receipt requested, or by
commercial overnight courier and shall be deemed to have been duly given upon
hand delivery, delivery by commercial overnight courier to the address
specified below, or three days after deposit in the U.S. mail as provided
above, addressed as follows:

(a)           If to
Manager:

High Plains A & M, LLC

333 W. Hampden Avenue

Suite 810

Englewood, CO 80110

Attention: Mark Campbell

Telephone:            (303)
534-1040

Telecopy:              (303) 534-6700

with a copy to (which shall not constitute notice):

 

H. Hunter White

9800 Walzer Court

Windermere, FL 34786

Telephone:            (407)
876-8915

Telecopy:              (407)
264-6487

and to:

Robert Bruce

Lawlis & Brice PC

1875 Lawrence Street, Suite
750

Denver, Colorado  80202

Telephone:            (303) 573-5498

Telecopy:              (303) 573-5537

and

 

14

 

(b)           If to
Pure Cycle or Mark W. Harding:

Pure Cycle Corporation

8451 Delaware Street

Thornton, Colorado  80260

Attention:              President

Telephone:            (303)
292-3456

Telecopy:              (303)
292-3475

 

with a copy to (which shall not constitute notice):

 

Davis, Graham & Stubbs LLP

1550 Seventeenth Street, Suite 500

Denver, Colorado  80202

Attention:              Wanda J.
Abel, Esq.

Telephone:            (303)
892-7314

Telecopy:              (303)
893-1379

 

(c)           To such
other address as to which notice is provided in accordance with this Section.

9.2           Assignments.  This Agreement and all rights hereunder shall
not be assignable by Manager without prior written approval of Pure Cycle,
which may be withheld or granted in Pure Cycle’s sole discretion.  Subject to the foregoing limitations on
assignments, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.  Whenever in this Agreement a reference is
made to any of the parties hereto, such reference shall be deemed to include a
reference to the successors and assigns of such parties.

9.3           Consent
And Approvals.  Pure Cycle’s consents
or approvals may be given only by representatives of Pure Cycle from time to
time designated in writing by the President of Pure Cycle.

9.4           Marketing
Materials.  All marketing materials
shall be subject to Pure Cycle’s consent and approval, not to be unreasonably
withheld.

9.5           Interpretation;
Governing Law.  This Agreement shall
be construed as though prepared by all parties hereto and shall be construed
without regard to any presumption or other rule requiring construction against
the party causing an agreement to be drafted. 
This Agreement shall be construed and governed by the laws of the State
of Colorado (without giving effect to its principles of conflicts of
laws).  Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement must be brought against the applicable party in the courts of the
State of Colorado located in the City and County of Denver, Colorado, or, if it
has or can obtain jurisdiction, in the United States District Court for such
state, and each party hereby consents to the jurisdiction of such courts (and
of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. 
Process in any action or proceeding referred to in this Section may be
served on any party anywhere in the world, 

 

15

 

whether within or without the State of Colorado and may also be served
upon any party in the manner provided for giving notices to it in
Section 9.1 above.

9.6           Construction.

(a)           The words “this Agreement”, “herein”, “hereof”, “hereby”, “hereunder”
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited.

(b)           Words in the singular form shall be construed to include
the plural and vice versa, unless the context otherwise requires.  Pronouns in masculine, feminine and neuter
genders shall be construed to include any other gender.

(c)           Unless the context otherwise requires or unless otherwise
provided herein, the terms defined in this Agreement which refer to a
particular agreement, instrument or document also refer to and include all
renewals, extensions, modifications, amendments or restatements of such
agreement, instrument or document, provided that nothing contained in this
subsection shall be construed to authorize such renewal, extension,
modification, amendment or restatement.

(d)           The word “includes” and its derivatives means “includes,
but is not limited to” and corresponding derivative expressions.

9.7           Third-Party
Beneficiaries.  Each party hereto
intends that this Agreement shall not benefit nor confer any rights or remedies
on any Person other than the parties hereto, the persons named as indemnified
persons in Article VIII, and their respective heirs, successors, assigns and
legal representatives.

9.8           Entire
Agreement; Modifications.  This
Agreement represents the entire understanding between the parties with respect
to the subject matter hereof and supersedes any and all prior understandings,
agreements, plans and negotiations, whether written or oral, with respect to
the subject matter hereof.  All modifications
to this Agreement must be in writing and signed by the party against whom
enforcement of such modification is sought.

9.9           Headings.  The Section headings herein are intended for
reference and shall not by themselves determine the construction or interpretation
of this Agreement.

9.10         Counterparts.  This Agreement may be executed in one or more
counterparts, in original or by facsimile, any of which shall be deemed an
original and all of which taken together shall constitute one and the same
Agreement.

9.11         Attorneys
Fees.  If litigation is brought to
enforce or interpret or is maintained to defend any provision contained herein,
the court shall award reasonable attorneys’ fees and disbursements to the
prevailing party as determined by the court.

9.12         Pure
Cycle’s Expense.   When the phrase “at
Pure Cycle’s expense” or a similar phrase is used herein, it means that during
the Term such amounts will be paid by Pure Cycle from funds other than funds in
the Operating Account or Other Account.

 

16

 

IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.

	
   

  	
  PURE CYCLE CORPORATION, a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Mark W. Harding, President

  
	
   

  	
   

  	
   

  
	
   

  	
  HIGH PLAINS A&M, LLC, a Colorado limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

17

 

EXHIBIT A

STANDARD REPORTS

In accord with Article IV, Section 4.2 and as further
detailed below, Manager shall prepare and submit to Pure Cycle the following
reports:

I.              Accounting

Property Cash Flow Report -
monthly

Purchases Journal (backup of
expenses) - monthly

Balance Sheet - monthly

Reconciled Bank Statements -
monthly

Aged Accounts
Receivables Report, reconciled to the receivables subsidiary ledger — monthly

Aged Accounts
Payables Report, reconcilable to the payables subsidiary ledger - monthly

General Ledger / Trial
Balance - quarterly

II.            Property
Management

Rent Roll Report — monthly

Physical Property Condition
Update Report — monthly

Operating Expense Budgets —
annually

Vacancy Report — monthly

 

A-1

 

EXHIBIT B

APPROVED INCOME WRITE OFF FORM

 

 

 

	
  RENT CONCESSION AND “WRITE-OFF”

  
	
  OF DELINQUENT RENT OR OTHER RECEIVABLES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TENANT:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ADDRESS:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MONTHLY PAYMENT:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  (RENT)

  
	
   

  	
   

  	
  $

  	
   

  	
  (MAINTENANCE)

  
	
   

  	
   

  	
  $

  	
   

  	
  (INSURANCE)

  
	
   

  	
   

  	
  $

  	
   

  	
  (TAXES)

  
	
   

  	
   

  	
  $

  	
   

  	
  (OTHER)

  
	
  TOTAL PAYMENT:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AMOUNT TO WRITE
  OFF:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  REPRESENTED BY:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  REASON FOR
  WRITE-OFF:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DATE:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  REQUESTED BY:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  APPROVED:

  	
   

  	
   

  
	
   

  	
  REPRESENTATIVE OF
  MANAGER

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  APPROVED:

  	
   

  	
   

  
	
   

  	
  REPRESENTATIVE OF
  PURE CYCLE

  	
   

  

 

B-1

 

EXHIBIT C

LEASING PARAMETERS

1.                                       All
future Leases (including expansions, extensions, assignments and amendments)
shall be in Pure Cycle’s name and executed by Pure Cycle.

2.                                       Manager
shall negotiate all Leases to provide Pure Cycle with the most favorable terms
and conditions possible.  Manager shall
use all reasonable efforts to avoid concessions.

3.                                       No
existing Lease shall be cancelled, modified, assigned, sublet or altered in any
respect without Pure Cycle’s written approval, which approval shall be governed
by the standards in the body of the Agreement.

4.                                       The
first month’s rent and any security deposit is to be collected upon tenant’s
execution of each Lease unless otherwise specifically approved by Pure
Cycle.  All advance rents and security
deposits are to be immediately deposited in the Operating Account.

5.                                       All Leases
shall be negotiated on a case-by-case basis with the cooperation and
involvement of both Pure Cycle and Manager, but in all events subject to Pure
Cycle’s prior approval, which approval shall be governed by the standards in
the body of the Agreement.  Use of lease
forms or any changes, additions or deletions in any standard lease form are
subject to Pure Cycle’s approval , which approval shall be governed by the
standards in the body of the Agreement.

6.                                       Any new
Lease, or renewal, or expansion, or modification of a Lease which requires the
expenditure of funds to refurbish, rehabilitate, remodel or otherwise prepare
the lease premises must be submitted, along with the estimated costs for such
work, to Pure Cycle for approval prior to execution of the Lease, which
approval shall be governed by the standards in the body of the Agreement.

7.                                       Any
Lease not complying with all of the foregoing conditions shall require Pure
Cycle’s approval prior to final submission to any tenant for execution, which
approval shall be governed by the standards in the body of the Agreement.

8.                                       Whenever
these parameters require advance Pure Cycle approval for Manager to consummate
a lease transaction, such approval shall be deemed denied after five (5)
business days (excludes national holidays and weekends) unless Pure Cycle
specifically grants approval to Manager within five (5) business
days.  Such approvals or denials may be
verbal or written.

The foregoing parameters may from time to time be amended, changed or
deleted from the Agreement but any such amendments change, or deletion shall
only be effected in compliance with the standards in the body of the Agreement.

 

C-1

 

EXHIBIT E

 

LENDER ESTOPPEL CERTIFICATE

 

TO:         Pure Cycle
Corporation, and its successors and assigns (the “Buyer”)

 

RE:         Property
located at [insert address and city], Colorado

 

The
undersigned Lender acknowledges that Buyer intends to purchase the above listed
property, and hereby certifies to Buyer as follows:

 

1.             Lender is the beneficiary under a deed of
trust dated                       ,
from High Plains A&M, LLC (“Debtor”), and encumbering the property at the address
listed above (the “Deed
of Trust”). Lender hereby authorizes and approves the transfer
of the property encumbered by the Deed of Trust from Debtor to Buyer.

 

2.             The Deed of Trust secures a note from Debtor
to Lender dated                       
in the original principal amount of $                              
(the “Note”).

 

3.             Debtor is not in default under the Note, the
Deed of Trust or any other obligation secured by the Deed of Trust.

 

4.             Monthly payments of principal and interest
under the Note are due and payable on the            
day of each month in the amount of $                    .
As of the date hereof, the outstanding principal due under the Note is $                      .
The maturity date of the Note is                       .

 

5.             The address for payments under the Note is:

 

 

 

 

6.             Lender covenants to Buyer that, prior to
taking any action to enforce the Deed of Trust against the above property for a
default by Debtor of any of its obligations secured by the Deed of Trust,
Lender shall give Buyer thirty (30) days prior written notice at the address
listed below of such default and an opportunity to cure. Lender agrees to
accept any cure of a Debtor breach by Buyer, provided that Lender acknowledges
that Buyer has no obligation to make such cure. Buyer’s notice address:

 

Pure Cycle Corporation

8451 Delaware Street

Thornton, Colorado 80260

Attention:  President

 

7.             [To be inserted only for
Lenders holding FLCC Shares to be pledged by Pure

 

 

Cycle]. Buyer has granted Debtor a junior security interest in the shares of
Fort Lyon Canal Company held by Lender. Lender agrees it is also holding the
Fort Lyon Canal Company stock certificates for the benefit of Debtor and will
not return the stock certificates to Pure Cycle, but rather will send them to
Debtor at 333 W. Hampton Avenue, Suite 810, Englewood, Colorado, 80110, Attn.
Mark Campbell (or another address given to Lender by Buyer and Debtor) unless
Debtor has sent Lender a letter to send them to Buyer.

 

2

 

Lender hereby certifies and
agrees to the foregoing as of the date written below.

 

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  

 

3

 

EXHIBIT F

 

NONSOLICITATION
AGREEMENT

 

THIS NONSOLICITATION
AGREEMENT is entered into effective as of the        
day of                      ,
2006, by and between Pure Cycle Corporation, a Delaware Corporation (“Pure
Cycle”), and [H. Hunter White, III/Mark D. Campbell/M. Walker Baus] (the “Equity
Holder”).

 

RECITALS

 

A.            Pure Cycle and
High Plains A & M, LLC, a Colorado limited liability company (“Seller”),
entered into an Asset Purchase Agreement dated as of May 10, 2006 (the “Purchase
Agreement”), pursuant to which Pure Cycle agreed to purchase certain water
interests in the Arkansas River and its tributaries represented by real
property interests and shares of stock in the Fort Lyon Canal Company. All
capitalized terms used herein but not otherwise defined herein shall have the
meanings ascribed to such terms in the Purchase Agreement.

 

B.            The Equity
Holder is a manager and member of Seller.

 

C.            The obligations
of each of Seller and Pure Cycle to effect the transactions contemplated by the
Purchase Agreement are subject to fulfillment at or prior to the Closing Date
of several conditions, one of which is that the Equity Holder and the other
owners of Seller enter into a nonsolicitation agreement substantially in the
form of this Agreement. In order to induce Pure Cycle to effect the
transactions contemplated by the Purchase Agreement, the Equity Holder has
agreed to enter into and deliver to Pure Cycle this Agreement.

 

AGREEMENT

 

In consideration of the
mutual covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.             Term. This
Agreement shall be effective from the date first set forth above until the
earlier of (a) the third anniversary date of this Agreement or (b) the
occurrence of an Event of Default (as defined below) (the “Term”). As used in
this Agreement, “Event of Default” means Pure Cycle’s failure to perform its
obligations under (i) Sections 2.3, 2.5, 8.11, 8.15, 8.16, 8.17, 8.19 and 8.19
of the Purchase Agreement, (ii) the Registration Rights Agreement, (iii) the
Property Management Agreement, or (iv) the Pure Cycle Pledge Agreement, in each
case in accordance with the terms thereof. If an Event of Default occurs and
Pure Cycle has not cured such Event of Default to High Plains’s reasonable
satisfaction within thirty (30) days after receiving notice thereof from High
Plains, this Agreement shall automatically terminate and be of no further force
or effect, provided, however, that if such Event of Default
results in whole or in part from the occurrence of a Bankruptcy Event affecting
Pure Cycle, this Agreement shall terminate immediately without notice or
opportunity to cure.

 

 

2.             Covenant Not To Compete.

 

(a)           In order to assure Pure
Cycle the complete benefit of the ownership of the Assets, the Equity Holder
agrees that during the Term, he shall not work as an employee, director, or
independent contractor or become an investor or owner in or lender to any
Person engaged in a Competing Business in the Territory. A “Competing Business”
shall mean the sale, lease, supply or other distribution of water, water
services or wastewater services on a wholesale or retail basis to any Person
within the State of Colorado in the following counties:  Denver, Arapahoe, Douglas, Adams, Otero,
Bent, Prowers, Jefferson, Elbert, El Paso, Pueblo, Washington, Weld, Lincoln,
Kit Carson, Cheyenne, and Kiowa (the “Territory”).

 

(b)           Notwithstanding the
foregoing, a Competing Business, whether within or outside the Territory, does
not include:

 

(i)            the Equity
Holder’s ownership interest in Seller or Pure Cycle or any Affiliate of Seller
or Pure Cycle;

 

(ii)           the Equity
Holder’s owning, acquiring or holding any issue of stock or securities of any
Person that has any securities listed on a national securities exchange or
quoted on the automated quotation system of the National Association of
Securities Dealers, Inc., provided that the Equity Holder does not own or hold
more than five percent (5%) of any class of voting securities of any such
Person;

 

(iii)          serving as an
employee, director, or independent contractor of any Person engaged in a
Competing Business, provided that the Equity Holder does not provide any
consulting, management, employment or other services to such Person with
respect to the Territory;

 

(iv)          investing in or
owning any properties or interests, directly or indirectly, constituting a
Competing Business, provided that (A) the acquisition relates to properties and
interests that are both within and outside of the Territory, and (B) the
properties and interests within the Territory represent twenty-five percent
(25%) or less of the properties or interests so acquired, in terms of allocated
fair market value of the aggregate cost of such acquisition;

 

(v)           the purchase,
sale, exchange or other conveyance of water in connection with a real estate
development in which the Equity Holder, the Seller, or any Affiliates of the
Equity Holder or Seller, individually or in the aggregate, owns at least a
twenty percent (20%) interest;

 

(vi)          the sale or
lease of land for purposes of storing water;

 

(vii)         any action
taken, in the Territory, by the Equity Holder, Seller or their successors or
assigns pursuant to the Purchase Agreement (or exhibits thereto), including the
foreclosure on any assets pledged by Pure Cycle to Seller and any subsequent
sale, purchase, use, holding or lease thereof;

 

2

 

(viii)        the sale,
lease, use, supply or other distribution of the water rights set forth on Schedule 1
attached hereto; or

 

(ix)           any action
taken by the Equity Holder in connection with water or water rights with
respect to which the Equity Holder has complied with Section 3 (Right of
First Offer) and Section 4 (Arkansas River Water Purchases).

 

3.             Right of First Offer.  Except
in connection with any of the activities described in Section 2(b)(i) – (viii)
above or in Section 4 below, the Equity Holder shall give Pure Cycle the right
of first offer to purchase Colorado water and water rights which he may want to
acquire. For any such water, the Equity Holder shall establish a price and
identify the water. The Equity Holder shall then inform Pure Cycle, in writing,
of the water and the price. Pure Cycle shall have fifteen (15) days to decide
whether to buy such water at or above the stated price. Pure Cycle’s failure to
contract to purchase such water within the fifteen (15) days shall constitute a
waiver of any and all objections Pure Cycle may have to the Equity Holder’s
subsequent purchase of such water. Notwithstanding the foregoing, the Equity
Holder may purchase such water during the fifteen (15) day notice period so
long as Pure Cycle continues to have the right to buy such water during the
full notice period and for the stated price.

 

4.             Arkansas River Water
Purchases.  Except in connection with any of the
activities described in Section 2(b)(i) – (viii) above, if the Equity Holder
proposes to consummate an acquisition of any decreed tributary surface water
rights below Pueblo Reservoir in the Arkansas River or its tributaries that are
subject to the jurisdiction of Division 2 of the Colorado Water Court or
additional shares of stock in Fort Lyon Canal Company (collectively, “Arkansas
Water Rights”), the Equity Holder shall promptly, and in any event not fewer
than thirty (30) days prior to the closing of any such acquisition, give Pure
Cycle written notice of the proposed acquisition, which notice shall described
in reasonable detail the terms on which the Equity Holder believes the
acquisition can be consummated and the Arkansas Water rights to be acquired. The
Equity Holder shall also deliver to Pure Cycle all due diligence materials it
has with respect to the proposed acquisition. Pure Cycle shall have twenty (20)
days to determine whether it is interested in pursuing the proposed acquisition.
If Pure Cycle determines to pursue the acquisition, the Equity Holder shall
fully cooperate with and assist (at no charge to the Equity Holder other than
normal overhead expenditures) Pure Cycle in consummating the acquisition. If
Pure Cycle is unwilling to pursue the acquisition or unable to negotiate a
definitive agreement with the owner(s) of the water rights which are the
subject of the proposed acquisition within three (3) months, then the Equity
Holder may pursue such proposed acquisition on its own behalf; provided,
however, that if the Equity Holder acquires the subject water rights
within six (6) months after the expiration of the three (3) month period
referenced above on terms and conditions which, taken as a whole, are
comparable to or more favorable to the Equity Holder than the terms that Pure
Cycle offered the owner(s) of the subject water rights, then at Pure Cycle’s
request made within thirty (30) days after the Equity Holder notifies Pure
Cycle of such purchase by the Equity Holder, the Equity Holder shall sell the
subject water rights to Pure Cycle on the same terms and conditions as the
Equity Holder acquired the subject water rights plus reasonable costs and
expenses, including attorneys’ fees and carrying costs, incurred by the Equity
Holder to complete the acquisition. If the Equity Holder does not enter into an
agreement in principle with the owner(s) of the subject water rights within six
(6) months after the expiration of the three-month period referenced above,
then the Equity Holder prior to any 

 

3

 

subsequent
attempt to acquire the subject water rights will be required to notify Pure
Cycle regarding any future proposed acquisition of the subject water rights in
accordance with this Section. If the Equity Holder determines that his or Pure
Cycle’s ability to acquire any Arkansas Water Rights that would otherwise be
subject to the right of first offer set forth in this Section would be impaired
by compliance with the timing provisions of this Section, the Equity Holder may
acquire the subject water rights without first complying with this Section,
provided that the Equity Holder shall promptly offer to sell the subject water
rights to Pure Cycle in accordance with the foregoing procedures (as if Pure
Cycle had been offered the right to purchase the subject water rights from a
third-party seller). If Pure Cycle elects to purchase the subject water rights
from the Equity Holder, it will do so on the same terms and conditions as the
Equity Holder acquired the subject water rights plus reasonable costs and
expenses, including attorneys’ fees and carrying costs, incurred by the Equity
Holder to complete the acquisition of the subject rights and the sale of such
rights to Pure Cycle hereunder. All obligations under this Section shall
terminate upon the expiration of the Term as provided in Section 1 above,
except that in the event that the Term expires as provided in Section 1(a)
above, the Term shall be extended beyond the third anniversary date of this
Agreement for any additional period required in order for either party to have
the full benefit of its rights set forth above, which in any event shall not be
more than six (6) months.

 

5.             No Solicitation of Clients.   During
the Term, the Equity Holder shall not (a) except as may be permitted
pursuant to Section 2 above, call upon, cause to be called upon, solicit
or assist in the solicitation of, any current client, former client or
potential client of Pure Cycle for the purpose of selling, leasing or supplying
any product or service that constitutes a Competing Business; (b) except
as may be permitted pursuant to Section 2 above, provide any products or
services to any current client, former client or potential client of Pure Cycle
that constitute a Competing Business; or (c) request, recommend, or advise
any client or potential client to cease or curtail doing business with Pure
Cycle. Any Person shall be deemed to be a client or potential client of Pure
Cycle to whom (i) Pure Cycle has provided any products or services at any time
prior to or during the Term which products or services would constitute a
Competing Business if provided by the Equity Holder, or (ii) Pure Cycle
has made one or more sales calls concerning products or services that, if
provided by the Equity Holder, would constitute a Competing Business, provided
that (x) such sales calls were made during the twenty-four (24) month period
preceding the date of this Agreement and the name of such Person and the nature
of such sales call is set forth on attached Schedule 2, and (y) if
such sales calls are made during the Term, Pure Cycle has notified the Equity
Holder in writing of the Person called upon and the nature of such call.

 

6.             No Hire of Employees or
Contractors.  During the Term, the Equity Holder shall
not:  (a) employ, engage or seek to
employ or engage on behalf of the Equity Holder any Person who is employed or
engaged by Pure Cycle or who was employed or engaged by Pure Cycle less than
six (6) months prior to the date of solicitation (other than construction
contractors); (b) solicit, recommend or advise any employee of Pure Cycle
or independent contractor to terminate such Person’s employment or engagement
with Pure Cycle for any reason; or (c) enter into a business arrangement
with any Person who is or has been an employee or independent contractor of
Pure Cycle in the six (6) months prior to the date of entering into the
business relationship, which Person, in each case, is or was primarily engaged
in Pure Cycle’s management or in retail sale, lease, supply or other
distribution of water, water services or 

 

4

 

wastewater
services operations of Pure Cycle in the Territory and which business
relationship would be expected to have a material adverse effect on Pure Cycle.

 

7.             Enforceability.    The
Equity Holder acknowledges that any breach of the provisions of this Agreement
will cause Pure Cycle irreparable injury and damage which will be extremely
difficult to quantify, therefore the Equity Holder agrees that Pure Cycle will
be entitled to, in addition to all other remedies available to it, injunctive
relief to prevent a breach and to secure the enforcement of all provisions. The
Equity Holder represents his experience and knowledge will enable him to earn
an adequate living in a noncompetitive business and that the injunctive relief
will not prevent him from providing for himself and his family.

 

8.             Severability.    Should
a court or other body of competent jurisdiction determine that any provision of
this Agreement is excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and all other provisions of this
Agreement shall be deemed valid and enforceable to the extent possible. In
particular, if any court in which Pure Cycle seeks to have the provisions of
this Agreement specifically enforced determines that the time or the Territory
herein specified is too broad, such court may determine a time or geographic
area in lieu of such time or the Territory and shall specifically enforce this
Agreement for such time and geographic area.

 

9.             Interpretation; Governing
Law.    This Agreement shall be construed as though
prepared by all parties hereto and shall be construed without regard to any
presumption or other rule requiring construction against the party causing an
agreement to be drafted. This Agreement shall be construed and governed by the
laws of the State of Colorado (without giving effect to its principles of
conflicts of laws). Any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement must be brought
against the applicable party in the courts of the State of Colorado located in
the City of Denver, Colorado, or, if it has or can obtain jurisdiction, in the
United States District Court for such state, and each party hereby consents to
the jurisdiction of such courts (and of the appropriate appellate courts) in
any such action or proceeding and waives any objection to venue laid therein. Process
in any action or proceeding referred to in this Section may be served on any
party anywhere in the world, whether within or without the State of Colorado,
and may also be served upon any party in the manner provided for giving notices
to it or him in Section 12 below.

 

10.           Construction.

 

(a)           The words “this Agreement”, “herein”,
“hereof”, “hereby”, “hereunder” and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited.

 

(b)           Words in the singular form
shall be construed to include the plural and vice versa, unless the context
otherwise requires. Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender.

 

(c)           Unless the context otherwise
requires or unless otherwise provided herein, the terms defined in this
Agreement which refer to a particular agreement, instrument or 

 

5

 

document
also refer to and include all renewals, extensions, modifications, amendments
or restatements of such agreement, instrument or document, provided that
nothing contained in this subsection shall be construed to authorize such
renewal, extension, modification, amendment or restatement.

 

(d)           The word “includes” and its
derivatives means “includes, but is not limited to” and corresponding
derivative expressions.

 

11.           Binding Effect.    This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, legal representatives, successors and
assigns.

 

12.           Notices.    All
notices and other communications under this Agreement shall be in writing and
shall be given by hand delivery, or first-class mail, certified or registered
with return receipt requested, or by commercial overnight courier and shall be
deemed to have been duly given upon hand delivery, delivery by commercial
overnight courier to the address specified below, or three days after deposit
in the U.S. mail as provided above, addressed as follows:

 

(a)           If to Equity Holder:

 

                                                  

                                                  

Telephone: (       )
       -          

Telecopy:  (       )        -          

 

with a copy to
(which shall not constitute notice):

 

Faegre &
Benson LLP

1900 Fifteenth
Street

Boulder,
Colorado 80302

Attention:              G.
James Williams, Jr.

Telephone:            (303)
447-7700

Telecopy:              (303)
447-7800

 

(b)           If to Pure Cycle:

 

Pure Cycle
Corporation

8451 Delaware
Street

Thornton,
Colorado 80260

Attention:              President

Telephone:            (303)
292-3456

Telecopy:              (303)
292-3475

 

6

 

with a copy to
(which shall not constitute notice):

 

Davis, Graham
& Stubbs LLP

1550
Seventeenth Street, Suite 500

Denver,
Colorado 80202

Attention:              Wanda
J. Abel, Esq.

Telephone:            (303)
892-7314

Telecopy:              (303)
893-1379

 

(c)           To such other address as to
which notice is provided in accordance with this Section.

 

13.           Third-Party Beneficiaries.   Each
party hereto intends that this Agreement shall not benefit nor confer any
rights or remedies on any Person other than the parties hereto and their
respective heirs, successors, assigns and legal representatives.

 

14.           Entire Agreement;
Modifications.    This Agreement represents the
entire understanding between the parties with respect to the subject matter
hereof and supersedes any and all prior understandings, agreements, plans and
negotiations, whether written or oral, with respect to the subject matter
hereof. All modifications to this Agreement must be in writing and signed by
the party against whom enforcement of such modification is sought.

 

15.           Headings.   The
Section headings herein are intended for reference and shall not by themselves
determine the construction or interpretation of this Agreement.

 

16.           Counterparts.   This
Agreement may be executed in one or more counterparts, in original or by
facsimile, any of which shall be deemed an original and all of which taken
together shall constitute one and the same Agreement.

 

17.           Attorneys Fees.   If
litigation is brought to enforce or interpret or is maintained to defend any
provision contained herein, the court shall award reasonable attorneys’ fees
and disbursements to the prevailing party as determined by the court.

 

7

 

IN WITNESS WHEREOF, the
parties have executed and delivered this Nonsolicitation Agreement as of the
date first above written.

 

	
   

  	
  PURE CYCLE CORPORATION, a Delaware 

  
	
   

  	
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
    Mark
  W. Harding, President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [EQUITY HOLDER]

  
	
   

  	
   

  
	
   

  	
   

  

 

8

 

Schedule 1

 

Water Rights Excluded From
Provisions of Section 2(a)

 

 

Schedule 2

 

Clients and Potential
Clients of Pure Cycle

 

 

EXHIBIT G

 

REGISTRATION
RIGHTS AGREEMENT

 

This Registration
Rights Agreement (this “Agreement”) is made and entered into as of                 
      , 2006, by and among Pure Cycle
Corporation, a Delaware corporation (“Pure Cycle”), and High Plains A & M,
LLC, a Colorado limited liability company (“High Plains”).

 

RECITALS

 

A.            Pure
Cycle and High Plains are parties to that certain Asset Purchase Agreement (the
“Acquisition Agreement”) whereby High Plains has agreed to transfer to Pure
Cycle and Pure Cycle has agreed to acquire from High Plains water interests in
the Arkansas River and its tributaries represented by shares of stock in the
Fort Lyon Canal Company and certain real property in consideration of the
issuance by Pure Cycle of a number of shares of Pure Cycle common stock, 1/3 of
$.01 par value per share (the “Common Stock”), calculated in accordance with
Section 2.5 of the Acquisition Agreement.

 

B.            The
shares of Common Stock to be issued by Pure Cycle under the Acquisition
Agreement have not been registered under the Securities Act and are “restricted
securities,” as such term is defined in Rule 144 under the Securities Act.

 

C.            Pure
Cycle has agreed that certain of the shares of Common Stock issued to High
Plains under the Acquisition Agreement will be entitled to registration under
the Securities Act in accordance with the terms of this Agreement.

 

D.            Pursuant
to the terms of a High Plains Pledge Agreement (the “Seller Pledge Agreement”)
entered into concurrently herewith, High Plains is pledging to Pure Cycle, as
secured party, certain of the shares of Common Stock being issued to it under
the Acquisition Agreement to secure the payment, performance and discharge by
High Plains of the Excluded Indebtedness as set forth in the Seller Pledge
Agreement.

 

AGREEMENT

 

In consideration of
the mutual covenants and agreements herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Pure Cycle and High Plains hereby agree as follows:

 

1.             REGISTRATION RIGHTS.

 

1.1           Definitions. Capitalized
terms used herein without definition shall have the meanings set forth in the
Acquisition Agreement. In addition to the terms that are defined elsewhere in
this Agreement, the following terms shall have the following meanings:

 

(a)           “Affiliate”,
with respect to any specified Person, has the meaning specified in Rule 144
under the Securities Act.

 

(b)           “Cash Equivalents”
means highly liquid debt and equity instruments with original maturities of
three (3) months or less.

 

 

(c)           “Exchange Act”
shall mean the Securities Exchange Act of 1934. as amended, and rules and
regulations promulgated thereunder.

 

(d)           “Holder”
means High Plains or any other Person that becomes the owner of record of
Registrable Securities in accordance with the provisions of Section 2.1.

 

(e)           “Person”
shall mean any individual, corporation, partnership, association, limited
liability company, trust, joint venture, unincorporated organization,
governmental or quasi-governmental authority or other legal or business entity
of any kind.

 

(f)            “Prospectus”
shall mean the prospectus included in any registration statement (including,
without limitation, a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement (including, without limitation, any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by such registration statement), and all
other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference therein.

 

(g)           “Registration”
shall include the terms “register,” “registration” and “registered” and refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration of effectiveness of
such registration statement.

 

(h)           “Registrable
Securities” shall mean a total of 1,500,000 shares of the Common Stock of
Pure Cycle, issued as Initial Consideration to High Plains under the
Acquisition Agreement. Registrable Securities includes any security issued with
respect thereto upon any stock dividend, split, merger or similar event. Registrable
Securities shall cease to have the status of Registrable Securities upon the
earliest to occur of (i) a transfer (other than to a permitted assignee
under Section 2.1) by High Plains pursuant to Rule 144 (or any similar
provision in force) under the Securities Act, (ii) the sale by High Plains
to the public pursuant to an effective registration statement or (iii) the
date as of which such securities may be transferred under Rule 144(k)
under the Securities Act. Of the 1,500,000 shares of Registrable Securities,
the smallest number possible at any point in time are shares subject to the
Seller Pledge Agreement.

 

(i)            “Securities Act”
shall mean the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

(j)            “SEC” means
the U.S. Securities and Exchange Commission.

 

1.2           Demand
Registration.

 

(a)           Request by Holders. At
any time after the earlier of (i) twelve (12) months after the date hereof
or (ii) the date of completion by Pure Cycle of a registered public
offering in which it has sold for the account of selling stockholders other
than High Plains up to 1.3 million shares of its Common Stock (the “Commencement
Date”), High Plains may request

 

2

 

registration under the Securities Act of up to 750,000 shares of the
Registrable Securities (the “Demand Securities”) by delivering to the President
of Pure Cycle a written request, specifying the number of Demand Securities as
to which registration is requested.

 

(b)           Underwriting.        If High
Plains intends to distribute the Registrable Securities covered by its request
by means of an underwriting, then it shall so advise Pure Cycle as a part of
the request made pursuant to this Section 1.2. In such event, High Plains
shall enter into an underwriting agreement in customary form with the managing
underwriter or underwriters selected for such underwriting by High Plains
(which underwriter or underwriters shall be reasonably acceptable to Pure
Cycle). Notwithstanding any other provision of this Section 1.2, if the
managing underwriter advises Pure Cycle in writing that marketing factors
require a limitation of the number of securities to be underwritten, then Pure
Cycle shall so advise High Plains, and, at High Plains’ election either (i) the
number of Registrable Securities that may be included in the underwriting shall
be reduced as required by the managing underwriter, or (ii) High Plains may
withdraw the request in which case the request shall not count pursuant to
Section 1.2(c) and High Plains shall reimburse Pure Cycle for Pure Cycle’s cost
of the withdrawn registration as provided in Section 1.2(f). Any Registrable Securities excluded and
withdrawn from such underwriting shall be withdrawn from the registration; provided,
however, that the number of shares of Registrable Securities included in
the underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting. A reduction in the number of
Registrable Securities included in the registration shall not affect the number
of demand registrations set forth in Section 1.2(c).

 

(c)           Maximum Number of Demand Registrations.      
Pure Cycle is obligated to effect only one (1) demand registration during the term of this agreement pursuant to
this Section 1.2.

 

(d)           Pending Offering.      If
at the time of any request for filing a registration statement pursuant to this
Section 1.2, Pure Cycle is engaged or has firm plans to engage within
ninety (90) days of the time of the request in a registered public offering as
to which High Plains may seek to include Registrable Securities pursuant to
piggyback rights granted under Section 1.3 hereof, Pure Cycle may, at its
option, direct that such demand registration request be delayed for a period
not to exceed six (6) months from the effective date of such offering; provided,
however, that Pure Cycle may not utilize this right more than once in
any twenty-four (24) month period.

 

(e)           Deferral.      Notwithstanding
the foregoing, if Pure Cycle shall furnish to High Plains following receipt of
a request for the filing of a registration statement delivered pursuant to this
Section 1.2 a certificate signed by the President of Pure Cycle stating
that, in the good faith judgment of the board of directors of Pure Cycle,
it would be detrimental to Pure Cycle and its stockholders for such
registration statement to become effective or to remain effective because such
action (x) would materially interfere with a significant acquisition, corporate
reorganization or other similar transaction involving Pure Cycle, (y) would
require premature disclosure of material information that Pure Cycle has a bona
fide business purpose for preserving as confidential, or (z) would render Pure
Cycle unable to comply with requirements under the Securities Act or the
Exchange Act, in which event Pure Cycle shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of the 

 

3

 

request of High Plains; provided, however, that Pure
Cycle may not utilize this right more than once in any twelve (12) month
period, and further provided that if any postponement has occurred under
Section 1.1(d), any postponement that would be required under this
Section 1.1(e) shall terminate upon termination of the postponement under
Section 1.1(d).

 

(f)            Expenses.    All
expenses incurred in connection with a registration pursuant to this
Section 1.2, including without limitation all registration and
qualification fees, printers’ and accounting fees, fees and disbursements of
counsel for Pure Cycle, and the reasonable fees and disbursements of one
counsel for High Plains, shall be borne by Pure Cycle, and High Plains shall be
responsible for payment of all discounts, commissions or other amounts payable
to underwriters or brokers in connection with such offering; provided, however,
that if Pure Cycle terminates or withdraws such registration, it shall bear all
such expenses, fees and disbursements (including High Plains’s attorneys’ fees
and disbursements).

 

1.3           Piggyback
Registrations.    After the Commencement
Date, Pure Cycle shall be obligated to notify High Plains in writing at least
twenty (20) days prior to filing any registration statement under the
Securities Act for purposes of effecting a public offering of Common Stock of
Pure Cycle (including registration statements filed at the request of any
holder relating to secondary offerings by such holder of Common Stock of Pure
Cycle, but excluding registration statements (i) effected under
Section 1.2 of this Agreement, (ii) registering Common Stock under
any employee benefit plan or (iii) registering Common Stock for use in an
acquisition or corporate reorganization) and will afford High Plains an
opportunity to include in such registration statement up to 750,000 shares of
Common Stock plus any number of shares of Common Stock previously subject to
reduction under Section 1.2(b) (the “Piggyback Securities”). If High Plains
desires to include in any such registration statement all or any part of the
Piggyback Securities held by it, it shall, within fifteen (15) days after
receipt of the above-described notice from Pure Cycle, so notify Pure Cycle in
writing, and in such notice shall inform Pure Cycle of the number of Piggyback
Securities it wishes to include in such registration statement. If High Plains
decides not to include all of its Piggyback Securities in any registration
statement filed by Pure Cycle, it shall nevertheless continue to have the right
to include any Piggyback Securities in any subsequent registration statement as
may be filed by Pure Cycle with respect to offerings of its securities, all
upon the terms and conditions set forth herein.

 

(a)           Underwriting.    If
a registration statement under which Pure Cycle gives notice under this
Section 1.3 is for an underwritten offering, then Pure Cycle shall include
such information in its notice to High Plains. In such event, the right of High
Plains to include its Piggyback Securities in such registration shall be
conditioned upon its participation in such underwriting as provided herein. High
Plains shall enter into an underwriting agreement in customary form with the
managing underwriter or underwriter(s) selected for such underwriting. Notwithstanding
any other provision of this Agreement, if the managing underwriter(s) determine
in good faith that marketing factors require a limitation of the number of
shares to be underwritten, then the managing underwriter(s) may exclude shares
(including Piggyback Securities) from the registration and the underwriting,
and the number of shares that may be included in the registration and the
underwriting shall be allocated, first, to stockholders exercising any
demand registration rights, second to Pure Cycle, and third,
among High Plains and any other holder of Common Stock requesting inclusion of
its shares in such registration on a pro rata basis based on the total number
of Piggyback Securities and other shares requested to 

 

4

 

be included in such registration. If High Plains disapproves of the
terms of any such underwriting, it may elect to withdraw from the underwriting
and the registration by written notice to Pure Cycle and the underwriter,
delivered at least ten (10) days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration.

 

(b)           Expenses.   All
expenses incurred in connection with a registration pursuant to this
Section 1.3 (excluding attorneys’ fees and disbursements), including,
without limitation, all federal and “blue sky” registration and qualification
fees, printers’ and accounting fees, and underwriters’ and brokers’ discounts
and commissions shall be borne by Pure Cycle and High Plains pro rata based on
the number of shares of Common Stock offered by each party in the registration
(provided that for purposes of computing High Plains’ pro rata portion all
shares of persons other than High Plains which are registered shall be deemed
shares offered by Pure Cycle) and each party shall be responsible for the fees
and disbursements of its own attorneys; provided, however, that
if Pure Cycle terminates or withdraws such registration, it shall bear all such
expenses, fees and disbursements (including High Plains’s attorneys’ fees and
disbursements).

 

(c)           No Obligation to
Complete Registration.    Notwithstanding
any notice given to, or the inclusion in any registration of Common Stock held
by High Plains, Pure Cycle may, in its discretion, terminate any registration
filed pursuant to this Section 1.3 at any time, or elect not to file a
registration statement as to which a notice has been given, without any
liability or obligation to High Plains except as otherwise provided herein. No
such termination or election not to file will result of any forfeiture of High
Plains’s rights hereunder.

 

1.4           Sale of Registrable
Securities Subject to Seller Pledge Agreement.   It is
understood that sale of Registrable Securities may be necessary for High Plains
to extinguish the Excluded Indebtedness. If High Plains has requested
registration of any Demand Securities or Piggyback Securities that are pledged
to Pure Cycle under the Seller Pledge Agreement (the “Pledged Common Stock”),
High Plains shall so identify the Pledged Common Stock in the written notice
delivered to Pure Cycle. Pure Cycle shall deliver such Pledged Common Stock to
facilitate such sale, but, under the terms of the Seller Pledge Agreement, the
proceeds of sale of such Pledged Common Stock shall continue to be subject to
the security interest created by the Seller Pledge Agreement and shall be
promptly applied first to payment of Excluded Indebtedness, and, if Excluded
Indebtedness has been paid in full, then to other Obligations under the Seller
Pledge Agreement. Until so utilized, such net cash proceeds shall be converted
by Pure Cycle in Cash Equivalents. Any Pledged Common Stock not sold in such
registration shall again be redelivered to Pure Cycle and shall remain subject
to the Seller Pledge Agreement in accordance with the terms of that agreement.

 

1.5           Obligations of Pure
Cycle.   Whenever required to effect the
registration of any Registrable Securities under this Agreement, Pure Cycle
shall, as expeditiously as reasonably possible:

 

(a)           Upon the request of
High Plains with respect to Demand Securities, prepare and file with the SEC a
registration statement with respect to such Demand Securities and use
reasonable best, diligent efforts to cause such registration statement to
become 

 

5

 

effective, and, keep such registration statement effective for up to
one hundred twenty (120) days or such earlier date when all Registrable
Securities included therein have ceased to be Registrable Securities.

 

(b)           Prepare and file
with the SEC such amendments and supplements to any registration statement and
the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement for
the period set forth in subsection (a) above.

 

(c)           Furnish to High
Plains such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as it may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by it that are included in such
registration.

 

(d)           Use reasonable best,
diligent efforts to register and qualify the securities covered by such
registration statement under such other securities or “blue sky” laws of such
jurisdictions as shall be reasonably requested by High Plains, provided that
Pure Cycle shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions unless Pure Cycle is already
subject to service in such jurisdiction and except as may be required under the
Securities Act.

 

(e)           In the event of any
underwritten public offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the managing
underwriter(s) of such offering. High Plains, as a participant in such
underwriting, shall also enter into and perform its obligations under such an
agreement.

 

(f)            Notify High Plains
at any time when a prospectus relating to Registrable Securities is required to
be delivered under the Securities Act or of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
made therein not misleading in the light of the circumstances then existing (a “Deficiency”),
following which notice High Plains shall be obligated to cease sales of Common
Stock until it shall be notified that the prospectus, as amended or
supplemented, no longer includes such Deficiency; provided, however,
that Pure Cycle will use reasonable best efforts to amend or supplement such
prospectus in order to cure such Deficiency.

 

(g)           Use its reasonable
best efforts to furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, (i) an opinion, dated as of such date, of the counsel
representing Pure Cycle for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter, dated as of
such date, from the independent certified public accountants of Pure Cycle, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering addressed to the
underwriters.

 

6

 

(h)           Use its reasonable
best efforts to cause all Registrable Securities registered pursuant to this
Agreement to be listed on each securities exchange or quotation system on which
similar securities issued by Pure Cycle are listed.

 

(i)            Provide a transfer
agent and registrar for all Registrable Securities registered pursuant to this
Agreement and a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration.

 

1.6           Furnish Information.  It
shall be a condition precedent to the obligations of Pure Cycle hereunder that
High Plains shall furnish to Pure Cycle such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to timely effect the
registration of its Registrable Securities.

 

1.7           Indemnification.  In
the event any Registrable Securities are included in a registration statement
under this Agreement:

 

(a)           By Pure Cycle.  To
the extent permitted by law, Pure Cycle will indemnify and hold harmless High
Plains, the partners, owners, managers, officers and directors of High Plains,
and each Person, if any, who controls High Plains within the meaning of the
Securities Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively, “Violations” and, individually, a “Violation”):

 

(i)            any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement or incorporated be reference therein, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto;

 

(ii)           the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading; or

 

(iii)          any violation or
alleged violation by Pure Cycle of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law in connection with the
offering covered by such registration statement

 

and Pure Cycle will reimburse each of High Plains and such partner,
owner, manager, officer, director or controlling Person for any legal or other
expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action; provided
however, that the indemnity agreement contained in this subsection 1.7(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of Pure
Cycle (which consent shall not be unreasonably withheld or delayed), nor shall
Pure Cycle be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a 

 

7

 

Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
High Plains or such partner, owner, manager, officer, director or controlling
Person.

 

(b)           By High Plains.   To
the extent permitted by law, High Plains will indemnify and hold harmless Pure
Cycle, each of its directors, each of its officers who have signed the
registration statement, each Person, if any, who controls Pure Cycle within the
meaning of the Securities Act, any underwriter and any other holder selling
securities under such registration statement or any of such other holder’s
partners, directors or officers or any Person who controls such holder within
the meaning of the Securities Act, against any losses, claims, damages or
liabilities (joint or several) to which Pure Cycle or any such director,
officer, controlling Person, underwriter or other such holder, partner or
director, officer or controlling Person of such other holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by High Plains expressly for
use in connection with such registration; and High Plains will reimburse any
legal or other expenses reasonably incurred by Pure Cycle or any such director,
officer, controlling Person, underwriter or other holder, partner, officer,
director or controlling Person of such other holder in connection with
investigating or defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this subsection
1.7(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of High Plains, which consent shall not be unreasonably withheld.

 

(c)           Notice.   Promptly
after receipt by an indemnified party under this Section 1.7 of notice of
the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 1.7, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if the representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the indemnified
party under this Section 1.7, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 1.7.

 

(d)           Defect Eliminated in
Final Prospectus.   The foregoing indemnity
agreements of Pure Cycle and High Plains are subject to the condition that,
insofar as they relate to any violation made in a preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the SEC or filed
with the SEC pursuant to SEC Rule 424(b) (the “Final 

 

8

 

Prospectus”), such indemnity agreement shall not inure to the benefit
of any indemnified party if a copy of the Final Prospectus was furnished to the
indemnified party who subsequently failed to furnish such Final Prospectus as
required.

 

(e)           Contribution.     If
the indemnification provided for in this Section 1.7 is unavailable to an
indemnified party or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand, and the indemnified
party on the other, in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by Pure Cycle or High
Plains and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Each Party hereto
agrees that it would not be just and equitable if contribution pursuant to this
Section 1.7 were determined by pro-rata allocation or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 1.7, in no event shall High Plains be required to contribute or
indemnify for any amount in excess of the net proceeds received by it from the
sale of the Registrable Securities pursuant to the registration statement. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.

 

(f)            Survival.   The
obligations of Pure Cycle and High Plains under this Section 1.7 shall
survive the completion of any offering of Registrable Securities in a
registration statement, and otherwise.

 

1.8           Termination of Pure
Cycle’s Obligations.   Except as
provided in Sections 1.7 and 1.10, Pure Cycle shall have no obligations
pursuant to this Agreement after the earlier of (i) six (6) years after the
effective date of this Agreement and (ii) the date that all Registrable
Securities cease to be Registrable Securities.

 

1.9           Limitations on Subsequent Registration Rights.   From
and after the date of this Agreement, Pure Cycle shall not, without the prior
written consent of High Plains, enter into any agreement with any holder or
prospective holder of any securities of Pure Cycle which would allow such
holder or prospective holder to include such securities in any registration
filed under Section 1.2 hereof, unless under the terms of such agreement,
such holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of its securities will not
reduce the amount of the Registrable Securities of High Plains which are
included. Pure Cycle warrants it does not have any outstanding obligations to
register securities 

 

9

 

for others that would violate this Section 1.9 if such obligation was
entered into after the date of this Agreement.

 

1.10         Rule 144 Reporting;
Listing.   If High Plains or any other Holder
owns any Registrable Securities, then (i) for a period of four (4) years after
the date of this Agreement or (ii) until High Plains or any other Holder no longer
owns any securities subject to registration rights hereunder, whichever is
earlier, Pure Cycle shall:

 

(a)           file on a timely
basis all reports required to be filed by it pursuant to Section 13 or 15(d) of
the Exchange Act, referred to in paragraph (c)(1) of Rule 144 under the
Securities Act (or, if applicable, Pure Cycle shall use reasonable efforts to
make publicly available the information regarding itself referred to in
paragraph (c)(2) of Rule 144); and

 

(b)           use reasonable
efforts to maintain the listing of the Pure Cycle Common Stock on the NASDAQ
Capital Market or, if not so listed, to cause the Pure Cycle Common Stock to be
listed on the NASDAQ National Market or on a national securities exchange (as
defined in the Exchange Act).

 

2              ASSIGNMENT AND AMENDMENT.

 

2.1           Assignment.   The
registration rights of High Plains hereunder may not be assigned to any Person
without the prior written consent of Pure Cycle; provided, however,
that High Plains may assign the rights to cause Pure Cycle to register Registrable
Securities pursuant to this Section 2 (but only with all related obligations)
to a transferee or assignee of Registrable Securities that (a) is H. Hunter
White, Mark Campbell or Walker Baus (the members of High Plains as of the date
hereof) (such individuals being the “Members”), the parents, children,
grandchildren, or spouse or significant other of a Member (“Family”), or (b) is
an entity (including a partnership or trust) controlled by one or more Members
or Family; provided, further, (i) High Plains shall, within ten
(10) days after such transfer, furnish to Pure Cycle written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned and (ii) such transferee
shall agree to be subject to all restrictions set forth in this Agreement. A
Member or Family may also transfer to a Member or Family pursuant to this
Section. Pure Cycle may not assign its rights or obligations under this
Agreement without the prior written consent of Holders of record of eighty
percent (80%) or more of the Registrable Securities.

 

2.2           Amendment of Rights.  Any
provision of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of Pure Cycle and Holders of
record of eighty percent (80%) or more of the Registrable Securities.

 

3.             GENERAL PROVISIONS.

 

3.1           Notices.   All
notices and other communications under this Agreement shall be in writing and
shall be given by hand delivery, or first-class mail, certified or registered
with return receipt requested, or by commercial overnight courier and shall be
deemed to have been duly given upon hand delivery, delivery by commercial
overnight courier to the address 

 

10

 

specified below, or three days after deposit in the U.S. mail as
provided above, addressed as follows:

 

(a)           If to High Plains:

 

High Plains A &M, LLC

333 West Hampden Avenue

Suite 810

Englewood, Colorado 80111

Attention: 
Mark Campbell

Telephone: 
(303) 534-1040

Telecopy:   
(303) 534-6700

 

with a copy to (which shall not constitute notice):

 

Faegre & Benson LLP

1900 Fifteenth Street

Boulder, Colorado 80302

Attention:  G.
James Williams, Jr.

Telephone: 
(303) 447-7700

Telecopy: 
(303) 447-7800

 

and

 

H. Hunter White

9800 Walzer Court

Windermere, Florida 34783

Telephone: 
(407) 876-8915

Telecopy: 
(407) 264-6487

 

(b)           If to Pure Cycle:

 

Pure Cycle Corporation

8451 Delaware Street

Thornton, Colorado 80260

Attention: 
President

Telephone: 
(303) 292-3456

Telecopy:    (303) 292-3475

 

with a copy to (which shall not constitute notice):

 

Davis Graham & Stubbs LLP

1550 Seventeenth Street, Suite 500

Denver, Colorado 80202

Attention: 
Wanda J. Abel, Esq.

Telephone: 
(303) 892-7314

Telecopy: 
(303) 893-1379

 

11

 

(c)           To such other
address as to which notice is provided in accordance with this Section.

 

3.2           Entire Agreement.   This
Agreement constitutes the entire agreement and understanding of the parties
with respect to the subject matter hereof and supersede any and all prior
understandings, agreements, plans and negotiations, whether written or oral,
with respect to the subject matter hereof.

 

3.3           Interpretation;
Governing Law.   This Agreement shall be
construed as though prepared by all parties hereto and shall be construed
without regard to any presumption or other rule requiring construction against
the party causing an agreement to be drafted. This Agreement shall be construed
and governed by the laws of the State of Colorado (without giving effect to its
principles of conflicts of laws). Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Agreement must be
brought against the applicable party in the courts of the State of Colorado
located in the City of Denver, Colorado, or, if it has or can obtain
jurisdiction, in the United States District Court for such state, and each
party hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred
to in this Section may be served on any party anywhere in the world, whether
within or without the State of Colorado.

 

3.4           Severability.   Should
a court or other body of competent jurisdiction determine that any provision of
this Agreement is excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and all other provisions of this
Agreement shall be deemed valid and enforceable to the extent possible.

 

3.5           Third-Party
Beneficiaries.   Each party hereto intends that
this Agreement shall not benefit nor confer any rights or remedies on any
Person other than the parties hereto and their respective heirs, successors and
legal representatives, and those Persons entitled to indemnification or
contribution rights under Section 1.7.

 

3.6           Successors And Assigns.   Subject
to the provisions of Section 2.1, the provisions of this Agreement shall
inure to the benefit of, and shall be binding upon, the successors and permitted
assigns of the parties hereto.

 

3.7           Headings.   The
section headings herein are intended for reference and shall not themselves
determine the construction or interpretation of this Agreement.

 

3.8           Counterparts.   This
Agreement may be executed in counterparts, in original or by facsimile, any of
which shall be deemed an original and all of which taken together shall
constitute one and the same Agreement.

 

3.9           Costs And Attorneys’ Fees.   In
the event that any action, suit or other proceeding is instituted concerning or
arising out of this Agreement or any transaction contemplated hereunder, the
prevailing party shall recover all of such party’s costs and attorneys’ fees
incurred in each such action, suit or other proceeding, including any and all
appeals or petitions therefrom.

 

12

 

3.10         Adjustments for Stock Splits, Etc.  Wherever
in this Agreement there is a reference to a specific number of shares of Common
Stock of Pure Cycle, then, upon the occurrence of any recapitalization,
subdivision, combination or stock dividend of such class or series of stock,
the specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the effect on the
outstanding shares by such subdivision, combination or stock dividend.

 

IN
WITNESS WHEREOF, the parties hereto have executed and
delivered this Registration Rights Agreement as of the date first above
written.

 

	
   

  	
  PURE CYCLE CORPORATION,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Mark W. Harding, President

  
	
   

  	
   

  
	
   

  	
  HIGH PLAINS A & M, LLC

  
	
   

  	
  a Colorado limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

13

 

EXHIBIT H

 

FORM OF
OPINION OF DAVIS GRAHAM & STUBBS LLP

 

The legal opinions remain subject to negotiation.

 

 

EXHIBIT I

 

VOTING AGREEMENT

 

THIS
VOTING AGREEMENT is entered into this          
day of                   ,
2006 by and between Mark W. Harding (“Harding”) and High Plains A&M,
LLC, a Colorado limited liability company (“High Plains”), and with respect to Section
2 only, Pure Cycle Corporation, a Delaware corporation (“Pure Cycle”).

 

RECITALS

 

A.            Pure Cycle entered into an Asset
Purchase Agreement dated as of May 10, 2006 (the “Purchase Agreement”),
pursuant to which Pure Cycle agreed to purchase certain water interests in the
Arkansas River and its tributaries represented by real property interests and
shares of stock in the Fort Lyon Canal Company and other Assets as defined in
Section 2.1 of the Purchase Agreement. All capitalized terms used herein but not
otherwise defined shall have the meanings given to such terms in the Purchase
Agreement.

 

B.            The execution of a voting agreement
by Harding with respect to the election of a member of Pure Cycle’s board of
directors (the “Board of Directors”) is a condition to the Purchase Agreement.

 

AGREEMENT

 

In
consideration of the forgoing, the mutual covenants, and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

 

1.             Election
of Directors. From and after the date hereof, at each annual meeting of
Pure Cycle’s stockholders, at each special meeting of Pure Cycle’s stockholders
called for the purpose of the election of directors of Pure Cycle, and at any
other time at which stockholders of Pure Cycle will have the right to or will
vote for or consent in writing to the election of directors of Pure Cycle, then
and in each event, Harding hereby covenants and agrees to vote all shares of
capital stock of Pure Cycle now or hereafter owned (directly, beneficially or
otherwise) or controlled by him and otherwise use his reasonable efforts as a
stockholder or director (if he serves as such) of Pure Cycle in favor of
causing and maintaining the election to the Board of Directors of one
representative of High Plains (the “High Plains’ director”) designated pursuant
to the Purchase Agreement.

 

2.             Audit.
High Plains shall have the right, exercisable from time to time upon reasonable
notice, to audit Harding’s performance hereunder by review of voting records,
proxies and other documents and materials related to Harding’s voting of shares
of capital stock of Pure Cycle. Pure Cycle and Harding agree to cooperate
reasonably and in good faith in connection with any reasonable request made by
High Plains hereunder.

 

3.             Duration
of Agreement. The rights and obligations of Harding under this Agreement
shall terminate on the earlier of (a) August 31, 2011, (b) the
annual meeting of Pure Cycle’s stockholders held following the fiscal year
ended August 31, 2010, (c) the date on which

 

 

Pure Cycle fully discharges its obligations
to pay the Tap Participation Fee under the Purchase Agreement, or (d) the
date on which Harding no longer owns (directly, beneficially or otherwise) or
controls any shares of capital stock of Pure Cycle.

 

4.             Ownership,
Etc.. Harding represents and warrants to High Plains that (a) Harding now
owns all shares of his capital stock of Pure Cycle free and clear of liens or
encumbrances, and has not, prior to or on the date of this Agreement, executed
or delivered any proxy or entered into any other voting agreement or similar
arrangement other than one which has expired or terminated prior to the date
hereof, and (b) Harding has full power and capacity to execute, deliver and
perform this Agreement, which has been duly executed and delivered by, and
evidences the valid and binding obligation of, Harding enforceable in
accordance with its terms. Harding agrees that, except as contemplated by the
terms of this Agreement, Harding shall not, with the prior written consent of
High Plains, (i) grant any proxies or powers of attorney in respect of Harding’s
shares of capital stock of Pure Cycle, deposit any such shares into a voting
trust or enter into a voting agreement with respect to any of such shares; or
(ii) take any action that would have the effect of preventing, impeding,
interfering with or adversely affecting Harding’s ability to perform his
obligations under this Agreement; provided, however, that nothing herein shall
preclude Harding from selling or otherwise transferring or disposing of any
shares of capital stock of Pure Cycle now or hereafter owned by Harding.

 

5.             Interpretation;
Governing Law. This Agreement shall be construed as though prepared by all
parties hereto and shall be construed without regard to any presumption or
other rule requiring construction against the party causing an agreement to be
drafted. This Agreement shall be construed and governed by the laws of the
State of Colorado (without giving effect to its principles of conflicts of
laws). Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement must be brought against the
applicable party in the courts of the State of Colorado located in the City of
Denver, Colorado, or, if it has or can obtain jurisdiction, in the United
States District Court for such state, and each party hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any such
action or proceeding and waives any objection to venue laid therein. Process in
any action or proceeding referred to in this Section may be served on any party
anywhere in the world, whether within or without the State of Colorado, and may
also be served upon any party in the manner provided for giving notices to it
or him in Section 9 below.

 

6.             Specific
Performance. Each party acknowledges and agrees that the other party would
be damaged irreparably in the event any provision of this Agreement is not performed
in accordance with its specific terms or otherwise is breached, so that such
party shall be entitled to injunctive relief to prevent breaches of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in addition to any other remedy to which such party may be
entitled at law or in equity.

 

7.             Binding
Effect and Assignment. This Agreement shall be binding upon the parties
hereto and their respective heirs, legal representatives, successors and
assigns.

 

8.             Counterparts.
This Agreement may be executed in one or more counterparts, in original or by
facsimile, any of which shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument.

 

2

 

9.             Notices.
All notices and other communications under this Agreement shall be in writing
and shall be given by hand delivery, or first-class mail, certified or
registered with return receipt requested, or by commercial overnight courier
and shall be deemed to have been duly given upon hand delivery, delivery by
commercial overnight courier to the address specified below, or three days
after deposit in the U.S. mail as provided above, addressed to such party at
the address set forth on the signature pages hereto. Any party may change its
address by notifying the other parties of such change in writing in the manner
described herein.

 

10.           Cross-Default.
At any time when High Plains is in material default of any obligation under
the Purchase Agreement, the Property Management Agreement or the Seller Pledge
Agreement, or when the High Plains’ director is in material default under a
Nonsolicitation Agreement, in either case which remains uncured thirty (30)
days after receiving written notice thereof from Pure Cycle, then the
obligations of Harding under this Agreement shall be suspended until such
default is cured to Pure Cycle’s reasonable satisfaction.

 

11.           Entire
Agreement; Modifications. This Agreement represents the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes any and all prior understandings, agreements, plans and
negotiations, whether written or oral, with respect to the subject matter
hereof. All modifications to this Agreement must be in writing and signed by
the party against whom enforcement of such modification is sought.

 

3

 

IN
WITNESS WHEREOF, the parties hereto have caused this Voting Agreement to be
executed as of the date first above written.

 

	
   

  	
   

  
	
   

  	
  Mark W. Harding

  
	
   

  	
   

  
	
   

  	
  Pure Cycle Corporation

  
	
   

  	
  8451 Delaware Street

  
	
   

  	
  Thornton, Colorado 80260

  
	
   

  	
  Attn: Mark W. Harding

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HIGH PLAINS A&M, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
  High Plains A&M, LLC

  
	
   

  	
   

  	
  333 W. Hampden Avenue

  
	
   

  	
   

  	
  Suite 810

  
	
   

  	
   

  	
  Englewood, Colorado 80110

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  With respect to Section 2 only:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURE CYCLE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title: President

  
					

 

4

 

EXHIBIT J

 

FORM OF
OPINION OF FAEGRE & BENSON LLP

 

The legal opinions remain subject to negotiation.

 

 

EXHIBIT K

 

GENERAL ASSIGNMENT, BILL OF SALE

AND ASSUMPTION AGREEMENT

 

This GENERAL
ASSIGNMENT, BILL OF SALE AND ASSUMPTION AGREEMENT is made as of the         
day of                     ,
2006, by and between HIGH PLAINS A&M, LLC, a Colorado limited liability
company (“Seller”), and PURE CYCLE CORPORATION, a Delaware corporation (“Buyer”).

 

RECITALS

 

A.            Upon the terms and subject to the
conditions set forth in that certain Asset Purchase Agreement dated May 10,
2006 (the “Asset Agreement”), Seller has agreed to transfer and deliver to
Buyer, and Buyer has agreed to acquire and accept from Seller, the Assets (as
defined below) in exchange for Shares of Pure Cycle Common Stock, the
assumption of certain liabilities by Buyer, and certain tap participation fees
described in the Asset Agreement.

 

B.            Upon the terms and subject to the
conditions set forth in the Asset Agreement, Seller shall assign and delegate
to Buyer, and Buyer shall assume, accept such delegation and undertake to
discharge, certain liabilities of Seller.

 

AGREEMENT

 

In
consideration of the foregoing and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:

 

1.             Capitalized Terms. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.

 

2.             Transfer
of Assets. For good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Seller
hereby sells, conveys, grants, assigns, transfers and delivers to Buyer and its
successors and assigns forever, without any representation or warranty except
as set forth in the Asset Agreement, all of Seller’s right, title and interest
in and to all of the assets and properties of Seller described on Schedule 1
attached hereto (the “Assets”), but excluding the Excluded Assets, and Buyer
hereby purchases, accepts and receives from Seller all of Seller’s right, title
and interest in and to the Assets.

 

3.             Assignment,
Delegation and Assumption of Liabilities. Seller
hereby assigns and delegates to Buyer, and Buyer hereby assumes, accepts such
delegation and undertakes to discharge in full:

 

(a)           All
of the obligations and liabilities of Seller under the Assumed Contracts
arising with respect to periods from and after the Effective Date; and

 

(b)           All
obligations and liabilities arising with respect to periods from and after the
Effective Date related to the ownership and operation of the Assets other than
the Excluded Indebtedness described on Schedule 2 attached hereto.

 

 

All of the
obligations and liabilities in this Section 3 shall be referred to
collectively herein as the “Assumed Liabilities.”  Other than the Assumed Liabilities, Buyer
shall not assume or be bound by any obligations of Seller of any kind or
nature, contingent or otherwise, including, but not limited to, any Tax
liability related to the Assets accruing prior to the Effective Date or the
transfer of the Assets (except as provided in the Asset Agreement) or any
litigation disclosed on Schedule 3.4 to the Asset Agreement.

 

4.             No
Merger. The representations, warranties and
covenants of the parties hereto set forth in the Asset Agreement shall survive
the execution and delivery of this General Assignment, Bill of Sale and
Assumption and shall not be merged herein or integrated herewith.

 

5.             Effective
Date. This General Assignment, Bill of Sale and
Assumption Agreement shall be deemed to have taken effect at 12:01 a.m.,
Mountain Daylight Time, on                        ,
2006 (the “Effective Date”).

 

 

**************

 

2

 

IN WITNESS
WHEREOF, the parties have executed and delivered this General Assignment, Bill
of Sale and Assumption Agreement as of the date first referenced above.

 

	
  SELLER:

  	
  BUYER:

  	
   

  
	
   

  	
   

  	
   

  
	
  HIGH PLAINS A&M, LLC,

  a Colorado limited liability company

  	
  PURE CYCLE CORPORATION,

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
  Mark W.
  Harding, President

  
								

 

3

 

Schedule 1

 

[List Assets from 2.1 of the Purchase Agreement (including Assumed
Contracts)]

 

4

 

Schedule 2

 

[List Excluded Indebtedness from Schedule 2.4 to the Purchase
Agreement]

 

5

 

The following is a
list of schedules and exceptions to certain of the representations and
warranties made by High Plains A & M, LLC (“Seller”) in that certain
Asset Purchase Agreement (the “Agreement”) dated May 10, 2006 between Seller
and Pure Cycle Corporation. Unless otherwise indicated, all section references
are to sections of the Agreement. All agreements appearing in these schedules
are qualified by the complete agreements so referenced.

 

Nothing in these
schedules shall constitute an admission of any liability or obligation of
Seller to any third party or acknowledgement that any matter disclosed in these
schedules is required to be disclosed (particularly where such disclosure is
required in accordance with a materiality standard or as not in the ordinary
course of business). The disclosures in these schedules are made in response to
the representations and warranties of Seller and certain covenants in the
Agreement; and no disclosure made in these schedules shall be deemed to modify
in any respect the standard of materiality or knowledge set forth in any
representation, warranty, covenant or other provision contained in the
Agreement.

 

 

Schedule 2.1(a)

 

Fort Lyon Canal Company Shares

 

	
  Farm #

  	
   

  	
  FLCC Certificate Number

  	
   

  	
  Number of Shares

  	
   

  
	
  1

  	
   

  	
  9494

  	
   

  	
  204

  	
   

  
	
  2

  	
   

  	
  9495

  	
   

  	
  144

  	
   

  
	
  3

  	
   

  	
  9559

  	
   

  	
  83

  	
   

  
	
  4

  	
   

  	
  9561

  9562

  	
   

  	
  144

  108

  	
   

  
	
  5

  	
   

  	
  9576

  9577

  	
   

  	
  80

  67

  	
   

  
	
  6

  	
   

  	
  9557

  	
   

  	
  143

  	
   

  
	
  7

  	
   

  	
  9496

  	
   

  	
  200

  	
   

  
	
  8

  	
   

  	
  9499

  9498

  	
   

  	
  100

  100

  	
   

  
	
  9

  	
   

  	
  9497

  	
   

  	
  140

  	
   

  
	
  10

  	
   

  	
  9545

  	
   

  	
  112

  	
   

  
	
  11

  	
   

  	
  9531

  	
   

  	
  138

  	
   

  
	
  12

  	
   

  	
  9530

  	
   

  	
  144

  	
   

  
	
  13

  	
   

  	
  9527

  	
   

  	
  188

  	
   

  
	
  14

  	
   

  	
  9586

  	
   

  	
  118

  	
   

  
	
  15

  	
   

  	
  9585

  	
   

  	
  219

  	
   

  
	
  16a

  	
   

  	
  9578

  	
   

  	
  100

  	
   

  
	
  16b

  	
   

  	
  9579

  	
   

  	
  100

  	
   

  
	
  17

  	
   

  	
  9570

  	
   

  	
  200

  	
   

  
	
  18

  	
   

  	
  9544

  	
   

  	
  314.20

  	
   

  
	
  19

  	
   

  	
  9541

  9542

  	
   

  	
  144

  144

  	
   

  
	
  20

  	
   

  	
  9488

  9489

  9490

  9491

  	
   

  	
  144

  397.60

  382

  239.92

  	
   

  
	
  21

  	
   

  	
  9532

  	
   

  	
  196

  	
   

  
	
  22

  	
   

  	
  9539

  9540

  	
   

  	
  108

  223.2

  	
   

  
	
  23

  	
   

  	
  9048 (old cert # of lost certificate)

  	
   

  	
  245

  	
   

  
	
  24

  	
   

  	
  9573

  	
   

  	
  210

  	
   

  
	
  25

  	
   

  	
  9588

  	
   

  	
  322

  	
   

  
	
  26

  	
   

  	
  9529

  	
   

  	
  112

  	
   

  
	
  27

  	
   

  	
  9533

  9534

  9535

  9536

  	
   

  	
  144

  216

  156

  144

  	
   

  

 

 

	
  Farm #

  	
   

  	
  FLCC Certificate Number

  	
   

  	
  Number of Shares

  	
   

  
	
  28

  	
   

  	
  9508

  9503

  	
   

  	
  55.80

  100.80

  	
   

  
	
  30

  	
   

  	
  9543

  	
   

  	
  232

  	
   

  
	
  31

  	
   

  	
  9506

  	
   

  	
  144

  	
   

  
	
  32

  	
   

  	
  9572

  	
   

  	
  120

  	
   

  
	
  33

  	
   

  	
  9644

  9645

  	
   

  	
  72

  36

  	
   

  
	
  34

  	
   

  	
  9550

  	
   

  	
  414

  	
   

  
	
  35

  	
   

  	
  9505

  	
   

  	
  376

  	
   

  
	
  36

  	
   

  	
  9537

  9538

  	
   

  	
  205

  7

  	
   

  
	
  37

  	
   

  	
  9591

  	
   

  	
  144

  	
   

  
	
  38

  	
   

  	
  9546

  9547

  9548

  9549

  	
   

  	
  288

  288

  288

  432

  	
   

  
	
  39

  	
   

  	
  9767

  9768

  9769

  9770

  9771

  	
   

  	
  58

  72

  380

  200

  150

  	
   

  
	
  40

  	
   

  	
  9825

  	
   

  	
  67

  	
   

  
	
  41

  	
   

  	
  9582

  	
   

  	
  80

  	
   

  
	
  42

  	
   

  	
  9552

  	
   

  	
  166

  	
   

  
	
  43

  	
   

  	
  9500

  9501

  9502

  	
   

  	
  238.5

  80

  238.5

  	
   

  
	
  44

  	
   

  	
  9503

  	
   

  	
  372.08

  	
   

  
	
  45

  	
   

  	
  9551

  	
   

  	
  216

  	
   

  
	
  46

  	
   

  	
  9563

  9564

  9565

  9566

  9567

  9568

  	
   

  	
  288

  225.04

  144

  144

  288

  144

  	
   

  
	
  47

  	
   

  	
  9506

  9507

  	
   

  	
  144

  144

  	
   

  
	
  48

  	
   

  	
  9553

  9554

  9555

  	
   

  	
  76

  144

  122

  	
   

  
	
  49

  	
   

  	
  9510

  9511

  	
   

  	
  248.4

  216

  	
   

  
	
  50

  	
   

  	
  9616

  	
   

  	
  72

  	
   

  
	
  51

  	
   

  	
  9589

  9590

  	
   

  	
  143

  30

  	
   

  

 

 

	
  Farm #

  	
   

  	
  FLCC Certificate Number

  	
   

  	
  Number of Shares

  	
   

  
	
  52

  	
   

  	
  9504

  	
   

  	
  238

  	
   

  
	
  53

  	
   

  	
  9526

  	
   

  	
  170

  	
   

  
	
  54

  	
   

  	
  9584

  9583

  	
   

  	
  144

  80

  	
   

  
	
  55

  	
   

  	
  9680

  	
   

  	
  216

  	
   

  
	
  56

  	
   

  	
  9574

  	
   

  	
  372

  	
   

  
	
  57

  	
   

  	
  9575

  	
   

  	
  83

  	
   

  
	
  58

  	
   

  	
  9772

  	
   

  	
  121

  	
   

  
	
  59

  	
   

  	
  9601

  	
   

  	
  144

  	
   

  
	
  60

  	
   

  	
  9693

  9694

  9695

  9696

  9697

  	
   

  	
  21.16

  27.96

  27.96

  27.96

  27.96

  	
   

  
	
  61

  	
   

  	
  9738

  	
   

  	
  400

  	
   

  
	
  62

  	
   

  	
  9629

  	
   

  	
  207

  	
   

  
	
  63

  	
   

  	
  9731

  9732

  9733

  9734

  	
   

  	
  213

  144

  122

  144

  	
   

  
	
  64

  	
   

  	
  9623

  	
   

  	
  224

  	
   

  
	
  65

  	
   

  	
  9628

  	
   

  	
  144

  	
   

  
	
  66

  	
   

  	
  9622

  	
   

  	
  60

  	
   

  
	
  67

  	
   

  	
  9617

  	
   

  	
  144

  	
   

  
	
  69

  	
   

  	
  9643

  	
   

  	
  100

  	
   

  
	
  70

  	
   

  	
  9640

  	
   

  	
  60

  	
   

  
	
  85

  	
   

  	
  9719

  	
   

  	
  144

  	
   

  
	
  103B

  	
   

  	
  9666

  	
   

  	
  901

  	
   

  
	
  107

  	
   

  	
  9651

  9641

  	
   

  	
  288

  280

  	
   

  
	
  110

  	
   

  	
  9677

  9678

  	
   

  	
  40

  112

  	
   

  
	
  114

  	
   

  	
  9659

  	
   

  	
  144

  	
   

  
	
  116

  	
   

  	
  9668

  9669

  9670

  	
   

  	
  144

  194

  144

  	
   

  
	
  117

  	
   

  	
  9686

  	
   

  	
  62

  	
   

  
	
  118

  	
   

  	
  9692

  	
   

  	
  230

  	
   

  
	
  127

  	
   

  	
  9705

  	
   

  	
  72

  	
   

  
	
  132

  	
   

  	
  9712

  9711

  	
   

  	
  215

  50

  	
   

  
	
  140

  	
   

  	
  9759

  	
   

  	
  108

  	
   

  
	
  141

  	
   

  	
  9760

  	
   

  	
  224

  	
   

  
	
   

  	
   

  	
  Total
  Shares

  	
   

  	
  21,782.04

  	
   

  

 

 

Schedule 2.1(b)

 

Property Descriptions

 

	
  Farm

  Number

  	
   

  	
  Legal Description Beginning...

  
	
  Farm

  	
   

  	
  1

  	
   

  	
  A tract of land lying in Bent County, Colorado in the NW1/4 of Sec.25
  and in the NE1/4 of Sec.26, T.22S., R.51W., 6th P.M.

  
	
  Farm

  	
   

  	
  2

  	
   

  	
  A tract of land lying in Bent County, Colorado in the SE1/4 of
  Sec.23, T.22S., R.51W., 6th P.M.

  
	
  Farm

  	
   

  	
  3

  	
   

  	
  Two tracts of land lying in Otero County, Colorado in Lots 6 and 7 of
  Holbrook Subdivision of a part of Sec.30, T.23S., R.54W., 6th. P.M.

  
	
  Farm

  	
   

  	
  4

  	
   

  	
  Transferred Water Rights Only

  
	
  Farm

  	
   

  	
  5

  	
   

  	
  A tract of land lying in the N1/2N1/2 of Sec.25, Twp. 22 S., Rg. 53
  W. of the 6th P.M.

  
	
  Farm

  	
   

  	
  6

  	
   

  	
  A tract of land lying in Bent County, Colorado in the SW1/4 of
  Sec.29, T.22S., R.51W., 6th P.M.

  
	
  Farm

  	
   

  	
  7

  	
   

  	
  A tract of land lying in Bent County, Colorado in the W1/2SE1/4 and
  the SW1/4 of Sec.36, T.22S., R.53W., 6th P.M.

  
	
  Farm

  	
   

  	
  8

  	
   

  	
  A tract of land lying in Bent County, Colorado in the E1/2SE1/4 of
  Sec.36, T.22S., R.53W., 6th P.M.

  
	
  Farm

  	
   

  	
  9

  	
   

  	
  All that part of the SW1/4 lying south and west of the Fort Lyon
  Canal in Section 24, Township 22 South, Range 53 West of the 6th. P.M., Bent
  County, Colorado

  
	
  Farm

  	
   

  	
  10

  	
   

  	
  Township 22 South, Range 51 West of the Sixth Principal Meridian
  Section 22: S1/2 NE1/4 and N1/2 SE1/4

  
	
  Farm

  	
   

  	
  11

  	
   

  	
  A tract of land lying in the W1/2 SW1/4 of Sec.33, T.22S., R.52W., in
  Lot 4 of Sec.4 and in Lot 1 of Sec.5, T.23S., R.52W., 6th P.M.

  
	
  Farm

  	
   

  	
  12

  	
   

  	
  A tract of land lying in the E1/2 SW1/4 of Sec.33, T.22S., R.52W. and
  in Lot 3 of Sec.4, T.23S., R.52W., 6th P.M.

  
	
  Farm

  	
   

  	
  13

  	
   

  	
  Township 22 South, Range 52 West of the Sixth Principal Meridian,
  County of Bent, State of Colorado

  
	
  Farm

  	
   

  	
  14

  	
   

  	
  A tract of land lying in Bent County, Colorado in the S1/2 NW1/4 and
  SW1/4 of Sec.19, T.22S., R.49W., 6th P.M.

  
	
  Farm

  	
   

  	
  15

  	
   

  	
  A tract of land lying in Bent County, Colorado in the W1/2 and NE1/4
  of Sec.31, T.22S., R.49W., 6th P.M.

  
	
  Farm

  	
   

  	
  16

  	
   

  	
  A tract of land lying in Prowers County, Colorado in the E1/2 of
  Sec.35 T.21S., R.46W., 6th P.M.

  
	
   

  	
   

  	
  16B

  	
   

  	
  A tract of land lying in Prowers County, Colorado in the E1/2 of
  Sec.35, T.21S., R.46W., 6th P.M.

  
	
  Farm

  	
   

  	
  17

  	
   

  	
  A tract of land lying in Prowers County, Colorado in the W1/2 of
  Sec.35, T.21S., R.46W., 6th P.M.

  
	
  Farm

  	
   

  	
  18

  	
   

  	
  The SW1/4 and N1/2 SE1/4 of Section 21, Township 22 South, range 51
  West of the 6th P.M.

  
	
  Farm

  	
   

  	
  19

  	
   

  	
  A tract of land lying in Bent County, Colorado in the E1/2 of Sec.17.
  T.22S., R.51W., 6th P.M.

  
						

 

 

	
  Farm

  	
   

  	
  20

  	
   

  	
  A tract of land lying in Sections 23, 24, 25, and 26, T.22S., R.52W.,
  6th P.M., Bent County, Colorado

  
	
  Farm

  	
   

  	
  21

  	
   

  	
  Township 22 South, Range 51 West of the Sixth Principal Meridian
  Section 20: N1/2 SE1/4, County of Bent, State of Colorado

  
	
  Farm

  	
   

  	
  22

  	
   

  	
  NE1/4 SE1/4, the fractional SE1/4 NE1/4, the fractional NW1/4 SE1/4,
  and the fractional NE1/4 SW1/4 of Section 31, Township 22 South, Range 51
  West of the 6th P.M., Bent County, Colorado

  
	
  Farm

  	
   

  	
  23

  	
   

  	
  Township 22 South, Range 51 West of the Sixth Principal Meridian,
  County of Bent, State of Colorado

  
	
  Farm

  	
   

  	
  24

  	
   

  	
  A tract of land lying in Bent County, Colorado in the NW1/4 of
  Sec.34, T.22S., R.52W., 6th P.M.

  
	
  Farm

  	
   

  	
  25

  	
   

  	
  A tract of land lying in Bent County, Colorado in Sec.11, T.22S.,
  R.48W., 6th P.M.

  
	
  Farm

  	
   

  	
  26a

  	
   

  	
  A tract of land lying in the SW1/4 and W1/2 SE1/4 of Sec.30, T.22S.,
  R.52W., 6th P.M.

  
	
   

  	
   

  	
  26b

  	
   

  	
  A tract of land lying in the SW1/4 and W1/2 SE1/4 of Sec.30, T.22S.,
  R.52W., 6th P.M.

  
	
  Farm

  	
   

  	
  27

  	
   

  	
  A tract of land lying in Bent County, Colorado in the W1/2 and SE1/4
  of Sec.26 and in the NE1/4 of Sec.35, T.22S., R.51 W., 6th P.M.

  
	
  Farm

  	
   

  	
  28

  	
   

  	
  Township 22 South, Range 51 West of the 6th P.M. Sec.27: NW1/4

  
	
  Farm

  	
   

  	
  30

  	
   

  	
  Township 22 South, Range 48 West of the Sixth Principal Meridian
  Section 1: NW1/4, and SW1/4

  
	
  Farm

  	
   

  	
  31

  	
   

  	
  The SW1/4 of Sec.31, T.22S., R.52W., 6th P.M., Bent County, Colorado

  
	
  Farm

  	
   

  	
  32

  	
   

  	
  TRACT ONE – A tract of land lying in Bent County, Colorado in Lots 2,
  3, and 4 of Sec.5 and in Indian Claim No. “A” and No.16, T.23S., R.52W., 6th
  P.M.

  

  TRACT TWO – A tract of land lying in Bent County, Colorado in Lot 1 of Sec.6
  and in Indian Claim No. “A”, T.23S., R.52W., 6th P.M.

  
	
  Farm

  	
   

  	
  33

  	
   

  	
  A tract of land lying in Bent County, Colorado in the E1/2 of Sec.27
  and N1/2 NE1/4 of Sec.34, T.22S., R.51W., 6th P.M.

  
	
  Farm

  	
   

  	
  34

  	
   

  	
  A tract of land lying in Bent County, Colorado in Lots 1, 2, 3, 4,
  and the E1/2 NW1/4 of Sec.31, T.22S., R.51W. of the 6th P.M.

  
	
  Farm

  	
   

  	
  35

  	
   

  	
  A tract of land lying in Bent County, Colorado in the E1/2 of Sec.36,
  T.22S., R.52W., 6th P.M.

  
	
  Farm

  	
   

  	
  36

  	
   

  	
  A tract of land lying in Bent County, Colorado in the SW1/4 of
  Sec.14, T.22S., R.51W. of the 6th P.M.

  
	
  Farm

  	
   

  	
  37

  	
   

  	
  A tract of land lying in Bent County, Colorado in the E1/2 of Sec.10,
  T.22S., R.48W., 6th P.M.

  
	
  Farm

  	
   

  	
  38

  	
   

  	
  Township 22 South, Range 51 West of the Sixth Principal Meridian
  Section 19: E1/2, SW1/4 Section 30: E1/2

  
	
  Farm

  	
   

  	
  39

  	
   

  	
  A tract of land lying in Bent County in Sections 12, 13, 14, 23, and
  24, T.22S., R.49W., 6th P.M.

  
	
  Farm

  	
   

  	
  40

  	
   

  	
  Lots 4, 5, and 8 in Holbrook Subdivision, being in Sections 29 and
  30, Twp. 23 S., Rg. 54 W. of the 6th P.M. Together With the Westerly 70.00
  feet of the Northerly 

  

 

 

	
   

  	
   

  	
   

  	
   

  	
  20.00 feet of the Southerly 50.00 feet of said tract for access to
  other lands

  
	
  Farm

  	
   

  	
  41

  	
   

  	
  A tract of land lying in Bent County, Colorado in the SE1/4 of
  Sec.24, T.22S., R.50W. of the 6th P.M.

  
	
  Farm

  	
   

  	
  42

  	
   

  	
  A tract of land lying in Bent County, Colorado in Sec.28, T.22S.,
  R.48W., 6th P.M.

  
	
  Farm

  	
   

  	
  43

  	
   

  	
  The N1/2 NE1/4 of Sec.22 and the W1/2 of Sec.23, T.22S., R.51W., 6th
  P.M., Bent County Colorado

  
	
  Farm

  	
   

  	
  44

  	
   

  	
  A tract of land lying in Bent County, Colorado in the W1/2 of Sec.36,
  T.22S., R.52W., 6th P.M.

  
	
  Farm

  	
   

  	
  45

  	
   

  	
  Two tracts of land lying in Prowers County, Colorado in the E1/2
  NE1/4 of Sec.19 and in the NW1/4 of Sec.20, T.21S., R.46W., 6th P.M.

  
	
  Farm

  	
   

  	
  46

  	
   

  	
  A tract of land lying in Bent County, Colorado in the NW1/4 of
  Sec.26, T.22S., R.52W., 6th P.M.

  
	
  Farm

  	
   

  	
  47

  	
   

  	
  The SW1/4 of Sec.31, T.22S., R.52W., 6th P.M., Bent County, Colorado

  
	
  Farm

  	
   

  	
  48

  	
   

  	
  A tract of land lying in Bent County, Colorado in the SW1/4 and in
  the NE1/4 of Sec.25, T.22S., R.49S., 6th P.M.

  
	
  Farm

  	
   

  	
  49

  	
   

  	
  All that part of the SE1/4 of Sec.21 lying below the Ft. Lyon Canal
  and all that part of the NE1/4 of Sec.28, lying South of the right of way of
  the Ft. Lyon Canal Company’s Canal and the SE1/4 of Sec.28, all in Township
  22 South, Range 52 West of the 6th P.M.

  
	
  Farm

  	
   

  	
  50

  	
   

  	
  Transferred Water Rights Only

  
	
  Farm

  	
   

  	
  51

  	
   

  	
  A tract of land lying in Bent County, Colorado in the SE1/4 and the
  S1/2 N1/2 of Sec.15, T.22S., R.51W., 6th P.M.

  
	
  Farm

  	
   

  	
  52

  	
   

  	
  The SE1/4 of Sec.25, T.22S., R.52W., 6th P.M., Bent County, Colorado

  
	
  Farm

  	
   

  	
  53

  	
   

  	
  A tract of land lying in Bent County, Colorado in Section 27 and in
  Lot 1 of Section 34, Township 22 South, Range 48 West of the Sixth Principal
  Meridian

  
	
  Farm

  	
   

  	
  54

  	
   

  	
  A tract of land lying in Bent County, Colorado in the SE1/4 of
  Sec.19, T.22S., R.49W., 6th P.M.

  
	
  Farm

  	
   

  	
  55

  	
   

  	
  Transfer of shares in Wollert Enterprises, Inc.

  
	
  Farm

  	
   

  	
  56

  	
   

  	
  A tract of land lying in Bent County, Colorado in the E1/2 of Sec.23,
  W1/2 NW1/4 of Sec.24 and the N1/2 NE1/4 of Sec.26, T.22S., R.53W., 6th P.M.

  
	
  Farm

  	
   

  	
  57

  	
   

  	
  A tract of land lying in Bent County, Colorado in the SW1/4 of Sec.6,
  T.23S., R53W., 6th P.M.

  
	
  Farm

  	
   

  	
  58

  	
   

  	
  A tract of land lying in Bent County, Colorado in the S1/2 NE1/4 and
  SE1/4 of Sec.18; T.22S., R.49W., 6th P.M.

  
	
  Farm

  	
   

  	
  59

  	
   

  	
  A tract of land lying in Bent County, Colorado in the NW1/4 SW1/4 and
  in the W1/2 of Lot 2 of Sec.28, T.22S., R.51W., 6th P.M.

  
	
  Farm

  	
   

  	
  60A

  	
   

  	
  A tract of land lying in Otero County, Colorado in the SW1/4 SW1/4 of
  Sec.11, in Lots 4, 5, 9, and 10 of Sec.14, and in Indian-Claim No. 13,
  T.23S., R.54W., 6th P.M.

  
	
   

  	
   

  	
  60B

  	
   

  	
  A tract of land lying in Otero County, Colorado in the SW1/4 SW1/4 of
  Sec.11, in Lots 4, 5, 9, and 10 of Sec.14, and in Indian-Claim No. 13,
  T.23S., R.54W., 6th P.M.

  
	
   

  	
   

  	
  60C

  	
   

  	
  A tract of land lying in Otero County, Colorado in the SW1/4 SW1/4 of
  Sec.11, in Lots 4, 5, 9, and 10 of Sec.14, and in Indian-Claim No. 13,
  T.23S., R.54W., 6th P.M.

  

 

 

	
   

  	
   

  	
  60D

  	
   

  	
  A tract of land lying in Otero County, Colorado in the SW1/4 SW1/4 of
  Sec.11, in Lots 4, 5, 9, and 10 of Sec.14, and in Indian-Claim No. 13,
  T.23S., R.54W., 6th P.M.

  
	
   

  	
   

  	
  60E

  	
   

  	
  A tract of land lying in Otero County, Colorado in the SW1/4 SW1/4 of
  Sec.11, in Lots 4, 5, 9, and 10 of Sec.14, and in Indian-Claim No. 13,
  T.23S., R.54W., 6th P.M.

  
	
   

  	
   

  	
  60F

  	
   

  	
  A tract of land lying in Otero County, Colorado in the SW1/4 SW1/4 of
  Sec.11, in Lots 4, 5, 9, and 10 of Sec.14, and in Indian-Claim No. 13,
  T.23S., R.54W., 6th P.M.

  
	
   

  	
   

  	
  60G

  	
   

  	
  A tract of land lying in Otero County, Colorado in the SW1/4 SW1/4 of
  Sec.11, in Lots 4, 5, 9, and 10 of Sec.14, and in Indian-Claim No. 13,
  T.23S., R.54W., 6th P.M.

  
	
   

  	
   

  	
  60H

  	
   

  	
  A tract of land lying in Otero County, Colorado in the SW1/4 SW1/4 of
  Sec.11, in Lots 4, 5, 9, and 10 of Sec.14, and in Indian-Claim No. 13,
  T.23S., R.54W., 6th P.M.

  
	
  Farm

  	
   

  	
  61

  	
   

  	
  Transferred Water Rights Only

  
	
  Farm

  	
   

  	
  62

  	
   

  	
  A tract of land lying in Prowers County, Colorado in the S1/2 of
  Sec.17, T.22S., R.46W., 6th P.M.

  
	
  Farm

  	
   

  	
  63

  	
   

  	
  Transferred Water Rights Only

  
	
  Farm

  	
   

  	
  64

  	
   

  	
  A tract of land lying in Bent County, Colorado in the N1/2 of Sec.32
  and in the NW1/4 of Sec.33, T.22S., R.48W., 6th P.M.

  
	
  Farm

  	
   

  	
  65

  	
   

  	
  A tract of land lying in Bent County, Colorado in the SE1/4 of
  Sec.25, T.22S., R.49W., 6th P.M.

  
	
  Farm

  	
   

  	
  66

  	
   

  	
  A tract of land lying in Bent County, Colorado in the SE1/4 of
  Sec.30, T.22S., R.52W., 6th P.M.

  
	
  Farm

  	
   

  	
  67

  	
   

  	
  A tract of land lying in Bent County, Colorado in the W1/2 SW1/4 of
  Sec.20, T.22S., R.51W., 6th P.M.

  
	
  Farm

  	
   

  	
  69

  	
   

  	
  A tract of land lying in Prowers County, Colorado in the NW1/4 of
  Sec.5, T.22S., R.47W., 6th P.M.

  
	
  Farm

  	
   

  	
  70

  	
   

  	
  A tract of land lying in Bent County, Colorado in Sections 23, 24,
  25, and 26, T.22S., R.50W., 6th P.M.

  
	
  Farm

  	
   

  	
  85

  	
   

  	
  Transferred Water Rights Only

  
	
  Farm

  	
   

  	
  103A

  	
   

  	
  TRACT No. 1 – A tract of land lying in Prowers County, Colorado in
  the SW1/4 and the S1/2 NW1/4 of Sec. 12, T.22S., R.46W. of the 6th P.M.

  

  TRACT No. 2 – A tract of land lying in Prowers County, Colorado in the W1/2
  lying above the Amity Canal and NE1/4 of Sec.14, T.22S., R.46W. of the 6th
  P.M.

  
	
   

  	
   

  	
  103B

  	
   

  	
  Transferred Water Rights Only

  
	
  Farm

  	
   

  	
  107

  	
   

  	
  PARCEL A – A tract of land lying in Prowers County, Colorado in the
  E1/2 and N1/2 NW1/4 of Sec.14, T.22S., R.47W., 6th P.M.

  

  PARCEL B – A tract of land lying in Prowers County, Colorado in the E1/2
  SE1/4 of Sec.18, T.22S., R.46W., 6th P.M.

  
	
  Farm

  	
   

  	
  110

  	
   

  	
  Transferred Water Rights Only

  
	
  Farm

  	
   

  	
  114

  	
   

  	
  A tract of land lying in Bent County, Colorado in the N1/2 of Sec.11,
  T.21S., R.48W., 6th P.M.

  

 

 

	
  Farm

  	
   

  	
  116

  	
   

  	
  Township 21 South, Range 48 West of the 6th P.M. Sec. 26: NE1/4 

  

  Township 22 South, Range 48 West of the 6th P.M. Sec. 2: S1/2 NW1/4

  
	
  Farm

  	
   

  	
  117

  	
   

  	
  Transferred Water Rights Only

  
	
  Farm

  	
   

  	
  118

  	
   

  	
  From a Real Property Transfer Declaration – A tract of land lying in
  Prowers County, Colorado in Sec.16, T.22S, R.46W. 6th P.M.

  
	
  Farm

  	
   

  	
  127

  	
   

  	
  A tract of land lying in Bent County, Colorado, in the W1/2 SW1/4 of
  Sec. 19, T.22S., R.48W., of the 6th P.M.

  
	
  Farm

  	
   

  	
  132

  	
   

  	
  Transferred Water Rights Only

  
	
  Farm

  	
   

  	
  140

  	
   

  	
  A tract of land lying in Bent County, Colorado in the NW1/4 of Sec.3,
  T.23S., R.53W., 6th P.M.

  
	
  Farm

  	
   

  	
  141

  	
   

  	
  T22S, R46W of the 6th P.M., County of Prowers, State of
  Colorado. Section 17: NE1/4 and that part of the SW1/4 lying North and East
  of the Amity Canal and the AT & SF Railway right-of-way.

  

 

 

Schedule 2.1(e)

 

Assumed Contracts and

Assumed Contracts Requiring Consent

 

	
  Farm
  #

  	
   

  	
  Farm & Water Lease/Tenant Name*

  
	
  1

  	
   

  	
  Miller, Jack and Allard, Tom

  
	
  2

  	
   

  	
  Miller, Jack

  
	
  3

  	
   

  	
  Cardenas, Cecil

  
	
  4

  	
   

  	
  Bartholomew, Charley

  
	
  5

  	
   

  	
  Netherton, Corky

  
	
  6

  	
   

  	
  Miller, Jack

  
	
  7

  	
   

  	
  Howe, Doug

  
	
  8a

  	
   

  	
  Howe, Doug

  
	
  8b

  	
   

  	
  Howe, Doug

  
	
  9

  	
   

  	
  Netherton, Corky

  
	
  10

  	
   

  	
  Bland, Walt

  
	
  11

  	
   

  	
  Findley, David and Bogner, Alvin

  
	
  12

  	
   

  	
  Findley, David

  
	
  13

  	
   

  	
  Findley, David and Bogner, Alvin

  
	
  14

  	
   

  	
  Wertz, Ivon and Pam Cass

  
	
  15

  	
   

  	
  Wertz, Brent

  
	
  16a

  	
   

  	
  Coen, Norman

  
	
  16b

  	
   

  	
  Coen, Norman

  
	
  17

  	
   

  	
  Coen, Monty

  
	
  18

  	
   

  	
  Spady, Mark

  
	
  19

  	
   

  	
  Denton, Bob

  
	
  20

  	
   

  	
  Davis, Stace

  
	
  21

  	
   

  	
  Mitchell, Larry

  
	
  22

  	
   

  	
  Miller Farms, Inc.

  
	
  23

  	
   

  	
  Fritz, Raymond

  
	
  24

  	
   

  	
  Stephens, Loyal

  
	
  25

  	
   

  	
  Wertz, Stanley

  
	
  26

  	
   

  	
  Miller, Kevin and Bogner, Alvin

  
	
  27

  	
   

  	
  Hoffman, Ron and Hoffman, Jerred

  
	
  28

  	
   

  	
  Hoffman, Ron

  
	
  30

  	
   

  	
  Reed, Ronnie

  
	
  32

  	
   

  	
  Findley, David

  
	
  33

  	
   

  	
  Miller, Jack

  
	
  34

  	
   

  	
  Miller, Jerry

  
	
  35

  	
   

  	
  Miller, Jerry

  
	
  36

  	
   

  	
  Karney Land & Cattle, Inc.

  
	
  37

  	
   

  	
  Wertz, Garrett

  
	
  38

  	
   

  	
  Reyher, Kent

  
	
  39

  	
   

  	
  Reyher, Bob

  

 

 

	
  Farm
  #

  	
   

  	
  Farm & Water Lease/Tenant Name*

  
	
  40

  	
   

  	
  Ricken Land & Cattle

  
	
  41

  	
   

  	
  Hemphil, Philip

  
	
  42

  	
   

  	
  Wertz, Scott and Root, Garold

  
	
  43

  	
   

  	
  Miller Farms, Inc.

  
	
  44

  	
   

  	
  Allen, Dean

  
	
  45

  	
   

  	
  Schemahorn, Steve

  
	
  46w

  	
   

  	
  Howe, Doug

  
	
  46NE

  	
   

  	
  Netherton, Corky

  
	
  46SE

  	
   

  	
  Gardner, David

  
	
  47

  	
   

  	
  Howe, Doug

  
	
  48

  	
   

  	
  Wertz, Scott and Sniff, Curtis

  
	
  49

  	
   

  	
  Siefkas, Kim

  
	
  50

  	
   

  	
  Dan DiRezza

  
	
  51

  	
   

  	
  Siefkas, Kerry

  
	
  52

  	
   

  	
  Allen, Dean

  
	
  53

  	
   

  	
  Wertz, Stan

  
	
  54N

  	
   

  	
  Wertz, Brent

  
	
  54S

  	
   

  	
  Snyder, David

  
	
  55

  	
   

  	
  Mauch, Galen

  
	
  56

  	
   

  	
  Hoffman, Jeffed

  
	
  57

  	
   

  	
  Howe, Preston

  
	
  58

  	
   

  	
  Reyher, Bob

  
	
  59

  	
   

  	
  Miller, Jack

  
	
  60

  	
   

  	
  Eck, Wesley

  
	
  61

  	
   

  	
  Turner Cattle

  
	
  62

  	
   

  	
  Hall, Jeremy

  
	
  63

  	
   

  	
  Webber, Johnie

  
	
  64

  	
   

  	
  Wertz, Scott

  
	
  65

  	
   

  	
  White Farms

  
	
  66

  	
   

  	
  Wilson, Rob and Miller, Kevin

  
	
  67

  	
   

  	
  Miller, Jack

  
	
  69

  	
   

  	
  Elmore, Ben

  
	
  70

  	
   

  	
  Wertz, Lee

  
	
  85

  	
   

  	
  Rudolph, Kenny

  
	
  103A

  	
   

  	
  May Farms

  
	
  103B

  	
   

  	
  May Farms

  
	
  107

  	
   

  	
  Wollert, Keith

  
	
  110

  	
   

  	
  Wollert, Kelley

  
	
  114

  	
   

  	
  Wollert, Ron

  
	
  116

  	
   

  	
  Colvin, Greg

  
	
  117

  	
   

  	
  Eck, Wesley

  
	
  118

  	
   

  	
  Haggard, Ronnie

  
	
  127

  	
   

  	
  Smartt, Dean

  
	
  132A

  	
   

  	
  Wertz, Brent

  

 

 

	
  Farm
  #

  	
   

  	
  Farm & Water Lease/Tenant Name*

  
	
  132B

  	
   

  	
  Wertz, Brent

  
	
  140

  	
   

  	
  DiRezza, Dan

  
	
  141

  	
   

  	
  Haggard, Ronnie

  

 

*Consent may be required in connection with the farm leases.

 

Certain oil and gas leases for development of minerals on the
Properties entered into by Seller as lessor, which will be provided to Pure
Cycle in more detail at least thirty (30) days prior to the end of the Due
Diligence Period.

 

 

Schedule 2.2(n)

 

Excluded Assets

 

	
  1.

  	
   

  	
  Lease for office at 520 Carson St., Las Animas, Colorado (the “Las
  Animas Office”).

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Miscellaneous office furniture and equipment at the Las Animas
  Office.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Farm vehicle: 2001 Polaris MAG 325 4x4 ATV. Serial# ACD32A6YA070219.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  30 shares of Fort Lyon Canal Company stock owned or under contract
  for purchase by SW Lamar, LLC, represented by certificate No. 9630.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  612 shares of Fort Lyon Canal Company stock owned or under contract
  for purchase by SW Lamar, LLC, represented by certificate Nos. 9621, 7961,
  7540, and 9620.

  

 

 

Schedule 2.4

 

Excluded Indebtedness; Permitted Liens

 

	
  Farm

  	
   

  	
  Note Holder

  	
   

  	
  Closing

  Date

  	
   

  	
  Original Loan

  Balance

  	
   

  	
  Balance as of

  12/31/05

  	
   

  	
  Maturity

  Date

  	
   

  
	
  1

  	
   

  	
  Allard, Tommy L. and Mary K.

  	
   

  	
  07/05/02

  	
   

  	
  $

  	
  223,046.25

  	
   

  	
  $

  	
  194,799.24

  	
   

  	
  07/04/12

  	
   

  
	
  2

  	
   

  	
  Allard, Tommy L. and Mary K.

  	
   

  	
  07/05/02

  	
   

  	
  $

  	
  139,650.00

  	
   

  	
  $

  	
  121,964.45

  	
   

  	
  07/04/12

  	
   

  
	
  3

  	
   

  	
  Allen, Peggy S.

  	
   

  	
  08/30/02

  	
   

  	
  $

  	
  81,490.50

  	
   

  	
  $

  	
  71,133.27

  	
   

  	
  08/29/12

  	
   

  
	
  4

  	
   

  	
  Bartholomew, Charley H.

  	
   

  	
  10/04/02

  	
   

  	
  $

  	
  273,420.00

  	
   

  	
  $

  	
  238,778.31

  	
   

  	
  10/03/12

  	
   

  
	
  6

  	
   

  	
  Bell, Jack G.

  	
   

  	
  08/23/02

  	
   

  	
  $

  	
  189,728.00

  	
   

  	
  $

  	
  165,700.48

  	
   

  	
  08/22/12

  	
   

  
	
  7

  	
   

  	
  Blackburn, Harry E., Jr. and Lorraine J.

  	
   

  	
  07/05/02

  	
   

  	
  $

  	
  276,850.00

  	
   

  	
  $

  	
  241,789.18

  	
   

  	
  07/04/12

  	
   

  
	
  8

  	
   

  	
  Blackburn, Harry E., Jr. and Lorraine J.

  	
   

  	
  07/05/02

  	
   

  	
  $

  	
  187,474.00

  	
   

  	
  $

  	
  163,731.93

  	
   

  	
  07/04/12

  	
   

  
	
  9

  	
   

  	
  Blackburn, Harry E., Jr.

  	
   

  	
  07/05/02

  	
   

  	
  $

  	
  124,698.00

  	
   

  	
  $

  	
  108,906.00

  	
   

  	
  07/04/12

  	
   

  
	
  10

  	
   

  	
  Bland, Walter G.

  	
   

  	
  07/12/02

  	
   

  	
  $

  	
  187,425.00

  	
   

  	
  $

  	
  163,689.13

  	
   

  	
  07/11/12

  	
   

  
	
  11

  	
   

  	
  Bogner, Alvin L.

  	
   

  	
  07/19/02

  	
   

  	
  $

  	
  134,272.25

  	
   

  	
  $

  	
  117,267.75

  	
   

  	
  07/18/12

  	
   

  
	
  12

  	
   

  	
  Bogner, Lorena

  	
   

  	
  07/19/02

  	
   

  	
  $

  	
  100,474.50

  	
   

  	
  $

  	
  87,750.21

  	
   

  	
  07/18/12

  	
   

  
	
  13

  	
   

  	
  Bogner, Alvin L. and Lorena

  	
   

  	
  07/19/02

  	
   

  	
  $

  	
  178,666.25

  	
   

  	
  $

  	
  156,039.61

  	
   

  	
  07/18/12

  	
   

  
	
  16a

  	
   

  	
  Coen, Cleo D.

  	
   

  	
  10/25/02

  	
   

  	
  $

  	
  113,940.00

  	
   

  	
  $

  	
  99,504.06

  	
   

  	
  10/24/12

  	
   

  
	
  16b

  	
   

  	
  Coen, Donald W.

  	
   

  	
  10/25/02

  	
   

  	
  $

  	
  113,940.00

  	
   

  	
  $

  	
  99,504.06

  	
   

  	
  10/24/12

  	
   

  
	
  17

  	
   

  	
  Coen, Norman and Carol S.

  	
   

  	
  09/24/02

  	
   

  	
  $

  	
  302,500.00

  	
   

  	
  $

  	
  264,163.73

  	
   

  	
  09/23/14

  	
   

  
	
  18

  	
   

  	
  Darnell, Fred A. and Roxana L.

  	
   

  	
  06/26/02

  	
   

  	
  $

  	
  129,093.00

  	
   

  	
  $

  	
  109,677.86

  	
   

  	
  06/25/12

  	
   

  
	
  19

  	
   

  	
  Denton, Bobby L. and Vickie B.

  	
   

  	
  07/12/02

  	
   

  	
  $

  	
  292,346.25

  	
   

  	
  $

  	
  255,322.95

  	
   

  	
  07/11/12

  	
   

  
	
  20

  	
   

  	
  Dodson, Kenneth and Donna Revocable Trust

  	
   

  	
  06/11/02

  	
   

  	
  $

  	
  903,849.10

  	
   

  	
  $

  	
  767,913.32

  	
   

  	
  06/10/12

  	
   

  
	
  22

  	
   

  	
  Elder, William J. and Audra Jean

  	
   

  	
  07/12/02

  	
   

  	
  $

  	
  230,147.60

  	
   

  	
  $

  	
  201,001.26

  	
   

  	
  07/11/12

  	
   

  
	
  23

  	
   

  	
  Elder, William J., Audra Jean and Brian C.

  	
   

  	
  07/12/02

  	
   

  	
  $

  	
  149,521.00

  	
   

  	
  $

  	
  130,585.37

  	
   

  	
  07/11/12

  	
   

  
	
  24

  	
   

  	
  FSD Family Investments

  	
   

  	
  09/12/02

  	
   

  	
  $

  	
  143,398.50

  	
   

  	
  $

  	
  125,225.40

  	
   

  	
  09/11/12

  	
   

  
	
  25

  	
   

  	
  Fowler, Lucy R.

  	
   

  	
  08/28/02

  	
   

  	
  $

  	
  518,852.60

  	
   

  	
  $

  	
  453,144.10

  	
   

  	
  08/27/12

  	
   

  
	
  26

  	
   

  	
  Gilbert, David F.

  	
   

  	
  07/29/02

  	
   

  	
  $

  	
  67,423.00

  	
   

  	
  $

  	
  58,884.42

  	
   

  	
  07/28/12

  	
   

  
	
  26b

  	
   

  	
  Philbin, Margaret L.

  	
   

  	
  07/29/02

  	
   

  	
  $

  	
  67,423.00

  	
   

  	
  $

  	
  58,884.42

  	
   

  	
  07/28/12

  	
   

  
	
  27

  	
   

  	
  Coy S. Ham and Diana P. Ham, Trustees

  	
   

  	
  07/26/02

  	
   

  	
  $

  	
  621,136.25

  	
   

  	
  $

  	
  542,474.35

  	
   

  	
  07/25/12

  	
   

  
	
  28

  	
   

  	
  Hoffman, Ronald R. and Linda R.

  	
   

  	
  06/14/02

  	
   

  	
  $

  	
  161,116.02

  	
   

  	
  $

  	
  136,884.73

  	
   

  	
  06/13/12

  	
   

  
	
  30

  	
   

  	
  Hudson & Persyn, Ltd.

  	
   

  	
  07/12/02

  	
   

  	
  $

  	
  367,353.00

  	
   

  	
  $

  	
  320,830.70

  	
   

  	
  07/11/12

  	
   

  
	
  31

  	
   

  	
  Johnson, Sharon Y.

  	
   

  	
  06/25/02

  	
   

  	
  $

  	
  96,162.00

  	
   

  	
  $

  	
  81,699.57

  	
   

  	
  06/24/12

  	
   

  
	
  32

  	
   

  	
  Jones, Charles O. and Ruby L.

  	
   

  	
  09/13/02

  	
   

  	
  $

  	
  121,397.50

  	
   

  	
  $

  	
  106,012.62

  	
   

  	
  09/12/12

  	
   

  
	
  33

  	
   

  	
  Miller Family Trust

  	
   

  	
  08/30/02

  	
   

  	
  $

  	
  46,845.95

  	
   

  	
  $

  	
  40,891.95

  	
   

  	
  08/29/12

  	
   

  
	
  34

  	
   

  	
  Miller, Jerry R. and Susan K.

  	
   

  	
  09/04/02

  	
   

  	
  $

  	
  318,780.00

  	
   

  	
  $

  	
  278,380.54

  	
   

  	
  09/03/12

  	
   

  
	
  35

  	
   

  	
  Miller, Irl A. and Hazel A.

  	
   

  	
  06/25/02

  	
   

  	
  $

  	
  280,161.00

  	
   

  	
  $

  	
  238,025.75

  	
   

  	
  06/24/12

  	
   

  
	
  36

  	
   

  	
  Pointon, Charles T. and Anita R.

  	
   

  	
  07/19/02

  	
   

  	
  $

  	
  193,231.50

  	
   

  	
  $

  	
  168,760.29

  	
   

  	
  07/18/12

  	
   

  

 

 

	
  Farm

  	
   

  	
  Note Holder

  	
   

  	
  Closing

  Date

  	
   

  	
  Original Loan

  Balance

  	
   

  	
  Balance as of

  12/31/05

  	
   

  	
  Maturity

  Date

  	
   

  
	
  37

  	
   

  	
  Colorado East Bank & Trust as successor to Boyd L. Quindt

  	
   

  	
  11/06/02

  	
   

  	
  $

  	
  124,814.80

  	
   

  	
  $

  	
  108,996.84

  	
   

  	
  110/5/12

  	
   

  
	
  38

  	
   

  	
  George Reyher & Sons, Inc.

  	
   

  	
  07/12/02

  	
   

  	
  $

  	
  855,000.00

  	
   

  	
  $

  	
  746,721.14

  	
   

  	
  07/11/12

  	
   

  
	
  39

  	
   

  	
  George F. Reyher Family Trust and Pauline K. Reyher Revocable Trust

  	
   

  	
  11/08/02

  	
   

  	
  $

  	
  1,245,513.41

  	
   

  	
  $

  	
  626,269.74

  	
   

  	
  01/01/13

  	
   

  
	
  40

  	
   

  	
  Ricken, Mark A. and Linda C.

  	
   

  	
  07/31/02

  	
   

  	
  $

  	
  77,945.00

  	
   

  	
  $

  	
  68,073.89

  	
   

  	
  07/30/12

  	
   

  
	
  42

  	
   

  	
  Root, Garold E.

  	
   

  	
  09/09/02

  	
   

  	
  $

  	
  258,622.00

  	
   

  	
  $

  	
  225,846.45

  	
   

  	
  09/08/12

  	
   

  
	
  43

  	
   

  	
  Rutkowski, James R. and Cecilia I.

  	
   

  	
  06/26/02

  	
   

  	
  $

  	
  488,469.00

  	
   

  	
  $

  	
  415,004.95

  	
   

  	
  06/25/12

  	
   

  
	
  44

  	
   

  	
  Sakai, Elmo R.

  	
   

  	
  07/05/02

  	
   

  	
  $

  	
  298,774.00

  	
   

  	
  $

  	
  260,936.68

  	
   

  	
  07/04/12

  	
   

  
	
  45

  	
   

  	
  Schemahorn, Marie A.

  	
   

  	
  09/09/02

  	
   

  	
  $

  	
  271,962.25

  	
   

  	
  $

  	
  237,496.07

  	
   

  	
  090/8/12

  	
   

  
	
  47

  	
   

  	
  Slack, Hazel E.

  	
   

  	
  06/25/02

  	
   

  	
  $

  	
  96,162.00

  	
   

  	
  $

  	
  81,699.57

  	
   

  	
  06/24/12

  	
   

  
	
  48

  	
   

  	
  Sniff, Curtis G. and Karla R.

  	
   

  	
  07/30/02

  	
   

  	
  $

  	
  360,031.77

  	
   

  	
  $

  	
  314,436.65

  	
   

  	
  07/29/12

  	
   

  
	
  49

  	
   

  	
  Spady, Donald L.

  	
   

  	
  06/24/02

  	
   

  	
  $

  	
  352,800.00

  	
   

  	
  $

  	
  299,740.10

  	
   

  	
  06/23/12

  	
   

  
	
  50

  	
   

  	
  Strahan, Florence F.

  	
   

  	
  03/12/03

  	
   

  	
  $

  	
  73,080.00

  	
   

  	
  $

  	
  65,525.58

  	
   

  	
  03/11/13

  	
   

  
	
  51

  	
   

  	
  W7, Inc.

  	
   

  	
  08/07/02

  	
   

  	
  $

  	
  253,566.85

  	
   

  	
  $

  	
  221,454.65

  	
   

  	
  080/6/12

  	
   

  
	
  52

  	
   

  	
  Wagner, Walter F. and Elizabeth C.

  	
   

  	
  06/26/02

  	
   

  	
  $

  	
  189,875.00

  	
   

  	
  $

  	
  161,318.46

  	
   

  	
  06/25/12

  	
   

  
	
  53

  	
   

  	
  Wertz Bros., LLC

  	
   

  	
  08/08/02

  	
   

  	
  $

  	
  207,074.00

  	
   

  	
  $

  	
  180,849.75

  	
   

  	
  08/07/12

  	
   

  
	
  54

  	
   

  	
  Wertz, Ivon R.

  	
   

  	
  10/18/02

  	
   

  	
  $

  	
  395,803.80

  	
   

  	
  $

  	
  345,656.36

  	
   

  	
  10/17/12

  	
   

  
	
  55

  	
   

  	
  Emma M. Miller

  	
   

  	
  04/01/03

  	
   

  	
  $

  	
  294,000.00

  	
   

  	
  $

  	
  263,550.32

  	
   

  	
  03/31/13

  	
   

  
	
  56

  	
   

  	
  DiRezza, Daniel G. and Katrena L.

  	
   

  	
  09/12/02

  	
   

  	
  $

  	
  437,729.25

  	
   

  	
  $

  	
  382,255.18

  	
   

  	
  09/11/12

  	
   

  
	
  57

  	
   

  	
  Likes, William R., Jr. and Linda M.

  	
   

  	
  11/07/02

  	
   

  	
  $

  	
  95,379.90

  	
   

  	
  $

  	
  83,292.27

  	
   

  	
  11/06/12

  	
   

  
	
  58

  	
   

  	
  Reyher, Robert and Mary Katheryn

  	
   

  	
  11/08/02

  	
   

  	
  $

  	
  185,722.25

  	
   

  	
  $

  	
  162,185.40

  	
   

  	
  11/07/12

  	
   

  
	
  59

  	
   

  	
  Cumbie, Laddie and Kathy

  	
   

  	
  11/13/02

  	
   

  	
  $

  	
  74,487.60

  	
   

  	
  $

  	
  65,047.68

  	
   

  	
  11/12/12

  	
   

  
	
  63

  	
   

  	
  Webber, Johnnie J. and Marilyn V.

  	
   

  	
  04/07/03

  	
   

  	
  $

  	
  949,375.00

  	
   

  	
  $

  	
  851,047.91

  	
   

  	
  04/06/13

  	
   

  
	
  67

  	
   

  	
  Hawkins, Jack F., Jr.

  	
   

  	
  03/25/03

  	
   

  	
  $

  	
  98,490.00

  	
   

  	
  $

  	
  95,853.44

  	
   

  	
  03/24/13

  	
   

  
	
  69

  	
   

  	
  Elmore, Bennie Howard and Jo Ellen

  	
   

  	
  06/18/03

  	
   

  	
  $

  	
  185,942.75

  	
   

  	
  $

  	
  179,938.69

  	
   

  	
  06/17/13

  	
   

  
	
  70

  	
   

  	
  Stephens, Thomas H. and Aleta M.

  	
   

  	
  06/30/03

  	
   

  	
  $

  	
  104,770.75

  	
   

  	
  $

  	
  101,387.10

  	
   

  	
  06/29/13

  	
   

  
	
  103A

  	
   

  	
  May Farms

  	
   

  	
  08/12/03

  	
   

  	
  $

  	
  641,495.75

  	
   

  	
  $

  	
  625,159.16

  	
   

  	
  08/11/13

  	
   

  
	
  103B

  	
   

  	
  May Farms

  	
   

  	
  08/12/03

  	
   

  	
  $

  	
  1,041,250.00

  	
   

  	
  $

  	
  1,014,733.10

  	
   

  	
  08/11/13

  	
   

  
	
  107

  	
   

  	
  Wollert, Ruben R. and Doris J.

  	
   

  	
  06/26/03

  	
   

  	
  $

  	
  692,088.25

  	
   

  	
  $

  	
  666,736.10

  	
   

  	
  06/25/13

  	
   

  
	
  114

  	
   

  	
  Wollert, Mildred L.

  	
   

  	
  07/22/03

  	
   

  	
  $

  	
  227,548.76

  	
   

  	
  $

  	
  221,753.91

  	
   

  	
  07/21/13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Total

  	
   

  	
  $

  	
  15,442,288.15

  	
   

  	
   

  	
   

  
															

 

*Farms not listed do not have secured financing.

 

 

Schedule 2.7

 

Quit Claim Wells

 

	
  Farm
  Number

  	
   

  	
  Colorado State Engineering Well Permit Number(s)

  
	
  Farm

  	
   

  	
  1

  	
   

  	
  Un-permitted

  
	
  Farm

  	
   

  	
  2

  	
   

  	
  Un-permitted

  
	
  Farm

  	
   

  	
  3

  	
   

  	
  7089

  
	
  Farm

  	
   

  	
  4

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  5

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  6

  	
   

  	
  10418

  
	
  Farm

  	
   

  	
  7

  	
   

  	
  03182-F and 03183-F

  
	
  Farm

  	
   

  	
  8

  	
   

  	
  11456 R

  
	
  Farm

  	
   

  	
  9

  	
   

  	
  172957-A and/or H20720

  
	
  Farm

  	
   

  	
  10

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  11

  	
   

  	
  19756-1 and 19756-2

  
	
  Farm

  	
   

  	
  12

  	
   

  	
  19757

  
	
  Farm

  	
   

  	
  13

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  14

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  15

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  16

  	
   

  	
  No well transferred

  
	
   

  	
   

  	
  16B

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  17

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  18

  	
   

  	
  03239-F and 5287-F

  
	
  Farm

  	
   

  	
  19

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  20

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  21

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  22

  	
   

  	
  10394 R

  
	
  Farm

  	
   

  	
  23

  	
   

  	
  6349 and 1980

  
	
  Farm

  	
   

  	
  24

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  25

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  26a

  	
   

  	
  No well transferred

  
	
   

  	
   

  	
  26b

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  27

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  28

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  30

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  31

  	
   

  	
  13732

  
	
  Farm

  	
   

  	
  32

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  33

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  34

  	
   

  	
  1987 R

  
	
  Farm

  	
   

  	
  35

  	
   

  	
  6423

  
	
  Farm

  	
   

  	
  36

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  37

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  38

  	
   

  	
  12482 and 12483

  
	
  Farm

  	
   

  	
  39

  	
   

  	
  9010 F, 9011 F, 9012 F, 9013 F, 6299 F, 9007 F, and 9008 F

  
						

 

 

	
  Farm

  	
   

  	
  40

  	
   

  	
  R14375RF

  
	
  Farm

  	
   

  	
  41

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  42

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  43

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  44

  	
   

  	
  19834-1 and 19834-2

  
	
  Farm

  	
   

  	
  45

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  46

  	
   

  	
  20327, 20327R, 14117, RF694, and 10084

  
	
  Farm

  	
   

  	
  47

  	
   

  	
  13732

  
	
  Farm

  	
   

  	
  48

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  49

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  50

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  51

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  52

  	
   

  	
  5988

  
	
  Farm

  	
   

  	
  53

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  54

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  55

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  56

  	
   

  	
  14064 R, 14065 R, 21599 F, 21601F, and 21600 F

  
	
  Farm

  	
   

  	
  57

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  58

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  59

  	
   

  	
  19835

  
	
  Farm

  	
   

  	
  60A

  	
   

  	
  6486 F

  
	
   

  	
   

  	
  60B

  	
   

  	
  6486 F

  
	
   

  	
   

  	
  60C

  	
   

  	
  6486 F

  
	
   

  	
   

  	
  60D

  	
   

  	
  6486 F

  
	
   

  	
   

  	
  60E

  	
   

  	
  6486 F

  
	
   

  	
   

  	
  60F

  	
   

  	
  6486 F

  
	
   

  	
   

  	
  60G

  	
   

  	
  6486 F

  
	
   

  	
   

  	
  60H

  	
   

  	
  6486 F

  
	
  Farm

  	
   

  	
  61

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  62

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  63

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  64

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  65

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  66

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  67

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  69

  	
   

  	
  5066-F and 5067-F

  
	
  Farm

  	
   

  	
  70

  	
   

  	
  22657-F, 22658-F, and 21533-F

  
	
  Farm

  	
   

  	
  85

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  103A

  	
   

  	
  20272 R and 15898 R

  
	
   

  	
   

  	
  103B

  	
   

  	
  20272 R

  
	
  Farm

  	
   

  	
  107

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  110

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  114

  	
   

  	
  6936-F

  
	
  Farm

  	
   

  	
  116

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  117

  	
   

  	
  No well transferred

  

 

 

	
  Farm

  	
   

  	
  118

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  127

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  132

  	
   

  	
  No well transferred

  
	
  Farm

  	
   

  	
  140

  	
   

  	
  232263

  
	
  Farm

  	
   

  	
  141

  	
   

  	
  No well transferred

  

 

 

Schedule 3.2(a)

 

Membership and Voting Interest Ownership

 

	
  Member

  	
   

  	
  Voting Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  H. Hunter White, III

  	
   

  	
  66.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  M. Walker Baus

  	
   

  	
  7.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Mark D. Campbell

  	
   

  	
  27.00

  	
  %

  

 

 

Schedule 3.2(b)

 

Outstanding Membership and Voting Interest
Rights;

Securities and Options Exchangeable for
Voting Rights

 

i.                                          Membership or
voting interests of Seller:

 

	
  Member

  	
   

  	
  Voting Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  H. Hunter White, III

  	
   

  	
  66.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  M. Walker Baus

  	
   

  	
  7.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Mark D. Campbell

  	
   

  	
  27.00

  	
  %

  

 

ii.                                       Securities
or other interests of Seller convertible into or exchangeable for membership or
voting interests of Seller:

 

None.

 

iii.                                    Options
or other rights to acquire from Seller, or other obligations of Seller to
issue, any membership or voting interests or rights convertible into or
exchangeable for membership or voting interests of Seller:

 

None.

 

 

Schedule 3.3(b)

 

List of Conflicts

 

None.

 

 

Schedule 3.3(d)

 

Required Seller Actions

 

1.             Potential consent
to transfer of Farm #55 needed from Emma Miller, lienholder. The Deed of Trust
encumbering Farm #55 has a due on sale clause which may apply if Wollert
Enterprises, Inc. is liquidated.

 

2.             Consent of Fort
Lyon Canal Company board of directors to transfer of Share Certificates as
required by the Articles of Incorporation and Bylaws of the Fort Lyon Canal
Company. Prior to any transfer of shares on the books of the company, the Fort
Lyon Canal Company will need to review the transfer to confirm it meets the
Company’s requirements and that assessments are current.

 

3.             Potential consents
needed for modification of Farm Leases as indicated on Schedule 2.1(e).

 

 

Schedule 3.4

 

Litigation

 

1.             Fort Lyon Canal
Company v. High Plains A & M, LLC et al, Case No. 04CW39, Water
Division No. 2, State of Colorado. Lawsuit seeks certain attorneys’ fees
incurred by Plaintiff in other legal proceedings.

 

2.             Howrey v. High
Plains A & M, LLC et al, Case No. 05CV1185, Douglas County District
Court, State of Colorado. Lawsuit seeks foreclosure of water rights in Douglas
County which were formerly owned by High Plains A & M, LLC.

 

3.             Estates at
Living Water v. High Plains A & M, LLC et al, Case No. 04CV1076,
Douglas County District Court, Sate of Colorado. Lawsuit seeks to quiet title
certain water rights in Douglas County which were formerly owned by High Plains
A & M, LLC.

 

4.             Claim of Robert
Reyher regarding alleged ambiguity in sales documents for Farm No. 58. The
dispute has been verbally settled, but formal settlement documents are not yet
signed.

 

 

Schedule 3.7

 

Environmental Liens

 

None.

 

 

Schedule 3.9

 

Water Rights Issues

 

	
  1.

  	
   

  	
  Farm # 23

  9648

  	
   

  	
  The prior owner lost the certificate. Notice Cert #  period has run. FLCC Board to issue a
  certificate to Seller at next meeting of FLCC Board.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Farm # 66

  	
   

  	
  The certificates are pending transfer from Mr. White to Seller at
  next meeting

  
	
   

  	
   

  	
  Cert # 9622

  	
   

  	
  of FLCC Board.

  	
   

  
	
   

  	
   

  	
  Farm # 65

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cert # 9628

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Farm # 62

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cert # 9629

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Farm # 67

  	
   

  	
  These certificates are being processed for transfer from Mr. White to
  Seller but 

  
	
   

  	
   

  	
  Cert # 9617

  	
   

  	
  action not likely until June FLCC Board Meeting.

  
	
   

  	
   

  	
  Farm # 140

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cert # 9759

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Farm # 85

  	
   

  	
  This certificate is being transferred from a Seller affiliate. FLCC
  Board to 

  
	
   

  	
   

  	
  Cert # 9719

  	
   

  	
  issue a new certificate at next meeting.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Farm # 132

  	
   

  	
  This certificate is being transferred from an intermediary to Seller.
  FLCC 

  
	
   

  	
   

  	
  Cert # 9712

  	
   

  	
  Board to issue a new certificate at next meeting.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Farm # 61

  	
   

  	
  This certificate was erroneously issued to a third party by FLCC
  Board and 

  
	
   

  	
   

  	
  Cert # 9738

  	
   

  	
  resolution is pending.

  	
   

  	
   

  

 

 

Schedule 3.10

 

Property Liens

 

FARM #1

 

	
  1.

  	
   

  	
  Reservation of right of way for any ditches or canals constructed by
  authority of the United States, in State Patent recorded 

  
	
  March 12, 1889, in Book 23 at Page 254, covering NW1/4 Sec 25-22-51.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in State
  Patent recorded April 24, 1888, in Book 1 at Page 362, covering NE1/4 Sec
  26-22-51.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Right of way easement in deed
  from John Ostman to American Beet Sugar Company dated February 20, 1906 and
  recorded May 19, 1906 at Book 47, Page 583, located in NE1/4 Sec 26-22-51.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Right of way easement in deed
  from Colorado National Bank of Denver to USA filed October 2, 1941 at Book
  207, Page 479 a right to go upon the NE1/4 Sec 26 & NW1/4 except part of
  Sec 25-22-51 to remove natural or artificial structures or obstructions which
  may be detrimental to the operation and maintenance of the said dam and
  reservoir.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Right of way easement to
  relocate telecommunication lines in deed from Mountain States Telephone Company
  and USA filed July 29, 1942 at Book 210, page 445.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Right of way easement for access
  road in deed from Virgil L. Hogue and Carol S. Hogue to Tommy L. Allard and
  Mark K. Allard filed September 8, 1978 at Book 348, Page 79.

  
	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Right of way easement for
  electric transmission in deed from Tommy Allard and Mary Allard to Utilities
  Board of City of Lamar filed May 17, 1989 at Book 399, page 158.

  
	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Right of way easement for
  telecommunication lines in deed from Tommy Allard and Mary Allard to Mountain
  States Telephone and Telegraph Company filed February 7, 1990 at Book 404,
  Page 299.

  
	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Easement from J-S Farms, Inc. to
  the Utility Board of the City of Lamar for utility lines recorded in Book 399
  at Page 160 on May 17, 1989.

  

 

FARM #2

 

	
  1.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from Federal Land Bank of Wichita to Lawrence J.
  Feik recorded December 30, 1946 at Book 194, Page 379, together with the
  appurtenant rights to use the surface.

  

 

 

FARM #3

 

	
  1.

  	
   

  	
  Easement for pipeline and
  incidental purposes, granted by William H. Bangeman and Emma E. Bangeman as
  found in Easement Deed to the United States of America dated September 13,
  1943 and recorded Sept. 13, 1943 in Book 376 at Page 283, as Reception Number
  299478.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Easement for a pipeline and
  incidental purposes, granted by Thomas J. Chrisco and Mamie M. Chrisco as
  found in Right of Way Grant to Phillips Petroleum Company dated October 11th,
  1946 and recorded Oct. 26, 1946 in Book 411 at Page 17, as Reception Number
  315508.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Right of way grant from J and G.
  Herrington to Phillips Petroleum Co. recorded February 4, 1971 in Book 636 at
  Page 196.

  

 

FARM #4  (Water Rights Only)

 

FARM #5

 

	
  1.

  	
   

  	
  Right of way for ditches or
  canals constructed by the authority of the United States, as reserved in
  United States Patent recorded 1/28/1999 in Book 89 at Page 140, affecting the
  SE1/4 NE1/4 of Section 25, Township 22 South, Range 53 West of the 6th
  P.M.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of right of
  proprietor of any penetrating vein or lode to extract his ore as reserved in
  United States Patent recorded 2/6/1900 in Book 14, Page 90, affecting the
  N1/2 NE1/4 and the N1/2 NW14 of Section 25, Township 22 South, Range 53 West
  of the 6th P.M.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Subject to roads and irrigation
  ditches as shown on Survey Plats by Brundage Land Surveying, Inc. at Job No.
  17502BEM and Job No. 1760HPL, dated October 11, 2002.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Oil and Gas Lease recorded
  August 31, 1881 in Book 361 at Page 811, and any and all assignments thereof,
  or interests therein.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  U.S. Patent dated January 28,
  1919 recorded in Volume 134 at Page 287.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  U.S. Land Patent No. 43389 to
  William King.

  

 

FARM #6

 

	
  1.

  	
   

  	
  Terms, agreements, provisions,
  conditions, and obligations as contained in Judgment and Decree in Case No.
  W-1461, in the District Court in and for Water Division No. 2, State of
  Colorado, entitled “In the Matter of the Application for Water Rights of
  Durward W. Jacobs in the Arkansas River or its tributaries in Bent County,
  Colorado”, recorded April 21, 1978, in Book 346, Page 643.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Easement and right of way
  granted to Las Animas Municipal Light and Power by Kenneth Dodson for lines
  for the transmission of electrical energy by instruments recorded January 9,
  1979, in Book 349, page 212.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Terms, agreements, provisions,
  conditions, and obligations as contained in Agreement for Electric Service
  for Irrigation and Water Pumping by and between Southeast Colorado 

  

 

 

	
   

  	
   

  	
  Power Association, as Seller,
  and Mrs. Kenneth Dodson, as Consumer, recorded November 14, 1979, in Book
  352, Page 652.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Oil and Gas Lease between K. and
  D. Dodson and C. Nolte recorded October 1, 1980 in Book 355 at Page 889.

  

 

FARM #7

 

	
  1.

  	
   

  	
  Reservations of (1) Right of
  proprietor of any penetrating vein or lode to extract his ore; and (2) Right
  of way for any ditches or canals constructed by authority of United States,
  in U.S. Patent recorded October 26, 1889 in Book 23 at Page 275, covering
  S1/2 Sec 36-22-53.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Right of way easement in deed
  from Richard Thaxton to the American Beet Sugar Company dated January 26,
  1906 and recorded May 19, 1906 at Book 47, Page 581.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Reservation of an undivided 1⁄2
  minerals in the instrument from Federal Land Bank of Wichita to Charley D.
  Myers dated June 23, 1937 and recorded July 16, 1937 at Book 195, Page 382 in
  Sec 36-22-52; Corrected April 23, 1938 at Book 197, Page 197, together with
  the appurtenant rights to use the surface.

  

 

FARM #8

 

None

 

FARM #9

 

	
  1.

  	
   

  	
  Reservations of (1) Right of
  proprietor of any penetrating vein or lode to extract his ore; and (2) Right
  of way for any ditches or canals constructed by authority of United States,
  in U. S. Patent recorded June 29, 1891 in Book 14 at Page 332.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of all minerals in
  the instrument from Harry E. Blackburn and Emma B. Blackburn to Harry E.
  Blackburn, Jr. and Viola Blackburn Smith recorded June 25, 1990 at Reception
  No, 274255, together with the appurtenant rights to use the surface.

  

 

FARM #10

 

None

 

FARM #11

 

	
  1.

  	
   

  	
  Right of way for electric
  transmission in deed from Alva C. Bart and Alma L. Bart to Bent-Prowers Rural
  Power Lines filed April 27, 1939 at Book 200, Page 131.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Agreement for purchase of power
  from Southeast Colorado Power Association to Eunice J. Bogner, recorded
  October 3, 2001 at Reception No. 20011150.

  

 

 

FARM #12

 

	
  1.

  	
   

  	
  Right of way for electric
  transmission in deed from William A. Bush and Esther E. Bush to Bent-Prowers
  Rural Power Lines filed April 27, 1939 at Book 200, Page 91.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Agreement for purchase of power
  from Southeast Colorado Power Association to Eunice J. Bogner, recorded
  October 3, 2001 at Reception No. 20011150, for a term to end July 3, 2002.

  

 

FARM #13

 

	
  1.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from Eliza M. Blair to Clyde Hutchinson and
  Richard Hutchinson, dated June 2, 1944 and recorded June 6, 1944 at Book 214,
  Page 76 in NE1/4 Sec 29-22-52, together with the appurtenant rights to use
  the surface.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of right of way or
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded August 20, 1945, in Book 219 at Page 385, covering NE1/4 Sec
  29-22-52.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, recorded
  in U.S. Patent recorded August 20, 1945 in Book 219 at Page 385.

  

 

FARM #14

 

	
  1.

  	
   

  	
  Right of way deed for electric
  transmission in deed from Dan Cass and Mrs. Dan Cass to Bent-Prowers Rural
  Power Lines Association dated June 6, 1938 and recorded October 14, 1939 at
  Book 199, Page 234 through the E1/2SW1/4, SE1/4NW1/4 and Lots 2, 3, & 4
  of Sec 19-22-49.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from Federal Land Bank of Wichita to Dan Cass
  recorded August 31, 1945 at Book 194, Page 371, together with the appurtenant
  rights to use the surface.

  

 

FARM #15

 

	
  1.

  	
   

  	
  Grant of undivided 1⁄2 minerals in
  the instrument from First National Bank of Colorado Springs, Trustee to The
  Poudre Valley National Bank of Fort Collins, Ruth Trostel Holman and Fred B.
  Trostel recorded April 18, 1958 under Book 273, Page 348, together with the
  appurtenant rights to use the surface.

  

 

 

FARM #16

 

	
  1.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded February 2, 1899 in Book 25 at page 317, under Reception No.
  10317, covering SE 1⁄4 of Sec. 35, Twp 21S., Rge 46W.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded December 26, 1899, in Book 25 at Page 380, under Reception
  No. 11812, covering NE 1⁄4 of Sec. 35, Twp 21S., Rge 46W.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Grant of 1⁄4 minerals in Decree of
  Estate of Grace M. Williams to Helen C. McMillen and Ruth J. Northrup,
  recorded August 28, 1970 in Book 496 at Page 152, under Reception No. 367606,
  together with appurtenant rights to use the surface.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Easement along the W1⁄2 NE 14 of
  Sec 35, Twp 21S., Rge 46W, for an electric transmission line as granted by
  Norman L. Coen to Southeast Colorado Power Association in instrument recorded
  April 20, 1983 at Reception No. 417785.

  

 

FARM #16b

 

	
  1.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded February 2, 1899 in Book 25 at page 317, under Reception No.
  10317, covering SE 1⁄4 of Sec. 35, Twp21S., Rge 46W.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded December 26, 1899, in Book 25 at Page 380, under Reception
  No. 11812, covering NE 1⁄4 of Sec. 35, Twp 21S., Rge 46W.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Grant of 1⁄4 minerals in Decree of
  Estate of Grace M. Williams to Helen C. McMillen and Ruth J. Northrup,
  recorded August 28, 1970 in Book 496 at Page 152, under Reception No. 367606,
  together with appurtenant rights to use the surface.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Easement along the W1⁄2 NE1⁄4 of Sec
  35, Twp 21S., Rge 46W, for an electric transmission line as granted by Norman
  L. Coen to Southeast Colorado Power Association in instrument recorded April
  20, 1983 at Reception No. 417785.

  

 

FARM #17

 

	
  1.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded January 27, 1899, in Book 11 at Page 164, covering SW1/4.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded March 9, 1899, in Book 11 at Page 175, covering NW1/4.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Grant of 1⁄4 minerals in the
  Decree of the Estate of Grace M. Williams to Helen C. McMillen & Ruth J.
  Northrup recorded August 28, 1970 in Book 496, Page 152, together with the
  appurtenant rights to use the surface.

  

 

 

FARM #18

 

	
  4.

  	
   

  	
  Judgment and Decree adopting award of certain absolute underground
  water rights made March 26, 1973 in the District Court for Colorado, Case No.
  W-1240.

  

 

FARM #19

 

	
  1.

  	
   

  	
  Easement for the Fort Lyon Canal
  Company’s canal as referred to in Warranty Deed recorded September 24, 1921
  in Book 118, Page 164.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Undivided 1⁄4 of all oil, gas and
  other minerals in and under said premises together with right of access to
  prospect for and remove the same as reserved by James G. Wright, Pearl
  Petersen, Lilly Mae Gunther, Maxine Wright, Marilyn Kay Roth and James
  Benjamin Wright, in a deed recorded November 2, 1970, in Book 323, Page 880,
  and any interests therein or rights thereunder.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Undivided 1/8 of all oil, gas
  and other minerals in and under the premises, as reserved by Joseph L. Brand
  and Elizabeth L. Brand, in a deed recorded April 18, 1972, in Book 327, Page
  167, and any interests therein or rights thereunder.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Undivided 1⁄2 of grantors interest
  in all oil, gas and other mineral rights, as reserved by The First National
  Bank in Lamar, in the deed to Terrence W. McManus and Roberta McManus,
  recorded March 27, 1985, in Book 377, Page 390, and any and all rights and
  interest thereunder.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Agreement for purchase of power
  between Southeast Colorado Power Association, as seller and Thomas Staker, as
  consumer, and recorded December 20, 1978, in Book 349, Page 110.

  

 

FARM #20

 

	
  1.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded August 31, 1921, in Book 105, Page 462, affecting N1/2NW1/4
  and NE1/4 of Sec 23-22-52.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded September 9, 1921, in Book 89, Page 504, affecting N1/2SE1/4
  of Sec 23-22-52.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Reservation of right of
  proprietor of any penetrating vein or lode to extract his ore, in U.S. Patent
  recorded July 20, 1900, in Book 14, Page 419, affecting S1/2NW1/4 and
  N1/2SW14 of Sec 23-22-52.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Easement and right of way 100
  feet wide for the main line of the canal as same is now located (February 20,
  1888), as reserved by The Arkansas River, Land, Reservoir and Canal Company
  in Deed to L.S. Campbell, recorded March 7, 1888, in Book 2, Page 118,
  affecting DS1/2SW1/4 of Sec 23-22-52, in which the specific location of the
  easement is not defined.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Permission to use the so-called
  “Heath” road and the so-called “Heath-King” road in an East-West direction
  between the SE1/4 and the NE1/4 of Section 26-22-52 as granted to

  

 

 

	
   

  	
   

  	
  Rachel Melchior, Kenneth Dodson
  and Donna Dodson, Plaintiff; E. Cecil King, Patricia Ann King, Douglas King
  and Catherine King, Defendants and Third-Party Plaintiffs; and Edward
  Melchoir, Third-Party Defendant, and their agents, servants, employees,
  independent contractors, or family members, as granted in Order Approving
  Stipulation in Civil Action 84 CV 3, District Court, Bent County, Colorado
  recorded June 23, 1987, in Book 385, Page 282, in which the specific location
  of the roads in not defined.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Easement and right of way for
  access from the County Road at two points across the country as granted to
  Tom Ward and Linda Ward, Grantees by Williams and Gail June Piper, Grantors,
  by instrument recorded December 11, 1990, in Book 410, Page 179.

  
	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Undivided 1⁄2 interest in all oil,
  gas and other mineral rights as reserved by Mildred C. Scott, aka Mildred
  Scott, in the deed to George F. Reyher and Pauline K. Reyher, as joint
  tenants, recorded January 25, 1956, in Book 262, Page 437, and any and all
  assignments thereof or interests therein.

  
	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Undivided 1⁄4 interest in all oil,
  gas and other mineral rights, as reserved by George F. Reyher and Pauline K.
  Reyher, in the Deed to Dwight L. Heath, Trustee under the Last Will and
  Testament of Harry H. Heath, Deceased, recorded August 10, 1965, in Book 307,
  Page 135, and any and all assignments thereof or interests therein.

  
	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Oil and Gas Lease between Dwight
  L. Heath, Trustee; and the Anschutz Corporation, recorded February 1, 1973,
  in Book 329, Page 479, and any and all assignments thereof, or interests
  therein.

  
	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Reservation of right of
  proprietor of any penetrating vein or lode to extract his ore, in United
  States Patent recorded June 21, 1876, in Book 1, Page 993, and in certified
  copy thereof, recorded April 19, 1965, in Book 306, Page 116.

  
	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Easement and right of way for a
  telephone and telegraph line, granted to The Mountain States Telephone and
  Telegraph Company by William J.A. Scott, by instrument recorded February 13,
  1959, in Book 277, Page 491.

  
	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  Easement and right of way for
  communication and other facilities, as said Grantee may require, as granted
  to The Mountain States Telephone and Telegraph Company, by Frank Richards, in
  the instrument recorded December 20, 1972, in Book 329, Page 51.

  
	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  Easement and right of way as
  referred to in Assignment and Assumption of Right of Way Agreements between
  U.S. West Communications, Inc., as Assignor, and Eagle Telecommunications,
  Inc./Colorado, a Colorado corporation as Assignee, recorded March 16, 1995,
  at Reception No. 1995-377, in which the specific location of the easements is
  not defined.

  
	
   

  	
   

  	
   

  
	
  14.

  	
   

  	
  Right to deny or restrict each
  and every right of access to and from the land insured hereby, directly onto
  abutting street or highway designated as State Highway No. 6 (U.S. Highway
  No. 50) recorded March 3, 1959, in Book 278, Page 1.

  
	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  Oil and Gas lease between Frank
  O. and Marjorie S. Richards; and Carol Russell, recorded October 2, 1981, in
  Book 362, Page 679, and any and all assignments thereof, or interests
  therein.

  

 

 

	
  16.

  	
   

  	
  All of grantors interest in oil,
  gas and other mineral rights, as conveyed to Marjorie S. Richards, by William
  L. Long and Nancy A. Long in the deed recorded January 9, 1991, in Book 411,
  Page 44, and any and all assignments thereof, or interests therein.

  
	
   

  	
   

  	
   

  
	
  17.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded June 15, 1895, in Book 23 at Page 292, covering N1/2N1/2NW1/4
  Sec 25-22-52.

  
	
   

  	
   

  	
   

  
	
  18.

  	
   

  	
  Reservation of right of way for
  any ditches or canals constructed by authority of the United States, in U.S.
  Patent recorded February 29, 1892, in Book 23 at Page 282, covering S1/2SW1/4
  Sec 24-22-52.

  
	
   

  	
   

  	
   

  
	
  19.

  	
   

  	
  Right of way easement across
  SW1/4 for perpetual easement for a waste water tube for benefit of NW1/4 Sec
  25 from First National Bank to Kenneth Dodson and Donna Dodson filed October
  25, 1985 under Reception No 267524.

  
	
   

  	
   

  	
   

  
	
  20.

  	
   

  	
  Right of way easement or
  railroad in deed from Charles Edward Heizer to The American Beet Sugar
  Company filed May 19, 1906 at Book 47, Page 591 in SW1/4 Sec 25-22-52.

  
	
   

  	
   

  	
   

  
	
  21.

  	
   

  	
  Right of way easement for
  railroad in deed from Charles Edward Heizer to The Atchinson, Topeka and
  Santa Fe Railway Company filed August 29, 1906 at Book 56, Page 573 in SW1/4
  Sec 25-22-52.

  
	
   

  	
   

  	
   

  
	
  22.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from Glenn E. McLaughlin, Personal Representative
  for Estate of Claude Everett McLaughlin, Deceased to Dale Hyatt recorded
  April 27, 1976 at Book 340, Page 211, together with the appurtenant rights to
  use the surface.

  

 

FARM #21

 

None

 

FARM #22

 

	
  1.

  	
   

  	
  Reservation of the Right of
  Proprietor of any penetrating vein or lode to extract his ore, in Patent
  recorded March 13, 1897, in Book 14 at Page 61.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Right of way for 50’ strip for
  railroad in deed from Peter Scott to D.J. Cooper to American Beet Sugar
  Company dated February 12, 1906 and recorded February 19, 1906 at Book 47,
  Page 577.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Right of way for railroad in
  deed from Joseph S. Purvis and William F. Purvis to AT & SF Railway
  Company recorded July 28, 1908 at Book 56, Page 559, located in Part of
  N1/2NE1/4.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Right of way for railroad in
  deed from Mrs. George Purvis to County Commissioners dated July 5, 1927 and
  recorded July 8, 1927 at Book 125, Page 397.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Right of way for electric
  transmission in deed from M.E. Poquette to The Western Public Service Company
  dated July 6, 1931 and recorded September 11, 1934 at Book 186, Page 353.

  

 

 

	
  6.

  	
   

  	
  Right of way for electric
  transmission in deed from Annie P. Purvis to Las Animas Municipal Light and
  Power dated June 9, 1945 and recorded June 11, 1945 at Book 219, Page 94.

  
	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Right of way for assess in deed
  from James M. Mayhew and Ellen Maxine McDermott to Department of Highways
  recorded October 11, 1958 at Book 276, Page 229.

  

 

FARM #23

 

	
  1.

  	
   

  	
  Reservations of (1) Right of
  proprietor of any penetrating vein or lode to extract his ore; and (2) Right
  of way for any ditches of canals constructed by authority of United States,
  in U.S. Patent recorded October 31, 1906 in Book 14 at Page 201.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Right of way for 10’ easement
  for telecommunications through S1/2 Sec 31-22-51 in deed from Margaret M.
  Shaw and Kenneth R. Shaw to Mountain States Telephone and Telegraph Company
  dated January 21, 1959 and recorded February 13, 1959 a Book 277, Page 496.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Right of way for 10’ easement
  for telecommunications through S1/2 Sec 31-22-51 in deed from Kenneth R. Shaw
  to Mountain States Telephone and Telegraph Company dated December 9, 1970 and
  recorded January 5, 1971 a Book 324, Page 218.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Judgment and Decree recorded
  July 12, 1972 in Book 327 at Page 734 adopting ruling of water referee
  regarding certain absolute underground water rights.

  

 

FARM #24

 

	
  1.

  	
   

  	
  Right of way for conduits for
  irrigation and drainage purposes along the South line of N1/2 of Sec 34-22-52
  in deed from The Las Animas Land & Stock Company to The American Beet
  Sugar Company filed May 19, 1906 at Book 47, Page 578.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from National Bank of Topeka, Trustee to Gladys M.
  Copeland, dated October 31, 1952 and recorded November 12, 1952 at Book 244,
  Page 147, in N1/2NW1/4 Sec 34-22-52, together with the appurtenant rights to
  use the surface.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Judgment and Decree dated August
  24, 1973 adopting ruling of water referee entered on July 19, 1973,
  concerning case number W-1969.

  

 

FARM #25

 

	
  1.

  	
   

  	
  Right-of-way easement between
  Donald H. Fowler and Lucy R. Fowler and Greeley Gas Company, a Colorado
  corporation, dated February 11, 1991, recorded February 22, 1991, in Book
  412, at Page 58, under Reception No. 274978.

  

 

 

FARM #26a

 

	
  1.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from Robert V. Karr & Ethel B. Karr to John W.
  Hurley and Alene E. Hurley recorded March 14, 1961 at Book 287, Page 499,
  together with the appurtenant rights to use the surface.

  

 

FARM #26b

 

	
  1.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from Robert V. Karr & Ethel B. Karr to John W.
  Hurley and Alene E. Hurley recorded March 14, 1961 at Book 287, Page 499,
  together with the appurtenant right to use the surface.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Life estate in favor of Alene E.
  Hurley created by Warranty Deed recorded January 11, 1984 at Book 372, Page
  864.

  

 

FARM #27

 

	
  1.

  	
   

  	
  Right of way for railroad in
  part of NW1/4 Sec 26-22-51 in deed from John R. Mulvane to Atchinson, Topeka
  and Santa Fe Railway Company recorded July 28, 1908 in Book 56, Page 550.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Easement right of way for
  electric transmission in deed from Edgar A. Ford to Utilities Board of Lamar
  dated November 23, 1964 and recorded November 25, 1964 at Book 304, Page 488
  through W1/2 & Lots 1 & 7 of Sec 35-22-51.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Right of way easement for
  telecommunications in deed from Coy S. Ham to Mountain States Telephone and
  Telegraph Company recorded June 5, 1980 at Book 354, page 371 through NE1/4
  Sec 25-22-51.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Right of way easement for
  electric transmission in deed from Coy S. Ham to Southeast Colorado Power
  Association recorded August 11, 1980 at Book 355, Page 96.

  

 

FARM #28

 

	
  1.

  	
   

  	
  All rights to any and all
  minerals, ore and metals of any kind and character, and all coal, asphalthum,
  oil gas and other like substances in or under said land, the rights of
  ingress and egress for the purpose of mining, together with enough of the
  surface of the same as may be necessary for the proper and convenient working
  of such minerals and substances, as reserved in Patent form the State of
  Colorado, recorded November 16, 2001, under Reception No. 20011403.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Right of way for railroad in
  part of NW1/4 Sec 27-22-51 in deed from State of Colorado to Arkansas Valley
  Railroad Company dated August 7, 1906 and recorded January 8, 1907 at Book
  56, Page 126.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Right of way for railroad in
  part of NW1/4 Sec 27-22-51 in deed from State of Colorado to Atchison, Topeka
  and Santa Fe Railroad Company dated May 28, 1908 and recorded June 20, 1908
  at Book 56, Page 525.

  

 

 

FARM #30

 

	
  1.

  	
   

  	
  Right-of-way easement between
  Hudson & Persyn, Ltd., and Charles R. Odgen and Vivienne H. Odgen, dated
  April 9, 1985, recorded April 10, 1985, in Book 377, Page 565, at Reception
  NO. 266365.

  

 

FARM #31

 

	
  1.

  	
   

  	
  Right of way easement for
  electric transmission in deed from A.S. Tolton and Emma Tolton to
  Bent-Prowers Rural Power Lines Association dated December 3, 1938 and
  recorded April 27, 1939 at Book 200, Page 69.

  

 

FARM #32

 

	
  1.

  	
   

  	
  Right of way for telecommunications
  through Lots 2, 3, 4 of Sec 5-23-52 & Lot 1 of 6-23-52 in deed from J.F.
  Walsh to Mountain States Telephone & Telegraph Company filed February 20,
  1929 at Book 166, Page 254.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Right of way for power lines
  through Indian Claim A in deed from Colorado National Bank of Denver,
  Executor of Estate of Helen Brown Douglas to Bent-Prowers Rural Power Lines
  filed April 22, 1939 at Book 200, Page 130.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Right of way for the purpose of
  correcting river channel for flood control in deed from Henry Manifor to Bent
  County filed June 19, 1953 at Book 247, Page 36.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in Indian Claim 16 in the instrument from Regis College & Saint
  Thomas Theological Seminary to Henry A. Manifor & Mary Manifor, dated
  June 3, 1936 and recorded October 3, 1936 at Book 191, Page 529, together
  with the appurtenant rights to use the surface.

  

 

FARM #33

 

	
  1.

  	
   

  	
  Subject to County Roads JJ and
  No. 17 right-of-way, as shown on the Warranty Deed recorded September 3,
  2002, at Reception No. 20021303.

  

 

FARM #34

 

	
  1.

  	
   

  	
  Right of way deed for railroad
  in deed from John R. Mulvane to The Atchison, Topeka and Santa Fe Railway
  Company dated July 27, 1909 and recorded October 11, 1909 at Book 61, Page
  205, in Sec 31-22-51.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Right of way for roadway along
  the North side of NW1/4 Sec 31-22-51 in deed from J.B. Shaw to Board of
  County Commissioners filed July 8, 1927 at Book 148, Page 450.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Right of way for roadway in Sec
  31-22-51 in deed from J.B Shaw to Board of County Commissioners filed July 8,
  1927 at Book 125, Page 395.

  

 

 

	
  4.

  	
   

  	
  Right of way for roadway lying
  South and adjacent to Railroad in deed from Joseph B. Shaw to Board of County
  Commissioners filed August 17, 1927 at Book 148, Page 474.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Right of way easement in W1/2 N of
  U.S. Highway 50 in Sec 31-22-51 for electric transmission in deed from
  Kenneth R. Shaw and Helen M. Samuelson to Las Animas Municipal Light and
  Power dated June 9, 1945 and recorded June 11, 1945 at Book 219, Page 95.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from Kenneth M. Shaw and Margaret S. Gallup to
  Cherry Enterprises, Inc. recorded January 9, 1984 at Book 372, Page 843
  together with the appurtenant rights to use the surface.

  

 

FARM #35

 

	
  1.

  	
   

  	
  Right of way granted by Janet M. Brown to Las Animas Municipal Light
  and Power Co., recorded June 13, 1056 in Book 264 at Page 339.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Undivided 1⁄2 interest in all oil,
  gas, minerals and mineral rights, as reserved by Janet M. Brown in the deed
  to Everett Bilyeu and Elma Maxine Bilyeu, recorded August 1, 1967, in Book
  314, Page 144, Bent County, Colorado records, and any and all rights and
  interest therein.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Easement and right of way for
  pole line for the purpose of transmitting electric current across the NE1/4
  of Section 36, in a westwardly direction by Janet M. Brown, by Hugh Munro,
  Agent, by instrument recorded February 16, 1952, in Book 242, Page 122, Bent
  County, Colorado records, in which the specific location of the easement is
  not defined.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Right to deny or restrict each
  and every right of access to and from the land insured hereby, directly onto
  abutting street or highway designated as Colorado State Highway No. 6 by deed
  from Janet M. Brown, formerly Janet M. Orr to the Department of Highways,
  State of Colorado, recorded March 3, 1959, in Book 278, Page 7, Bent County,
  Colorado records.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Any right, title or interest of
  Everett Bilyeu, Campo Holding Trust, Derral Schroder, John Eatherage, Kinan
  Burk, Walter Marston, Dale Hyatt or Common Title Bond and Trust under the
  following instruments: Recorded February 6, 1986 at Book 380, Page 860, and
  April 23, 1986, Book 381, Page 502.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Access easement over and upon
  the W40’ E 433.65’ N54’ of Section 36-22-52 in deed from A. Miller and Hazel
  A. Miller to Walter and Elizabeth Wagner filed May 26, 2002 under Reception
  No. 20020605.

  

 

FARM #36

 

None

 

 

FARM #37

 

	
  1.

  	
   

  	
  Right-of-way between Mrs. Martha
  Burger and Bent-Prowers Rural Power Lines Association, a corporation, dated
  July 29, 1938, recorded April 27, 1939, in Book 200, at Page 51.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Right-of-way between August
  Reyher and Kansan-Colorado Utilities, Inc., dated November 16, 1951, recorded
  March 26, 1952, in Book 242 at Page 270, the purpose to lay, maintain, alter,
  repair, operate, remove and relay parallel pipelines for the transportation
  of oil or gas, on and over subject property.

  

 

FARM #38

 

	
  1.

  	
   

  	
  Agreement between George Reyher
  & Sons, Inc. and Wallace A. Doe and Irene A. Doe, dated March 26, 1982,
  recorded March 30, 1982, in Book 365, Page 786, at Reception No 258466,
  conveyed premises is supplied with domestic water from a well North of and
  adjoining the premises conveyed through a pipeline.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Well Users Agreement between
  George Reyher & Sons, Inc., Party of the first part, Kristin A. Reyher,
  personal representative of the Irene A. Doe Estate, party of the second part,
  and Jeanne K. Bullard Kenneth E. Rowland, Parties of the Third Part, dated
  June 8, 1999, recorded June 10, 1999, at Reception No. 19990819, conveyed
  premises is supplied with domestic water from a well owned by George Reyher
  & Sons, Inc., through a pipeline extending Southerly across the premises
  conveyed.

  

 

FARM #39

 

	
  1.

  	
   

  	
  Subject to an easement or ditch
  over a strip of land 15.00 fee wide according to the deed recorded June 2, 2003,
  at Reception No. 20030737.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Subject to the right-of-way of
  County Roads LL and MM, according to the deed recorded June 2, 2003, at
  Reception No. 20030737.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Findings of the District Court
  of Colorado dated August 26, 1946 regarding August Reyher Seepage Ditch No.
  1.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Decree recorded November 13,
  1930 in Book 165 at Page 464 regarding priorities of right to use water for
  domestic purposes.

  

 

FARM #40

 

	
  1.

  	
   

  	
  Easement for the right to lay,
  maintain, operate, inspect and remove a pipeline or pipelines and incidental
  purposes, granted by William Ricken and Christine Ricken as found in Right of
  Way Grant to Phillips Petroleum Company dated October 10, 1946 and recorded
  October 26, 1946 in Book 411 and Page 19, as Reception No. 315511.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Easement for the right to lay,
  maintain, operate, inspect, and remove a pipeline or pipelines, and
  appurtenances, over, through, upon, under and across lands and incidental
  purposes, granted by George William Ricken as found in Right of Way Grant to
  Phillips 

  

 

 

	
   

  	
   

  	
  Petroleum Company dated November
  6, 1946 and recorded December 7, 1946 in Book 411 and Page 36, as Reception
  No. 316114.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  One-half of all mineral and
  mineral rights, in, on, on underlying the land as reserved by Denver Joint
  Stock Land Bank of Denver in Special Warranty Deed to George William Ricken
  and William Ricken dated February 3, 1943 and recorded February 13, 1943 in
  Book 376 and Page 195 at Reception No. 296603 and file number C01800.

  

 

FARM #41

 

	
  1.

  	
   

  	
  Subject to the East 30.00 feet
  of said tract for County Road 24 right-of-way purposes.

  

 

FARM # 42

 

	
  1.

  	
   

  	
  Subject to telephone and utility
  easements appearing in Book 298, at Page 149, Bent County, Colorado records
  and for the electric transmission lines appearing in Book 302, Page 184, Bent
  County, Colorado records, and for water pipelines in Book 334, Page 8, Bent
  County, Colorado records.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Oil and gas lease between Garold
  E. Root and Rock Royalty, Inc., dated February 16, 2001, recorded October
  30,2001, under reception NO. 20011309, and any interests therein or right
  thereunder for a term of three years.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Subject to the rights-of-way for
  County Roads No. 32 and “JJ”.

  

 

FARM # 43

 

	
  1.

  	
   

  	
  Reservation of an undivided 1⁄2
  royalties in the instrument form Bessie L. Rogers and Bert E. Rogers to L.M.
  Felkner and A.O. Felkner, dated December 29, 1925 and recorded January 21,
  1926 at Book 148, Page 154, together with the appurtenant rights to use the
  surface.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Right of way easement for
  electric transmission through N1/2NE1/4 Sec 22-22-51 in deed from L.M.
  Felkner to Bent-Prowers Rural Power Lines Association dated February 18, 1039
  and recorded April 27, 1939 at Book 200, Page 118.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Easement and right of way to
  carry irrigation water granted to Edgar A. Ford and Bertha P. Ford by John
  Miller, Executer of the Estate of Katherine Miller, deceased, Catherine B.
  Henderson and Evelyn L. Young in the instrument recorded January 30, 1962, in
  Book 291, Page 485.

  

 

FARM # 44

 

	
  1.

  	
   

  	
  Right of way granted by F. Kreybill and A. Lubers to the AT&SF
  Railway Co., recorded June 15, 1907 in Book 56 at Page 232.

  

 

 

	
  2.

  	
   

  	
  Reservation of undivided 1/6
  mineral in the instrument from Nellie F. Heizer, Kenneth F. Heizer and Robert
  E. Heizer to Elmo R. Sakai recorded February 5, 1956 at Book 268, Page 23
  under Reception No. 79297, together with the appurtenant rights to use the
  surface.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Reservation of undivided 1⁄2
  mineral in the instrument from American Crystal Sugar Company fka American
  Beet Sugar Company to Elmo R. Sakai recorded July 20, 1956 at Book 264, Page
  562, together with the appurtenant rights to use the surface.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Right of way for electric
  transmission in deed from Elmo Sakai to Las Animas Municipal Light and Power
  filed February 16, 1952 at Book 242, Page 120, located in part of NW1/4 Sec
  36-22-52.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Right of way for railroad in
  deed from Robert E. Heizer to AT&SF Railway Company filed July 24, 1908
  at Book 56, Page 543.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Ruling of Referee recorded
  October 24, 1973 in Book 331 at Page 869 regarding certain absolute
  underground water rights.

  

 

FARM #45

 

None

 

FARM #46

 

	
  1.

  	
   

  	
  Rights of way granted by J. Mulvane to the AT&SF Railway Co.,
  recorded July 28, 1908 at Page 557 and 558.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Right of way for canal located
  in NW1/4 Sec 26-22-52 in deed from August Wadhams to the Fort Lyon Canal
  Company filed March 6, 2006 at Book 53, Page 431.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Right of way for electric
  transmissions located in NW1/4 Sec 26-22-52 in deed from Ed Wadhams,
  Administrator of Estate of August Wadhams, Deceased to Bent-Prowers Rural
  Power Line Association filed October 14, 1939 at Book 200, Page 377.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Right of way for electric
  transmission located in SE1/4 Sec 31-22-52 in deed from George Hillman to
  Bent-Prowers Rural Power Lines Association filed April 27, 1939 at Book 200,
  Page 80.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from National Bank of Topeka, Trustee to E.L.
  Wilkins, Sr. and E.L. Wilkins, Jr. recorded June 10, 1952 at Book 242, Page
  402, covering S12NW1/4 Sec 31-22-52, together with the appurtenant rights to
  use the surface.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from American Crystal Sugar Co. to E.L. Wilkins
  and Son recorded April 23, 1956 at Book 263, Page 522, to together with the
  appurtenant rights to use the surface.

  
	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Stipulations recorded at Book
  385, Page 282 in the office of the Clerk & Recorder of Bent County,
  Colorado.

  

 

 

	
  8.

  	
   

  	
  Judgment and decree dated
  December 20, 1971 adopting the ruling of the water referee dated November 18,
  1971 regarding certain absolute underground water rights.

  

 

FARM #47

 

	
  1.

  	
   

  	
  Right of way easement for
  electric transmission in deed from A.S. Tolton and Emma Tolton to
  Bent-Prowers Rural Power Lines Association dated December 3, 1938 and
  recorded April 27, 1939 at Book 200, Page 69.

  

 

FARM #48

 

	
  1.

  	
   

  	
  Oil and gas lease between C. Sniff and wife and Rock Royalty, Inc.,
  dated February 16, 2001.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Pipeline right-of-ray for the
  use of transporting water granted to Joe Cline and Bonnie Cline, and ALA-TEX
  Cattle Company, by Curtis G. Sniff and Karla R. Sniff, dated August 31, 1998,
  recorded October 20, 1998, at Reception No. 19981499.

  

 

FARM #49

 

	
  1.

  	
   

  	
  Subject to easements for
  electric transmission lines, public roads, and ditches which may be apparent
  from a visual examination of the surface of the land as shown in document
  recorded March 7, 1972 in Book 326 at Page 601.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reserving and excepting one-half
  of all oil, gas, coal and other mineral rights, together with the right of
  ingress and egress therefrom for the purposes of prospecting, exploring and
  developing the same, as reserved in document recorded January 15, 1966 in
  Book 282 at Page 219.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Easement for repair and
  replacement of a domestic pipeline as it crosses the property as shown in
  deed recorded June 24, 2002 at Reception No. 20020821.

  

 

FARM #50 (Water Rights Only)

 

FARM #51

 

	
  1.

  	
   

  	
  Right of way for electric
  transmission through E1/2 Sec 15-22-51 in deed from E.S. Taliaferro and J.
  Mabel Taliaferro to Bent-Prowers Rural Power Lines Association dated June 13,
  1938 and Recorded October 14, 1939 at Book 199, Page 230.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of (1) Right of
  proprietor of any penetrating vein or lode to extract his ore; and (2) Right
  of way for any ditches or canals constructed by authority of United States,
  U.S. Patent recorded February 6. 1896 in Book 14, Page 381, covering SE1/4
  Sec 15-22-51.

  

 

 

	
  3.

  	
   

  	
  Reservation of right of
  proprietor of any penetrating vein or lode to extract his ore, in U.S. Patent
  recorded April 19, 1912 in Book 14, Page 567, covering NW1/4 of Sec 15-22-51.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Reservation of right of
  proprietor of any penetrating vein or lode to extract his ore, in U.S. Patent
  recorded May 19, 1890 in Book 14, Page 306.

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Reservation of undivided 1⁄2
  minerals in the instrument from Federal Land Bank of Wichita to Mabel
  Taliaferro, dated February 18, 1938 and recorded March 7, 1938 at Book 199,
  Page 26, located SE1/4 Sec 15-22-21, together with the appurtenant rights to
  use the surface.

  

 

FARM #52

 

	
  1.

  	
   

  	
  All rights to any and all
  minerals, ore and metals of any kind and character, and all coal, asphaltum,
  oil gas and other like substances in or under said land, the rights of
  ingress and egress for the purpose of mining, together with enough of the
  surface of the same as may be necessary for the proper and convenient working
  of such minerals and substances, as reserved in patent form the State of
  Colorado, recorded May 19, 1894, in Book 23 at Page 288.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Easement deed from I. and H.
  Millen to W. Wagner Access dated May 6, 2002 – no recording information
  available.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Ruling of referee dated February
  10, 1973 regarding an absolute underground water right in District Court Case
  No. W-1227.

  

 

FARM #53

 

	
  1.

  	
   

  	
  Subject to County Road “JJ”
  Right-of-Way and access and utility easements as given in Reception No.
  1997435.

  

 

FARM #54

 

	
  1.

  	
   

  	
  Right of way for irrigation of
  the SW1/4 Sec 20-22-49 in deed from John Beckman to The Las Animas Land and
  Stock Company filed January 17, 1903 at Book 47, Page 218.

  

 

FARM #55

 

	
  1.

  	
   

  	
  Reservations of (1) right of
  proprietor of any penetrating vein or lode to extract his ore, and (2) right
  of way for any ditches or canals constructed by authority of United States,
  in U.S. Patent recorded November 14, 1900, in Book 40 at Page 41, covering
  SE1/4 Sec 31-21-46.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Reservation of (1) right of
  proprietor of any penetrating vein or lode to extract his ore; and (2) right
  of way for any ditches or canals constructed by authority of United States,
  in U.S. Patent recorded February 27, 1905, in Book 25 at Page 566, covering
  S1/2NE1/4 Sec 31-21-46.

  

 

 

3.                                       Easement
and right of way for communications, as granted by Geo. R. Wilson to AT&T,
in the instrument recorded May 16, 1929, in Book 210 at Page 242.

 

4.                                       Easement
and right of way for roadway, as granted by Charles E. Wilson to Board of
County Commissioners, in the instrument recorded October 22, 1937, in Book 268
at Page 273.

 

5.                                       Easement
and right of way for conveyance and transfer of water from Thurston Lake aka
Thurston Reservoir, as granted by the Fort Lyon Canal Company to W.W. Land and
Cattle Co., in the instrument recorded October 24, 1977, in Book 522 at Page
613.

 

FARM #56

 

1.                                       A right of
way for ditches or canals constructed by the authority of the United States, as
reserved in United States Patent covering the E1/2E1/2 of Section 23, Township 22
South, Range 53 West of the 6th P.M., recorded April 2, 1902 in Book 14 at Page
434.

 

2.                                       An ingress
and egress easement reserved by Daniel G. DiRezza and Katrena L. DiRezza across
the West 35 feet of the South 331 feet of the SW1/4 of Sec 24-22-53, as shown
on deed recorded September 13, 2002 under Reception No. 20021363.

 

FARM #57

 

1.                                       Right of
way easement for ditch pipeline across Sections 6 & 7 in deed from William
R. Likes, Jr. and Linda M. Likes to Curtis D. Byers and Starla R. Byers filed
August 12, 1999 under Reception No. 19991111.

 

FARM #58

 

1.                                       Subject to
the East and South 30.00 feet of said tract for County Road No. 25 and No. LL
purposes.

 

2.                                       Lease
between R. and M. Reyher and McClave Water Association, Inc. recorded September
16, 1998 at Reception No. 19981320

 

FARM #59

 

1.                                       Right of
way for railroad in deed from Mary E. Chase and Eva S. Hollenbeck to AT &
SF Railway Company dated August 26, 1907 and recorded September 26, 1908 in
Book 61, Page 12 in NW1/4SW1/4 Sec 28-22-51.

 

2.                                       Right of
way to go over, upon, and across certain portions of SW1/4 Sec 28-22-51 in deed
from State of Colorado to James H. Ashcraft filed November 23, 1912 at Book 68,
Page 509.

 

3.                                       Right of
way to go over, upon and across certain portions of SW1/4 Sec 28-22-51 in deed from
James H. Ashcraft to R.B. Morrison filed March 15, 1918 at Book 80, Page 587.

 

 

4.                                       Reservation
of undivided 1⁄2 minerals in the instrument from Federal Land Bank of Wichita to
W.H. Basse and Cynthia Basse recorded July 8, 1946 at Book 224, Page 210, together
with the appurtenant rights to use the surface.

 

5.                                       Right of
way for telecommunications in deed from Williamett Hornseth to Mountain States
Telephone and Telegraph Company filed June 29, 1977 at Book 344, Page 264.

 

6.                                       Reservation
of undivided 1⁄2 minerals in the instrument from Robert Hornseth and Williamett
Hornseth fka Basse to Willard Kasza recorded January 16, 1992 at Book 419, Page
22, together with the appurtenant rights to use the surface.

 

7.                                       Upon death
of Robert and Williamett Hornseth an undivided 1⁄4 mineral interest shall revert
to Willard Kasza, his heirs and assigns as shown in deed filed January 16, 1992
at Book 419, Page 22.

 

8.                                       Reservation
of all minerals now owned by Joe Kasza and Kaye Kasza, including all reversions
in the instrument recorded February 23, 1998 under Reception No. 19980271,
together with the appurtenant rights to use the surface.

 

9.                                       Reservation
by Joe Kasza and Kaye Kasza (grantors), their Personal Representatives, heirs,
successors or assigns of 10 percent of the gross selling price of any Fort Lyon
Water presently appurtenant to the above described real property if the same is
sold by Grantees (Laddie & Kathy Cumbie), or either of them, or their
assigns, separate from the above described real property on or before 15 years
from February 17, 1998 (the date of the Deed); it being understood that
grantors (Joe & Kaye Kasza) shall not be responsible for any expenses
incurred in the sale of such water.

 

FARM #60 A-H

 

1.                                       Rights of
Ways for the following:  Fort Lyon Canal
along the North 40 feet, more or less, of subject property; for County Road 35
along the West 30 feet, more or less, of subject property; and for Colo Hwy No.
194 along the Southerly boundary of subject property; and easements therefor
and incidental purposes, insofar as the same might affect subject property. All
as shown by Land Survey Plat dated June 27, 2003, prepared by Petersen
Surveying, Inc.

 

2.                                       Encroachment
of fences and field onto land adjoining North and East of that part of Lot 9
and that part of Indivian Claim No. 13 covered in subject legal description, as
shown by Land Survey Plat dated June 27, 2003, prepared by Petersen Surveying,
Inc.

 

3.                                       An
undivided 1⁄2 interest in all oil, gas and other minerals and mineral rights in
upon and under said real estate, together with the full and free right to enter
upon said premises and use so much of the surface thereof as may be reasonable
and necessary for operating drilling and marketing the production thereof as
reserved by The Federal Land Bank of Wichita In Warranty Deed To George Dorsch
and Alex Forsch dated June 18, 1943 and recorded Oct. 20, 1943 in Book 376 at
Page 296 at Reception Number 299951.

 

4.                                       Judgment
and Decree recorded September 4, 1973 in Book 657 at Page 482 adopting the
ruling of the water referee regarding certain absolute underground water
rights.

 

 

FARM #61  (Water Rights Only)

 

FARM #62

 

1.                                       Reservation
of right of way for any ditches or canals constructed by authority of the
United States, in U.S. Patent recorded June 7, 1902 in Book 40 at Page 78,
under Reception No. 17472, covering SW1/4 Sec 17.

 

2.                                       Easement
and right of way for an electric transmission and/or distribution line or
system purposes as granted by G.V. Culp to Southeast Colorado Power, recorded
November 7, 1951 in Book 357 Page 98.

 

3.                                       Easement
for the purpose of laying, constructing, operating, inspecting, maintaining,
repairing, replacing, and removing of pipeline for the transportation of
irrigation water over and across land in SE1/4 17-22-46 from H. Hunter White,
III to A.C. Rowan & Bonnie I. Rowan in deed dated March 12, 2003 and
recorded March 13, 2003 under Reception No. 499440.

 

4.                                       Right of
way easement from A.C. & Bonnie Rowan to Southeast Colorado Power
Association recorded October 9, 1979 in Book 530 at Page 584.

 

FARM #63  (Water Rights Only)

 

FARM #64

 

1.                                       Right of
way for electric transmission through W1/2NE1/4 Sec 32-22-48 in deed from
Daniel & Lena Carl to Bent-Prowers Rural Power Lines Association filed
March 22, 1939 at Book 200, Page 10.

 

2.                                       Reservation
of undivided 1⁄2 minerals in the instrument from Federal Land Bank of Wichita to
Daniel Carl recorded August 24, 1945 at Book 194, Page 369, covering E1/2NE1/4
Sec 32 & NW1/4 Sec 33-22-48, together with the appurtenant rights to use
the surface.

 

3.                                       Reservation
of undivided 1⁄2 minerals in the instrument from Daniel Carl to Lloyd M. Carl
& Lala L. Carl recorded June 30, 1950 at Book 237, Page 14, covering
E1/2NE1/4 Sec 32 & NW1/4 Sec 33-22-48, together with the appurtenant rights
to use the surface.

 

4.                                       Right of
way for gas pipeline through E1/2NE1/4 Sec 32-22-48 from Lloyd M. Carl to
Colorado Interstate Gas Company filed August 4, 1951 at Book 239, Page 376.

 

5.                                       Reservation
of right of way for any ditches or canals constructed by authority of the
United States, in U.S. Patent recorded February 16, 1909, in Book 63 at Page
10, covering E1/2NW1/4 Sec 32-22-48.

 

6.                                       Ruling of
Referee recorded July 26, 1974 in Book 335 at Page 246 regarding water storage
right..

 

 

FARM #65

 

None

 

FARM #66

 

1.                                       Reservations
of (1) Right of proprietor of any penetrating vein or lode to extract his ore;
and (2) Right of way for any ditches or canals constructed by authority of
United States, in U.S. Patent recorded July 31, 1889 in Book 23 at Page 268.

 

2.                                       Reservation
or undivided 1/3 minerals in the instrument from Opal F. Johnston & Oscar
L. Johnston to Herman C. Hopper and Belva Lois Belva, recorded May 5, 1958 at
Book 273, Page 417, together with the appurtenant rights to use the surface.

 

3.                                       Reservation
of undivided 1⁄2 minerals in the instrument from Richard R. Hutchinson and Mary
Hutchinson aka Mary E. Hutchinson to Lewis Gary Gray and Nancy Jean Gray
recorded April 20, 1981 at Book 358, Page 965, together with the appurtenant
rights to use the surface.

 

FARM #67

 

1.                                       Right of
way for electric transmission in deed from J.L. Butler to Bent-Prowers Rural
Power Lines Association dated December 3, 1938 and recorded October 14, 1939 at
Book 200, Page 368.

 

2.                                       Life estate
reserved by J.F. Hawkins, Jr. aka Joseph F. Hawkins, Jr. and Alice J. Hawkins
aka Alice Joanne Hawkins in deed recorded March 12, 1991 under Reception No.
275051, at Book 412, Page 193.

 

FARM #69

 

1.                                       Reservations
of (1) right of proprietor of any penetrating vein or lode to extract his ore;
and (2) right of way for any ditches or canals constructed by authority of
United States, in U.S. Patent recorded August 24, 1922, in Book 115 at Page
329, under Reception No. 111753.

 

2.                                       Easement
and right of way for electric transmission or distribution system, as granted
by Ray Sharp to Bent-Prowers Rural Power Lines Association, in the instrument
recorded February 23, 1939, in Book 274 at Page 525, under Reception No.
221538.

 

3.                                       Easement
and right of way for water distribution and transmission pipelines, as granted
by Estate of Ray O. Sharp by Wilma L. Smith, as Personal Representative to May
Valley Water Association, in the instrument recorded September 29, 1981, in
Book 539 at Page 983, under Reception No. 410960.

 

4.                                       Lease and
the terms and conditions thereof, between Jo Ellen Elmore, Trustee of the Wilma
L. Smith Family Trust, Lessor and Forte of Colorado, a partnership, Lessee, as
shown by Memorandum of Lease recorded October 28, 1991, under Reception No.
454997.

 

 

FARM #70

 

1.                                       Reservation
of right of proprietor of any penetrating vein or lode to extract his ore, in
U.S. Patents. Recorded:

 

•                  October 13,
1891, Book 14, Page 328.

 

•                  May 2,
1903, Book 14, Page 461

 

•                  May 18,
1903, Book 14, Page 462

 

•                  July 27,
1945, Book 219, Page 288

 

•                  December
24, 1909, Book 14, Page 550

 

2.                                       Undivided 3⁄4
of grantors interest in all oil, gas and mineral rights as reserved by Joseph
Frampton in the deed to the All Colorado Investment Company, a Colorado
Corporation, recorded February 15, 1921, in Book 119, Page 20, affecting the
E1/2 of Sec 23-22-50, and any and all assignments thereof or interests therein.

 

3.                                       Undivided 1⁄2
of grantors interest in all oil and mineral rights as reserved by The All
Colorado Investment Company, a Corporation in the deed to Emma L. Earle,
recorded June 4, 1924, in Book 68, Page 180, affecting E1/2 of Sec 23-22-50,
and any and all assignments thereof or interests therein.

 

4.                                       Grantors
interest in all oil, gas and other minerals, together with the right of ingress
and egress to prospect for and remove the same, as reserved by Earl Elmer
Millyard, aka E.E. Millyard in the deed to Earl E. Millyard, recorded January
31, 1956, in Book 262, Page 498, and any and all assignments thereof or
interests therein.

 

5.                                       Grantors
interest in all oil, gas and other mineral rights for the life of Grantor and
wife only, together with the right of ingress and egress to prospect for and
remove the same, as reserved by Carl E. Millyard in the deed to John Sutphin,
recorded April 3, 1973, in Book 330, Page 19, affecting S1/2SW1/4 of Sec
24-22-50 and E1/2 of Sec 23-22-50, and any and all assignments thereof or
interests therein.

 

6.                                       Grantors
interest in all oil, gas and other mineral rights for the life of Grantor and
the life of his wife, Arlene E. Millyard, of the survivor of them, as reserved
by Carl E. Millyard and Arlene E. Millyard in the deed to John P. Sutphin,
recorded October 19, 1973, in Book 331, Page 812, affecting the NW1/4 of Sec
25-22-50, and any and all assignments thereof or interests therein.

 

7.                                       Those
mineral rights retained by Carl E. Millyard in that certain deed shown in Book
330 at Page 19, as reserved by John Sutphin, aka John Sutphin, Jr. aka John P.
Sutphin, aka John P. Sutphin, Jr. in the deed to Charles Chitwood, Trustee,
recorded February 15, 1983, in Book 369, Page 127, affecting S1/2SW1/4 of Sec
24-22-50, and E1/2 of Sec 23-22-50, and any and all assignments thereof or
interests therein.

 

8.                                       Terms,
agreements, provisions, conditions and obligations as contained in Agreement
for Electric Service to Irrigation Pump by and between Southeast Colorado Power
Association and John Sutphin Farms, recorded October 24, 1977, in Book 345,
Page 64, affecting SE1/4 of Sec 23-22-50.

 

 

9.                                       Terms,
agreements, provisions, conditions and obligations as contained in Agreement
Electric Service to Irrigation Pump by and between Southeast Colorado Power
Association and John Sutphin, recorded October 24, 1977, in Book 345, Page 67,
affecting SE1/4 of Sec 23-22-50.

 

10.                                 Terms,
agreements, provisions, conditions and obligations as contained in Agreement
for Electric Service for Irrigation and Water Pumping by and between Southeast
Colorado Power Association and Charles Chitwood, Trustee, recorded May 3, 1983,
in Book 370, Page 315, affecting Sec 23-22-50.

 

11.                                 Terms,
agreements, provisions, conditions and obligations as contained in Agreement
for Electric Service for Irrigation and Water Pumping by and between Southeast
Colorado Power Association and Charles Chitwood, Trustee, recorded May 3, 1983,
in Book 370, Page 316, affecting Sec 23-22-50.

 

12.                                 Terms,
agreements, provisions, conditions and obligations as contained in Agreement
for Electric Service for Irrigation and Water Pumping by and between Southeast
Colorado Power Association and Charles Chitwood, Trustee, recorded May 3, 1983,
in Book 370, Page 317, affecting Sec 23-22-50.

 

13.                                 Terms,
agreements, provisions, conditions and obligations as contained in Agreement
for Electric Service for Irrigation and Water Pumping by and between Southeast
Colorado Power Association and Charles Chitwood, Trustee, recorded May 3, 1983,
in Book 370, Page 318, affecting Sec 23-22-50.

 

14.                                 Terms,
agreements, provisions, conditions and obligations as contained in Agreement
for Electric Service for Irrigation and Water Pumping by and between Southeast
Colorado Power Association and Charles Chitwood, Trustee, recorded May 3, 1983,
in Book 370, Page 321, affecting Sec 23-22-50.

 

FARM #85 (Water
Rights Only)

 

FARM #103A

 

1.                                       Subject to
any vested and accrued water rights for mining, agricultural, manufacturing, or
other purposes, and rights to ditches and reservoirs used in connection with
such water rights as may be recognized and acknowledged by the local customs,
laws and decisions of courts, and also subject to the right of the proprietor
of a vein or lode to extract and remove his ore therefrom, should the same be
found to penetrate or intersect the premises hereby granted, as provided by
law, as reserved in the following:  NW1/4
of Sec 12, dated December 15, 1890 and SW1/4 of Section 12, dated January 25,
1894.

 

2.                                       Undivided 1⁄2
grantors interest in all oil, gas and other mineral rights, as reserved by
Henry N. Leasure, Trustee of Margaret Leasure, Estate in the deed to Reyher
Enterprises, Inc. recorded January 17, 1968, in Book 478 at Page 191, covering
SW1/4 & S1/2NW1/4 of Sec 12, and any interests therein or rights
thereunder.

 

3.                                       Any and all
minerals, mineral rights and rights appurtenant thereto, in, or under lying in
the NE1/4 of said Section 14-22-46. NOTE: 
The record appears to be ambiguous and

 

 

uncertain with respect to reservations or conveyances of mineral
interests in said property. It appears, however, that the following are
appurtenant to the present surface ownership of said NW1/4:  1/8 interest in 148 mineral acres, 1⁄4 interest
in 10 mineral acres, and 1⁄2 interest in 20 mineral acres.

 

4.                                       Right of
way for roads, 30 feet in width, the centerlines of which are the North-South
and East-West centerlines of said Sections 11, 12 and 15 in Twp 22S Rge 46W as
reserved by deed from the Arkansas Valley Sugar Beet and Irrigated Land Co at
the following Books and Pages in Prowers County records:  Book 321, Page 591; Book 328, Page 563; Book
93, Page 239; Book 93, Page 237; Book 158, Page 12; Book 158, Page 13; Book
158, Page 11; and Book 93, Page 193.

 

FARM #103B (Water
Rights Only)

 

FARM #107

 

1.                                       Right of
way easement for telecommunications through S1/2 Sec 18-22-46 from R.W. Logue
& Bessie Logue to AT & T Co filed March 28, 1929 in Book 310, Page 168.

 

2.                                       Right of
way for road in S1/2 Sec 18-22-46 in deed from M.R. Sunday to Board of County
Commissioners filed March 22, 1937 at Book 265, Page 485.

 

3.                                       Easement
for power transmission in S1/2 Sec 18-22-46 in deed from M.R. Sunday to Bent
Prowers Rural Power Lines Association filed November 7, 1938 at Book 273, Page
373.

 

4.                                       Right of
way for pump and ditch in NE1/4 Sec 14-11-47 in deed from Grover L. Carrico,
Executor of Adolph Marburg to E.J. Wagner and James E. Wagner filed March 30,
1950 at Book 346, Page 575.

 

5.                                       Grant for
permission to move a pump from its present location to a point on the Marburg
Seepage Ditch from Grover L. Carrico, Executor for Adolph Marburg, Deceased to
E.J. Wagner and James E. Wagner filed March 30, 1950 at Book 346, page 575.

 

6.                                       Right of
way along the North side and long the West side of E1/2 Sec 14-22-47 so that
water rights may be carried to the NE1/4 Sec 23-22-47, in deed from Grover L.
Carrico, Executor of Adolph Marburg, Deceased to E.J. Wagner and James E.
Wagner filed March 30, 1950 at Book 346, Page 575, together with a right of way
from Southwest corner of E1/2 Sec 14-22-47 North along the West line of E1/2
Sec 14-22-47 to Marburg Seepage Ditch to do any maintenance or repair work.

 

7.                                       Reservation
of right of way for any ditches or canals constructed by authority of the
United States, in U.S. Patent recorded March 6, 1902, in Book 25 at Page 322,
covering S1/2SE1/4 Sec 14-22-47.

 

8.                                       Reservation
of undivided 1⁄2 minerals in the instrument from Federal Land Bank to Arthur F.
Esgar recorded February 10, 1943 at Book 290, Page 325, covering N1/2NW1/4 Sec
14-22-47, together with the appurtenant rights to use the surface.

 

 

FARM #110  (Water Rights Only)

 

FARM #114

 

1.                                       Reservation
of all minerals in the instrument from State of Colorado to George R. Wilson
recorded July 9, 1927 at Book 153, Page 512, together with the appurtenant
rights to use the surface.

 

2.                                       Right of
way for pipeline from Josephine L. Dotson, et al. to Pleasant Valley Water
Association filed May 10, 1967 recorded in Plat Book, covering W1/2NE1/4 Sec
11-21-48.

 

3.                                       Right of
way for pipeline from Sam M. Wollert and Mildred L. Wollert to The Nueces
Company filed January 5, 1981 at Book 356, Page 850, covering a strip 50 feet
wide across NW1/4 & W1/2 & NE1/4 Sec 11-21-48.

 

FARM #116

 

1.                                       Reservation
of undivided 1⁄2 minerals in the instrument from Harvey Thomas Rowe and Mabel M.
Rowe to George Pallaoro recorded November 18, 1976 at Book 342, Page 135,
covering NE1/4 Sec 26-21-48, together with the appurtenant rights to use the
surface.

 

2.                                       Right of
way for pipeline through NE1/4 Sec 26-21-48 from Robert Smith and Norma Smith
to May Valley Water Association filed April 18, 1996 under Reception No.
1996456.

 

3.                                       Any claim
which arises by virtue of Notice of Lien as given by the Utilities Board of the
City of Lamar as recorded January 26, 2000 at Reception No. 487480.

 

4.                                       Reservation
of right of way for any ditches or canals constructed by authority of the
United States, in U.S. Patent recorded November 13, 1917, in Book 89 at Page 2,
covering NE1/4 Sec 34-21-48.

 

5.                                       Reservation
of right of way for any ditches or canals constructed by authority of the
United States, in U.S. Patent recorded November 6, 1920, in Book 105 at Page
283, covering SE1/4 Sec 34-21-48.

 

6.                                       Reservation
of undivided 1⁄2 minerals in the instrument from Jacob S. Johnson, Lydia C.
Johnson, Ben A. Johnson, Clarence Lincoln Johnson, Hanna O’Brien, and Ruby
LaVerne Woodcock to Otto Centner recorded January 26, 1959 at Book 277, Page
349, covering NE1/4 Sec 34-21-48, together with the appurtenant rights to use
the surface.

 

7.                                       Reservation
of undivided 1⁄2 minerals in the instrument from Otto & Minnie Centner to
George Pallaoro recorded October 15, 1973 at Book 331, Page 730, covering SE1/4
Sec 34-21-48 East of Right of Way of Ft. Lyon Canal, together with the
appurtenant rights to use the surface.

 

8.                                       Reservation
of right of way for any ditches or canals constructed by authority of the
United States, in U.S. Patent recorded January 14, 1999, in Book 14 at Page 75,
covering NW1/4 Sec 35-21-48.

 

9.                                       Reservation
of undivided 1⁄2 minerals in the instrument from Harold L. Rowe, Cora E.
Nickerson, Ruby Mann & Amelia E. Rowe to Dave & Lydia Reyher recorded
February

 

 

1, 1966 at Book 308, Page 435,
covering NE1/4 Sec 35-21-48, together with the appurtenant rights to use the
surface.

 

10.                                 Reservation
of undivided 1⁄4 minerals in the instrument from William O. Centner to D.L.
Pomeroy recorded October 15, 1973 at Book 331, Page 725, covering NE1/4 Sec
35-21-48, together with the appurtenant rights to use the surface.

 

11.                                 Reservation
of undivided 1⁄2 minerals in the instrument from Otto Centner to George Pallaoro
recorded October 15, 1973 at Book 331, Page 730, covering S1/2NW1/4 Sec
21-22-48 and NW1/4 & triangular tract in Sec 35-21-48, together with the
appurtenant rights to use the surface.

 

12.                                 Oil and Gas
lease between George & Nancy Pallaoro and Ellora LLC dated February 7, 2003
and filed May 21, 2003 under Reception No. 20030657, for a term of 5 years.

 

13.                                 Reservation
of all minerals in the instrument from State of Colorado to Harold Rowe
recorded May 3, 1954 at Book 248, Page 284, covering W1/2NW1/4 Sec 36-21-48,
together with the appurtenant rights to use the surface.

 

14.                                 Reservation
of all minerals in the instrument from State of Colorado to Otto J. Centner and
Minnie Centner recorded February 1, 1957 at Book 267, Page 594, covering
E1/2NW1/4 Sec 36-32-48, together with the appurtenant rights to use the
surface.

 

15.                                 Reservation
of right of way for any ditches or canals constructed by authority of the
United States, in U.S. Patent recorded January 21, 1944, in Book 213 at Page
332, covering S1/2NW1/4 and Lots 3 & 4 of Sec 2-22-48.

 

16.                                 Oil and Gas
Lease between Nancy Pallaoro and George Pallaoro and Rhodes Interests, Ltd.
Dated September 28, 2003 and recorded under Reception No. 20031249, for a term
of 5 years.

 

FARM #117  (Water Rights Only)

 

FARM #118

 

1.                                       Right of
Way Deed from J.K. Mullen to The Atchison, Topeka and Santa Fe Railway Company,
dated July 18, 1908 and recorded July 24, 1908 at Book 59, Page 578, covering a
strip of land 100 feet wide in Sec 16-22-46.

 

FARM #127

 

Awaiting receipt of title policy

 

FARM #132  (Water Rights Only)

 

 

FARM #140

 

1.                                       Right of
way easement for electric transmission or redistribution lines in deed from W
W. Hall and Beulah M. Hall to Bent-Prowers Rural Power Lines Association dated
June 21, 1938 and recorded April 27, 1939 at Book 200, Page 124.

 

2.                                       Agreement
for purchase of power from Southeast Colorado Power Association to Bob
Blackburn or Connie Blackburn, dated July 10, 2000, recorded at Reception No.
20001335.

 

FARM #141

 

Awaiting receipt of title policy

 

 

Schedule 3.12

 

Taxes

 

1.             Returns and Taxes for
the year 2005.

 

2.             Taxes and assessments
related to the Property for the year 2006, which are a lien but are not yet due
and payable.

 

 

Schedule 7.4

 

Title Insurance

 

	
  Farm

  	
   

  	
  Amount Insured on

  Existing Title Policy

  	
   

  
	
  Farm 1

  	
   

  	
  $

  	
  318,637.50

  	
   

  
	
  Farm 2

  	
   

  	
  $

  	
  199,500.00

  	
   

  
	
  Farm 3

  	
   

  	
  $

  	
  116,415.00

  	
   

  
	
  Farm 4

  	
   

  	
  Water Rights Only

  	
   

  
	
  Farm 5

  	
   

  	
  $

  	
  163,792.00

  	
   

  
	
  Farm 6

  	
   

  	
  $

  	
  271,040.00

  	
   

  
	
  Farm 7

  	
   

  	
  $

  	
  395,500.00

  	
   

  
	
  Farm 8

  	
   

  	
  $

  	
  267,820.00

  	
   

  
	
  Farm 9

  	
   

  	
  $

  	
  178,140.00

  	
   

  
	
  Farm 10

  	
   

  	
  $

  	
  267,750.00

  	
   

  
	
  Farm 11

  	
   

  	
  $

  	
  191,817.50

  	
   

  
	
  Farm 12

  	
   

  	
  $

  	
  143,535.00

  	
   

  
	
  Farm 13

  	
   

  	
  $

  	
  255,237.50

  	
   

  
	
  Farm 14

  	
   

  	
  $

  	
  251,440.00

  	
   

  
	
  Farm 15

  	
   

  	
  $

  	
  515,358.37

  	
   

  
	
  Farm 16

  	
   

  	
  $

  	
  227,881.00

  	
   

  
	
  Farm 16B

  	
   

  	
  $

  	
  227,881.00

  	
   

  
	
  Farm 17

  	
   

  	
  $

  	
  476,542.50

  	
   

  
	
  Farm 18

  	
   

  	
  $

  	
  395,093.00

  	
   

  
	
  Farm 19

  	
   

  	
  $

  	
  417,637.50

  	
   

  
	
  Farm 20

  	
   

  	
  $

  	
  1,291,213.00

  	
   

  
	
  Farm 21

  	
   

  	
  $

  	
  195,000.00

  	
   

  
	
  Farm 22

  	
   

  	
  $

  	
  390,568.00

  	
   

  
	
  Farm 23

  	
   

  	
  $

  	
  272,530.00

  	
   

  
	
  Farm 24

  	
   

  	
  $

  	
  204,855.00

  	
   

  
	
  Farm 25

  	
   

  	
  $

  	
  741,218.00

  	
   

  
	
  Farm 26a

  	
   

  	
  $

  	
  96,319.00

  	
   

  
	
  Farm 26b

  	
   

  	
  $

  	
  96,319.00

  	
   

  
	
  Farm 27

  	
   

  	
  $

  	
  887,337.50

  	
   

  
	
  Farm 28

  	
   

  	
  $

  	
  269,098.00

  	
   

  
	
  Farm 30

  	
   

  	
  $

  	
  524,790.00

  	
   

  
	
  Farm 31

  	
   

  	
  $

  	
  137,375.00

  	
   

  
	
  Farm 32

  	
   

  	
  $

  	
  173,425.00

  	
   

  
	
  Farm 33

  	
   

  	
  $

  	
  231,095.00

  	
   

  
	
  Farm 34

  	
   

  	
  $

  	
  455,400.00

  	
   

  
	
  Farm 35

  	
   

  	
  $

  	
  400,230.00

  	
   

  
	
  Farm 36

  	
   

  	
  $

  	
  276,045.00

  	
   

  
	
  Farm 37

  	
   

  	
  $

  	
  283,670.00

  	
   

  
	
  Farm 38

  	
   

  	
  $

  	
  1,365,000.00

  	
   

  

 

 

	
  Farm 39

  	
   

  	
  $

  	
  1,779,304.00

  	
   

  
	
  Farm 40

  	
   

  	
  $

  	
  111,650.00

  	
   

  
	
  Farm 41

  	
   

  	
  $

  	
  185,780.00

  	
   

  
	
  Farm 42

  	
   

  	
  $

  	
  369,460.00

  	
   

  
	
  Farm 43

  	
   

  	
  $

  	
  697,813.00

  	
   

  
	
  Farm 44

  	
   

  	
  $

  	
  426,820.00

  	
   

  
	
  Farm 45

  	
   

  	
  $

  	
  388,517.50

  	
   

  
	
  Farm 46

  	
   

  	
  $

  	
  1,340,885.00

  	
   

  
	
  Farm 47

  	
   

  	
  $

  	
  137,375.00

  	
   

  
	
  Farm 48

  	
   

  	
  $

  	
  726,303.50

  	
   

  
	
  Farm 49

  	
   

  	
  $

  	
  504,000.00

  	
   

  
	
  Farm 50

  	
   

  	
  Water Rights Only

  	
   

  
	
  Farm 51

  	
   

  	
  $

  	
  362,238.36

  	
   

  
	
  Farm 52

  	
   

  	
  $

  	
  271,250.00

  	
   

  
	
  Farm 53

  	
   

  	
  $

  	
  295,820.00

  	
   

  
	
  Farm 54

  	
   

  	
  $

  	
  565,434.00

  	
   

  
	
  Farm 55

  	
   

  	
  $

  	
  420,000.00

  	
   

  
	
  Farm 56

  	
   

  	
  $

  	
  625,327.50

  	
   

  
	
  Farm 57

  	
   

  	
  $

  	
  136,257.00

  	
   

  
	
  Farm 58

  	
   

  	
  $

  	
  265,317.50

  	
   

  
	
  Farm 59

  	
   

  	
  $

  	
  148,975.20

  	
   

  
	
  Farm 60A

  	
   

  	
  $

  	
  41,471.60

  	
   

  
	
  Farm 60B

  	
   

  	
  $

  	
  10,367.90

  	
   

  
	
  Farm 60C

  	
   

  	
  $

  	
  41,471.60

  	
   

  
	
  Farm 60D

  	
   

  	
  $

  	
  10,367.90

  	
   

  
	
  Farm 60E

  	
   

  	
  $

  	
  10,367.90

  	
   

  
	
  Farm 60F

  	
   

  	
  $

  	
  10,367.90

  	
   

  
	
  Farm 60G

  	
   

  	
  $

  	
  41,471.60

  	
   

  
	
  Farm 60H

  	
   

  	
  $

  	
  41,471.60

  	
   

  
	
  Farm 61

  	
   

  	
  Water Rights Only

  	
   

  
	
  Farm 62

  	
   

  	
  $

  	
  325,800.00

  	
   

  
	
  Farm 63

  	
   

  	
  Water Rights Only

  	
   

  
	
  Farm 64

  	
   

  	
  $

  	
  401,629.50

  	
   

  
	
  Farm 65

  	
   

  	
  $

  	
  240,295.00

  	
   

  
	
  Farm 66

  	
   

  	
  $

  	
  82,388.25

  	
   

  
	
  Farm 67

  	
   

  	
  $

  	
  140,700.00

  	
   

  
	
  Farm 69

  	
   

  	
  $

  	
  265,632.50

  	
   

  
	
  Farm 70

  	
   

  	
  $

  	
  149,672.50

  	
   

  
	
  Farm 85

  	
   

  	
  Water Rights Only

  	
   

  
	
  Farm 103A

  	
   

  	
  $

  	
  916,422.50

  	
   

  
	
  Farm 103B

  	
   

  	
  Water Rights Only

  	
   

  
	
  Farm 107

  	
   

  	
  $

  	
  988.697.50

  	
   

  
	
  Farm 110

  	
   

  	
  Water Rights Only

  	
   

  
	
  Farm 114

  	
   

  	
  $

  	
  350,075.00

  	
   

  
	
  Farm 116

  	
   

  	
  $

  	
  987,498.00

  	
   

  

 

 

	
  Farm 117

  	
   

  	
  Water Rights Only

  	
   

  
	
  Farm 118

  	
   

  	
  $

  	
  387,611.00

  	
   

  
	
  Farm 127

  	
   

  	
  Awaiting receipt of title policy

  	
   

  
	
  Farm 132

  	
   

  	
  Water Rights Only

  	
   

  
	
  Farm 140

  	
   

  	
  $

  	
  127,447.50

  	
   

  
	
  Farm 141

  	
   

  	
  Awaiting receipt of title policy

  	
   

  

 

 

Schedule 8.26

 

Pledged FLCC Share Certificates

 

	
  Farm

  #

  	
   

  	
  FLCC

  Certificate

  Number

  	
   

  	
  Number of

  Shares

  	
   

  	
  Lienholder (holds

  certificate unless

  noted at right) *

  	
   

  	
  Party Secured in

  Lienholder Rights

  (if any)

  
	
  1

  	
   

  	
  9494

  	
   

  	
  204

  	
   

  	
  Allard, Tommy L. and Mary K.

  	
   

  	
   

  
	
  2

  	
   

  	
  9495

  	
   

  	
  144

  	
   

  	
  Allard, Tommy L. and Mary K.

  	
   

  	
   

  
	
  3

  	
   

  	
  9559

  	
   

  	
  83

  	
   

  	
  Allen, Peggy S.

  	
   

  	
   

  
	
  4

  	
   

  	
  9561

  9562

  	
   

  	
  144

  108

  	
   

  	
  Bartholomew, Charley H.

  	
   

  	
   

  
	
  5

  	
   

  	
  9576

  9577

  	
   

  	
  80

  67

  	
   

  	
  None

  	
   

  	
   

  
	
  6

  	
   

  	
  9557

  	
   

  	
  143

  	
   

  	
  Bell, Jack G.

  	
   

  	
   

  
	
  7

  	
   

  	
  9496

  	
   

  	
  200

  	
   

  	
  Blackburn, Harry E., Jr. and Lorraine J.

  	
   

  	
   

  
	
  8

  	
   

  	
  9499

  9498

  	
   

  	
  100

  100

  	
   

  	
  Blackburn, Harry E., Jr. and Lorraine J.

  	
   

  	
   

  
	
  9

  	
   

  	
  9497

  	
   

  	
  140

  	
   

  	
  Blackburn, Harry E., Jr.

  	
   

  	
   

  
	
  10

  	
   

  	
  9545

  	
   

  	
  112

  	
   

  	
  Bland, Walter G.

  	
   

  	
   

  
	
  11

  	
   

  	
  9531

  	
   

  	
  138

  	
   

  	
  Bogner, Alvin L.

  	
   

  	
   

  
	
  12

  	
   

  	
  9530

  	
   

  	
  144

  	
   

  	
  Bogner, Lorena

  	
   

  	
   

  
	
  13

  	
   

  	
  9527

  	
   

  	
  188

  	
   

  	
  Bogner, Alvin L. and Lorena

  	
   

  	
   

  
	
  14

  	
   

  	
  9586

  	
   

  	
  118

  	
   

  	
  None

  	
   

  	
   

  
	
  15

  	
   

  	
  9585

  	
   

  	
  219

  	
   

  	
  None

  	
   

  	
   

  
	
  16a

  	
   

  	
  9578

  	
   

  	
  100

  	
   

  	
  Coen, Cleo D.

  	
   

  	
   

  
	
  16b

  	
   

  	
  9579

  	
   

  	
  100

  	
   

  	
  Coen, Donald W.

  	
   

  	
   

  
	
  17

  	
   

  	
  9570

  	
   

  	
  200

  	
   

  	
  Coen, Norman and Carol S.

  	
   

  	
   

  
	
  18

  	
   

  	
  9544

  	
   

  	
  314.20

  	
   

  	
  Darnell, Fred A. and Roxana L.

  	
   

  	
   

  
	
  19

  	
   

  	
  9541

  9542

  	
   

  	
  144

  144

  	
   

  	
  Denton, Bobby L. and Vickie B.

  	
   

  	
   

  
	
  20

  	
   

  	
  9488

  9489

  9490

  9491

  	
   

  	
  144

  397.60

  382

  239.92

  	
   

  	
  Dodson, Kenneth and Donna Revocable Trust

  	
   

  	
   

  
	
  21

  	
   

  	
  9532

  	
   

  	
  196

  	
   

  	
  None

  	
   

  	
   

  
	
  22

  	
   

  	
  9539

  9540

  	
   

  	
  108

  223.2

  	
   

  	
  Elder, William J. and Audra Jean

  	
   

  	
   

  
	
  23

  	
   

  	
  9048 (old cert # of lost certificate)

  	
   

  	
  245

  	
   

  	
  Elder, William J., Audra Jean and Brian C.

  	
   

  	
  The First National Bank of Las Animas

  

 

 

	
  Farm

  #

  	
   

  	
  FLCC

  Certificate

  Number

  	
   

  	
  Number of

  Shares

  	
   

  	
  Lienholder (holds

  certificate unless

  noted at right) *

  	
   

  	
  Party Secured in

  Lienholder Rights

  (if any)

  
	
  24

  	
   

  	
  9573

  	
   

  	
  210

  	
   

  	
  FSD Family Investments

  	
   

  	
   

  
	
  25

  	
   

  	
  9588

  	
   

  	
  322

  	
   

  	
  Fowler, Lucy R.

  	
   

  	
   

  
	
  26

  	
   

  	
  9529

  	
   

  	
  112

  	
   

  	
  Gilbert, David F. and Philbin, Margaret L.

  	
   

  	
   

  
	
  27

  	
   

  	
  9533

  9534

  9535

  9536

  	
   

  	
  144

  216

  156

  144

  	
   

  	
  Coy s. Ham and Diana P. Ham, Trustees

  	
   

  	
   

  
	
  28

  	
   

  	
  9508

  9503

  	
   

  	
  55.80

  100.80

  	
   

  	
  Hoffman, Ronald R. and Linda R.

  	
   

  	
  The First National Bank of Las Animas

  
	
  30

  	
   

  	
  9543

  	
   

  	
  232

  	
   

  	
  Hudson & Persyn, Ltd.

  	
   

  	
   

  
	
  31

  	
   

  	
  9506

  	
   

  	
  144

  	
   

  	
  Johnson, Sharon Y.

  	
   

  	
   

  
	
  32

  	
   

  	
  9572

  	
   

  	
  120

  	
   

  	
  Jones, Charles O. and Ruby L.

  	
   

  	
   

  
	
  33

  	
   

  	
  9644

  9645

  	
   

  	
  72

  36

  	
   

  	
  Miller Family Trust

  	
   

  	
   

  
	
  34

  	
   

  	
  9550

  	
   

  	
  414

  	
   

  	
  Miller, Jerry R. and Susan K.

  	
   

  	
  Valley State Bank

  
	
  35

  	
   

  	
  9505

  	
   

  	
  376

  	
   

  	
  Miller, Irl A. and Hazel A.

  	
   

  	
   

  
	
  36

  	
   

  	
  9537

  9538

  	
   

  	
  205

  7

  	
   

  	
  Pointon, Charles T. and Anita R.

  	
   

  	
   

  
	
  37

  	
   

  	
  9591

  	
   

  	
  144

  	
   

  	
  Colorado East Bank & Trust as successor to Boyd L. Quindt

  	
   

  	
   

  
	
  38

  	
   

  	
  9546

  9547

  9548

  9549

  	
   

  	
  288

  288

  288

  432

  	
   

  	
  George Reyher & Sons, Inc.

  	
   

  	
  The First National Bank of Las Animas

  
	
  39

  	
   

  	
  9767

  9768

  9769

  9770

  9771

  	
   

  	
  58

  72

  380

  200

  150

  	
   

  	
  George F. Reyher Family Trust and Pauline K. Reyher Revocable Trust

  	
   

  	
   

  
	
  40

  	
   

  	
  9825

  	
   

  	
  67

  	
   

  	
  Ricken, Mark A. and Linda C.

  	
   

  	
   

  
	
  41

  	
   

  	
  9582

  	
   

  	
  80

  	
   

  	
  None

  	
   

  	
   

  
	
  42

  	
   

  	
  9552

  	
   

  	
  166

  	
   

  	
  Root, Garold E.

  	
   

  	
   

  
	
  43

  	
   

  	
  9500

  9501

  9502

  	
   

  	
  238.5

  80

  238.5

  	
   

  	
  Rutkowski, James R. and Cecilia I.

  	
   

  	
   

  

 

 

	
  Farm

  #

  	
   

  	
  FLCC

  Certificate

  Number

  	
   

  	
  Number of

  Shares

  	
   

  	
  Lienholder (holds

  certificate unless

  noted at right) *

  	
   

  	
  Party Secured in

  Lienholder Rights

  (if any)

  
	
  44

  	
   

  	
  9503

  	
   

  	
  372.08

  	
   

  	
  Sakai, Elmo R.

  	
   

  	
   

  
	
  45

  	
   

  	
  9551

  	
   

  	
  216

  	
   

  	
  Schemahorn, Marie A.

  	
   

  	
   

  
	
  46

  	
   

  	
  9563

  9564

  9565

  9566

  9567

  9568

  	
   

  	
  288

  225.04

  144

  144

  288

  144

  	
   

  	
  None

  	
   

  	
   

  
	
  47

  	
   

  	
  9507

  	
   

  	
  144

  	
   

  	
  Slack, Hazel E.

  	
   

  	
  Estate of Hazel E. Slack c/o Mark A. MacDonnell

  
	
  48

  	
   

  	
  9553

  9554

  9555

  	
   

  	
  76

  144

  122

  	
   

  	
  Sniff, Curits G. and Karla R.

  	
   

  	
  McClave State Bank

  
	
  49

  	
   

  	
  9510

  9511

  	
   

  	
  248.4

  216

  	
   

  	
  Spady, Donald L.

  	
   

  	
   

  
	
  50

  	
   

  	
  9616

  	
   

  	
  72

  	
   

  	
  Strahan, Florence F.

  	
   

  	
   

  
	
  51

  	
   

  	
  9589

  9590

  	
   

  	
  143

  30

  	
   

  	
  W7, Inc.

  	
   

  	
   

  
	
  52

  	
   

  	
  9504

  	
   

  	
  238

  	
   

  	
  Wagner, Walter F. and Elizabeth C.

  	
   

  	
   

  
	
  53

  	
   

  	
  9526

  	
   

  	
  170

  	
   

  	
  Wertz Bros., LLC

  	
   

  	
   

  
	
  54

  	
   

  	
  9584

  9583

  	
   

  	
  144

  80

  	
   

  	
  Wertz, Ivon R.

  	
   

  	
   

  
	
  55

  	
   

  	
  9680

  	
   

  	
  216

  	
   

  	
  Emma M. Miller

  	
   

  	
   

  
	
  56

  	
   

  	
  9574

  	
   

  	
  372

  	
   

  	
  DiRezza, Daniel G. and Katrena L.

  	
   

  	
   

  
	
  57

  	
   

  	
  9575

  	
   

  	
  83

  	
   

  	
  Likes, William R., Jr. and Linda M.

  	
   

  	
   

  
	
  58

  	
   

  	
  9772

  	
   

  	
  121

  	
   

  	
  Reyher, Robert and Mary Katheryn

  	
   

  	
   

  
	
  59

  	
   

  	
  9601

  	
   

  	
  144

  	
   

  	
  Cumbie, Laddie and Kathy

  	
   

  	
   

  
	
  60

  	
   

  	
  9693

  9694

  9695

  9696

  9697

  	
   

  	
  21.16

  27.96

  27.96

  27.96

  27.96

  	
   

  	
  None

  	
   

  	
   

  
	
  61

  	
   

  	
  9738

  	
   

  	
  400

  	
   

  	
  None

  	
   

  	
   

  
	
  62

  	
   

  	
  9629

  	
   

  	
  207

  	
   

  	
  None

  	
   

  	
   

  
	
  63

  	
   

  	
  9731

  9732

  9733

  9734

  	
   

  	
  213

  144

  122

  144

  	
   

  	
  Webber, Johnnie J. and Marilyn V.

  	
   

  	
   

  

 

 

	
  Farm

  #

  	
   

  	
  FLCC

  Certificate

  Number

  	
   

  	
  Number of

  Shares

  	
   

  	
  Lienholder (holds

  certificate unless

  noted at right) *

  	
   

  	
  Party Secured in

  Lienholder Rights

  (if any)

  
	
  64

  	
   

  	
  9623

  	
   

  	
  224

  	
   

  	
  None

  	
   

  	
   

  
	
  65

  	
   

  	
  9628

  	
   

  	
  144

  	
   

  	
  None

  	
   

  	
   

  
	
  66

  	
   

  	
  9622

  	
   

  	
  60

  	
   

  	
  None

  	
   

  	
   

  
	
  67

  	
   

  	
  9617

  	
   

  	
  144

  	
   

  	
  Hawkins, Jack F., Jr.

  	
   

  	
   

  
	
  69

  	
   

  	
  9643

  	
   

  	
  100

  	
   

  	
  Elmore, Bennie Howard and Jo Ellen

  	
   

  	
   

  
	
  70

  	
   

  	
  9640

  	
   

  	
  60

  	
   

  	
  Stephens, Thomas H. and Aleta M.

  	
   

  	
   

  
	
  85

  	
   

  	
  9719

  	
   

  	
  144

  	
   

  	
  None

  	
   

  	
   

  
	
  103A

  	
   

  	
  N/A

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  103B

  	
   

  	
  966

  	
   

  	
  901

  	
   

  	
  May Farms

  	
   

  	
   

  
	
  107

  	
   

  	
  9651

  9641

  	
   

  	
  288

  280

  	
   

  	
  Wollert, Ruben R. and Doris J.

  	
   

  	
   

  
	
  110

  	
   

  	
  9677

  9678

  	
   

  	
  40

  112

  	
   

  	
  None

  	
   

  	
   

  
	
  114

  	
   

  	
  9659

  	
   

  	
  144

  	
   

  	
  Wollert, Mildred L.

  	
   

  	
   

  
	
  116

  	
   

  	
  9668

  9669

  9670

  	
   

  	
  144

  194

  144

  	
   

  	
  None

  	
   

  	
   

  
	
  117

  	
   

  	
  9686

  	
   

  	
  62

  	
   

  	
  None

  	
   

  	
   

  
	
  118

  	
   

  	
  9692

  	
   

  	
  230

  	
   

  	
  None

  	
   

  	
   

  
	
  127

  	
   

  	
  9705

  	
   

  	
  72

  	
   

  	
  None

  	
   

  	
   

  
	
  132

  	
   

  	
  9712

  9711

  	
   

  	
  215

  50

  	
   

  	
  None

  	
   

  	
   

  
	
  140

  	
   

  	
  9759

  	
   

  	
  108

  	
   

  	
  None

  	
   

  	
   

  
	
  141

  	
   

  	
  9760

  	
   

  	
  224

  	
   

  	
  None

  	
   

  	
   

  

 

* If there is no lienholder, the original certificate is held by High
Plains A & M, LLC (unless otherwise stated on schedule 3.9).

 

 

Schedule 8.29

 

Homes

 

Potential Home Sites:

 

	
  Farm Name

  	
   

  	
  Acres

  	
   

  	
  Mortgage

  	
   

  	
  Est. Value

  	
   

  	
  Area

  	
   

  	
  Comments

  	
   

  
	
  Pallaoro

  	
   

  	
  2.75

  	
   

  	
  No

  	
   

  	
  $

  	
  20,000

  	
   

  	
  Big Bend

  	
   

  	
  Has partially burnt house

  	
   

  
	
  Pallaoro

  	
   

  	
  5.25

  	
   

  	
  No

  	
   

  	
  $

  	
  36,000

  	
   

  	
  Big Bend

  	
   

  	
  Under contract

  	
   

  
	
  Pallaoro

  	
   

  	
  3.0+

  	
   

  	
  No

  	
   

  	
  $

  	
  35,000

  	
   

  	
  Big Bend

  	
   

  	
  Included in farm lease through 2008

  	
   

  
	
  Bogner

  	
   

  	
  20.0+

  	
   

  	
  Yes

  	
   

  	
  $

  	
  15,000

  	
   

  	
  West LA

  	
   

  	
  Has old abandoned house

  	
   

  
	
  Elder

  	
   

  	
  2.7

  	
   

  	
  Yes

  	
   

  	
  $

  	
  20,000

  	
   

  	
  East LA

  	
   

  	
  Has barn that we use for HP storage

  	
   

  
	
  Edwards

  	
   

  	
  7.0+

  	
   

  	
  No

  	
   

  	
  $

  	
  20,000

  	
   

  	
  East LA

  	
   

  	
  Large tree grove with domestic well

  	
   

  
	
  Rutkowski

  	
   

  	
  2.9

  	
   

  	
  Yes

  	
   

  	
  $

  	
  7,500

  	
   

  	
  East LA

  	
   

  	
   

  	
   

  
	
  Wollert Ent.

  	
   

  	
  1.75

  	
   

  	
  Yes

  	
   

  	
  $

  	
  15,000

  	
   

  	
  South Lamar

  	
   

  	
  Can’t sell until corporate structure is changed

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  168,500

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Larger Non-Irrigated Acres:

 

	
  Farm Name

  	
   

  	
  Acres

  	
   

  	
  Mortgage

  	
   

  	
  Est. Value

  	
   

  	
  Description

  	
   

  
	
  Gilbert/Philbin

  	
   

  	
  100+

  	
   

  	
  Yes

  	
   

  	
  $

  	
  20,000

  	
   

  	
  N1/2SW1/4 S30-T22S-R48W (Lease through 2008)

  	
   

  
	
  Hudson

  	
   

  	
  35+

  	
   

  	
  Yes

  	
   

  	
  $

  	
  17,500

  	
   

  	
  Middle of the NW1/4 S1-T22S-R48W (Lease through 2008)

  	
   

  
	
  Pallaoro

  	
   

  	
  140+

  	
   

  	
  No

  	
   

  	
  $

  	
  28,000

  	
   

  	
  NE1/4 S34-T21S-R48W

  	
   

  
	
  Pallaoro

  	
   

  	
  70

  	
   

  	
  No

  	
   

  	
  $

  	
  14,000

  	
   

  	
  S1/2NW1/4 S2-T22S-R48W

  	
   

  
	
  Root

  	
   

  	
  140

  	
   

  	
  Yes

  	
   

  	
  $

  	
  28,000

  	
   

  	
  W1/2SE1/4 & Part of E1/2SW1/4 S28-T22S-R48W (Lease through 2008)

  	
   

  
	
  Quint

  	
   

  	
  39

  	
   

  	
  Yes

  	
   

  	
  $

  	
  9,750

  	
   

  	
  Above Canal NE1/4 S10-T22S-R48W

  	
   

  
	
  Reyher Trust

  	
   

  	
  50+

  	
   

  	
  Yes

  	
   

  	
  $

  	
  10,000

  	
   

  	
  West of Seep Ditch NW1/4 S12-T22S-R48W

  	
   

  
	
  Sniff

  	
   

  	
  40

  	
   

  	
  Yes

  	
   

  	
  $

  	
  10,000

  	
   

  	
  Portion of the SE1/4 S16-T22S-R48W (Lease through 2008)

  	
   

  
	
  Montgomery

  	
   

  	
  31

  	
   

  	
  No

  	
   

  	
  $

  	
  7,750

  	
   

  	
  NW1/3NW1/4 S33-T22S-R48W (Lease through 2008)

  	
   

  
	
  Stephens

  	
   

  	
  300+

  	
   

  	
  Yes

  	
   

  	
  $

  	
  60,000

  	
   

  	
  SE1/2 S23-T22S-R50W

  	
   

  
	
  W7 Inc.

  	
   

  	
  70+

  	
   

  	
  Yes

  	
   

  	
  $

  	
  17,500

  	
   

  	
  East LA has 2 old abandoned houses

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  222,500

  	
   

  	
   

  	
   

  

 

 

PURE CYCLE
SCHEDULES

 

The following is a list
of schedules and exceptions to certain of the representations and warranties
made by Pure Cycle Corporation (“Pure Cycle”) in that certain Asset Purchase
Agreement (the “Agreement”) dated May 10, 2006 between High Plains
A&M, LLC, and Pure Cycle Corporation. Unless otherwise indicated, all
section references are to sections of the Agreement.

 

Nothing in these
schedules shall constitute an admission of any liability or obligation of Pure
Cycle to any third party or acknowledgement that any matter disclosed in these
schedules is required to be disclosed (particularly where such disclosure is
required in accordance with a materiality standard or as not in the ordinary
course of business). The disclosures in these schedules are made in response to
the representations and warranties of Pure Cycle and certain covenants in the
Agreement; and no disclosure made in these schedules shall be deemed to modify
in any respect the standard of materiality or knowledge set forth in any
representation, warranty, covenant or other provision contained in the
Agreement.

 

 

Schedule 2.5(b) to Asset Purchase Agreement

By and Among Pure Cycle Corporation and High Plains A&M, LLC

 

TBD at effective date.

 

 

Schedule 4.3(b) to Asset Purchase Agreement

By and Among Pure Cycle Corporation and High Plains A&M, LLC

 

As of the date of this
Agreement, Pure Cycle has the following outstanding stock options, with the
following expiration dates and vesting terms and warrants.

 

	
  Options vested and exercisable:

  	
   

  	
  Unvested options:

  	
   

  
	
  Expiration Date:

  	
   

  	
  Options

  	
   

  	
  Expiration Date:

  	
   

  	
  Options

  	
   

  
	
  August 31, 2007

  	
   

  	
  788,840

  	
   

  	
  August 6, 2014

  	
   

  	
  25,000

  	
  (1)

  
	
  April 30, 2014

  	
   

  	
  15,000

  	
   

  	
  April 18, 2015

  	
   

  	
  2,500

  	
  (2)

  
	
  August 6, 2014

  	
   

  	
  25,000

  	
   

  	
  April 12, 2016

  	
   

  	
  7,500

  	
  (3)

  
	
  April 12, 2015

  	
   

  	
  7,500

  	
   

  	
  April 18, 2016

  	
   

  	
  2,500

  	
  (4)

  
	
  April 18, 2015

  	
   

  	
  2,500

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  838,840

  	
   

  	
   

  	
   

  	
  37,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total options outstanding

  	
   

  	
  876,340

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Options available for granting pursuant to
  stockholder approved option plans:

  	
   

  	
  1,512,500

  	
  (5)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total warrants outstanding:

  	
   

  	
  15,612

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(1)  50% vest August 2006 and 50% vest August 2007

(2)  Fully vest on April 18, 2007

(3)  Fully vest on April 12, 2007

(4)  Fully vest on April 18, 2007

(5)  Can only be granted by the Compensation
Committee of the Board of Directors

 

There are no outstanding
stock subscriptions, calls, rights or other agreements requiring Pure Cycle to
issue common stock other than those listed above. Pure Cycle has the right, but
not the obligation, to redeem the Series B Preferred Stock at any time for
cash.

 

 

Schedule 4.5 to Asset Purchase Agreement

By and Among Pure Cycle Corporation and High Plains A&M, LLC

 

As disclosed in Pure
Cycle’s SEC Reports, Pure Cycle’s Paradise Water Supply is subject to a Finding
of Reasonable Diligence every six years. The latest review of Pure Cycle’s
conditional Paradise Water rights began in fiscal 2005. As disclosed in Pure
Cycle’s Interim Financial Statements on Form 10-Q for the three and six months
ended February 28, 2006, subsequent to the filing of Pure Cycle’s Form
10-Q for the three months ended November 30, 2005, Pure Cycle learned of
two objectors to its Paradise Water rights. As of the date of this Agreement,
Pure Cycle is unaware of the reasons for the objections or the impact this may
have on the ultimate outcome of the review. In each of the past four reviews,
Pure Cycle’s Paradise Water rights have had objectors, and each time the
objectors have withdrawn their objections before the review was remitted to the
Water Court. Pure Cycle intends to vigorously defend its Paradise Water Supply
throughout this review process and Pure Cycle believes the fair value of the
Paradise Water Supply is not impaired.

 

 

Schedule 4.12 to Asset Purchase Agreement

By and Among Pure Cycle Corporation and High Plains A&M, LLC

 

The following represent the Liens, rights,
mortgages, leases, conditional sales, title retention agreements and other
agreements that require or could require Pure Cycle to pay all or a portion of
its tap fees to third parties.

 

•                  The Comprehensive Amendment Agreement
No. 1 dated April 11, 1996;

 

•                  Mortgage Deed, Security Agreement,
and Financing Statement dated April 11, 2006 (Pledge of Rangeview Water to
Secure Comprehensive Amendment Agreement on behalf of the State of Colorado);

 

•                  Water Service Agreement for the Sky Ranch PUD
dated October 31, 2003 (Water dedicated by Sky Ranch is pledged in the event of
a default by Pure Cycle); and

 

•                  Water Service Agreement for the Hills
at Sky Ranch dated May 14, 2004 (Water dedicated by Hills at Sky Ranch is
pledged in the event of default by Pure Cycle).

 

 

Schedule 4.14 to Asset Purchase Agreement

By and Among Pure Cycle Corporation and High Plains A&M, LLC

 

(a)           Customers.
As disclosed in Pure Cycle’s Annual Report on Form 10-KSB for the year ended
August 31, 2005, for the year ended August 31, 2005, 98% of Pure
Cycle’s sales were from two customers, Ridgeview Youth Service Center and
Schmidt Aggregate.

 

(b)           Suppliers.
None.

 

(c)           Taps
sold for which Seller will not be entitled to a Tap Participation Fee.

 

	
  Lowry Range Property

  	
   

  	
  202

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Arapahoe County

  	
   

  	
  39Exhibit 10.1

BIOSPHERE MEDICAL, INC.

2006 STOCK INCENTIVE PLAN

1.             Purpose

The purpose of this 2006 Stock Incentive Plan (the “Plan”)
of BioSphere Medical, Inc., a Delaware corporation
(the “Company”), is to advance the interests of the Company’s stockholders by
enhancing the Company’s ability to attract, retain and motivate persons who are
expected to make important contributions to the Company and by providing such
persons with equity ownership opportunities and performance-based incentives
that are intended to align their interests with those of the Company’s
stockholders. Except where the context otherwise requires, the term “Company”
shall include any of the Company’s present or future parent or subsidiary
corporations as defined in Sections 424(e) or (f) of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the “Code”) and any other business venture (including, without
limitation, joint venture or limited liability company) in which the Company
has a controlling interest, as determined by the Board of Directors of the
Company (the “Board”).

2.             Eligibility

All of the Company’s employees, officers, directors,
consultants and advisors are eligible to receive options, stock appreciation
rights, restricted stock, restricted stock units and other stock unit awards
(each, an “Award”) under the Plan. Each person who receives an Award under the
Plan is deemed a “Participant”.

3.             Administration
and Delegation

(a)           Administration by
Board of Directors. The Plan will be administered by the Board. The Board
shall have authority to grant Awards and to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable. The Board may construe and interpret the terms of the Plan and
any Award agreements entered into under the Plan. The Board may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or any
Award in the manner and to the extent it shall deem expedient to carry the Plan
into effect and it shall be the sole and final judge of such expediency. All
decisions by the Board shall be made in the Board’s sole discretion and shall
be final and binding on all persons having or claiming any interest in the Plan
or in any Award. No director or person acting pursuant to the authority
delegated by the Board shall be liable for any action or determination relating
to or under the Plan made in good faith.

(b)           Appointment of
Committees. To the extent permitted by applicable law, the Board may
delegate any or all of its powers under the Plan to one or more committees or
subcommittees of the Board (a “Committee”). During such time as the common
stock, $0.01 par value per share, of the
Company (the “Common Stock”) is registered under the Securities Exchange Act of
1934 (the “Exchange Act”), the Board shall appoint one such Committee of not
less than two members, each member of which shall be an “outside director”
within the meaning 

 

of Section 162(m) of the Code and a “non-employee
director” as defined in Rule 16b-3 promulgated under the Exchange
Act. All references in the Plan to the “Board” shall mean the Board or a
Committee of the Board or the officers referred to in Section 3(c) to
the extent that the Board’s powers or authority under the Plan have been delegated
to such Committee or officers.

(c)           Delegation
to Officers. To the extent permitted by applicable law, the Board may
delegate to one or more officers of the Company the power to grant Awards to
employees or officers of the Company or any of its present or future subsidiary
corporations and to exercise such other powers under the Plan as the Board may
determine, provided that the Board shall fix the terms of the Awards to be
granted by such officers (including the exercise price of such Awards, which may
include a formula by which the exercise price will be determined) and the
maximum number of shares subject to Awards that the officers may grant;
provided further, however, that no officer shall be authorized to grant Awards
to any “executive officer” of the Company (as defined by Rule 3b-7
under the Exchange Act of 1934) or to any “officer” of the Company (as defined
by Rule 16a-1 under the Exchange Act).

4.             Stock Available for Awards

(a)           Number
of Shares. Subject to adjustment under Section 10, Awards may be made
under the Plan for up to 2,000,000 shares of Common Stock. If any Award expires
or is terminated, surrendered or canceled without having been fully exercised,
is forfeited in whole or in part (including as the result of shares of Common
Stock subject to such Award being repurchased by the Company at the original
issuance price pursuant to a contractual repurchase right), is settled in cash
or otherwise results in any Common Stock not being issued, the unused Common
Stock covered by such Award shall again be available for the grant of Awards
under the Plan. However, in the case of Incentive Stock Options (as hereinafter
defined), the foregoing provisions shall be subject to any limitations under
the Code. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.

(b)           Sub-limits.
Subject to adjustment under Section 10, the following sub-limits on the
number of shares subject to Awards shall apply:

(1)           Section 162(m) Per-Participant
Limit. The maximum number of shares of Common Stock with respect to which
Awards may be granted to any Participant under the Plan shall be 600,000 per calendar year. For purposes of
the foregoing limit, the combination of an Option in tandem with an SAR (as
each is hereafter defined) shall be treated as a single Award. The per-Participant
limit described in this Section 4(b)(1) shall be construed and
applied consistently with Section 162(m) of the Code or any successor
provision thereto, and the regulations thereunder (“Section 162(m)”).

(2)           Limit
on Awards to Directors. The maximum number of shares with respect to which
Awards may be granted to any director who is not an employee of the Company at
the time of grant shall be 50,000 per calendar year.

(c)           Substitute
Awards. In connection with a merger or consolidation of an entity with the
Company or the acquisition by the Company of property or stock of an entity,
the Board may 

 2
 

 

grant Awards in substitution for any options or other
stock or stock unit awards granted by such entity or an affiliate thereof. Substitute
Awards may be granted on such terms as the Board deems appropriate in the
circumstances, notwithstanding any limitations on Awards contained in the Plan.
Substitute Awards shall not count against the
overall share limit set forth in Section 4(a), except as may be required
by reason of Section 422 and related provisions of the Code.

5.             Stock Options

(a)           General.
The Board may grant options to purchase Common Stock (each, an “Option”) and
determine the number of shares of Common Stock to be covered by each Option,
the exercise price of each Option and the conditions and limitations applicable
to the exercise of each Option, including conditions relating to applicable
federal or state securities laws, as it considers necessary or advisable. An
Option that is not intended to be an Incentive Stock Option (as hereinafter
defined) shall be designated a “Nonstatutory Stock Option.”

(b)           Incentive
Stock Options. An Option that the Board intends to be an “incentive stock option”
as defined in Section 422 of the Code (an “Incentive Stock Option”) shall
only be granted to employees of BioSphere Medical, Inc., any of BioSphere
Medical, Inc.’s present or future parent or subsidiary corporations as
defined in Sections 424(e) or (f) of the Code, and any other entities
the employees of which are eligible to receive Incentive Stock Options under
the Code, and shall be subject to and shall be construed consistently with the
requirements of Section 422 of the Code. The Company shall have no
liability to a Participant, or any other party, if an Option (or any part
thereof) that is intended to be an Incentive Stock Option is not an Incentive
Stock Option or for any action taken by the Board, including without limitation
the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.

(c)           Exercise
Price. The Board shall establish the exercise price of each Option and
specify such exercise price in the applicable option agreement; provided,
however, that the exercise price shall be not less than 100% of the Fair Market
Value (as defined below) on the date the Option is granted.

(d)           Duration
of Options. Each Option shall be exercisable at such times and subject to
such terms and conditions as the Board may specify in the applicable option
agreement, provided, however, that no Option will be granted for a term in
excess of 10 years.

(e)           Exercise
of Option. Options may be exercised by delivery to the Company of a written
notice of exercise signed by the proper person or by any other form of notice
(including electronic notice) approved by the Board, together with payment in
full as specified in Section 5(f) for the number of shares for which
the Option is exercised. Shares of Common Stock subject to the Option will be
delivered by the Company following exercise either as soon as practicable or,
subject to such conditions as the Board shall specify, on a deferred basis
(with the Company’s obligation to be evidenced by an instrument providing for
future delivery of the deferred shares at the time or times specified by the
Board).

(f)            Payment
Upon Exercise. Common Stock purchased upon the exercise of an Option
granted under the Plan shall be paid for as follows:

(1)           in
cash or by check, payable to the order of the Company;

 3
 

 

(2)           except
as may otherwise be provided in the applicable option agreement, by (i) delivery
of an irrevocable and unconditional undertaking by a creditworthy broker to
deliver promptly to the Company sufficient funds to pay the exercise price and
any required tax withholding or (ii) delivery by the Participant to the
Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price and any required tax withholding;

(3)           to
the extent provided for in the applicable option agreement or approved by the
Board, in its sole discretion, by delivery (either by actual delivery or
attestation) of shares of Common Stock owned by the Participant valued at their
fair market value as determined by (or in a manner approved by) the Board (“Fair
Market Value”), provided (i) such method of payment is then permitted
under applicable law, (ii) such Common Stock, if acquired directly from
the Company, was owned by the Participant for such minimum period of time, if
any, as may be established by the Board in its discretion and (iii) such
Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting
or other similar requirements;

(4)           to
the extent permitted by applicable law and provided for in the applicable
option agreement or approved by the Board, in its sole discretion, by (i) delivery
of a promissory note of the Participant to the Company on terms determined by
the Board, or (ii) payment of such other lawful consideration as the Board
may determine; or

(5)           by
any combination of the above permitted forms of payment.

(g)           Limitation
on Repricing. Unless such action is approved by the Company’s
stockholders:  (i) no outstanding
Option granted under the Plan may be amended to provide an exercise price per
share that is lower than the then-current exercise price per share of such
outstanding Option (other than adjustments pursuant to Section 10) and (ii) the
Board may not cancel any outstanding option (whether or not granted under the
Plan) and grant in substitution therefore new Awards under the Plan covering
the same or a different number of share of Common Stock and having an exercise
price per share lower than the then-current exercise price per share of the
cancelled option.

6.             Director Awards.

(a)           Initial
Grant. Upon the commencement of service on the Board by any individual who
is not then an employee of the Company or any subsidiary of the Company, the
Company shall grant to such person a Nonstatutory Stock Option to purchase
10,000 shares of Common Stock (subject to adjustment under Section 10).

(b)           Annual
Grant. On the date of each annual meeting of stockholders of the Company,
the Company shall grant to each member of the Board of Directors of the Company
who is both serving as a director of the Company immediately prior to and
immediately following such annual meeting and who is not then an employee of
the Company or any of its subsidiaries, (i) a Nonstatutory Stock Option to
purchase 5,000 shares of Common Stock and (ii) 2,500 shares of Restricted
Stock (as defined in Section 8 below) (each subject to adjustment under Section 10);
provided, however, that a director shall not be eligible to receive an option 

 4
 

 

grant or restricted stock grant under this Section 6(b) until
such director has served on the Board for at least six months.

(c)           Terms
of Director Options. Options granted under this Section 6 shall: (i) have
an exercise price equal to the closing sale price (for the primary trading
session) of the Common Stock on The Nasdaq Stock Market (“NASDAQ”) or the
national securities exchange on which the Common Stock is then traded on the
trading date immediately prior to the date of grant (and if the Common Stock is
not then traded on NASDAQ or a national securities exchange, the fair market
value of the Common Stock on such date as determined by the Board), (ii) with
respect to Options granted under Section 6(a), vest in five equal annual
installments beginning on the first anniversary of the date of grant, (iii) with
respect to Options granted under Section 6(b), vest in full on the date of
grant, (iii) expire on the earlier of 10 years from the date of grant or
three months following cessation of service on the Board, and (iv) contain
such other terms and conditions as the Board shall determine.

(d)           Terms
of Director Restricted Stock. Restricted Stock granted under this Section 6
shall (i) have an exercise price equal to $.01 per share, (ii) be
subject to repurchase by the Company at a price equal to the purchase price until
the second anniversary of the date of grant provided that the individual is
serving on the Board on such date, and provided that the Board may provide not
to exercise such repurchase option in the case of death, disability, attainment
of mandatory retirement age or retirement following at least 10 years of
service, and (iii) contain such other terms and conditions as the Board
shall determine.

(e)           Board
Discretion. The Board retains the specific authority to from time to time
increase or decrease the number of shares subject to options and restricted
stock awards granted under this Section 6, subject to the provisions of Section 4(b)(2).

7.             Stock Appreciation Rights.

(a)           General. The Board may grant
Awards consisting of a Stock Appreciation Right (“SAR”) entitling the holder,
upon exercise, to receive an amount in Common Stock or cash or a combination
thereof (such form to be determined by the Board) determined by reference to
appreciation, from and after the date of grant, in the fair market value of a share
of Common Stock. The date as of which such appreciation or other measure is
determined shall be the exercise date.

(b)           Grants. Stock
Appreciation Rights may be granted in tandem with, or independently of, Options
granted under the Plan.

(1)           Tandem Awards. When Stock Appreciation Rights are
expressly granted in tandem with Options, (i) the Stock Appreciation Right
will be exercisable only at such time or times, and to the extent, that the
related Option is exercisable (except to the extent designated by the Board in
connection with an Acquisition Event) and will be exercisable in accordance
with the procedure required for exercise of the related Option; (ii) the
Stock Appreciation Right will terminate and no longer be exercisable upon the
termination or exercise of the related Option, except to the extent designated
by the Board in connection with an Acquisition Event and except that a Stock
Appreciation Right granted with respect to less than the full number of shares 

 5
 

 

covered by an Option will not be reduced until the
number of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock Appreciation
Right; (iii) the Option will terminate and no longer be exercisable upon
the exercise of the related Stock Appreciation Right; and (iv) the Stock
Appreciation Right will be transferable only with the related Option.

(2)           Independent SARs. A Stock Appreciation Right not expressly
granted in tandem with an Option will become exercisable at such time or times,
and on such conditions, as the Board may specify in the SAR Award.

(c)           Grant
Price. The grant price or exercise price of an SAR shall not be less than
100% of the Fair Market Value per share of Common Stock on the date of grant of
the SAR.

(d)           Term.
The term of an SAR shall not be more than 10 years from the date of grant.

(e)           Exercise.
Stock Appreciation Rights may be exercised by delivery to the Company of a
written notice of exercise signed by the proper person or by any other form of
notice (including electronic notice) approved by the Board, together with any
other documents required by the Board.

8.             Restricted Stock; Restricted Stock Units.

(a)           General.
The Board may grant Awards entitling recipients to acquire shares of Common
Stock (“Restricted Stock”), subject to the right of the Company to repurchase
all or part of such shares at their issue price or other stated or formula
price (or to require forfeiture of such shares if issued at no cost) from the
recipient in the event that conditions specified by the Board in the applicable
Award are not satisfied prior to the end of the applicable restriction period
or periods established by the Board for such Award. Instead of granting Awards
for Restricted Stock, the Board may grant Awards entitling the recipient to
receive shares of Common Stock to be delivered at the time such shares of
Common Stock vest (“Restricted Stock Units”) (Restricted Stock and Restricted
Stock Units are each referred to herein as a “Restricted Stock Award”).

(b)           Terms
and Conditions for all Restricted Stock Awards. The Board shall determine
the terms and conditions of a Restricted Stock Award, including the conditions
for vesting and repurchase (or forfeiture) and the issue price, if any.

(c)           Additional Provisions Relating to Restricted Stock.

(1)           Dividends.
Participants holding shares of Restricted Stock will be entitled to all
ordinary cash dividends paid with respect to such shares, unless otherwise
provided by the Board. If any such dividends or distributions are paid in
shares, or consist of a dividend or distribution to holders of Common
Stock other than an ordinary cash dividend, the
shares, cash or other property will be subject to the same restrictions on
transferability and forfeitability as the shares of Restricted Stock with
respect to which they were paid.  Each
dividend payment will be made no later than the end of the calendar year in
which the dividends are paid to shareholders of that class of stock or, if
later, the 15th day of the third month following the date the dividends are
paid to shareholders of that class of stock.

 6
 

 

(2)           Stock
Certificates. The Company may require that any stock certificates issued in
respect of shares of Restricted Stock shall be deposited in escrow by the
Participant, together with a stock power endorsed in blank, with the Company
(or its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant
to receive amounts due or exercise rights of the Participant in the event of
the Participant’s death (the “Designated Beneficiary”). In the absence of an
effective designation by a Participant, “Designated Beneficiary” shall mean the
Participant’s estate.

(d)           Additional
Provisions Relating to Restricted Stock Units.

(1)           Settlement.
Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement)
with respect to each Restricted Stock Unit, the Participant shall be entitled
to receive from the Company one share of Common Stock or an amount of cash
equal to the Fair Market Value of one share of Common Stock, as provided in the
applicable Award agreement. The Board may, in its discretion, provide that
settlement of Restricted Stock Units shall be deferred, on a mandatory basis or
at the election of the Participant.

(2)           Voting
Rights. A Participant shall have no voting rights with respect to any
Restricted Stock Units.

(3)           Dividend
Equivalents. To the extent provided by the Board, in its sole discretion, a
grant of Restricted Stock Units may provide Participants with the right to
receive an amount equal to any dividends or other distributions declared and
paid on an equal number of outstanding shares of Common Stock (“Dividend
Equivalents”). Dividend Equivalents may be paid currently or credited to an
account for the Participants, may be settled in cash and/or shares of Common
Stock and may be subject to the same restrictions on transfer and
forfeitability as the Restricted Stock Units with respect to which paid, as
determined by the Board in its sole discretion, subject in each case to such
terms and conditions as the Board shall establish, in each case to be set forth
in the applicable Award agreement.

9.             Other Stock Unit Awards.

Other Awards of shares of Common Stock, and other
Awards that are valued in whole or in part by reference to, or are otherwise
based on, shares of Common Stock or other property, may be granted hereunder to
Participants (“Other Stock Unit Awards”), including without limitation Awards
entitling recipients to receive shares of Common Stock to be delivered in the
future. Such Other Stock Unit Awards shall also be available as a form of
payment in the settlement of other Awards granted under the Plan or as payment
in lieu of compensation to which a Participant is otherwise entitled. Other
Stock Unit Awards may be paid in shares of Common Stock or cash, as the Board
shall determine. Subject to the provisions of the Plan, the Board shall
determine the terms and conditions of each Other Stock Unit Award, including
any purchase price applicable thereto.

 7

 

10.           Adjustments
for Changes in Common Stock and Certain Other Events.

(a)           Changes in
Capitalization. In the event of any stock split, reverse stock split, stock
dividend, recapitalization, combination of shares, reclassification of shares,
spin-off or other similar change in capitalization or event, or any dividend or
distribution to holders of Common Stock other than an ordinary cash dividend, (i) the
number and class of securities available under this Plan, (ii) the
sub-limits set forth in Section 4(b), (iii) the number and class of
securities and exercise price per share of each outstanding Option and each
Option issuable under Section 6, (iv) the share- and per-share
provisions and the exercise price of each Stock Appreciation Right, (v) the
number of shares subject to and the repurchase price per share subject to each
outstanding Restricted Stock Award and (vi) the share- and
per-share-related provisions and the purchase price, if any, of each
outstanding Other Stock Unit Award, shall be appropriately adjusted by the
Company (or substituted Awards may be made, if applicable) to the extent
determined by the Board. Without limiting the generality of the foregoing, in
the event the Company effects a split of the Common Stock by means of a stock
dividend and the exercise price of and the number of shares subject to such
Option are adjusted as of the date of the distribution of the dividend (rather
than as of the record date for such dividend), then an optionee who exercises
an Option between the record date and the distribution date for such stock
dividend shall be entitled to receive, on the distribution date, the stock
dividend with respect to the shares of Common Stock acquired upon such Option
exercise, notwithstanding the fact that such shares were not outstanding as of
the close of business on the record date for such stock dividend.

(b)           Acquisition
Events

(1)           Consequences Of
Acquisition Events. Subject to Section 10(b)(2) below, upon the
occurrence of an Acquisition Event (as defined below), or the execution by the
Company of any agreement with respect to an Acquisition Event, the Board shall
take any one or more of the following actions with respect to then outstanding
Awards: (i) provide that outstanding Options shall be assumed, or
equivalent Options shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof), provided that any such Options
substituted for Incentive Stock Options shall satisfy, in the determination of
the Board, the requirements of Section 424(a) of the Code; (ii) upon
written notice to the Participants, provide that all then unexercised Options
will become exercisable in full as of a specified date (the “Acceleration Date”)
prior to the Acquisition Event and will terminate immediately prior to the
consummation of such Acquisition Event, except to the extent exercised by the
Participants between the Acceleration Date and the consummation of such
Acquisition Event; (iii) in the event of an Acquisition Event under the
terms of which holders of Common Stock will receive upon consummation thereof a
cash payment for each share of Common Stock surrendered pursuant to such
Acquisition Event (the “Acquisition Price”), provide that all outstanding
Options shall terminate upon consummation of such Acquisition Event and each
Participant shall receive, in exchange therefor, a cash payment equal to the
amount (if any) by which (A) the Acquisition Price multiplied by the
number of shares of Common Stock subject to such outstanding Options (whether
or not then exercisable), exceeds (B) the aggregate exercise price of such
Options; (iv) provide that all Restricted Stock Awards then outstanding
shall become free of all restrictions prior to the consummation of the
Acquisition Event; and (v) provide that any other stock-based Awards
outstanding (A) shall become exercisable, realizable or vested in full, 

 8
 

 

or shall be free of all conditions or restrictions, as applicable to
each such Award, prior to the consummation of the Acquisition Event, or (B), if
applicable, shall be assumed, or equivalent Awards shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof).

An “Acquisition Event” shall be deemed to have
occurred only if any of the following events occur: (a) the stockholders
of the Company approve a merger or consolidation which results in the voting
securities of the Company outstanding immediately prior thereto representing
thereafter (either by remaining outstanding or by being converted into voting
securities of the surviving or acquiring entity) less than 50% of the combined
voting power of the voting securities of the Company or such surviving or
acquiring entity outstanding immediately after such merger or consolidation; (b) any
sale of all or substantially all of the assets of the Company; (c) the
complete liquidation of the Company; or (d) the acquisition of “beneficial
ownership” (as defined in Rule 13d-3 under the Exchange Act) of
securities of the Company representing 50% or more of the combined voting power
of the Company’s then outstanding securities (other than through a merger or
consolidation or an acquisition of securities directly from the Company) by any
“person”, as such term is used in Sections 13(d) and 14(d) of the
Exchange Act other than the Company, Sepracor Inc. (or its successor), any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportion as their ownership of stock
of the Company; or (e) individuals who, on the date on which the Plan was
adopted by the Board of Directors, constituted the Board of Directors of the
Company, together with any new director whose election by the Board of
Directors or  nomination for election by
the Company’s stockholders was approved by a vote of at least a majority of the
directors then still in office who were directors on the date on which the Plan
was adopted by the Board of Directors or whose election or nomination was
previously so approved, cease for any reason to constitute at least a majority
of the Board of Directors.

(2)           Acceleration
Upon An Acquisition Event. Except to the extent otherwise provided in the
instrument evidencing the Award or in any other agreement between the Participant
and the Company, upon the occurrence of an Acquisition Event or with respect to
Options or any other similar Awards only, upon the execution by the Company of
any agreement with respect to an Acquisition Event, (i) the Board shall
provide a written notice to the Participants that are directors or employees of
the Company that all Options then outstanding shall become immediately
exercisable in full as of a specified date (the “Acceleration Date”) prior to
the Acquisition Event and will terminate immediately prior to the consummation
of such Acquisition Event, except to the extent exercised by the Participants
between the Acceleration Date and the consummation of such Acquisition Event; (ii) all
Restricted Stock Awards then outstanding and held by directors or employees of
the Company shall become immediately free of all restrictions; (iii) all
other stock-based Awards that are held by directors or employees of the Company
shall become immediately exercisable, realizable or vested in full, or shall be
immediately free of all restrictions or conditions, as the case may be.

11.           General
Provisions Applicable to Awards

(a)           Transferability
of Awards. Awards shall not be sold, assigned, transferred, pledged or
otherwise encumbered by the person to whom they are granted, either voluntarily
or by operation of law, except by will or the laws of descent and distribution
or, other than in the 

 9
 

 

case of an Incentive Stock Option, pursuant to a qualified domestic
relations order, and, during the life of the Participant, shall be exercisable
only by the Participant; provided, however, that the Board may permit or
provide in an Award for the gratuitous transfer of the Award by the Participant
to or for the benefit of any immediate family member, family trust or other
entity established for the benefit of the Participant and/or an immediate
family member thereof if, with respect to such proposed transferee, the Company
would be eligible to use a Form S-8 for the registration of the sale
of the Common Stock subject to such Award under the Securities Act of 1933, as
amended; provided, further, that the Company shall not be required to recognize
any such transfer until such time as the Participant and such permitted
transferee shall, as a condition to such transfer, deliver to the Company a
written instrument in form and substance satisfactory to the Company confirming
that such transferee shall be bound by all of the terms and conditions of the
Award. References to a Participant, to the extent relevant in the context,
shall include references to authorized transferees.

(b)           Documentation.
Each Award shall be evidenced in such form (written, electronic or otherwise)
as the Board shall determine. Each Award may contain terms and conditions in
addition to those set forth in the Plan.

(c)           Board
Discretion. Except as otherwise provided by the Plan, each Award may be
made alone or in addition or in relation to any other Award. The terms of each
Award need not be identical, and the Board need not treat Participants
uniformly.

(d)           Termination of
Status. The Board shall determine the effect on an Award of the disability,
death, termination of employment, authorized leave of absence or other change
in the employment or other status of a Participant and the extent to which, and
the period during which, the Participant, or the Participant’s legal
representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award.

(e)           Withholding.
The Participant must satisfy all applicable federal, state, and local or other
income and employment tax withholding obligations before the Company will
deliver stock certificates or otherwise recognize ownership of Common Stock
under an Award. The Company may decide to satisfy the withholding obligations
through additional withholding on salary or wages. If the Company elects not to
or cannot withhold from other compensation, the Participant must pay the
Company the full amount, if any, required for withholding or have a broker
tender to the Company cash equal to the withholding obligations. Payment of
withholding obligations is due before the Company will issue any shares on
exercise or release from forfeiture of an Award or, if the Company so requires,
at the same time as is payment of the exercise price unless the Company
determines otherwise. If provided for in an Award or approved by the Board in
its sole discretion, a Participant may satisfy such tax obligations in whole or
in part by delivery of shares of Common Stock, including shares retained from
the Award creating the tax obligation, valued at their Fair Market Value;
provided, however, except as otherwise provided by the Board, that the total
tax withholding where stock is being used to satisfy such tax obligations
cannot exceed the Company’s minimum statutory withholding obligations (based on
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable
income). Shares surrendered to satisfy tax withholding requirements cannot be
subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.

 10
 

 

(f)            Amendment of
Award. Except as otherwise provided in Section 5(g), the Board may
amend, modify or terminate any outstanding Award, including but not limited to,
substituting therefor another Award of the same or a different type, changing
the date of exercise or realization, and converting an Incentive Stock Option
to a Nonstatutory Stock Option, provided either (i) that the Participant’s
consent to such action shall be required unless the Board determines that the
action, taking into account any related action, would not materially and
adversely affect the Participant or (ii) that the change is permitted
under Section 10 hereof.

(g)           Conditions on
Delivery of Stock. The Company will not be obligated to deliver any shares
of Common Stock pursuant to the Plan or to remove restrictions from shares
previously delivered under the Plan until (i) all conditions of the Award
have been met or removed to the satisfaction of the Company, (ii) in the
opinion of the Company’s counsel, all other legal matters in connection with
the issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market rules and
regulations, and (iii) the Participant has executed and delivered to the
Company such representations or agreements as the Company may consider
appropriate to satisfy the requirements of any applicable laws, rules or
regulations.

(h)           Acceleration.
The Board may at any time provide that any Award shall become immediately
exercisable in full or in part, free of some or all restrictions or conditions,
or otherwise realizable in full or in part, as the case may be.

(i)            Performance
Awards.

(1)           Grants. Restricted
Stock Awards and Other Stock Unit Awards under the Plan may be made subject to
the achievement of performance goals pursuant to this Section 11(i) (“Performance
Awards”), subject to the limit in Section 4(b)(1) on shares covered
by such grants.

(2)           Committee. Grants
of Performance Awards to any Covered Employee intended to qualify as “performance-based
compensation” under Section 162(m) (“Performance-Based Compensation”)
shall be made only by a Committee (or subcommittee of a Committee) comprised
solely of two or more directors eligible to serve on a committee making Awards
qualifying as “performance-based compensation” under Section 162(m). In
the case of such Awards granted to Covered Employees, references to the Board
or to a Committee shall be deemed to be references to such Committee or
subcommittee. “Covered Employee” shall mean any person who is a “covered
employee” under Section 162(m)(3) of the Code.

(3)           Performance
Measures. For any Award that is intended to qualify as Performance-Based
Compensation, the Committee shall specify that the degree of granting, vesting
and/or payout shall be subject to the achievement of one or more objective
performance measures established by the Committee, which shall be based on the
relative or absolute attainment of specified levels of one or any combination
of the following:  (a) net income, (b) earnings
before or after discontinued operations, interest, taxes, depreciation and/or
amortization, (c) operating profit before or after discontinued operations
and/or taxes, (d) sales, (e) sales growth, (f) earnings growth, (g) cash
flow or cash position, (h) gross margins, (i) stock price, (j) market
share, (k) return on sales, assets, equity or investment, (l) improvement
of financial 

 11
 

 

ratings, (m) achievement of balance sheet or income statement
objectives or (n) total shareholder return, and may be absolute in their
terms or measured against or in relationship to other companies comparably,
similarly or otherwise situated. Such performance measures may be adjusted to
exclude any one or more of (i) extraordinary items, (ii) gains or
losses on the dispositions of discontinued operations, (iii) the
cumulative effects of changes in accounting principles, (iv) the writedown
of any asset, and (v) charges for restructuring and rationalization
programs. Such performance measures:  (i) may
vary by Participant and may be different for different Awards; (ii) may be
particular to a Participant or the department, branch, line of business,
subsidiary or other unit in which the Participant works and may cover such
period as may be specified by the Committee; and (iii) shall be set by the
Committee within the time period prescribed by, and shall otherwise comply with
the requirements of, Section 162(m). Awards that are not intended to
qualify as Performance-Based Compensation may be based on these or such other
performance measures as the Board may determine.

(4)           Adjustments. Notwithstanding
any provision of the Plan, with respect to any Performance Award that is
intended to qualify as Performance-Based Compensation, the Committee may adjust
downwards, but not upwards, the cash or number of Shares payable pursuant to
such Award, and the Committee may not waive the achievement of the applicable
performance measures except in the case of the death or disability of the
Participant.

(5)           Other. The
Committee shall have the power to impose such other restrictions on Performance
Awards as it may deem necessary or appropriate to ensure that such Awards
satisfy all requirements for Performance-Based Compensation.

12.           Miscellaneous

(a)           No Right To
Employment or Other Status. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to continued employment or any other relationship with
the Company. The Company expressly reserves the right at any time to dismiss or
otherwise terminate its relationship with a Participant free from any liability
or claim under the Plan, except as expressly provided in the applicable Award.

(b)           No Rights As
Stockholder. Subject to the provisions of the applicable Award, no
Participant or Designated Beneficiary shall have any rights as a stockholder
with respect to any shares of Common Stock to be distributed with respect to an
Award until becoming the record holder of such shares.

(c)           Effective Date
and Term of Plan. The Plan shall become effective on the date the Plan is
approved by the Company’s stockholders (the “Effective Date”). No Awards shall
be granted under the Plan after the completion of 10 years from the Effective
Date, but Awards previously granted may extend beyond that date.

(d)           Amendment of Plan.
The Board may amend, suspend or terminate the Plan or any portion thereof at
any time provided that (i) to the extent required by Section 162(m),
no Award granted to a Participant that is intended to comply with Section 162(m) after
the date of such amendment shall become exercisable, realizable or vested, as
applicable to such Award, 

 12
 

 

unless and
until such amendment shall have been approved by the Company’s stockholders if
required by Section 162(m) (including the vote required under Section 162(m));
(ii) no amendment that would require stockholder approval under the rules of
NASDAQ may be made effective unless and until such amendment shall have been
approved by the Company’s stockholders; and (iii) if the NASDAQ amends its
corporate governance rules so that such rules no longer require
stockholder approval of material amendments to equity compensation plans, then,
from and after the effective date of such amendment to the NASDAQ rules, no
amendment to the Plan (A) materially increasing the number of shares
authorized under the Plan (other than pursuant to Section 10), (B) expanding
the types of Awards that may be granted under the Plan, or (C) materially
expanding the class of participants eligible to participate in the Plan shall
be effective unless stockholder approval is obtained. In addition, if at any
time the approval of the Company’s stockholders is required as to any other
modification or amendment under Section 422 of the Code or any successor
provision with respect to Incentive Stock Options, the Board may not effect
such modification or amendment without such approval. No Award shall be made
that is conditioned upon stockholder approval of any amendment to the Plan.

(e)           Provisions for
Foreign Participants. The Board may modify Awards or Options granted to
Participants who are foreign nationals or employed outside the United States or
establish subplans or procedures under the Plan to recognize differences in
laws, rules, regulations or customs of such foreign jurisdictions with respect
to tax, securities, currency, employee benefit or other matters.

(f)            Compliance With
Code Section 409A. No Award shall provide for deferral of compensation
that does not comply with Section 409A of the Code, unless the Board, at
the time of grant, specifically provides that the Award is not intended to
comply with Section 409A of the Code. The Company shall have no liability
to a Participant, or any other party, if an Award that is intended to be exempt
from, or compliant with, Section 409A is not so exempt or compliant or for
any action taken by the Board.

(g)           Governing Law.
The provisions of the Plan and all Awards made hereunder shall be governed by
and interpreted in accordance with the laws of the State of Delaware, excluding
choice-of-law principles of the law of such state that would require the
application of the laws of a jurisdiction other than such state.

Adopted by the
Board of Directors, March 9, 2006.

Approved by the
Shareholders, May 10, 2006.

 13

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