-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OhUUWcl6ygvk96mo2Py/OlitZPnByL4MjNxAoGSBr7R9PRdrujZHvdIpuYRBwWA3 N9Uj8u+0CmtkWuZAJcBmBg== 0000276720-96-000006.txt : 19960716 0000276720-96-000006.hdr.sgml : 19960716 ACCESSION NUMBER: 0000276720-96-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960712 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PURE CYCLE CORP CENTRAL INDEX KEY: 0000276720 STANDARD INDUSTRIAL CLASSIFICATION: REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580] IRS NUMBER: 840705083 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-08814 FILM NUMBER: 96594402 BUSINESS ADDRESS: STREET 1: 5650 YORK STREET CITY: COMMERCE CITY STATE: CO ZIP: 80022 BUSINESS PHONE: 3032923456 MAIL ADDRESS: STREET 1: 5650 YORK ST CITY: COMMERCE CITY STATE: CO ZIP: 80022 FORMER COMPANY: FORMER CONFORMED NAME: PURECYCLE CORP DATE OF NAME CHANGE: 19920703 10QSB 1 ______________________________________________________________ Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB (Mark One) X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended May 31, 1996 ___ TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT For the transition period from __________ to __________ Commission file number 0-8814 PURE CYCLE CORPORATION (Exact name of small business issuer as specified in its charter) Delaware 84-0705083 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5650 York Street, Commerce City, CO 80022 (Address of principal executive offices) (Zip Code) Registrant's telephone number(303) 292 - 3456 _________________________________________________________________ N/A (Former name, former address and former fiscal year, if changed since last report.) Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x]; NO [ ] State the number of shares outstanding of each of the issuer's classes of common equity , as of May 31, 1996: Common Stock, 1/3 of $.01 Par Value 78,439,763 (Class) (Number of Shares) Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [x] _________________________________________________________________ PAGE 1 OF 12 PURE CYCLE CORPORATION AND SUBSIDIARY INDEX TO MAY 31, 1996 FORM 10-QSB Page Part I - Financial Information (unaudited) Balance Sheets - May 31, 1996 and 3 August 31, 1995 Statements of Operations - For the three months 4 ended May 31, 1996 and May 31, 1995 Statements of Operations - For the Nine months 5 ended May 31, 1996 and May 31, 1995 Statements of Cash Flows - For the Nine months 6-7 ended May 31, 1996 and May 31, 1995 Notes to Financial Statements 8 Management's Discussion and Analysis of 9 Results of Operations and Financial Condition Part II - Other Information Item 1 - Legal Proceedings 10 Item 2 - Exhibits and reports on Form 8-K 11 Signature Page 12 PAGE 2 OF 12 PURE CYCLE CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED BALANCE SHEETS (unaudited)
May 31 August 31 Assets 1996 1995 ------ --------- Current Assets: Cash and cash equivalents $ 242,148 $ 865,803 Marketable securities 3,429 3,429 Note receivable (Note 2) 245,406 119,327 Prepaid expenses and other current assets 10,710 16,037 Total current assets 501,693 1,004,596 Investments in water projects: Paradise water rights 5,463,984 5,462,457 Rangeview water commercialization agreement (Rangeview WCA) 5,989,895 5,856,194 Sellers Gulch water rights -- 31,997 Equipment, at cost, net of accumulated depreciation of $11,527 and $9,514 5,711 5,359 Patents, net of accumulated amortization of $35,460 and $34,776 in 1996 and 1995, respectively -- 684 Other assets 22,596 22,596 ---------- ---------- $ 11,983,879 $ 12,383,883 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt (Note 3) $ -- $ 185,460 Accounts payable 51,568 60,450 --------- ---------- Total current liabilities 51,568 245,910 Long-term debt payable to related parties, less current maturities 3,010,203 2,888,296 Other non-current liabilities 125,583 120,228 Minority interest in Rangeview WCA 4,020,630 4,020,630 Stockholders' equity: Preferred stock, par value $.001 per share; authorized - 25,000,000 shares: Series A - 1,600,000 shares issued and outstanding 1,600 1,600 Series B - 432,513 shares issued and outstanding 433 433 Common stock, par value 1/3 of $.01 per share; authorized - 135,000,000 shares; issued and outstanding 78,439,763 shares 261,584 261,584 Additional paid-in capital 23,615,561 23,615,561 Deficit accumulated during development stage ( 6,376,911) ( 6,043,987) Deficit accumulated prior to September 1, 1986 (12,726,372) (12,726,372) ---------- ---------- Total stockholders' equity 4,775,895 5,108,819 Contingency (Note 4) ---------- ---------- $ 11,983,879 $ 12,383,883 ========== ==========
[FN] See Accompanying Notes to the Consolidated Financial Statements PAGE 3 OF 12 PURE CYCLE CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended May 31 May 31 1996 1995 ------ ------ Expenses: General, administrative and marketing $( 79,155) $( 90,114) Interest ( 50,731) ( 51,531) ------- ------- Total Expenses (129,886) (141,645) Interest income 9,000 9,064 ------- ------- Net loss $(120,886) $(132,581) ======= ======= Net Loss per common share $ --* $ --* ======= ======= * less than $.01 per share
[FN] See Accompanying Notes to the Consolidated Financial Statements PAGE 4 OF 12 PURE CYCLE CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Nine Months Ended Cumulative May 31 May 31 Sept. 1, 1986 to 1996 1995 May 31,1996 ------ ------ ----------- General and administrative expenses $(249,403) $(254,959) $(3,749,123) Other income (expense): Interest expense (132,530) (145,524) (1,841,723) Loss on abandonment of option on water rights -- -- ( 850,000) Financing expense on purchase of water rights option -- -- ( 200,000) Financing cost for issuance of stock below market price -- -- ( 187,500) Loss on abandonment of power plant equipment -- -- ( 242,500) Gain from waived put options -- -- 40,950 Expiration of option to purchase water rights ( 31,997) -- ( 31,997) Gain on sale of marketable securities -- ( 3,611) 24,809 Interest income 32,778 -- 71,019 Other, net -- -- 29,503 ------- ------- --------- Net loss before extraordinary item (381,152) (404,094) (6,936,562) Extraordinary gain on extinguishment of debt (Note 3) 48,228 -- 559,651 ------- ------- --------- Net loss $(332,924) $(404,094) $(6,376,911) ======= ======= ========= Net Loss per common share $ --* $ --* ======= ======= * less than $.01 per share
[FN] See Accompanying Notes to the Consolidated Financial Statements PAGE 5 OF 12 PURE CYCLE CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended Cumulative May 31 May 31 Sept. 1, 1986 to 1996 1995 May 31, 1996 ------ ------ ---------------- Cash flows from operating activities: Net loss $(332,924) $(404,094) $(6,376,911) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,697 3,669 30,982 Amortization of debt issuance costs -- 4,600 23,000 (Loss)/gain on sale of marketable securities -- 3,611 ( 24,809) Accretion of discount on long-term debt -- 11,750 69,630 Common shares issued as additional interest expense -- -- 25,000 Extraordinary gain on extinguishment of debt ( 48,228) -- ( 559,651) Loss on abandonment of option on water rights -- -- 750,000 Financing expense on purchase of water option -- -- 200,000 Financing costs for issuance of stock options below market price -- -- 187,500 Gain on put options waived -- -- ( 40,950) Loss on abandonment of power plant equipment -- -- 62,500 Payment for services and expenses with common stock donated by President -- -- 298,250 Other unrealized loss on marketable securities -- -- 1,143 Increase in accrued interest on note receivable (12,769) ( 784) ( 16,096) Other -- -- ( 1,065) Changes in operating assets and liabilities: Prepaid expenses and other current assets 5,327 ( 6,667) ( 5,760) Accounts payable and other non-current liabilities ( 3,527) 13,397 432,418 Accrued interest 127,175 139,800 1,545,294 ------- ------- --------- Net cash used in operating activities $(262,249) $(234,718) $(3,399,525) ------- ------- --------- (continued) PAGE 6 OF 12
PURE CYCLE CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Nine Months Ended Cumulative May 31 May 31 Sept. 1, 1986 to 1996 1995 May 31, 1996 ------ ------ ---------------- Cash flows from investing activities: Investments in water rights $(103,231) $( 84,800) $(2,288,859) Purchase of marketable securities -- ( 300,000) (2,000,000) Proceeds from sale of marketable securities -- 1,278,289 2,024,809 Increase in note receivable (113,310) 679 ( 229,310) Purchase of equipment ( 2,365) ( 71,000) ( 17,237) Increase in other assets -- -- ( 106,595) ------- --------- --------- Net cash provided by (used in) investing activities (218,906) 821,810 (2,617,192) ------- --------- --------- Cash flows from financing activities: Proceeds from issuance of debt -- -- 2,677,629 Repayments of debt (142,500) -- (1,167,190) Proceeds from sale of common stock -- -- 2,900,000 Proceeds from sale of Series A convertible Preferred stock -- -- 1,600,000 Proceeds from issuance of redeemable common stock -- -- 245,000 Proceeds from issuance of stock options -- -- 100,000 Repurchase of stock options -- -- ( 100,000) ------- ------- --------- Net cash provided by (used in) financing activities (142,500) -- 6,255,439 ------- ------- --------- Net increase (decrease) in cash and cash equivalents (623,655) 587,092 238,722 Cash and cash equivalents beginning of period 365,803 122,441 3,426 ------- ------- --------- Cash and cash equivalents end of period $ 242,148 $ 709,533 $ 242,148 ======= ======= =========
[FN] See Accompanying Notes to the Consolidated Financial Statements PAGE 7 OF 12 PURE CYCLE CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ACCOUNTING PRINCIPLES The consolidated balance sheet as of May 31, 1996 and August 31, 1995, the consolidated statements of operations for the three and nine months ended May 31, 1996 and May 31, 1995 and the consolidated statements of cash flows for the nine months ended May 31, 1996 and May 31, 1995, have been prepared by the Company, without an audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows at May 31, 1996 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 1995 Annual Report on Form 10- KSB. The results of operations for interim periods presented are not necessarily indicative of the operating results for the full year. NOTE 2 - NOTE RECEIVABLE In April 1995, the Company extended short-term credit to the Rangeview Metropolitan District. The loan permits borrowings up to $250,000, is unsecured, bears interest based on the prevailing prime rate plus 2% and, matures on December 31, 1996. NOTE 3 - CURRENT MATURITIES OF LONG-TERM DEBT During January 1996, the Company reached an agreement with a creditor to retire a note payable, totaling $190,728 with accrued interest, for payment of $142,500. The difference in the face value of the note and the cash paid to retire the debt of $48,228 has been reflected as an extraordinary gain on the consolidated statement of operations for the nine months ended May 31, 1996. NOTE 4 - CONTINGENCY In 1988, the Company initiated efforts to acquire approximately 10,000 acre feet of non-tributary ground water rights from the Rangeview Metropolitan District (the "District"). Since that time, the Company, together with other investors, has purchased certain real property, municipal notes and bonds, and options to purchase water related to this project. In October of 1994, the Company joined in a lawsuit initiated by others including the District, against the Colorado State Board of Land Commissioners (the "Board") seeking a Declaratory Judgment affirming that the lease between the Board and the District was valid and binding. In May of 1996, the parties to the lawsuit agreed to a settlement (the "Settlement"). The Settlement was subject to obtaining a final non-appealable order of the trial court approving the Settlement. The trial court order was signed subsequent to the end of the quarter on June 14, 1996 and will be non-appealable on July 29, 1996. PAGE 8 OF 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations General and administrative expenses for the nine months ended May 31, 1996 were approximately $5,555 lower than for the period ended May 31, 1995, primarily because of a decrease in facility costs and administrative salaries. Interest expense decreased for the nine months ended May 31, 1996 by approximately $28,630 compared to the period ended May 31, 1995 due to a lower average outstanding balance of notes payable in the first nine months of fiscal 1996 compared to the same period in fiscal 1995. Net loss for the nine months ended May 31, 1996 decreased approximately $71,170 compared to the nine months ended May 31, 1995 primarily because of the combined effects of the recognition of an extraordinary gain on the extinguishment of debt, higher interest income and lower interest expense offset by the expiration of an option to purchase certain water rights. Liquidity and Capital Resources At May 31, 1996, current assets exceed current liabilities by approximately $450,125 and, the Company had cash and cash equivalents of $242,148. The Company is aggressively pursuing the sale and development of its water rights. The Company cannot provide any assurances that it will be able to sell its water rights. In the event a sale of the Company's water rights is not forthcoming and the Company is not able to generate revenues from the sale or development of its technology, the Company may sell additional portions of the Company's profit interest pursuant to the WCA, incur short or long-term debt obligations or seek to sell additional shares of Common Stock, Preferred Stock or stock purchase warrants as deemed necessary by the Company to generate operating capital. Development of any of the water rights that the Company has, or is seeking to acquire, will require substantial capital investment by the Company. Any such additional capital for the development of the water rights is anticipated to be financed through the sale of water taps and water delivery charges to a city or municipality. A water tap charge refers to a charge imposed by a municipality to permit a water user to access a water delivery system (i.e. a single-family home's tap into the municipal water system), and a water delivery charge refers to a water user's monthly water bill generally based on a per 1,000 gallons of water consumed. PAGE 9 OF 12 PART II - OTHER INFORMATION Item 1 - Legal Proceedings In 1988, the Company initiated efforts to acquire approximately 10,000 acre feet of non-tributary ground water rights located in the four principal aquifers known as the Denver Basin Aquifers from the Rangeview Metropolitan District (the "District"). Since that time, the Company, together with other investors, has purchased certain real property, municipal notes and bonds, and options to purchase water related to this project. In October of 1994, the Company joined in a lawsuit initiated by others including the District, against the Colorado State Board of Land Commissioners (the "Board") seeking a Declaratory Judgment affirming that the lease between the Board and the District was valid and binding. Under the lease, the Board granted development rights to the ground water located on and beneath certain land owned by the Board. In May of 1996, the parties to the lawsuit agreed to a settlement (the "Settlement"). The Settlement, among other things, provides for the retirement of all of the District's outstanding Water Revenue Notes and Bonds, and clarifies the Board's royalty participation in a new lease of the ground water. The Company negotiated agreements to acquire the remainder of the District's outstanding Water Revenue Notes and Bonds not already owned by the Company with a principal value of $24,914,058 in exchange for participation interests in the Company's Water Rights Commercialization Agreement ("WCA"). Commitments with respect to the WCA will increased from approximately $31,00,000 to approximately $32,026,000 as a result of the Settlement. The Settlement was subject to obtaining a final non-appealable order of the trial court approving the Settlement. The trial court order was signed subsequent to the end of the quarter on June 14, 1996 and will be non-appealable on July 29, 1996. Pursuant to the Settlement, the Company will deliver all of the outstanding Notes and Bonds to the District in exchange for ownership of 11,650 acre feet of tributary and non-tributary ground water, 12,000 acre feet of surface storage rights, and an 85 year Service Agreement between the District and the Company. The Service Agreement provides for the Company to design, develop, operate, and maintain the District's water system which will deliver water to customers within the District's 24,000 acre service area. The District has reserved approximately 14,000 acre feet of water to provide water service to future customers within its service area. The Company will receive approximately 85% of the District's tap fees, user fees, and system development fees in exchange for the Company's commitments under the Service Agreement. The Company is currently negotiating with several Denver area water providers to sell portions of the 11,650 acre feet of water and with certain property owners within the District's Service Area for development of the District's water system PAGE 10 OF 12 Item 2 - Exhibits and Reports on Form 8-K (a) Exhibits - The following exhibits are included herewith. 10.1 Settlement Agreement and Mutual Release, dated April 11, 1996, by and among the Colorado State Board of Land Commissioners (the "Land Board"), Rangeview Metropolitan District ("Rangeview"), the Company, INCO Securities Corporation ("Inco"), and Apex Investment Fund II, L.P., Landmark Water Partners, L.P., Landmark Water Partners II, L.P., Environmental Venture Fund, L.P., Environmental Private Equity Fund II, L.P., The Productivity Fund II, L.P., Proactive Partners, L.P., Warwick Partners, L.P., Auginco, Anders C. Brag, Amy Leeds, and D.W Pettyjohn (collectively the "Bondholders"), and ("OAR"), Willard G. Owens and H. F. Riebesell, Jr. (collectively the "Owens Group Bondholders"). 10.2 Service Agreement, dated April 11, 1996, by and between the Company and Rangeview. 10.3 Agreement for Sale of Export Water, dated April 11, 1996, by and between the Company and Rangeview. 10.4 Amended and Restated Option and Purchase Agreement, dated April 11, 1996, by and among OAR, the Company and INCO. 10.5 Amended and Restated Option and Purchase Agreement, dated April 11, 1996, by and among the Land Board, Riebesell, the Company and Inco. 10.6 Second Amended and Restated Closing Escrow Instructions Willard Owens Transaction, dated April 11, 1996, by and among OAR, the Company, the Land Board, H. F. Riebesell, Jr., and Colorado National Bank. 10.7 Comprehensive Amendment Agreement No. 1, dated April 11, 1996, by and among Inco, the Company, the Bondholders, Gregory M. Morey, Newell Augur, Jr., Bill Peterson, Stuart Sundlun, Alan C. Stormo, Beverly A. Beardslee, Bradley Kent Beardslee, Robert Douglas Beardslee, Asra Corporation, International Properties, Inc., and the Land Board. (b) The Company has not filed any reports on Form 8-K during the quarter. PAGE 11 OF 12 PURE CYCLE CORPORATION SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PURE CYCLE CORPORATION Date: July 12, 1996 /S/ Thomas P. Clark - ---------------------- -------------------------- Thomas P. Clark, President Date: July 12, 1996 /S/ Mark W. Harding - --------------------- -------------------------- Mark W. Harding, Chief Financial Officer PAGE 12 OF 12 EX-27 2 FDS 5/96 10-QSB
5 THIS DOCUMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S 10-QSB DATED MAY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS AUG-31-1996 MAY-31-1996 242,148 3,429 0 0 0 501,693 17,238 11,527 11,983,879 51,568 0 261,584 0 2,033 4,512,278 11,983,879 0 0 0 249,403 31,997 0 132,530 (381,152) 0 (381,152) 0 48,228 0 (332,924) (0.01) 0
EX-10 3 ============== DOCUMENT 10.1: ============== SETTLEMENT AGREEMENT AND MUTUAL RELEASE - ----------------------------------------------------------------- This Settlement Agreement and Mutual Release (the "Agreement") is entered into this 11th day of April, 1996, by and among the Colorado State Board of Land Commissioners, Robert R. Mailander, Maxine F. Stewart and John S. Wilkes, III, in their capacities as Land Board Commissioners, the State of Colorado ex rel, Gale S. Norton, Attorney General of the State of Colorado (collectively the "Land Board"), on the one hand, and Rangeview Metropolitan District ("Rangeview"), Pure Cycle Corporation ("Pure Cycle"), INCO Securities Corporation ("INCO"), Apex Investment Fund II, L.P., Landmark Water Partners, L.P., Landmark Water Partners II, L.P., Environmental Venture Fund, L.P., Environmental Private Equity Fund II, L.P., The Productivity Fund II, L.P., Proactive Partners, L.P., Warwick Partners, L.P., Auginco, Anders C. Brag, Amy Leeds, and D.W. Pettyjohn (collectively the "Bondholders"), and OAR, Incorporated, Willard G. Owens and H.F. Riebesell, Jr. (collectively the "Owens Group Bondholders"), on the other hand. RECITALS WHEREAS, the Land Board and Rangeview are parties to a lease of the use of water on and under the surface of certain public school trust land of the State of Colorado known as the "Lowry Range," which lease and the amendments thereto (the "Lease"), are more specifically identified in Article 1 of the Amended and Restated Lease Agreement attached hereto as Exhibit 1 (the "Amended and Restated Lease"); WHEREAS, Rangeview has issued the following notes and bonds secured by revenues of Rangeview derived from the sale of use of the water (collectively, the "Rangeview Notes and Bonds"): (1) Series 1987 A-L Water Revenue Notes issued August, 1987, in the aggregate principal amount of $5,000,000; (2) 1988 Series A-L Water Revenue Notes issued in December, 1988, in the aggregate principal amount of $2,142,858; and (3) 1988 Series M Water Revenue Bonds, issued December, 1988, in the aggregate principal amount of $17,771,200. WHEREAS, Pure Cycle, INCO, the Bondholders and the Owens Group Bondholders collectively are the current owners of all the Rangeview Notes and Bonds except the Allderdice Notes and Bonds as described in the following paragraph. WHEREAS, the Land Board is the current owner of the below listed Rangeview Notes and Bonds (the "Allderdice Notes and Bonds"): .1 Certificate or Certificates, issued in the name of Carlton Allderdice ("Allderdice"), representing Rangeview Bonds in the principal amount of $1,206,206.00 (including, without limitation, the Bond identified as Series 1988M); .2 Certificate or Certificates, issued in the name of Allderdice, representing Rangeview Notes in the principal amount of $600,000.00 (including, without limitation, the Note identified as Series 1988L); .3 Certificate or Certificates, issued in the name of Colorado Water Consultants, Inc. ("CWC") (now named Colorado Financial Consultants, Inc. ("CFC")), representing Rangeview Notes in the principal amount of $942,858.00 (including, without limitation, the notes identified as Series 1988A-K, inclusive). WHEREAS, the Land Board, Rangeview, Pure Cycle, INCO, the Bondholders, and the Owens Group Bondholders are parties in a lawsuit pending in the District Court for the City and County of Denver, State of Colorado (the "Denver District Court"), styled Apex Investment Fund II, L.P., et al. v. Colorado State Board of Land Commissioners, et al., Case No. 94-CV-5405, Courtroom I (hereinafter referred to as the "Litigation"), in which the parties have asserted various claims, including damages claims, relating to the status and validity of the Lease and the Rangeview Notes and Bonds. WHEREAS, the parties to this Agreement have agreed to amicably settle the Litigation and all matters and disputes between the Land Board and the other parties to the Agreement. TERMS OF SETTLEMENT AND RELEASES NOW, THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree to the following terms of settlement: Termination of Litigation by Entry of Consent Judgment. Attached hereto as Exhibit 2 is a form of consent judgment (the "Consent Judgment") to be signed concurrently with this Agreement, in which the parties consent to the entry of a judgment in the Litigation on the terms set forth in this Agreement and which includes a finding that the Amended and Restated Lease complies with the requirements of C.R.S. 36-1-118(1)(a). On April 22, 1996, provided the Service Agreement described in Section 4(l) and the Guaranty Bank Release described in Section 4(b) are delivered as required, the parties shall file a joint motion with the Denver District Court to seek entry of the Consent Judgment. The parties shall use their best efforts to obtain the Denver District Court's entry of the Consent Judgment. Effective Date. This Agreement shall be binding on the date it is fully executed and delivered by the parties hereto subject only, as a condition subsequent, to entry of the final non-appealable order of the Denver District Court in the Litigation in conformance with the Consent Judgment. The Effective Date of this Agreement shall be the date on which the Denver District Court has entered a judgment in the Litigation in conformance with the Consent Judgment and all applicable appeal periods have run such that the Consent Judgment is final and non-appealable. Consent Judgment. Each party agrees that upon entry of the Consent Judgment, such party will not appeal or seek to vacate, alter, amend or modify the Consent Judgment or take any action inconsistent with the Consent Judgment. Closing Documents. Concurrent with the execution and delivery of this Agreement and the Consent Judgment (unless a later date is specified herein), the following items (the "Closing Documents") shall be delivered to Davis, Graham & Stubbs LLP (the "Escrow Agent") to be held in trust for distribution on the Effective Date: .1 The Land Board shall deliver a copy of the assignment executed by CFC and Allderdice assigning the Allderdice Bonds and Notes to the Land Board (the "Allderdice Assignment"). .2 The Land Board shall deliver a release executed by Guaranty Bank and Trust Company (the "Guaranty Bank Release") releasing the security interest in the Allderdice Bonds and Notes pursuant to Loan No. 2660412-001 (formerly 2660400-001) by April 19, 1996. .3 An assignment in the form attached hereto as Exhibit 4 shall be executed and delivered by INCO (the "INCO Assignment"). .4 The amended and restated option and purchase agreement in the form attached hereto as Exhibit 5 shall be executed and delivered by OAR, INCO and Pure Cycle (the "OAR Option Agreement"). .5 The amended and restated option and purchase agreement in the form attached hereto as Exhibit 6 shall be executed and delivered by the Land Board, Riebesell, INCO and Pure Cycle (the "CWC Option Agreement"). .6 The amended escrow instructions in the form attached hereto as Exhibit 7 (the "Amended Escrow Instructions") which supplement the Escrow Agreement among Colorado National Bank ("CNB"), INCO, OAR, CWC, and others dated August 12, 1991 (the "Escrow Agreement"), shall be delivered by all of the parties set forth on the signature page of such Amended Escrow Instructions. .7 The assumption agreement in the form of Schedule 3 to the Amended Escrow Instructions shall be executed and delivered by Pure Cycle (the "Assumption Agreement"). .8 The instruction letter to CNB (the "Instruction Letter") required by paragraph C of the Amended Escrow Instructions shall be executed and delivered by the Escrow Agent and the Attorney General of the State of Colorado (the "Attorney General"). .9 The comprehensive amendment agreement in the form attached hereto as Exhibit 8 (the "Comprehensive Amendment Agreement") executed by all of the parties set forth on the signature pages thereto shall be delivered by Pure Cycle. .10 Releases in the form of Exhibit A attached to the Comprehensive Amendment Agreement executed by all parties to the Comprehensive Amendment Agreement (other than the Land Board) shall be delivered by Pure Cycle. Pure Cycle and Rangeview represent and warrant that the Releases delivered pursuant to this subsection (j) cover all record owners of the outstanding Rangeview Notes and Bonds except the Allderdice Notes and Bonds. .11 The Amended and Restated Lease shall be (i) executed and delivered by the State of Colorado, acting by and through the Land Board and by Rangeview, acting by and through its water activity enterprise (the "Enterprise") established by a duly adopted resolution of Rangeview on September 11, 1995, and (ii) approved of as to form by the Attorney General of the State of Colorado. .12 The service agreement in the form set forth as Exhibit B to the Amended and Restated Lease, with such revisions as are consistent with the Lease and agreed to by the Land Board, Rangeview and Pure Cycle, shall be executed and delivered by Rangeview, acting by and through the Enterprise, and Pure Cycle (the "Service Agreement") by April 19, 1996. .13 The agreement for sale of export water in the form set forth as Exhibit C to the Amended and Restated Lease shall be executed and delivered by Rangeview, acting by and through the Enterprise, and Pure Cycle (the "Export Water Agreement"). .14 All Rangeview Bonds and Notes not currently held by CNB pursuant to the Escrow Agreement shall be delivered by Pure Cycle along with an assignment of all such Rangeview Bonds and Notes in the form attached to the Export Water Agreement as Exhibit D (the "Bond Assignment"). .15 All documents required to be delivered by any Exhibit hereto shall be delivered by the parties as required by such Exhibit. Delivery. .1 On the Effective Date, the Escrow Agent shall deliver The Closing Documents as follows: (a) An original of the Amended and Restated Lease shall be delivered to each of the Land Board and Rangeview. (b) Copies of the Allderdice Assignment shall be delivered to INCO, Pure Cycle and CNB. (c) The original INCO Assignment shall be delivered to Pure Cycle and copies shall be delivered to OAR, Riebesell, the Land Board and CNB. (d) An original of the OAR Option Agreement shall be delivered to each of OAR, INCO and Pure Cycle. (e) An original of the CWC Option Agreement shall be delivered to each of the Land Board, Riebesell, INCO and Pure Cycle. (f) The Instruction Letter, the Amended Escrow Instructions and the Guaranty Bank Release shall be delivered to CNB. (g) An original of the Assumption Agreement shall be delivered to OAR, Riebesell, the Land Board and CNB. (h) An original of the Comprehensive Amendment Agreement shall be delivered to each of the parties thereto. (i) The releases delivered pursuant to paragraph 4(j) shall be delivered to the Land Board. (j) An original of the Service Agreement and the Export Water Agreement shall be delivered to each of Rangeview and Pure Cycle. (k) The Rangeview Bonds and Notes delivered pursuant to paragraph 4(n) and the Bond Assignment shall be delivered to Rangeview. (l) Any document delivered pursuant to an Exhibit hereto shall be delivered in accordance with the instructions in such Exhibit. .2 If the Agreement is terminated, the Escrow Agent shall return the Rangeview Bonds and Notes to Pure Cycle or, if applicable, to the party who delivered such bonds and notes to Pure Cycle pursuant to the Comprehensive Amendment Agreement, OAR Option Agreement or CWC Option Agreement. The Guaranty Bank Release and the Allderdice Assignment shall be returned to the Land Board. The Escrow Agent shall destroy all other Closing Documents. Cancellation of Bonds and Notes. On the Effective Date, after receipt of the Rangeview Bonds and Notes, Rangeview shall cancel all of the Rangeview Bonds and Notes without any payment or consideration to any prior holder of the Rangeview Bonds and Notes except (1) the conveyance to Pure Cycle of the Export Water as this term is defined in Article Six of the Amended and Restated Lease Agreement pursuant to the Export Water Agreement, and (2) issuance of the Service Agreement to Pure Cycle. Rangeview hereby represents and warrants to the Land Board that its outstanding debt, other than the Rangeview Bonds and Notes, is less than Five Hundred Thousand Dollars ($500,000). Real Property Transfer. At the option of the Land Board, at any time after the Effective Date the Land Board may designate an individual to become a landowner within the boundaries of Rangeview. If the Land Board exercises this option, subject to the conditions set forth below, Pure Cycle shall grant or cause to be granted to such individual an interest in the land within the boundaries of Rangeview for a cost not to exceed One Hundred Dollars ($100.00). The designated individual must agree, at the time of acquiring the property, to be bound by the tenancy in common agreement pursuant to which the current holders of land within the boundaries of Rangeview hold such land and the right of first refusal agreement on such land granted to INCO (which as of the Effective Date shall be assigned to Pure Cycle). Provided the designated individual meets the legal requirements to serve as a member of the board of Rangeview, Pure Cycle shall take all lawful actions within its power, at no cost to Pure Cycle, to promote the election of the individual designated by the Land Board to the board of Rangeview. Release of Land Board Claims. As of the Effective Date, the Land Board fully, finally and irrevocably releases the Bondholders, Rangeview, Pure Cycle, INCO, and the Owens Group Bondholders and their parents, subsidiaries, affiliates and all other related companies and their past and present shareholders, officers and directors, partners, employees, agents, attorneys, successors and assigns from any and all claims, controversies, actions, causes of action, suits, demands, obligations, debts, losses, damages, or liabilities which may exist in law or equity, whether known or unknown, fixed or contingent, asserted or unasserted, presently existing or arising in the future, based on acts or omissions to date, of any kind or nature whatsoever arising out of or in any way connected with (1) any matters that were or could have been raised in the Litigation, and (2) any matters arising out of or in any way related to the Lease, the Rangeview Notes and Bonds, the Lowry Range, or the Rangeview Metropolitan District, except that this Release shall not release any party hereto from its obligations and duties pursuant to this Agreement (including the Exhibits hereto). The Land Board covenants to the Bondholders, Rangeview, Pure Cycle, INCO, and the Owens Group Bondholders that it will never institute any lawsuit or proceeding, at law or in equity, or otherwise assert any claim against such parties on account of any such claims or controversies. This covenant may be pleaded by the Bondholders, Rangeview, Pure Cycle, INCO, and the Owens Group Bondholders, or any of them, as a complete defense to any action or proceeding, including third party claims, that may be brought or instituted by the Land Board in breach of this Agreement. Release of Claims of the Bondholders, Rangeview, Pure Cycle, INCO and the Owens Group Bondholders. As of the Effective Date, the Bondholders, Rangeview, Pure Cycle, INCO, and the Owens Group Bondholders, on behalf of themselves, their parents, subsidiaries, affiliates and all other related companies and their past and present shareholders, officers and directors, employees, agents, partners, successors and assigns, fully, finally and irrevocably release the Land Board and all present and prior Land Board Commissioners, its and their attorneys, agents, successors and assigns, from any and all claims, controversies, actions, causes of action, suits, demands, obligations, debts, losses, damages, or liabilities which may exist in law or equity, whether known or unknown, fixed or contingent, asserted or unasserted, presently existing or arising in the future, based on acts or omissions to date, of any kind or nature whatsoever arising out of or in any way connected with (1) any matters that were or could have been raised in the Litigation, and (2) any matters arising out of or in any way related to the Lease, the Rangeview Notes and Bonds, the Lowry Range, or the Rangeview Metropolitan District, except that this Release shall not release any party hereto from its obligations and duties pursuant to this Agreement (including the Exhibits hereto). The Bondholders, Rangeview, Pure Cycle, INCO, and the Owens Group Bondholders covenant to the Land Board that they will never institute any lawsuit or proceeding, at law or in equity, or otherwise assert any claim against the Land Board on account of any such claims or controversies. This covenant may be pleaded by the Land Board as a complete defense to any action or proceeding, including third party claims, that may be brought or instituted by any of the Bondholders, Rangeview, Pure Cycle, INCO or the Owens Group Bondholders in breach of this Agreement. Release of Claims among the Bondholders, Rangeview, Pure Cycle, INCO and the Owens Group Bondholders. As of the Effective Date, each of the Bondholders, Rangeview, Pure Cycle, INCO, and each of the Owens Group Bondholders, on behalf of himself, herself or itself, as applicable, any such entity's parents, subsidiaries, affiliates and all other related companies and past and present shareholders, officers and directors, and his, her or its employees, agents, partners, successors and assigns, fully, finally and irrevocably release each of the other parties enumerated in this Section 10 and his, her or its respective past and present shareholders, officers and directors, partners, employees, agents, attorneys, successors and assigns, from any and all claims, controversies, actions, causes of action, suits, demands, obligations, debts, losses, damages, or liabilities which may exist in law or equity, whether known or unknown, fixed or contingent, asserted or unasserted, presently existing or arising in the future, based on acts or omissions to date, of any kind or nature whatsoever arising out of or in any way connected with (1) any matters that were or could have been raised in the Litigation, and (2) any matters arising out of or in any way related to the Lease, the Rangeview Notes and Bonds, the Lowry Range, or the Rangeview Metropolitan District, except that this Release shall not release any party hereto from its obligations and duties pursuant to this Agreement (including the Exhibits hereto). Each of the Bondholders, Rangeview, Pure Cycle, INCO, and each of the Owens Group Bondholders covenant to each other that he, she or it will never institute any lawsuit or proceeding, at law or in equity, or otherwise assert any claim against the others on account of any such claims or controversies. This covenant may be pleaded by each of the parties enumerated in this Section 10 as a complete defense to any action or proceeding, including third party claims, that may be brought or instituted by any of the Bondholders, Rangeview, Pure Cycle, INCO or the Owens Group Bondholders in breach of this Agreement. Indemnity. Pure Cycle agrees to hold Rangeview, the Land Board, the Land Board Commissioners, and the attorneys, agents, employees, successors and assigns of each of them, harmless from and indemnify them against any and all claims, and all costs including without limitation, all attorneys' fees, expert witness fees, and all other costs which may be incurred by such indemnitees, which may be brought by any person or entity which does not execute and deliver a release as provided in paragraph 4(j) but which claims an interest in any of the Rangeview Notes and Bonds (other than a claim asserted by or through Allderdice or CFC). The parties acknowledge and agree that the Land Board has an interest in Rangeview's being indemnified under this paragraph and therefore agree that Rangeview may not waive such indemnification without the Land Board's written consent. Settlement and Compromise. This Agreement is entered into by the parties for the sole purpose of settling and compromising claims and disputes between them and does not constitute, and should not in any way be construed to constitute, admissions of wrongdoing or liability by any party. Costs and Attorneys' Fees. Except as may otherwise be agreed in writing among individual parties, each party agrees to bear and pay his/her/its own costs and attorneys' fees, incurred in connection with the Litigation and this Agreement. However, in the event any party fails to comply with the provisions of this Agreement, any other party taking action to enforce compliance with this Agreement shall be entitled to recover costs and attorneys' fees incurred in connection with such enforcement activity from the defaulting party. Termination. This Agreement will automatically terminate if (i) the Guaranty Bank Release and the Service Agreement are not delivered by April 19, 1996, or (ii) the Consent Judgment is not entered by June 21, 1996, unless a later date is agreed to by all of the parties. Effect of Termination. Upon termination, this Agreement shall be null and void ab initio and shall have no force and effect. Such termination shall be without prejudice to the rights and contentions of the parties in the Litigation. Escrow Agent. .1 The Escrow Agent undertakes to perform only such duties as are specifically set forth in this Agreement. The Escrow Agent shall not be liable for any acts or omissions by it of any kind unless caused by its own misconduct, bad faith or gross negligence, and shall be entitled to rely upon written notice, instrument or signature reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties duly authorized to do so. The Escrow Agent shall have no responsibility for the contents of any writing submitted to it under this Agreement and shall be entitled reasonably to rely in good faith upon the contents thereof. .2 The parties, jointly and severally, agree to indemnify, to the extent permitted by law, the Escrow Agent and to hold it harmless against any and all liabilities incurred by it under this Agreement, except for liabilities incurred by the Escrow Agent resulting from its own misconduct, bad faith or gross negligence. .3 The Escrow Agent may resign at any time by giving notice of such resignation to the other parties hereto specifying a date not less than ten (10) business days following the date of such notice when such resignation shall take effect. Upon such notice, a successor escrow agent shall be appointed by mutual agreement of the Land Board and Rangeview, such successor escrow agent to become the Escrow Agent hereunder upon the resignation date specified in such notice. If the Land Board and Rangeview do not appoint a successor escrow agent prior to the resignation date, the Escrow Agent may appoint as successor escrow agent any entity to which the Land Board consents, and in which Rangeview concurs, which consent and concurrence shall not be unreasonably withheld. The Land Board and Rangeview (with each other's concurrence which shall not be unreasonably withheld) may at any time appoint a new escrow agent by giving notice thereof to the Escrow Agent then acting. The Escrow Agent shall continue to serve until its successor accepts such appointment and receives the Closing Documents. .4 Upon disposition of the Closing Documents in accordance with this Agreement, this Agreement shall be deemed terminated with respect to the Escrow Agent and the Escrow Agent shall be released and discharged from any further obligations hereunder. If any dispute arises under this Agreement with respect to the delivery, ownership or right of possession of the Closing Documents or any portion thereof, the Escrow Agent may deposit the same with the clerk of the Denver District Court, interplead the parties hereto, and upon so depositing the documents held by it hereunder and filing its complaint in interpleader it shall be relieved of all liability hereunder, and furthermore, the parties hereto for themselves, their respective successors and assigns do hereby submit themselves to the jurisdiction of such court. Press Releases/Other Communications. Each party shall limit any comments to the public or the press regarding the Litigation, this Agreement or the exhibits hereto to the terms and benefits of this Agreement. Entire Agreement. This Agreement, including the exhibits hereto, sets forth the entire agreement and understanding of the parties with respect to its subject matter and supersedes all prior discussions or negotiations in connection therewith and there are no understandings or agreements, oral or written, relating to the subject matter of this Agreement, except as specifically provided herein. This Agreement shall not be modified, amended or supplemented except by written agreement of the parties. Authority. Each party to this Agreement represents to every other party that (i) he/she/it has full authority to enter into and perform his/her or its obligations hereunder, (ii) with respect to a party who is an individual, such party is of lawful age and is competent, (iii) with respect to a party who is an entity, the persons signing this Agreement and the exhibits hereto on their behalf have full authority to do so and that no additional resolution or action, other than those which have been obtained, is needed in order for them to execute and legally bind the parties to the terms of this Agreement and the exhibits hereto, (iv) he/she/it has obtained the advice of counsel of his/her/its choice, or has had the opportunity for such consultation, with respect to the terms of this Agreement and the exhibits hereto, (v) he/she/it fully understands this Agreement and the exhibits hereto applicable to he/she/it, has sufficient information to make an informed decision about this Agreement and the exhibits hereto, and agrees to be bound by its terms, (vi) this Agreement and the exhibits hereto applicable to him/her/it are binding and enforceable against him/her or it in accordance with their terms and (vii) this Agreement and the exhibits hereto do not and will not violate any other agreement, court order or law to which he/she/it or his/her/its property is subject; provided, however, the Land Board does not represent that it has the authority to amend the agreements amended by the Comprehensive Amendment Agreement with respect to agreements amended thereby to which it is not a party, the CWC Option Agreement and the Amended Escrow Instructions, except to the extent such authority may exist by virtue of its ownership of the Allderdice Notes and Bonds. Binding Effect. This Agreement shall be binding upon and inure to the benefit of all parties and their respective heirs, successors, executors, legal representatives, assigns, insurers, and all persons claiming by, through or under any of them. Governing Law. This Agreement shall be construed as though it were equally drafted by each party to the Agreement. It shall be governed by and interpreted in accordance with the laws of the Colorado. Execution in Counterparts. This Agreement may be executed in counterparts, with each counterpart being an original document, and all counterparts together constituting a single agreement. Further Assurances. Each party to this Agreement agrees to execute and deliver to the other parties hereto all such other and additional instruments, releases, and documents and to do all other acts and things consistent with the terms and conditions hereof, as any party may reasonably deem necessary to carry out the intent of this Agreement, and to cooperate at any hearing seeking entry of the Consent Judgment, and to provide such information or testimony as is necessary to provide the factual basis for such judgment. Consent to Jurisdiction. All parties consent to, and waive all objections to jurisdiction and venue in the Denver District Court for purposes of enforcing the terms of this Agreement. Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable, said holding shall not affect the enforceability of any other provision of this Agreement, and the parties agree that in such event, in lieu of each clause or provision of the Agreement which is illegal, invalid or unenforceable, there shall be added as a part of this Agreement a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. IN WITNESS WHEREOF, this Settlement Agreement and Mutual Release has been executed on behalf of each of the parties hereto as of the day and date first above written. STATE OF COLORADO STATE BOARD OF LAND COMMISSIONERS --------------------------------- President RANGEVIEW METROPOLITAN DISTRICT By:_________________________________ Title:________________________________ PURE CYCLE CORPORATION, a Delaware corporation By: Title: INCO SECURITIES CORPORATION, a Delaware corporation By: Title: APEX INVESTMENT FUND II, L.P., a Delaware limited partnership By: Apex Management Partnership, L.P., General Partner of Apex Investment Fund II, L.P. By: George Middlemas, General Partner LANDMARK WATER PARTNERS, L.P. By: COMPTON CAPITAL, LTD., its general partner By: _________________________ Earl A. Samson, III, President LANDMARK WATER PARTNERS II, L.P., a Delaware limited partnership By: COMPTON CAPITAL PARTNERS, INC., its general partner By: __________________________ Earl A. Samson, III, President THE ENVIRONMENTAL VENTURE FUND, L.P., a Delaware limited partnership By: Environmental Venture Management, L.P., General Partner of The Environmental Venture Fund, L.P. By: First Analysis Corporation, General Partner of Environmental Venture Management, L.P. By: __________________________ Bret Maxwell, General Partner THE ENVIRONMENTAL PRIVATE EQUITY FUND II, L.P., a Delaware limited partnership By: Environmental Private Equity Management II, L.P., General Partner of The Environmental Private Equity Fund II, L.P. By: First Analysis EPEF Management II, L.P., General Partner of Environmental Private Equity Management II, L.P. By: First Analysis Corporation, General Partner of First Analysis EPEF Management II, L.P. By:______________________________ Bret Maxwell, General Partner PRODUCTIVITY FUND II, L.P., a Delaware limited partnership By: First Analysis Management Company II, L.P., General Partner of Productivity Fund II, L.P. By: First Analysis Corporation, General Partner of First Analysis Management Company II, L.P. By: _____________________________ Bret Maxwell, General Partner PROACTIVE PARTNERS, L.P., a California limited partnership By:________________________________ Charles McGettigan, General Partner WARWICK PARTNERS, L.P., a Delaware limited partnership By: PROVIDENCE PARTNERS, L.P., its general partner By: PACIFIC EQUITY LIMITED, its general partner By:_______________________________ Herbert A. Denton, authorized officer AUGINCO, a Colorado general partnership By: ______________________________ Harrison H. Augur, general partner ___________________________________ Anders C. Brag ___________________________________ Amy Leeds ____________________________________ D. W. Pettyjohn OAR, Incorporated, a Colorado corporation By:_________________________________ Willard G. Owens, President _____________________________________ Willard G. Owens _____________________________________ H. F. Riebesell, Jr. For purposes of paragraphs 4, 5 and 16: DAVIS, GRAHAM & STUBBS LLP By:________________________________ Wanda J. Abel, Partner APPROVED AS TO FORM: DUFFORD & BROWN _________________________________ Gregory A. Ruegsegger, #9936 1700 Broadway, Suite 1700 Denver, CO 80290-1701 GALE A. NORTON Attorney General STEPHEN K. ERKENBRACK Chief Deputy Attorney General TIMOTHY M. TYMKOVICH Solicitor General __________________________________ RICHARD A. WESTFALL, #15295* Special Deputy Solicitor General 1525 Sherman Street, 5th Floor Denver, CO 80203 Telephone: (303) 866-5334 *Counsel of Record ATTORNEYS FOR THE STATE DEFENDANTS SENN, LEWIS, VISCIANO, & STRAHLE, P.C. _________________________________________ Frank W. Visciano, #7274 1801 California Street, Suite 4300 Denver, CO 80202 ATTORNEYS FOR PLAINTIFFS HALIGMAN AND LOTTNER a Professional Corporation __________________________________________ Richard I. Brown, #5195 633 Seventeenth Street, Suite 2700 Denver, CO 80202-3635 ATTORNEYS FOR RANGEVIEW METROPOLITAN DISTRICT DUNCAN, OSTRANDER & DINGESS, P.C. __________________________________________ Donald M. Ostrander, #12458 7800 East Union Avenue, Suite 200 Denver, CO 80237 ATTORNEYS FOR PURE CYCLE AND INCO HOPPER AND KANOUFF, P.C. __________________________________________ Dennis A. Graham, #6773 Robert R. Marshall, #2851 1610 Wynkoop, Suite 200 Denver, CO 80202 ATTORNEYS FOR WILLARD G. OWENS AND OAR, INC. ___________________________________________ H.F. Riebesell, Jr., #719 5290 DTC Parkway, Suite 150 Englewood, CO 80111 PRO SE' GALE A. NORTON Attorney General STEPHEN K. ERKENBRACK Chief Deputy Attorney General TIMOTHY M. TYMKOVICH Solicitor General RICHARD A. WESTFALL, #15295* Special Deputy Solicitor General 1525 Sherman Street, 5th Floor Denver, CO 80203 Telephone: (303) 866-5334 *Counsel of Record ATTORNEYS FOR THE STATE DEFENDANTS HALIGMAN AND LOTTNER a Professional Corporation By: Richard I. Brown, #5195 633 Seventeenth Street, Suite 2700 Denver, CO 80202-3635 Telephone: (303) 292-1200 ATTORNEYS FOR RANGEVIEW METROPOLITAN DISTRICT SENN, LEWIS, VISCIANO, & STRAHLE, P.C. By: Frank W. Visciano, #7274 1801 California Street, Suite 4300 Denver, CO 80202 Telephone: (303) 298-1122 ATTORNEYS FOR PLAINTIFFS DUNCAN, OSTRANDER & DINGESS, P.C. By: Donald M. Ostrander, #12458 7800 East Union Avenue, Suite 200 Denver, CO 80237 Telephone: (303) 779-0200 ATTORNEYS FOR PURE CYCLE AND INCO HOPPER AND KANOUFF, P.C. By: Dennis A. Graham, #6773 Robert R. Marshall, #2851 1610 Wynkoop, Suite 200 Denver, CO 80202 Telephone: (303) 892-6000 ATTORNEYS FOR WILLARD G. OWENS AND OAR, INCORPORATED H.F. Riebesell, Jr., #719 5290 DTC Parkway, Suite 150 Englewood, CO 80111 PRO SE Exhibit 1 Amended and Restated Lease Exhibit 2 Consent Judgment Exhibit 3 Intentionally Omitted Exhibit 4 INCO Assignment Exhibit 5 OAR Option Agreement Exhibit 6 CWC Option Agreement Exhibit 7 Escrow Instructions Exhibit 8 Comprehensive Amendment Agreement EXHIBIT 1 OF DOCUMENT 10.1 ========================== AMENDED AND RESTATED LEASE AGREEMENT between STATE OF COLORADO, ACTING BY AND THROUGH THE STATE BOARD OF LAND COMMISSIONERS, LESSOR and RANGEVIEW METROPOLITAN DISTRICT, LESSEE Lease No. S-37280 TABLE OF CONTENTS ARTICLE 1 Definitions 1 ARTICLE 2 Preliminary Matters 5 ARTICLE 3 Effective Date 5 3.1 Effective Date of This Agreement 5 3.2 Amendment 5 3.3 Objectives of This Agreement 5 3.4 Rangeview 6 ARTICLE 4 Leased Premises 6 4.1 General Description of Water Subject to This Agreement 6 ARTICLE 5 Grant of Lease 6 5.1 Grant 6 5.2 Term 7 5.3 Effect of Expiration of the Agreement 7 5.4 Land Board's Legal Right to Water 7 5.5 Sale of Land 8 ARTICLE 6 Right to Sell Water 8 6.1 Rangeview's Conveyance of Export Water 8 6.2 Right to Artificially Recharge 10 6.3 Water Available to Export 13 6.4 Sale of Use of Water on the Lowry Range 13 6.5 Quality of Water 14 6.6 Termination of Export Water 14 ARTICLE 7 Rent and Royalty Payments to Land Board 15 7.1 Annual Rent 15 7.2 Royalty for Export Water 15 7.3 Royalties for On-site Use 18 7.5 Payment of Royalty 19 7.6 Reporting 20 ARTICLE 8 Development of Infrastructure and Water Service on the Lowry Range 21 8.1 Rangeview Shall Serve 21 8.2 Water Fees and Rates 21 8.3 Substitution of Facilities 21 8.4 Right to Use Transmission Lines; Infrastructure 22 8.5 Title to Equipment and Improvements 23 8.6 Future Leases 23 8.7 Rangeview District Boundaries 23 8.8 Development of Lowry Range 23 8.9 Reserves 23 ARTICLE 9 Service Provider Contract 24 9.1 Service Provider for Rangeview 24 ARTICLE 10 East Cherry Creek Valley Water and Sanitation District 26 10.1 Terms and Revenue 26 10.2 Title Reversion 26 ARTICLE 11 Rights-of-Way 26 11.1 Master Plan 26 11.2 Fee for Right-of-Way 27 11.3 License to Service Provider 27 ARTICLE 12 Bonding Requirements 27 12.1 Bond 27 12.2 Bond of Contractors 27 ARTICLE 13 Default and Remedies 28 13.1 Events of Default 28 13.2 Remedies 29 13.3 No Waiver 30 13.4 Land Board's Right to Cure Rangeview's Breach 30 ARTICLE 14 Improvements 31 14.1 Transfer of Improvements 31 14.2 Abandonment of Export Water Facilities 31 ARTICLE 15 General Provisions 31 15.1 Assignment by Rangeview 31 15.2 Work Requirements 32 15.3 Third Party Beneficiaries 33 15.4 Notice 33 15.5 Construction 34 15.6 Entire Agreement 34 15.7 Authority 34 15.8 Copies 34 15.9 Amendment 34 15.10 Compliance with Law 34 15.11 Binding Effect 35 15.12 Severability 35 15.13 Optimum Long-Term Revenue 35 15.14 Further Assurance 35 15.15 Governing Law 35 15.16 Arbitration 35 15.17 Litigation 36 15.18 Duty of Good Faith and Fair Dealing 36 15.19 Force Majeure 36 EXHIBITS Exhibit A Water Previously Conveyed Exhibit B Service Agreement Exhibit C Export Water Contract Exhibit D Master Plan of Well Field and Rights-of-Way Exhibit E Pipe Sizes Exhibit F Right-of-Way Grant Form Exhibit G Service Provider Right-of-Way License Exhibit H Export Water Contractor Right-of-Way License AMENDED AND RESTATED LEASE AGREEMENT THIS AMENDED AND RESTATED LEASE AGREEMENT is by and between the State of Colorado, acting through its State Board of Land Commissioners and Rangeview Metropolitan District, a state quasi- municipal corporation and political subdivision of the State of Colorado, acting by and through its water activity enterprise. NOW, THEREFORE, in consideration of the promises hereinafter stated, to be kept and performed by the Parties, their successors and assigns, the Parties agree as follows: 1. Definitions "Agreement" shall be defined to mean this Amended and Restated Lease Agreement, Lease No. S-37280, dated April __, 1996. "Annual Rent" shall be defined as set forth in Section 7.1. "Construction" shall be defined as set forth in Section 5.1. "Delivered Basis" shall be defined as set forth in Section 7.2(d)(2). "Effective Date" shall be defined as set forth in Section 3.1. "East Cherry Creek Agreement" shall be defined to mean that certain agreement dated July 8, 1983 by and between OAR, Incorporated (Rangeview's predecessor), and East Cherry Creek Valley Water and Sanitation District. "ECCV" shall be defined to mean East Cherry Creek Valley Water and Sanitation District. "Enterprise" shall be defined as Rangeview's water activity enterprise established by resolution of Rangeview adopted at a public meeting of Rangeview's board of directors on September 11, 1995, and effective as of the date of its adoption. "Entitlement Basis" shall be defined to mean a sale or other disposition of water to a third party with the third party bearing all costs of withdrawal, treatment and delivery. "Export Water" shall be defined as set forth in Section 6.1. "Export Water Contractor" shall be defined as set forth in Section 6.1. "Export Water Purchaser" shall be defined to mean the person or entity who purchases Export Water other than the Export Water Contractor and a retail end user. "Force Majeure" shall be defined as set forth in Section 15.20. "Gross Revenues" shall be defined to mean all pre-tax amounts or consideration actually received directly or indirectly by Rangeview or the Export Water Contractor, as applicable, from the sale or other disposition of Water Rights, including tap fees, usage fees, service charges and all other revenues, excluding taxes and refunds. "Index" shall be defined to mean the Consumer Price Index for Urban Consumers-All items (CPI-U) published by the Bureau of Labor Statistics of the U.S. Department of Labor. In the event that the Index shall subsequently be converted to a different standard reference base or otherwise revised, the determination involved shall be made with the use of such conversion factor, formula or table for converting said Index as may be published by the Bureau of Labor Statistics, or if said Bureau shall not publish the same, then with the use of such conversion factor, formula or table as may be published by Prentice Hall, Inc., or, failing such publication, by any other nationally recognized publisher of similar statistical information. In the event that the Index shall cease to be published, then for the purposes of this Agreement, there shall be substituted such other index as the Parties shall agree upon, and if they are unable to agree, then ninety (90) days after the Index ceases to be published, such matters shall be determined by arbitration as provided in Section 15.16 of this Agreement. "Initial Export Royalty Rates" shall be defined as set forth in Section 7.2(a). "Initial Permitted Sale" shall be defined as set forth in Section 6.1. "Land Board" is defined to mean the State of Colorado acting by and through its State Board of Land Commissioners. "Lease" is defined to mean the aggregate of the following: a. Lease S-37280, dated April 26, 1982 between the Land Board and OAR, Inc., whose rights and obligations were subsequently conveyed to Lowry Range Metropolitan District, now known as Rangeview; b. Amendment to Lease S-37280, dated February 22, 1983; c. Amendment to Lease S-37280, dated December 19, 1983; d. Amendment to Lease S-37280, dated November 26, 1984; e. Amendment to Lease S-37280, dated June 5 and 6, 1986; f. Transfer Agreement dated December 8, 1986 ("Transfer Agreement"); and g. Novation Agreement dated December 7, 1988 ("Novation Agreement"). "Litigation" is defined to mean the case entitled Apex Investment Firm, II, L.P., et al. v. Colorado State Board of Land Commissioners, et al., Case No. 94CV5405, District Court, in and for the City and County of Denver, State of Colorado. "Lowry Range" shall be defined to mean the approximately 24,567.21 acres, more or less, according to U.S. Government survey, in Arapahoe County, Colorado more particularly described as follows: Township 5 South, Range 64 West of the 6th P.M., Sections 7 through 10: all; Sections 15 through 22: all; Sections 27 through 34: all. Township 4 South, Range 65 West of the 6th P.M., Sections 33: all; and 34: all. Township 5 South, Range 65 West of the 6th P.M., Section 3: all; Sections 10 through 15: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 15; Sections 22 through 27: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 22; Sections 35 and 36: all; Section 34: north 2,183.19 feet. Township 5 South, Range 66 West, of the 6th P.M., Section 36: all. "Non-Export Water" shall be defined to mean the Water Rights other than (i) the Export Water and (ii) the water subject to the East Cherry Creek Agreement. "Off-Site" shall be defined to mean outside the boundaries of the Lowry Range. "Operating Expenses" shall mean all actual maintenance and operating costs incurred by Rangeview or its Service Provider in discharging Rangeview's obligations to provide Non-Export Water to Water Users as required by Section 8.1. Such Operating Expenses may include, for example, expenses for repairs to the infrastructure; salaries, wages and employee benefit expenses; fees for services, materials and supplies; rents, administrative and general expenses; insurance expenses; fees for legal, engineering, accounting and other consulting and technical services; and taxes and other governmental charges. Such Operating Expenses shall not include expenditures which are properly capitalized under generally accepted accounting prin ciples, depreciation or obsolescence charges or reserves therefor, reserves for any other purpose, amortization of intangibles or other bookkeeping entries of a similar nature, interest charges and charges for the payment of principal or amortization of bonded or other indebtedness, royalties, or losses from the sale, abandonment, reclassification, re- evaluation or other disposition of capitalized assets. "Parties" shall be defined to mean the Land Board and Rangeview. "Rangeview" shall be defined to mean Rangeview Metropolitan District, a State quasi-municipal corporation and political subdivision of the State of Colorado, acting directly as such or acting by and through the Enterprise. "Reserved Water" shall be defined as set forth in Section 5.1(e). "Retail Sales Price" shall be defined to mean the gross rates and charges per 1,000 gallons charged by a municipality, water district or other water provider to retail end users of the water. "Royalty Base" shall be defined as set forth in Section 7.2(b). "Sale of Water" or similar phrases used herein shall mean the sale of the rights as set forth in Section 5.1 and Section 6.1. "Service Agreement" shall be defined as set forth in Section 6.4. "Service Provider" shall be defined to mean any entity, other than Rangeview, actually delivering the Non-Export Water and related services to the Water Users as permitted by Article 9. "Settlement Agreement" shall be defined to mean the Settlement Agreement and Mutual Release dated April 4, 1996 among the Parties and the other parties in the Litigation. "Substitute Facilities" shall be defined as set forth in Section 8.3. "Water Interest Ratio" shall be defined as set forth in Section 8.3. "Water Rights" shall be defined as set forth in Section 5.1. "Water Users" shall be defined to mean surface tenants, occupants, developers, land owners and all other water users on the Lowry Range. 2. Preliminary Matters (1) A dispute has arisen between the Parties and others concerning the status of the Lease as evidenced in part by the claims asserted by and against various parties in the Litigation. (2) The Parties to this Agreement desire to: (1) amend and completely restate the rights and obligations of the Lease; (2) acknowledge and agree that the Lease as amended and completely restated by this Agreement is valid and enforceable; (3) eliminate uncertainty surrounding the Lease as amended and completely restated by this Agreement; and (4) resolve all issues between the Parties to this Agreement which are related to all issues which have been raised or could be raised in connection with the Litigation. 3. Effective Date (1) Effective Date of This Agreement. This Agreement shall be binding on the date it is fully executed and delivered by the Parties subject only to, as a condition subsequent, entry of the final non-appealable order of the Denver District Court in the Litigation approving this Agreement and the related Settlement Agreement. The date of the final non-appealable order of the Denver District Court shall be deemed the Effective Date of this Agreement. The Parties agree to cooperate and to use their best efforts to obtain prompt entry of a final non-appealable order. (2) Amendment. This Agreement amends, restates in its entirety, and supersedes in all respects the Lease, and from and after the Effective Date, this Agreement, including the Exhibits hereto and the Settlement Agreement, shall control and define the rights and obligations of the Parties with respect to the subject matter of this Agreement. (3) Objectives of This Agreement. The Parties acknowledge that it is in their best interests to arrange for water development on the Lowry Range to be pursued in a manner which encourages efficient and economical use of the water resources which are the subject of this Agreement and encourages surface development on the Lowry Range. Rangeview has the objective of acquiring an adequate water supply to provide water delivery to Water Users pursuant to this Agreement and, subject to the terms of this Agreement, to apply the Export Water to a use which creates revenue and thereby provides additional royalty payments to the Land Board. In order to achieve this objective, the Parties acknowledge that Rangeview's first priority for utilization of its available revenues will be the fulfillment of its commitment to provide water service to its Water Users. The Land Board contemplates that it may lease, sell, or otherwise dispose of portions of the surface of the Lowry Range at some undetermined point in the future and anticipates that the availability and provision of water service to the Lowry Range pursuant to this Agreement may promote development on the Lowry Range. (4) Rangeview. The Enterprise agrees that it shall cause Rangeview, acting directly and not through the Enterprise, to execute and deliver a guaranty of this Agreement in the form attached hereto as Exhibit I. 4. Leased Premises (1) General Description of Water Subject to This Agreement. Except as otherwise reserved to the Land Board in Section 5.1 below, this Agreement shall encompass the use of all of the waters on and under the surface of the Lowry Range. 5. Grant of Lease (1) Grant. Subject to the terms, conditions and limitations set forth in this Agreement, the Land Board hereby leases to Rangeview the right and privilege during the term of this Agreement to divert and put to beneficial use all water on and under the surface of the Lowry Range, including all rights to the first use, reuse, successive use and disposition of such water, together with the right to use as much of the surface and underground portions of the Lowry Range as provided in Article 11 of this Agreement as may be reasonably required in the exercise of the rights granted by this Agreement, including, in accordance with commercially reasonable and prudent water provider practice in Colorado, the right to drill and build wells, construct buildings (except office and other such buildings not directly necessary for the extraction and transportation of water), make excavations, stockpiles, dumps, drains, roads, power lines, pipelines, and other improvements (all such activity hereinafter being referred to as "Construction"), but only as may be reasonably necessary for the development and delivery of the water pursuant to this Agreement. The foregoing items exclusive of the reservations set forth below are collectively referred to as the "Water Rights." Reserving, however, to the Land Board: 1. Except as are herein specifically granted, the right to exercise all rights and privileges of every type and nature which are incident to the ownership of the Lowry Range, or any part thereof, at any time, for any purpose, including, without limita tion, the right to explore, prospect for and extract oil and gas and other minerals, including sand and gravel, on or under said land, in a manner not inconsistent with the full exercise by Rangeview of the rights and privileges herein granted; 2. The right at any time to go upon those portions of the Lowry Range not exclusively utilized by Rangeview and the right at all reasonable times upon five (5) days' written notice during the term of this Agreement to go upon those portions of the Lowry Range exclusively utilized by Rangeview and every part thereof for the purpose of inspecting same, including metering, measuring and other similar devices, and, in accordance with Section 7.6, to inspect the books of accounts and records of water development and use therein, and of ascertaining whether or not Rangeview, and those entities holding under and buying from or contracting with Rangeview, are carrying out the terms, covenants and agreements of this Agreement; 3. All interests in the Water Rights and all interests in the Lowry Range previously granted by the Land Board identified in Exhibit A; 4. The Land Board's recharge rights set forth in 6.2(b); and 5. A total of 1,135 acre feet annually of non-tributary and not non-tributary (as defined by statute) water blended proportionally from all aquifers based on water court decrees adjudicating water under the Lowry Range as such decrees may be amended from time to time ("Reserved Water"). Except for the restriction on sale set forth in Section 6.1(b), this Reserved Water shall not be subject to this Agreement and is released by Rangeview in favor of Land Board. (2) Term. The term of the Lease commenced at 12:00 noon on May 1, 1982, and, as amended by this Agreement, shall expire at 12:00 noon on May 1, 2081 unless terminated earlier in accordance with the terms of this Agreement or otherwise extended. (3) Effect of Expiration of the Agreement. Upon expiration, or earlier termination of the term of this Agreement, the right to the use of the Non-Export Water shall automatically and without further act of the Parties or anyone else revert to the Land Board. To the extent Non-Export Water is actually being delivered to provide water service to Water Users, the Land Board agrees that such water will continue to be made available to Water Users under commercially reasonable agreements to be negotiated at the time of such expiration or termination, which agreements shall include adequate revenue for the Land Board. In the event no agreement is reached, then the terms of such agreements shall be determined by arbitration pursuant to Section 15.16. (4) Land Board's Legal Right to Water. The Land Board hereby warrants and represents that, except as provided in Exhibit A, it has all right, title and interest in the Water Rights granted to Rangeview and it has not granted such rights to any other person or entity. Rangeview agrees to pursue diligently (1) the adjudication of all of the Water Rights, and (2) the development of the Water Rights as necessary to provide water service to Water Users in a commercially reasonable time and manner and in accordance with prudent water provider practice in Colorado, without cost or legal expense to the Land Board. The Land Board shall reasonably cooperate and render assistance with respect to all permits, applications, filings and documents related to Rangeview's activity in adjudicating all of the Water Rights and shall be provided courtesy copies of such papers five (5) days before they are filed. It is further agreed by the Parties hereto that all permits, applications, filings, documents and decrees in connection with establishing such Water Rights shall bear the name of, and be made in the name of Land Board and, if necessary, Rangeview, as lessee. Legal title to the Water Rights shall be held in the name of the Land Board except to the extent reasonably necessary to include Rangeview, as lessee, in water decrees, without cost to the Land Board, and any water rights adjudicated on and under the Lowry Range shall auto matically become Water Rights under this Agreement. Nothing in this Agreement shall be deemed to prohibit Rangeview from adjudicating in its sole name and for its sole benefit any other Off-Site water rights not subject to this Agreement. Unless expressly agreed to by the Land Board in writing and in its sole discretion, the Water Rights, the water system to be constructed, and the rights-of-way on and aquifers under the Lowry Range required to deliver both Export and Non-Export Water, and any other rights granted hereunder, shall not be used for any business or other purpose except to provide water service consistent with this Agreement and the water decrees by which such Water Rights have been or may be adjudicated. (5) Sale of Land. C.R.S. 36-1-118(4) provides that the Land Board may, in its discretion, offer for sale any land leased at any time during the term of any lease as though said lease had not been executed, or it may withdraw such land from sale during the full term of the lease. The Land Board affirms that the right to develop, divert, convey and use the Water Rights and the interest in the surface of the Lowry Range conferred by Article 11 of this Agreement shall be withdrawn from sale until this Agreement terminates in accordance with the provisions hereof. 6. Right to Sell Water (1) Rangeview's Conveyance of Export Water. 1. As of the Effective Date and subject only to the terms of this Agreement, Rangeview shall sell or have the right to sell the right to divert and sell outside the Lowry Range the use of up to a total gross volume of 1,165,000 acre feet of the non- tributary and not non-tributary water included in the Water Rights ("Export Water") pursuant to an agreement in the form attached hereto as Exhibit C (the "Initial Permitted Sale"). The purchaser of the Export Water, pursuant to Exhibit C, shall be referred to herein as the "Export Water Contractor." The Export Water may be withdrawn only to the extent permitted by the water decrees by which such water was adjudicated, as such decrees may be amended from time to time, and may not be withdrawn in quantities or in any other manner that would adversely affect the delivery of Non-Export Water to Water Users. Notwithstanding the expiration or early termination of this Agreement, such right to divert, sell and use the total gross volume of 1,165,000 acre feet of Export Water shall be absolute and irrevocable subject to the provisions of Section 6.6. The diversion and use of the Export Water shall be in accordance with the terms of the water decrees by which such water was adjudicated, as such decrees may be amended, from time to time and will include the right to sell all use, reuse, and successive uses of the Export Water. Upon the sale or other disposition of all or any portion of the Export Water following the Initial Permitted Sale, Rangeview shall cause to be paid and the Land Board shall receive the royalty described in Section 7.2 below. The Land Board will have no approval rights as to any sale or other disposition of the use of the Export Water subsequent to the Initial Permitted Sale, except that Rangeview shall provide to the Land Board written notice of and access to the contemplated sale documents twenty-one (21) days in advance of such sale or other disposition pursuant to Rangeview's rights as set forth in Section 12.1 of Exhibit C. Contracts for sales of the use of Export Water shall provide for the substitution of facilities and oversizing of pipes as provided in Sections 8.3 and 8.4 below and that the capital costs for the Off-Site delivery system and oversizing of pipes will not be charged, directly or indirectly, to the Land Board, Rangeview, or Water Users (except to the extent such facilities are substituted for on-site service, in which case Water Users will indirectly bear costs through rates and charges and Rangeview may incur administrative and maintenance expenses with respect thereto). In addition, Rangeview shall cause such contracts to provide for the payment of royalties as otherwise provided in this Agreement. 2. The Land Board agrees that the Reserved Water shall not be sold by the Land Board before (i) the sale or disposition of the Export Water by the Export Water Contractor subsequent to the Initial Permitted Sale or (ii) May 1, 2032, whichever is earlier. 3. Rangeview is in the process of adjudicating certain tributary waters on the Lowry Range. To the extent Rangeview is successful in completing adjudication of such rights, and to the extent water is available pursuant to such adjudication, the Export Water Contractor shall have the right at any time during the first five (5) years following the adjudication to substitute up to 1,650 acre feet per year of non-tributary water which constitutes the Export Water as defined in this Section 6.1 for an absolute and irrevocable decree for up to 1,650 acre feet of tributary water. If the Export Water Contractor exercises the foregoing right, the Export Water Contractor shall reconvey a total gross volume of 165,000 acre feet of non-tributary water and not non-tributary water which constitutes the Export Water to the Land Board, as lessor, and Rangeview, as lessee, to become Non-Export Water subject to this Agreement and the Export Water Contractor shall enter into an agreement with Rangeview which provides that in years when less than a total of 3,300 acre feet per year of tributary water on the Lowry Range is physically available, the Export Water Contractor shall only utilize up to fifty percent (50%) of the available tributary water unless the remaining available tributary water is not being utilized by Rangeview, its Service Provider, or the Land Board, as applicable, and Rangeview, its Service Provider, or the Land Board, if applicable, agrees that it does not plan to utilize such water during the year, in which case the Export Water Contractor may utilize the available tributary water which Rangeview, its Service Provider, or the Land Board does not plan to use up to a maximum of 1,650 acre feet. In no case shall Non- Export Water be used to augment the Export Water Contractor's tributary water hereunder. For example, if in a year there are only 2,400 acre feet of tributary water available, the Export Water Contractor could only utilize 1,200 acre feet unless Rangeview, its Service Provider, or the Land Board, if applicable, does not plan to use some portion of the remaining 1,200 acre feet, in which case the Export Water Contractor could use the unused tributary water up to a maximum of 450 acre feet for a combined total of 1,650 acre feet. (2) Right to Artificially Recharge. 1. Rangeview's Right to Recharge. Rangeview, the Service Provider (but only as to the provision of water to Water Users pursuant to the Service Agreement) and the Export Water Purchaser shall have the right to artificially recharge and to store the recharged water in the aquifers from which such Water Rights are withdrawn (but only to the extent all or some of the Water Rights have been withdrawn from the aquifers by the recharging party) and to withdraw such artificially recharged and stored water. Rangeview, the Service Provider, and the Export Water Purchaser shall also have the right, to the extent Water Rights have been withdrawn from the aquifers by the recharging party, to store additionally acquired water in reservoirs on the surface of the Lowry Range in a commercially reasonable manner consistent with prudent water provider practice in Colorado and subject to the requirements set forth herein. (i) The amount of recharged water stored in the aquifers and on the surface in reservoirs combined cannot exceed the amount of Water Rights withdrawn by the recharging entity from the aquifers. (ii) If Rangeview, the Service Provider, or the Export Water Purchaser desires to construct a surface reservoir, such entity must notify the other entities of such intention and give them the opportunity to participate in the project. Any such reservoir must be compatible with the existing and reasonably projected development of the surrounding land. The Land Board shall have the right to veto the construction of any surface reservoir if it reasonably determines that the reservoir would adversely impact either (i) the provision of service to Water Users, or (ii) the value of the Land Board's land within the Lowry Range, based on then known facts and reasonable projections regarding future needs of Water Users and future development of the Lowry Range. Any disputes over whether the reservoir will be compatible with the development of the surrounding land or whether the reservoir would adversely impact the provision of service to Water Users or the value of the Land Board's land shall be resolved by arbitration pursuant to Section 15.16 of this Agreement. The burden of proof in such arbitration shall be on the entity desiring to construct the reservoir. If a reservoir is constructed, the entity or entities constructing such reservoir shall permit reasonable access to the reservoir, if requested by surrounding land owners, municipalities, parks and recreation districts or similar entities, provided that the access requested does not interfere with or render more costly the planned use and operation of the reservoir and provided that it shall not be the responsibility of Rangeview, the Service Provider, or the Export Water Purchaser to provide amenities or safety features to accommodate needs of such third persons unrelated to the water service function of the reservoir. (iii) Subject to the provisions of subsection (ii) above: (a) Notwithstanding Article 11, if the Export Water Purchaser plans to construct the reservoir, the Land Board shall grant to the Export Water Purchaser a perpetual right- of-way on the land for such reservoir, which does not expire unless the reservoir is abandoned in accordance with Section 14.2. This right-of-way shall be granted in exchange for payment of the then fair market value for the land. (b) If Rangeview or the Service Provider requests a right-of-way for a reservoir, Rangeview shall be granted the right-of-way, and Rangeview shall grant a license to the Service Provider, if necessary, and the Land Board shall receive fees in accordance with Article 11. (c) If the reservoir is planned to be jointly constructed by Rangeview and/or its Service Provider and the Export Water Purchaser, then the fees and rights-of-way granted will be based on the proportionate part of the reservoir to be used by Rangeview or its Service Provider on the one hand, and the Export Water Purchaser on the other. For example, if Rangeview and the Export Water Purchaser agree to construct a reservoir which will be used to store ten thousand (10,000) acre feet of water per year and which requires a one hundred (100) acre right-of-way, and each party intends to utilize one-half of the reservoir, then Rangeview will pay to the Land Board the fee set forth in Section 11.2 for fifty (50) acres and the Export Water Purchaser will pay fair market value for the remaining fifty (50) acres. Rangeview will receive a right-of-way in the one hundred (100) acres in the form of Exhibit F, and, if necessary, will license such right-of-way to the Service Provider pursuant to a license in the form of Exhibit G. The Export Water Purchaser shall receive a perpetual right-of-way in the one hundred (100) acres. Each entity would thereafter have access to the entire reservoir but would only have the usage rights to their undivided one-half of the reservoir. (iv) Any artificial recharge must be done in accordance with all applicable laws, rules, and regulations in effect at the time of such artificial recharge, and notwithstanding such compliance, shall not interfere with or render more burdensome or costly delivery of the Non-Export Water to Water Users. (v) Rangeview, the Service Provider, the Export Water Contractor, and the Export Water Purchaser (but excluding the end user) shall be jointly and severally liable for all damages, including without limitation, environmental or water quality damages, if any, incurred by the Land Board or the Water Users arising out of the artificial recharge, storage, or withdrawal of such artificially recharged water. (vi) Rangeview shall cause all contracts for the sale or other disposition of the Export Water to provide that the Land Board shall be paid the royalty required by Section 7.4(a) at the time the recharged water is withdrawn. The royalty shall be payable by the entity withdrawing such water and the Land Board shall have the right to enforce such payment requirement, including the rights as provided in Section 6.6. If there is a dispute as to the royalty attributable to such recharged water when it is withdrawn, the royalty shall be resolved by arbitration pursuant to Section 15.16 of this Agreement. (vii) The right to recharge Export Water is not alienable from the Export Water and must be sold in conjunction therewith. Subject to Section 15.19, the right to recharge sold with the Export Water shall be deemed abandoned when the Export Water Purchaser withdraws the entire portion of the Export Water purchased plus the entire amount of water recharged by the Export Water Purchaser and such purchaser has failed to recharge any portion of the aquifers for a period of ten (10) years. In the event of a dispute in the determination of the abandonment of the right to recharge, the matter shall be determined by arbitration pursuant to Section 15.16 of this Agreement. (viii) Rangeview shall cause the Service Provider and the Export Water Purchaser to comply with this Section 6.2(a) in conducting any recharge activities permitted above. 2. Land Board's Right to Recharge. The Land Board shall have the right to artificially recharge, store and withdraw water in the aquifers beneath the Lowry Range in accordance with all applicable laws, rules and regulations in effect at the time of such artificial recharge; provided, however, that notwithstanding such compliance, the Land Board shall not interfere with or render more burdensome or costly the storage of or delivery of or recharge of water by Rangeview, the Service Provider, or the Export Water Purchaser and shall not interfere with or render more burdensome or costly the delivery of Export Water by the Export Water Contractor if the Export Water is sold by the Export Water Contractor on a Delivered Basis. Further, the Land Board shall be liable for damages, including without limitation, environmental or water quality damages, if any, incurred by Rangeview, the Service Provider, the Export Water Contractor, the Export Water Purchaser or the Water Users arising out of such artificial recharge, storage or withdrawal by the Land Board. (3) Water Available to Export. The Non-Export Water (and water recharged other than with respect to Export Water withdrawn) shall not be used, transferred, sold, or otherwise disposed of Off-Site without the express written consent of the Land Board. Disposal of untreated effluent, sewage, or sewerage Off-Site shall be permitted only with the express written consent of the Land Board, which consent shall not be unreasonably withheld. Rangeview shall pay to the Land Board forty-five percent (45%) of Gross Revenues, if any, for the disposal of untreated effluent, sewage, or sewerage Off-Site, within thirty (30) days after receipt. In the event that Rangeview sells or disposes of treated effluent off-site (subject to the consent required in the first sentence of this Section 6.3), then Rangeview shall pay to the Land Board forty-five percent (45%) of all Gross Revenues received after deduction of all costs of treatment. If there is a dispute as to such payment, the matter shall be resolved by arbitration pursuant to Section 15.16 of this Agreement. The Land Board shall be provided twenty-one (21) days advance written notice and access to contemplated contracts for the disposal of effluent, sewage, and sewerage Off-Site. Sale of Use of Water on the Lowry Range. Subject to the provisions of this Agreement, Rangeview shall provide water service to all current and future Water Users needing water service on the Lowry Range and shall have the right to divert and use all Non-Export Water for such purpose. Reuse and successive use of Non-Export Water, if any, shall be done in a commercially reasonable manner consistent with prudent water provider practice in Colorado. At its option, and subject to the provisions of Article 9 below, Rangeview may enter into a Service Agreement contract to provide Non-Export Water to Water Users substantially in the form attached hereto as Exhibit B (the "Service Agreement"). To the extent that Non-Export Water is insufficient to provide water service to Water Users, Rangeview shall be obligated to locate additional sources of water for Water Users. Rangeview shall either acquire such additional water and provide service to Water Users at the rates and charges set forth in Section 8.2 or it shall notify the Land Board that it (4) requires an increase in the rates and charges to cover the cost of acquiring the additional water, in which case the Land Board shall have the option of (i) permitting Rangeview to charge such increased rates or (ii) serving any Water Users requesting service after the Non-Export Water is committed. Rangeview agrees that if it acquires such additional water, it shall, consistent with prudent water provider practices in Colorado, use such water to provide water service to Water Users without additional cost to the Land Board. Any additional water shall not be subject to the terms of this Agreement except (i) to the extent that such additional water is stored in aquifers beneath the surface of the Lowry Range or in reservoirs on the surface of the Lowry Range, in which case, such water shall thereafter be subject to the royalty set forth in Section 7.4(b) and (ii) to the extent such additional water may remain subject to the rates and charges in Section 8.3 as described above. Such additional water shall not be used to determine when Section 7.3(b) of this Agreement becomes applicable and Section 7.3(b) shall not be applicable to such additional water unless Rangeview utilizes additional water to provide water service to Water Users when there is still sufficient Non-Export Water available on a commercially reasonable basis and in compliance with prudent water provider practice in Colorado to provide such service. If Rangeview does not acquire additional water for Water Users, because the Land Board elects to serve Water Users requesting service after the Non-Export Water is committed, then Rangeview shall continue to provide Non-Export Water to Water-Users who are issued taps prior to the time when the available Non-Export Water was committed pursuant to such taps. Rangeview shall not issue taps based on unused cumulative rights under the decrees for the Non-Export Water. The phrase "unused cumulative rights under the decrees" means the amount of water that could otherwise have been legally withdrawn pursuant to the Statewide Non-Tributary Ground Water Rules, 2 C.C.R. 402-7, Rule 8A., over and above the allowed average annual amount of withdrawal permitted under the decrees. The Land Board may utilize the Reserved Water or any other water sources it may have or acquire, to service subsequent Water Users. The Land Board shall have the right to jointly use and expand the facilities constructed by Rangeview or its Service Provider to provide Non-Export Water to Water Users to provide service to subsequent Water Users to the same extent Rangeview would have used and expanded such facilities consistent with prudent water provider practices in Colorado if it had acquired additional water to service such Water Users. (5) Quality of Water. Unless authorized in writing by the Land Board, the use of Water Rights may only be sold or otherwise disposed of as water blended proportionally from all aquifers based on water court decrees adjudicating the Water Rights, except for the water committed pursuant to the East Cherry Creek Agreement and the sale or disposition of any tributary water (including the tributary water described as set forth in Section 6.1(c)). (6) Termination of Export Water. In the event the Export Water Contractor or the Export Water Purchaser fails to pay the royalties required by this Agreement within ten (10) business days after the applicable due date, or takes or fails to take action which would cause material harm to the Water Rights or the aquifers, or the surface of the Lowry Range then owned by the Land Board and such action or failure is not cured within thirty (30) days after written notice has been given by the Land Board or Rangeview specifically setting forth the nature of the problem, or if more than thirty (30) days is reasonably required to cure such matter complained of, if the Export Water Contractor or Export Water Purchaser, as applicable, shall fail to commence to correct the same within said thirty (30) day period and shall thereafter fail to prosecute the same to completion with reasonable diligence, or commits a fraud in the performance (as opposed to the inducement) of this Agreement, as may be determined in a final non-appealable order of a court of competent jurisdiction, the Land Board or Rangeview may elect to terminate the rights to the portion of the Export Water which has not been conveyed or is not otherwise subject to a good faith, binding agreement to be conveyed to an Export Water Purchaser and pursue such other remedies as may be provided by law. Rangeview, at its option, without prejudice to any other remedies it may have, may cure any of the foregoing defaults in order to protect its rights under this Agreement without waiting for the thirty (30) day period to run and seek reimbursement from the Export Water Contractor or Export Water Purchaser, as applicable, for any costs and damages associated therewith. 7. Rent and Royalty Payments to Land Board (1) Annual Rent. Rangeview shall pay annual rent ("Annual Rent") in the amount of Five Thousand Dollars ($5,000.00) to the Land Board on or before May 1 of each year until this Agreement expires or otherwise terminates. The Annual Rent shall be increased every five (5) years proportionally to the five (5) year increase, in the Index. In no case shall the annual rent be reduced. (2) Royalty for Export Water. 1. Royalty Rates for Public Versus Private Use. A sum equal to ten percent (10%) of the Royalty Base shall be paid to the Land Board as a royalty in the case of a sale or other disposition of Export Water to a Title 32 water district or other similar municipal or public entity, and a sum equal to twelve percent (12%) of the Royalty Base shall be paid to the Land Board as a royalty in the case of a sale or other disposition of Export Water to all others. These royalty rates shall be referred to as the "Initial Export Royalty Rates." 2. Application of Initial Royalty Rates. In addition to the Annual Rent, Rangeview shall pay or cause the Export Water Contractor to pay the Initial Export Royalty Rates (subject to adjustment as provided in Section 7.2(c)) on the sale or other disposition of the Export Water. The royalty paid to the Land Board upon a sale or other disposition of Export Water shall be based on the greater of the following values ("Royalty Base"): (1) the Export Water Contractor's Gross Revenues for the specific interest granted; or (2) the value of the specific interest granted, as determined in accordance with Section 7.2(d). The Parties intend that the Royalty Base shall include, without limitation, all Gross Revenues relative to the sale or other disposition of any or all Export Water rights, including without limitation, option rights, the right to first use, reuse, successive use, or any other disposition of the Export Water. 3. Adjustment of Initial Export Royalty Rate. a. If the Export Water is sold or disposed of by the Export Water Contractor on an Entitlement Basis to a public entity for an amount in excess of Forty-Five Million Dollars ($45,000,000) in Gross Revenues, the Initial Export Royalty Rate shall be increased for Gross Revenues received in excess of $45,000,000 as follows: Royalty Gross Revenue Rate 0 - $45,000,000 10% $45,000,000 - $60,000,000 20% $60,000,000 - $75,000,000 30% $75,000,000 - $90,000,000 40% Over $90,000,000 50% As an example, if the Export Water Contractor receives One Hundred Million Dollars ($100,000,000) in Gross Revenues from sales of the Export Water on an Entitlement Basis to a public entity, the Land Board will receive a royalty as follows: Gross Revenue Royalty the first $45,000,000 $4,500,000 the next $15,000,000 $3,000,000 the next $15,000,000 $4,500,000 the next $15,000,000 $6,000,000 the next $10,000,000 $5,000,000 b. If the Export Water is sold by or disposed of by the Export Water Contractor on an Entitlement Basis for a private use for an amount in excess of Forty-Five Million Dollars ($45,000,000), the Initial Royalty Rate shall be increased for the Export Water Contractor's Gross Revenues in excess of Forty- Five Million Dollars ($45,000,000) as follows: Royalty Gross Revenue Rate 0 - $45,000,000 12% $45,000,000 - $60,000,000 24% $60,000,000 - $75,000,000 36% $75,000,000 - $90,000,000 48% Over $90,000,000 50% c. The foregoing adjustments to the Initial Export Royalty Rate shall also apply to sales or other dispositions on other than an Entitlement Basis, i.e., where the Export Water Contractor bears all or part of the costs of withdrawal, treatment or delivery. In such cases, there shall be deducted from Gross Revenues those costs (including a reasonable overhead allocation) which are incurred as a direct or indirect result of the incremental activity associated with the withdrawal, treatment and delivery of the Export Water involved on an other than Entitlement Basis. In such cases, the resulting number (Gross Revenues less such incremental costs) shall be used as the "Gross Revenues" number in the formulae set forth in subparagraphs 7.2(c)(1) and (2). 4. Determination of Royalty Base. a. If interests in the Export Water are sold or otherwise disposed of by the Export Water Contractor on an Entitlement Basis, the value of the Export Water shall be conclusively deemed to equal the Export Water Contractor's Gross Revenues attributable to each acre foot of water plus Five Hundred Dollars ($500.00) per acre foot and the $500 shall be added to Gross Revenues for purposes of calculating the Royalty Base. The Five Hundred Dollar ($500.00) figure shall be increased or decreased every five (5) years proportionally to the five (5) year increase or decrease in the Index. b. If the Export Water is sold or otherwise disposed of with the Export Water Contractor bearing the cost of withdrawal, treatment and delivery to a purchaser at least to the boundary of the Lowry Range (a "Delivered Basis"), then the Royalty Base shall be as set forth in Section 7.2(b)(1). c. If the Export Water is sold other than on a Delivered Basis or an Entitlement Basis, then each contract for the sale or other disposition of a specific interest in the Export Water shall be delivered to the Land Board for its review together with a written statement setting forth the Royalty Base believed to apply to each such transaction (the "Proposed Royalty Base"). The Land Board shall have forty-five (45) days to either approve the Proposed Royalty Base or make its own determination of the Royalty Base. If the Land Board does not make such determination within forty-five (45) days after receipt of the Proposed Royalty Base, the Proposed Royalty Base shall conclusively be deemed to have been accepted. In the event of a dispute in the determination of the Royalty Base under this Section 7.2(d)(3), the matter shall be determined by arbitration pursuant to Section 15.16 of this Agreement. The arbitrator shall be required to determine a Royalty Base for a sale or other disposition under this Section 7.2(d)(3) which results in a royalty no higher than that for a Delivered Basis sale and no less than that for an Entitlement Basis sale. d. Except for the sale or disposition of Export Water on a Delivered Basis, Rangeview shall cause each contract for the sale or other disposition of Export Water by the Export Water Contractor to include a requirement that the first Export Water Purchaser pay as additional consideration ("Additional Consideration") at least five percent (5%) of such Export Water Purchaser's Retail Sales Price at the time the Export Water is delivered to a third person (regardless of whether such person is a retail end user). Rangeview shall cause the Export Water Contractor to pay directly to the Land Board an amount equal to the greater of (i) five percent (5%) of such Export Water Purchaser's Retail Sales Price or (ii) fifty percent (50%) of such Additional Consideration received by the Export Water Contractor. As an example, if the Export Water Contractor sells the Export Water on an Entitlement Basis for Two Thousand Dollars ($2,000.00) per acre/foot, plus twelve percent (12%) of the Export Water Purchaser's Retail Sales Price, the Land Board royalty shall be calculated as follows: the Land Board shall receive Two Hundred Fifty Dollars ($250.00) per acre/foot (ten percent (10%) of the sum of Two Thousand Dollars ($2,000.00) plus Five Hundred Dollars ($500.00) for each acre foot) plus fifty percent (50%) of the twelve percent (12%) of the Retail Sales Price when the Export Water is delivered to a third person. If the Retail Sales Price to retail end users totals $2.00 per 1,000 gallons, then the Land Board shall receive $.12 for each 1,000 gallons delivered to a third person even if such third person uses such water for an augmentation plan or other non-retail use. 5. Subsequent to the anniversary date of this Agreement in the year 2081, any ongoing Gross Revenues from the sale of Export Water shall belong to and be paid to the Land Board. (3) Royalties for On-site Use. 1. Initial Royalty. For sales or other dispositions of Non-Export Water for use on the Lowry Range, Rangeview will pay to the Land Board a royalty of twelve percent (12%) of the Gross Revenues related to the sale or other disposition of the Non- Export Water (including any reuse or successive use) to Water Users. 2. Royalty at Build-Out. At such time as metered production in any calendar year of Non-Export Water reaches 13,000 acre feet (including any re-use of water), or, alternatively, at such time as a total of 10,000 surface acres on the Lowry Range has been (i) rezoned to a use other than agricultural, (ii) finally platted, and (iii) water tap agreements have been entered into with respect to all improvements to be constructed on such acreage, then the Land Board may elect to receive, at its option, in lieu of the royalty provided in Section 7.3(a), an amount equal to fifty percent (50%) of the collective net profits derived by Rangeview and the Service Provider from the sale of Non-Export Water to Water Users. Net Profits shall be defined as the Gross Revenues received from Water Users less (i) the currently amortized portion of applicable capital costs (assuming for purposes of this calculation that such costs are to be amortized over the estimated useful lives of the assets involved) incurred with respect to the Non-Export Water delivery system; and (ii) all Operating Expenses whether incurred by Rangeview or its Service Provider. (4) Recharge Royalty. 1. Export Water. If additional water acquired by the Export Water Purchaser is stored pursuant to Section 6.2(a) in surface reservoirs or in aquifers beneath the surface of the Lowry Range, Rangeview shall pay or cause to be paid to the Land Board a royalty equal to ten percent (10%) (for sales or dispositions to public entities) or twelve percent (12%) (for sales or dispositions to all others) of the Export Water Purchaser's Retail Sales Price at the time of the sale or other disposition of such stored or recharged water (regardless of whether such sale or other disposition is to a retail purchaser). 2. Non-Export Water. If additional water acquired by Rangeview or its Service Provider is stored pursuant to Section 6.2(a) in surface reservoirs or in aquifers beneath the surface of the Lowry Range for sale or other disposition to Water Users, Rangeview shall pay or cause to be paid to the Land Board a royalty equal to ten percent (10%) (for sales or dispositions to public entities) or twelve percent (12%) (for sales or dispositions to all others) of the Retail Sales Price received by Rangeview or its Service Provider from the sale or other disposition of such stored or recharged water to Water Users. (5) Payment of Royalty. Payment of any royalty payable pursuant to this Agreement shall be deemed earned in proportionate part as Gross Revenues derived from the subject transaction are received. In the case of an installment sale, the royalty shall be deemed earned upon receipt of each installment payment. The royalty on Export Water sold by the Export Water Contractor shall be deemed earned as actual payments are made by the purchaser of the Export Water or when the Export Water is delivered Off-Site whichever shall first occur. Royalties earned in any calendar year quarter shall be paid to the Land Board within thirty (30) days after the end of the quarter in which earned. Unpaid royalties shall accrue interest at the rate of two percent (2%) per month from the date due. (6) Reporting. 1. Rangeview shall report to the Land Board the quantity of Water Rights (including any recharged or stored water pursuant to Section 6.2(a)) delivered, the exact amount of Gross Revenues or, if applicable, Retail Sales Price relating to the sale or other disposition of Water Rights, and the entity to whom the Water Rights were delivered. The report shall be due within thirty (30) days after the end of each calendar year, until such time as production of Export and/or Non-Export Water reaches 500 acre feet in a calendar year, and thereafter on or before the thirtieth (30th) day following the end of each calendar quarter during the term of this Agreement. 2. Rangeview shall, or shall cause its Service Provider and/or the Export Water Contractor to, prepare and keep full, complete, and proper books, records and accounts of all Water Rights (including any recharged or stored water pursuant to Section 6.2(a)) sales or dispositions and shall document such transactions as may be required by law. Said books, records, and accounts of Rangeview, its Service Provider, and/or the Export Water Contractor shall be open at all reasonable times, upon ten (10) days' prior written notice, to the inspection of the Land Board and its representatives who may, at the Land Board's expense, copy or extract all or a portion of said books, records, and accounts for a period of up to five (5) years after the date such books, records and accounts are made. The Land Board's right to inspect shall not prejudice the Land Board's right to collect payments due pursuant to this Agreement. The Land Board may, upon no less than fourteen (14) days' prior written notice to Rangeview, its Service Provider, and/or the Export Water Contractor, cause a partial or complete audit of the entire records and operations of Rangeview, its Service Provider, and/or the Export Water Contractor for a five (5) year period preceding the date of the audit relating to the Lowry Range and water use pursuant to this Agreement to be made at the Land Board's expense by an auditor selected by the Land Board. Within fourteen (14) days following the Land Board's notice, Rangeview, its Service Provider, and/or the Export Water Contractor shall make available to the Land Board's auditor the books and records the auditor reasonably deems necessary or desirable for the purpose of making the audit. Any deficiency in the payment of royalties determined upon such inspection or audit shall be immediately due and payable by Rangeview, and by the inspected or audited party if other than Rangeview, together with interest thereon at the rate of two percent (2%) per month from the date or dates such amounts should have been paid. If such deficiency is in excess of two percent (2%) of the royalty previously paid, then Rangeview shall pay or cause the audited party if other than Rangeview to pay to the Land Board the actual cost of the audit at the time the deficiency is paid. 8. Development of Infrastructure and Water Service on the Lowry Range (1) Rangeview Shall Serve. Subject to the requirement that customers pay any appropriate fees and charges and comply with reasonable policies, rules and regulations which may govern the activities of Rangeview acting in its capacity as the provider of water service to the Lowry Range, Rangeview shall, consistent with the terms of this Agreement, and consistent with the obligations of the Service Provider as set forth in Article 9 below, provide water service during the term of this Agreement to all Water Users. All such service, whether actually provided by Rangeview, or some other entity as may be approved by the Land Board, shall remain the primary obligation and responsibility of Rangeview, and shall be provided in a commercially reasonable time and manner consistent with prudent water service practice in Colorado. (2) Water Fees and Rates. Tap fees, usage charges, and service charges to Water Users on the Lowry Range for Non-Export Water shall not exceed the average of those similar charges then imposed by the Town of Castle Rock, East Cherry Creek Valley Water and Sanitation District, and Parker Water and Sanitation District, or their respective successors. (3) Substitution of Facilities. All contracts for the sale of Export Water shall allow Rangeview or the Service Provider, or the Land Board (upon the expiration or termination of this Agreement), as applicable, at its option, to utilize a portion (equal to the ratio of Export Water to Non-Export Water based on the acre feet decreed in the now existing water court decrees, said ratio being hereinafter referred to as the "Water Interest Ratio") of the capacity of the ground water wells which are used to produce the Export Water, under the following conditions: 1. Rangeview, the Service Provider or the Land Board, as applicable, must provide substitute well capacity (the "Substitute Facilities") of equivalent quantity and, to the extent practicable, water quality as the well capacity utilized by the Export Water Purchaser under this Section 8.3. 2. Subject to further substitution, the Substitute Facilities will be dedicated to the benefit of the Export Water user. Title to the Substitute Facilities shall be held in the same manner as title to the facilities which they replace. The construction and operation of the Substitute Facilities are intended to enable Rangeview, the Service Provider or the Land Board, as applicable, to incrementally expand the 3. delivery system for the Export Water to provide service to those areas of the Lowry Range on which the Export Water delivery system has already been developed. 4. The intent of this Section 8.3 is to allow Rangeview, the Service Provider or the Land Board, as applicable, the use of that portion of the Export Water delivery system, utilizing the excess capacity as discussed in Section 8.4, to provide water service to the Lowry Range. The further intent of this Section 8.3 is to ensure that facilities initially constructed to serve Export Water will, as necessary, be available for service to the Lowry Range if Substitute Facilities are constructed and dedicated to the Export Water user as outlined in Sections 8.3(a) and (b). The Export Water user will have the same opportunity to substitute facilities from the Non-Export Water delivery system for the Export Water delivery system so that the well field is developed in a manner reasonably consistent with the master plan attached hereto as Exhibit D. The well field and Export Water and Non-Export Water delivery systems, when fully completed, shall have been developed in a manner such that each of Rangeview, the Service Provider, or the Land Board, as applicable, on the one hand, and the Export Water Purchaser(s), on the other, shall bear the economic burden of developing their proportionate part of the total infrastructure based on the ratio of Water Rights used on the Lowry Range and outside the Lowry Range. 5. In the event a dispute arises concerning substitution of facilities pursuant to this Section, the dispute shall be resolved by arbitration pursuant to Section 15.16 of this Agreement. (4) Right to Use Transmission Lines; Infrastructure. All contracts for the sale of Export Water will provide for construction of excess capacity in Export Water transmission lines only within the Lowry Range, so as to accommodate the transmission of water for on-site use within that portion of the Lowry Range which may be served by those lines. The Service Provider, Rangeview, or the Land Board, as applicable, shall have access to and the right to use a portion of the capacity of any and all Export Water transmission lines on the premises to the extent set forth in Exhibit E attached hereto. The well field and delivery system built for delivery of Export Water must be built in a commercially reasonable manner using accepted engineering practices considering the requirements of Section 8.3 and 8.4 related to the development of infrastructure for water service on the Lowry Range. The costs of constructing (1) infrastructure to deliver Export Water; and (2) the excess pipeline capacity required by this Section will not be paid, directly or indirectly, by Rangeview, the Land Board, or Water Users (except to the extent such facilities are substituted for on-site service, in which case Water Users will indirectly bear costs through rates and charges and Rangeview may incur administrative and maintenance expenses with respect thereto). Ownership of the excess capacity needed for on-site use will be transferred to Rangeview, the Service Provider, or the Land Board, as applicable, at such time as such capacity is utilized, under agreements which provide for the payment by Rangeview, the Service Provider, or the Land Board, as applicable, of a proportionate share of operation, maintenance and replacement costs. (5) Title to Equipment and Improvements. Rangeview acknowl edges and shall cause its Service Provider to acknowledge that equipment and improvements placed on the Lowry Range are subject to the provisions of this Agreement. Rangeview shall pay or cause its Service Provider to pay all taxes, fees, assessments or other charges, if any, which may be assessed upon or become due with respect to, the equipment and improvements during the term of this Agreement. On the Effective Date, this Agreement shall be recorded with the Clerk and Recorder for Arapahoe County. (6) Future Leases. The Parties acknowledge that the Lowry Range is tax exempt as long as it is owned by the Land Board or another tax exempt entity and that the operation of Rangeview is based upon a revenue and not a tax base. The provisions of any leases or contracts for exchanges, sales or other dispositions pertaining to any interest in the surface of the Lowry Range shall not restrict the ability of Rangeview to sell water to, and receive revenue from, Water Users. Unless expressly authorized in writing by the Land Board or unless otherwise required by law, Rangeview will not impose taxes, assessments or other charges of any kind on Water Users in connection with the provision of, or cost to deliver, Non-Export Water to such Water Users except as contemplated by Section 8.2; provided that Rangeview may assess amounts it is required to pay in lieu of taxes pursuant to 36 1-120.5(5), 15 C.R.S. (1990 Rplc.). (7) Rangeview District Boundaries. Subject to complying with reasonable policies, rules and regulations which may govern the activities of Rangeview, and to the extent permitted by law, upon petition for inclusion by a landowner within the Lowry Range qualified under Title 32 or other appropriate action thereafter, Rangeview shall cooperate and, with due diligence proceed to take action pursuant to law, to include such area as may be designated by such petition or other action within Rangeview's district boundaries. (8) Development of Lowry Range. Rangeview shall have no obligation to promote development of the Lowry Range, other than its obligation under this Agreement to provide water service and associated infrastructure as a prudent water provider to meet all reasonable Water User demands, if and when a demand may arise. The nature, timing, financing, and approval of development of any land uses shall be the sole responsibility of the Land Board. The Land Board makes no representation as to if, when, and how the land development, if any, on the Lowry Range will occur, or as to the density of any such development. (9) Reserves. Rangeview shall establish and maintain a maintenance and operating reserve for providing Non-Export Water to Water Users in accordance with Section 8.1. The amount of such reserve shall be at least equal to thirty-three and one- third per cent (33-1/3%) of the Operating Expenses budgeted by Rangeview and, if applicable, its Service Provider, for the then current calendar year. In establishing such reserve initially and in increasing the amount of such reserve as a result of an increase in budgeted Operating Expenses or an expenditure which diminishes the reserve below the required amount, Rangeview shall allocate any available funds not budgeted to other proper and necessary functions of Rangeview toward building such reserve. Such reserve funds shall be continuously maintained and may be utilized by Rangeview solely for paying lawful obligations relating to the provision of Non-Export Water to Water Users as required by Section 8.1. 9. Service Provider Contract (1) Service Provider for Rangeview. As of the Effective Date, at its option Rangeview may enter into a contract pursuant to which a Service Provider will provide the service of delivering Non-Export Water to the current and future Water Users pursuant to and consistent with the terms of this Agreement. Rangeview shall not enter into any Service Provider contract except as contemplated by the Settlement Agreement without the express written consent of the Land Board. All Service Provider contracts shall be in the form of Exhibit B only with such changes as may be approved in writing by the Land Board. If Rangeview chooses to contract with a Service Provider to provide Non-Export Water services on the Lowry Range, Rangeview shall cause such Service Provider to comply with all obligations of Rangeview under this Agreement relating to Non-Export Water services on the Lowry Range. Rangeview agrees (and will cause any other Service Provider to agree) that: 1. The Service Provider contract cannot be assigned or transferred without the express written consent of the Land Board, which consent may be withheld by the Land Board in its sole discretion. The Service Provider contract cannot be amended without the express written consent of the Land Board, which consent shall not be unreasonably withheld. 2. Any breach by the Service Provider of its obligations under its Service Provider contract with Rangeview shall constitute a breach of this Agreement by Rangeview subject to Rangeview's right to cure such breach or default. 3. Ten (10) days prior to the execution of any construc tion or financing contracts by Rangeview or the Service Provider in excess of Five Hundred Thousand Dollars ($500,000) related to the provision of Non-Export Water Service to Water Users (including contracts for the disposal of effluent, sewage or sewerage as permitted under Section 6.3 of this Agreement), Rangeview shall provide or cause the Service Provider to provide the Land Board with courtesy copies of such contracts (drafts being acceptable if finals are not yet available). 4. Water service on the Lowry Range shall be provided as needed in a commercially reasonable time and manner consistent with prudent water service practice in Colorado if and when development of the surface of the Lowry Range may occur. 5. If there is an approved Service Provider, all financing for infrastructure for delivery of Water Rights and all costs of operation, maintenance, debt service and repair to provide water service to Water Users will be provided without cost to Rangeview, the Land Board or any Water User on the Lowry Range, except to the extent paid for with the water fees and rates described in Section 8.2, and Rangeview shall not issue bonds to finance such infrastructure or service. 6. Re-use and successive use of Non-Export Water, if any, shall be done in a commercially reasonable manner consistent with prudent water provider practice in Colorado. 7. Except for the disposal of effluent, sewage or sewerage Off-Site as provided in Section 6.3 of the Agreement, none of the Non-Export Water, including all re-use and successive uses of such water, shall be used, sold, transferred, or otherwise disposed of outside the Lowry Range without the express written consent of the Land Board. 8. If the Service Provider decides not to provide or not to continue providing service to Water Users on the Lowry Range during the term of this Agreement, then Rangeview shall require the Service Provider to give one (1) year's prior written notice to Rangeview which written notice shall be transmitted by Rangeview to the Land Board. During such one-year period, the Service Provider shall continue to provide service in accordance with the terms of the Service Agreement, unless Land Board and Rangeview require the Service Provider to discontinue providing services prior to the expiration of such one-year period. 9. Rangeview and its Service Provider shall, at all times, act in a commercially reasonable manner consistent with prudent water provider practice in Colorado. 10. If and to the extent at any time monies are not available to Rangeview to fund the reserve which Rangeview is required to maintain pursuant to Section 8.9 or if monies in such reserve are withdrawn such that the amount of the reserve drops below the amount which Rangeview is required to maintain and such reserve cannot reasonably be expected to be reestablished from anticipated income to Rangeview within one year, then Rangeview shall promptly notify the Service Provider of such fact and the Service Provider shall within thirty (30) days deliver funds to Rangeview sufficient to replenish the reserve fund to its required level. Notwithstanding the fact that the reserve can reasonably be expected to be reestablished within one year, the Service Provider shall be required to deliver funds to Rangeview sufficient to replenish the reserve fund to its required level at the time the Service Provider discontinues service. 10. East Cherry Creek Valley Water and Sanitation District (1) Terms and Revenue. The terms of the East Cherry Creek Agreement are not altered or affected by this Agreement, nor is its duration extended. All revenue paid by ECCV pursuant to the East Cherry Creek Agreement subsequent to the Effective Date of this Agreement shall be paid as follows: fifty percent (50%) to be paid by Rangeview directly to the Land Board (unless ECCV agrees to pay such fifty percent (50%) directly to the Land Board) and fifty percent (50%) to be paid by ECCV directly to Rangeview. Rangeview further agrees that within ten (10) days following the Effective Date, Rangeview shall pay the Land Board ten percent (10%) of all revenues paid by ECCV for January and February 1995 and fifty percent (50%) of all revenues paid by ECCV to Rangeview for the period from March 1, 1995 through the Effective Date. No additional royalty with respect to the revenue derived from the East Cherry Creek Agreement shall be payable to the Land Board. (2) Title Reversion. Upon the expiration or termination of the East Cherry Creek Agreement, for whatever reason, all interests in the water, infrastructure, and leased premises related thereto, to the extent provided for in the East Cherry Creek Agreement, shall automatically and without further act of the Parties or anyone else revert to the Land Board free and clear of this Agreement. Failure of Rangeview to contest the expiration or termination of the East Cherry Creek Agreement, which the Land Board contends expires in 2032, shall not be a default under this Agreement. The Land Board agrees not to take any action inconsistent with the Land Board's rights, duties, and obligations of this Agreement which would cause Rangeview to be in default or otherwise result in liability to Rangeview under the East Cherry Creek Agreement. Nothing in the preceding sentence shall prevent the Land Board or Rangeview from taking any actions they are permitted to take by law with respect to ECCV. 11. Rights-of-Way (1) Master Plan. The Parties agree to a master plan of rights-of-way, which plan is attached to this Agreement as Exhibit D. To the extent not already granted, the rights-of-way described on Exhibit D shall be granted by Land Board to Rangeview within sixty (60) days of Rangeview's complete application with Land Board for specific rights-of-way, provided that the requested rights-of-way are necessary for construction of facilities within a reasonable time after the rights-of-way are to be granted. The grant shall be made in accordance with the form attached as Exhibit F, which form may be amended to comply with applicable statutes, regulations and Land Board policy directives from time to time. Said master plan may be amended by Land Board for the convenience of the Parties, provided that any such amendment shall not materially adversely affect the rights and privileges of any Party. The total acres of rights-of-way shall not be reduced and the Land Board may relocate rights-of-way, whether planned or in use, for the commercially reasonable development of the Lowry Range. If the Land Board relocates rights-of-way which are in use by Rangeview, its Service Provider, or the Export Water Purchaser (or which any such entity has expended funds to develop for use), then the Land Board must pay the affected entities' costs associated with relocating such rights-of-way. (2) Fee for Right-of-Way. Rangeview shall pay Land Board an amount equal to Fifty Dollars ($50.00) per acre of the surface land utilized at the time of granting a right-of-way, which, commencing with the Effective Date of this Agreement, shall be increased every five (5) years proportionally to the five (5) year increase in the Index. In no case shall the rights-of-way fee be reduced. Land Board shall include a description of the master plan of rights-of-way in subsequent leases, sales or other dispositions pertaining to the Lowry Range and shall, subject to the amendment provisions set forth in Section 11.1, be bound by such master plan in all subsequent leases, sales or other dispositions. (3) License to Service Provider. To the extent necessary to implement the intent of Article 11, Rangeview may grant to its Service Provider and/or the Export Water Purchaser a license to use the rights-of-way granted by the Land Board to Rangeview for the purposes contemplated by this Agreement. Such licenses shall be in the forms attached hereto as Exhibits G and H, respectively. 12. Bonding Requirements (1) Bond. No operations are to be commenced on the Lowry Range until Rangeview, its Service Provider, the Export Water Purchaser or their agents have filed good and sufficient bonds with Land Board consistent with the requirements of C.R.S. 38-26- 106 and 36-1-129 in an amount fixed by Land Board, to secure the payment for damages, losses or expenses caused by Rangeview, its Service Provider, the Export Water Purchaser or their agents as a result of operations on or under the Lowry Range. Land Board may waive the bonding requirements, in its discretion, and may require that the bond be maintained in full force and effect for one (1) year after cessation of the operations for which the bond was intended. (2) Bond of Contractors. Bonds provided by contractors for construction activities to Rangeview, its Service Provider, or the Export Water Purchaser may list Land Board as a coinsured. As long as such bonds otherwise comply with Section 12.1 above and list Land Board as coinsured, the contractors shall not be required to obtain any other bonds for the Land Board. Contracts entered into by Rangeview, its Service Provider or the Export Water Purchaser which constitute public works shall comply with 24-91-103, 103.5 and 103.6, 10B C.R.S. (1988 Rplc.). 13. Default and Remedies (1) Events of Default. The following events shall hereinafter be referred to as "Events of Default": 1. Rangeview shall default in the due and punctual payment of royalties, rents or any other amounts payable hereunder, and such default shall continue for ten (10) business days after the applicable due date; 2. This Agreement shall be transferred to or shall pass to or devolve upon any other person or party except as expressly permitted by this Agreement; 3. This Agreement or the Non-Export Water or any part thereof shall be taken upon execution or by other process of law directed against Rangeview, or shall be taken upon or subject to any attachment at the instance of any creditor or claimant against Rangeview, and said attachment shall not be discharged or disposed of within sixty (60) days after the levy thereof; 4. Rangeview shall file a petition in bankruptcy or insolvency or for reorganization or arrangement under the bank ruptcy laws of the United States or under any insolvency act of any state, or shall be dissolved or shall make an assignment for the benefit of creditors; 5. Involuntary proceedings under any such bankruptcy law or insolvency act or for the dissolution of Rangeview shall be instituted against Rangeview, or a receiver or trustee shall be appointed for all or substantially all of the property of Rangeview, and such proceeding shall not be dismissed or such receivership or trusteeship vacated within sixty (60) days after such institution or appointment; 6. If either party shall fail to perform any material term, covenant or condition herein contained and such failure shall continue and not be cured for a period of thirty (30) days after written notice specifically setting forth the nature of the default has been given by the non-defaulting party to the defaulting party, or if more than thirty (30) days is reasonably required to cure such matter complained of, if the defaulting party shall fail to commence to correct the same within said thirty (30) day period and shall thereafter fail to prosecute the same to completion with reasonable diligence. For purposes of this subparagraph (f), if Rangeview has a Service Provider and such Service Provider shall breach any of its obligations to Rangeview, or if the Export Water Contractor shall breach any of its obligations to Rangeview, or if the Export Water Purchaser shall breach any of its obligations to Rangeview or the Export Water Contractor, and such acts or omissions also constitute or result in the failure to perform a material obligation for which Rangeview has responsibility hereunder, then the same shall constitute a material failure of performance by Rangeview. Further in such event, the thirty (30) day period provided in the first sentence of such subparagraph (f) shall be extended up to a maximum of sixty (60) days if Rangeview first attempts to require its Service Provider, the Export Water Contractor, or the Export Water Purchaser, as applicable, to cure during any applicable cure period provided in the agreements applicable to the defaulting party, so that if in such case the Service Provider, the Export Water Contractor, or the Export Water Purchaser, as applicable, fails to cure, Rangeview itself shall have an additional thirty (30) days to cure such material failure of performance. Thus, for example, if such a material failure of performance results from an act or omission of Rangeview's Service Provider, the Land Board may immediately give Rangeview notice regarding the same and thereby commence the running of Rangeview's cure period. That period would be thirty (30) days, unless Rangeview in turn gives notice to its Service Provider and commences an applicable cure period under the Service Provider Agreement, in which case if the Service Provider fails to cure, Rangeview would have an additional thirty (30) days to cure; provided that no more than a total of sixty (60) days shall be allowed for such cure period (subject to any reasonably required extension as provided in the first sentence of this paragraph (f)). (2) Remedies. If any one or more Events of Default shall occur and not be cured within any applicable cure period, then: 1. If Rangeview is the defaulting party, Land Board, without prejudice to any other remedies that it may have, may give written notice of its intention to terminate this Agreement on the date of such notice or on any later date specified in such notice, and, on the date specified in such notice, Rangeview's right to possession of the premises will cease and this Agreement will be terminated (except as to Rangeview's liability set forth in this Section 13.2) as if the expiration of the term fixed in such notice were the end of the term of this Agreement. In connection with such termination, Land Board with notice may re- enter and take possession of the leased premises or any part thereof (subject to any existing licenses related to delivery of Export Water) and repossess the same as the Land Board's former estate, and expel Rangeview from the premises and those claiming through or under Rangeview except with respect to the Export Water, and remove the effects of both or either, without being deemed guilty of any manner of trespass and without prejudice to any other remedies. In the event of such termination, Rangeview and its Service Provider shall surrender and peacefully deliver to the Land Board the above-described land and the Non-Export Water, and such land as was in Rangeview's possession or control shall be returned to the Land Board in good condition (subject to any existing licenses related to the delivery of Export Water), and the Land Board shall be entitled to the return of all Non- Export Water, plus the title to all infrastructure built to divert or withdraw and deliver Non-Export Water and any other interest in shared facilities for use with the Non-Export Water, plus the revenue stream associated with such Non-Export Water and the East Cherry Creek Agreement, and the reserves required to be maintained by Rangeview pursuant to Section 8.9. Upon such termination, if Rangeview shall remain in possession of any part of the Lowry Range (subject to any existing licenses related to delivery of Export Water) or Non-Export Water, Rangeview shall be guilty of an unlawful detainer and shall be subject to eviction or removal, forcibly or otherwise, to the extent provided by law. 2. In the Event of Default by either party, the non- defaulting party shall be entitled to any and all damages proximately caused by the default or breach and its costs and reasonable attorney fees from the defaulting party. In addition, Rangeview shall be entitled to specifically enforce performance by the Land Board of the Land Board's obligations under this Agreement. (3) No Waiver. No failure by Rangeview or the Land Board, to insist upon the strict performance of any agreement, term, covenant or condition hereof or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial payment of any amount payable during the continuance of any such breach, shall constitute a waiver of any such breach of such agreement, term, covenant or condition hereof to be performed or complied with by Rangeview or the Land Board, as the case may be. No breach thereof shall be waived, altered, or modified except by written instrument executed by the Land Board, or Rangeview, as the case may be. No waiver of any breach shall affect or alter this Agreement, but each and every agreement, term, covenant and condition hereof shall continue in full force and effect with respect to any other then-existing or subsequent breach thereof. Notwithstanding any termination of this Agreement, the same shall continue in force and effect as to any provisions hereof which require observance or performance of Rangeview or Land Board subsequent to termination. (4) Land Board's Right to Cure Rangeview's Breach. The Land Board may, but shall not be obligated to, cure any default by Rangeview, specifically including, but not by way of limitation, Rangeview's failure to pay any tax due hereunder, obtain insurance, make repairs, or satisfy lien claims, after providing reasonable notice to Rangeview, and whenever the Land Board so elects, all costs and expenses paid by the Land Board in curing such default, including, without limitation, reasonable attorneys' fees, shall be so much additional rent due ten (10) days after such payment together with interest at the rate of two percent (2%) per month from the date of advancement to the date of repayment by Rangeview to the Land Board. 14. Improvements (1) Transfer of Improvements. In the event this Agreement is terminated by forfeiture, surrender, or election upon default or breach, and no later than the expiration of this Agreement, title to all improvements and equipment and related permits and licenses and all rights-of-way on the Lowry Range exclusively for delivering Non-Export Water and interests in shared facilities used for delivery of Non-Export Water shall automatically, without the necessity of any further action by the Parties or anyone else, revert and be transferred to the Land Board as of the date of such forfeiture, surrender, election, upon default or breach, or as of the expiration of the Agreement. Such automatic reversion and transfer shall be conclusively evidenced of record by the Land Board's filing with the Clerk and Recorder for Arapahoe County a certificate stating the fact of such reversion and transfer. Title to improvements and rights-of-way on the Lowry Range for the sale of the use of Export Water including, without limitation, the East Cherry Creek Agreement, shall not be affected by termination of this Agreement. (2) Abandonment of Export Water Facilities. Once the Export Water Purchaser withdraws the entire portion of the Export Water purchased plus the entire amount of water recharged by the Export Water Purchaser and such purchaser has failed to recharge any portion of the aquifer for a period of ten (10) years, the Land Board shall have the right to notify the Export Water Purchaser in writing of its intention to declare the rights-of- way, improvements and equipment on the Lowry Range owned or licensed by such Export Water Purchaser as abandoned. The Export Water Purchaser shall have three (3) months from receipt of such notice to remove any improvements and equipment which can be removed without damaging the Lowry Range or any shared facilities. At the end of such three (3) month period, title to any improvements and equipment then remaining and all rights-of- way shall automatically, without necessity of any further action by the Export Water Purchaser or anyone else, revert and be transferred to the Land Board as of such date. Such automatic reversion and transfer shall be conclusively evidenced of record by the Land Board's filing with the Clerk and Recorder for Arapahoe County a certificate stating the fact of such reversion and transfer. In the event of a dispute regarding this Section 14.2, the matter shall be determined by arbitration pursuant to Section 15.16 of this Agreement. 15. General Provisions (1) Assignment by Rangeview. Rangeview may assign its interest in this Agreement, but only upon terms expressly approved in writing by the Land Board in its sole discretion. Any attempted assignment in contravention of this section shall be null and void. (2) Work Requirements. To the extent work is performed on the Lowry Range directly by (i) Rangeview or its Service Provider (ii) independent contractors of Rangeview or its Service Provider or (iii) a permitted assignee (in which case any reference to Rangeview shall be deemed to be a reference to the assignee where appropriate), the following shall apply: 1. Indemnity. Rangeview and its Service Provider shall jointly and severally indemnify and hold harmless the Land Board against and from all liabilities, claims and demands, settlement or litigation expenses and related attorneys' fees (hereafter "Indemnified Items") for personal injury or property damage arising out of, or caused by, any act or omission of Rangeview, its Service Provider, or their contractors, agents or employees. 2. Insurance. Rangeview shall at all times carry insurance in the amounts and for the liabilities required by 24-10-114, 10A C.R.S. (1988 Repl.), as amended, which insurance shall name the Land Board as an additional insured. Rangeview shall require its Service Provider at all times to carry insurance in amounts and with carriers reasonably acceptable to the Land Board for worker's compensation coverage in accordance with Colorado law, and for public liability insurance covering death and bodily injury with limits of not less than One Million Five Hundred Thousand Dollars ($1,500,000.00) for one person, and Five Million Dollars ($5,000,000.00) for any one accident or disaster, and property damage coverage with limits of not less than Five Hundred Thousand Dollars ($500,000.00), which insurance shall name the Land Board as an additional insured. The Land Board reserves the right to reasonably increase the limits of insurance required of the Service Provider as the Land Board may deem appropriate from time to time; provided that, if Rangeview or the Service Provider disputes the reasonableness of such increase, the matter shall be submitted to arbitration as provided in Section 15.16. 3. Liens. Except with respect to liens or encumbrances expressly permitted hereunder, Rangeview and its Service Provider shall jointly and severally indemnify and hold the Land Board harmless from and against all Indemnified Items relating to liens or claims of right to enforce liens arising from actions of Rangeview or its Service Provider, their contractors and agents. Rangeview and its Service Provider shall promptly cause any such lien to be removed notwithstanding the fact that Rangeview may believe that there is a valid defense to any such claim. Rangeview and its Service Provider shall retain the right to pursue any claims against the claimant after any such lien is removed. 4. Permits and Licenses. Rangeview and its Service Provider shall, at their own expense, apply for and obtain all necessary building, occupancy, well and other permits and licenses which may be required by any governmental entity which has jurisdiction over the operations to be performed pursuant to this Agreement. Copies of all such permits and licenses shall be provided to the Land Board. 5. Taxes. Rangeview and its Service Provider shall be jointly and severally responsible for and shall pay all taxes, fees and assessments, including payments pursuant to 36-1- 120.5(5), 15 C.R.S. (1990 Rplc.), if any, in connection with the work, improvements, facilities or the materials to be utilized in accomplishing the activities of Rangeview or its Service Provider pursuant to this Agreement. (3) Third Party Beneficiaries. Except as otherwise contem plated by the provisions of this Agreement, it is not the intent of the Parties, nor shall it be the effect of this Agreement, to vest rights of any nature or form in individuals or entities not executing this Agreement. (4) Notice. All notices required by this Agreement shall be in writing and shall be delivered to the person to whom the notice is directed, either in person, by courier service or by United States mail as a certified item, return receipt requested, addressed to the address stated below. Notices delivered in person or by courier service shall be deemed given when delivered to the person to whom the notice is directed. Notices delivered by mail shall be deemed given on the date of delivery as indicated on the return receipt. The Parties may change the stated address by giving ten (10) days' written notice of such change pursuant to this section. RANGEVIEW METROPOLITAN DISTRICT: Rangeview Metropolitan District 141 Union Boulevard, Suite 150 Lakewood, Colorado 80228 With a copy to: Pure Cycle Corporation 5650 York Street Commerce City, Colorado 80022 Attn: President STATE BOARD OF LAND COMMISSIONERS: Board of Land Commissioners Attention: President 620 Centennial Building 1313 Sherman Street Denver, Colorado 80203 With a copy to: Office of Attorney General Attn: State Land Board Attorney 1525 Sherman Street, Fifth Floor Denver, Colorado 80203 (5) Construction. Where required for proper interpretation, words in the singular shall include the plural, and the masculine gender shall include the neuter and the feminine, and vice versa, as is appropriate. The article and section headings are for convenience and are not a substantive portion of this Agreement. This Agreement shall be construed and interpreted in accordance with the laws of the State of Colorado. It shall be construed as if it were equally drafted in all aspects by all Parties. (6) Entire Agreement. This Agreement, including the items attached in accordance with the provisions of this Agreement and Service Provider Agreement and the Settlement Agreement and Mutual Release of even date herewith, constitute the entire agreement among the Parties pertaining to the subject matter of this Agreement and supersede all prior and contemporaneous agreements and understandings of the Parties as to the subject matter of this Agreement. No representation, warranty, covenant, agreement or condition not expressed in this Agreement shall be binding upon the Parties or shall change or restrict the provisions of this Agreement. (7) Authority. Each of the Parties represents and warrants that it has all requisite power, corporate and otherwise, to execute, deliver and perform its obligations pursuant to this Agreement, that the execution, delivery and performance of this Agreement and the documents to be executed and delivered pursuant to this Agreement have been duly authorized by it, and that upon execution and delivery, this Agreement and all documents to be executed and delivered pursuant to this Agreement will constitute its legal, valid and binding obligations, enforceable against it in accordance with their terms. (8) Copies. Numerous copies of this Agreement have been executed by the Parties. Each such executed copy shall have the full force and effect of an original, executed Agreement. (9) Amendment. This Agreement shall not be amended except by a writing executed by all Parties. (10) Compliance with Law. Rangeview and the Land Board covenant and agree that during the continuance of this Agreement, they shall comply fully with all provisions, terms, and conditions of all laws whether state or federal, and orders issued thereunder, which may be in effect during the continuance hereof, which in any manner affect their operations and the Lowry Range and the Water Rights which are the subject of this Agreement. (11) Binding Effect. The benefits and terms and obligations of this Agreement shall extend to and be binding upon the successors or permitted assigns of the respective Parties hereto. (12) Severability. If any clause or provision of this Agreement is illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, then and in that event, it is the intention of the Parties hereto that the remainder of this Agreement shall not be affected thereby. It is also agreed that in lieu of each clause or provision of this Agreement that is illegal, invalid or unenforceable, there shall be added as a part of this Agreement a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. (13) Optimum Long-Term Revenue. C.R.S. 36-1-118(1)(a) states that the public lands of the State of Colorado may be leased by the Land Board in such manner and to such persons as will produce an optimum long-term revenue. Article IX, Section 10 of the Colorado Constitution provides that the Land Board shall provide for the disposition of lands in such manner as will secure the maximum possible amount therefor. The Land Board determines that, under all existing facts and circumstances, this Agreement constitutes an arrangement which will produce an optimum long-term revenue and meet the requirements of C.R.S. 36-1-118(1)(a) and Article IX, Section 10 of the Colorado Constitution. (14) Further Assurance. Each of the Parties hereto, at any time and from time to time, will execute and deliver such further instruments and take such further action as may reasonably be requested by the other Party hereto, in order to cure any defects in the execution and delivery of, or to comply with or accomplish the covenants and agreements contained in, this Agreement and/or any other agreements or documents related thereto. (15) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado and applicable federal law. (16) Arbitration. Any controversy or claim arising out of or relating to the computation of royalties or net profits interest under this Agreement, and all other controversies or claims which the Parties have expressly agreed herein shall be submitted to arbitration, shall be settled by arbitration administered by the American Arbitration Association in accordance with its commercial rules, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Rangeview and the Land Board agree that the Service Provider, the Export Water Contractor, or the Export Water Purchaser, as applicable, may participate directly in any arbitration which affects such entity's rights and/or obligations with respect to the Water Rights; provided such entity agrees to be bound by the arbitration award to the same extent as the Land Board and Rangeview. (17) Litigation. Except as provided in Section 15.16 above, in the event of claims, disputes or other disagreements between the Parties which the Parties are not able to resolve amicably, either party may bring suit in a court of competent jurisdiction seeking resolution of the matter. (18) Duty of Good Faith and Fair Dealing. The parties acknowledge and agree that each party has a duty of good faith and fair dealing in its performance of this Agreement. Rangeview will advise the Land Board of its and its Service Provider's activities no less than annually until such time as production of Water Rights exceeds 500 acre feet per year and thereafter, quarterly during the term of this Agreement and will respond to reasonable requests of the Land Board for additional information on Rangeview's and its Service Provider's activities affecting the Lowry Range. (19) Force Majeure. Should either Party be unable to perform any obligation required of it under this Agreement, other than the payment of money, due to any cause beyond its control (including, but not limited to war, insurrection, riot, civil commotion, shortages, strikes, lockout, fire, earthquake, calamity, windstorm, flood, material shortages, failure of any suppliers, freight handlers, transportation vendors or like activities, or any other force majeure), then such party's performance of any such obligation shall be suspended for such period as the party is unable to perform such obligation. IN WITNESS WHEREOF, the Land Board has caused these presents to be executed in multiple originals by the State Board of Land Commissioners and sealed with the official seal of the Land Board. Rangeview has similarly executed this Agreement this 4th day of April, 1996. APPROVED AS TO FORM: STATE OF COLORADO STATE BOARD OF LAND COMMISSIONERS GALE A. NORTON Attorney General of the State of Colorado President STEPHEN K. ERKENBRACK Chief Deputy Attorney General TIMOTHY M. TYMKOVICH Solicitor General _________________________ Richard A. Westfall Special Deputy Solicitor General RANGEVIEW METROPOLITAN DISTRICT, ACTING BY AND THROUGH ITS WATER ACTIVITY ENTERPRISE By: Its: STATE OF COLORADO ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me this day of April, 1996, by Maxine F. Stewart, as President of the State of Colorado, State Board of Land Commissioners. Witness my hand and official seal. My commission expires: Notary Public STATE OF COLORADO ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me this ______ day of April, 1996, by , as , of Rangeview Metropolitan District. Witness my hand and official seal. My commission expires: Notary Public EXHIBITS Exhibit A Water Previously Conveyed Exhibit B Service Agreement Exhibit C Export Water Contract Exhibit D Master Plan of Well Field and Rights-of-Way Exhibit E Pipe Sizes Exhibit F Right-of-Way Grant Form Exhibit G Service Provider Right-of-Way License Exhibit H Export Water Contractor Right-of Way License Exhibit I Guaranty EXHIBIT A TO EXHIBIT 1 OF DOCUMENT 10.1 ======================================= EXHIBIT A EXISTING WATER AND OTHER USES Type Lessee Water Used Acreage ------------------ ---------- ---------- ----------- 1. Grazing Lease S- Michael- Livestock 1,870.98 41136 Peterson Acres 2. Grazing Lease S- Pancost Livestock/ 10,655.44 41250 Domestic Acres 3. Grazing Lease S- Pancost Livestock/ 10,874.80 41251 Domestic Acres 4. Missile Site Well Rangeview Water* 0.1 Acres SUP S-300 5. Improvements Lease Arapahoe Domestic 161.13 Acres CD S-39443 Hunt Club 6. Unimproved Hunting Arapahoe Minimal 21,410.24 Area Lease CD S-39443 Hunt Club Acres 7. Model Plane Mile High Domestic 40 Acres Club Lease CD S- RC Club 39485 8. Model Plane Cross Domestic 40 Acres Club Lease 0T S- Winds RC 39655 Club 9. Model Plane Model Domestic 40 Acres Club Lease 0T S- Museum 40047 Flying Club 10. Military Flyover Army None 21,570.24 SUP S-30 National Acres Guard 11. Helicopter Landing Army None 6.06 Acres SUP S-150 National Guard 12. Concrete Plant and Owens Commercial 14.87 Acres Brothers Exempt* Concrete & Asphalt Concrete Recycling S-39471 13. Sand & Gravel Triad For gravel 1,590.00 Lease Western mining & Acres GL 264 Corp. augmentation of water loss* 14. Explosives Atlas Commercial 2 Acres Magazines Powder Exempt plus clear SUP S-132 zone 15. Monitoring Wells U.S. Dept Monitoring 0.03 Acres SUP S-351 of Interior Geo. Survey 16. Radio Tower Site Century Commercial 31.49 Acres OT S-39670 Broadcast Exempt ing 17. Gravel Stockpile Cooley Commercial 40.00 Acres OT S- Gravel Exempt 38542 18. Firewood OM 3104 Ozark None 1800.00 Firewood Acres 19. Oil & Gas Various Use of Multiple Exploration Lessees water leases Leases incidental covering to oil & gas most of production Lowry 20. Rights-of-Way numerous Minimal Listed in SLB plat books or records 21. State Patent No. City of None described in 7845 (June Aurora patent 17,1985) (Aurora Reservoir) 22. PLUS: other 90 acre feet incidental uses as have been or may be permitted by the Land Board, exclusive of this Agreement, which may result in cumulative consumption of not more than 90 acre feet per year. * subject to existing Agreement with Rangeview EXHIBIT B TO EXHIBIT 1 OF DOCUMENT 10.1 ======================================= For Exhubit B to the Lease, which consists of a Service Agreement between the Company and Rangeview Metropolitan District, see DOCUMENT 10.2 EXHIBIT C TO EXHIBIT 1 OF DOCUMENT 10.1 ======================================= For Exhubit C to the Lease, which consists of an Agreement for the Sale of Export Water between Rangeview Metropolitan District and the Company, see DOCUMENT 10.3 EXHIBIT D TO EXHIBIT 1 OF DOCUMENT 10.1 ======================================= Exhibit D to the Lease is a Master Plan of Well Field and Rights- of-Way. It consists of a map of the Lowry Range which is approximately 24,567.21 acres, more or less, according to U.S. Government survey, in Arapahoe County, Colorado. The full legal description of the Lowry Range is set forth in Exhibit 1 to Exhibit 10.1. The map depicts proposed rights of way, proposed well site locations, and potential reservoir sites for development of water rights on and under the surface of the Lowry Range. EXHIBIT E TO EXHIBIT 1 OF DOCUMENT 10.1 ======================================= Exhibit E -- Right to Partial Capacity of Export Water Transmiss ion Lines Pursuant to Section 8.4 of the Amended and Restated Lease Agreement, the Service Provider, Rangeview, or the Land Board, as applicable, shall have the right to use the following partial capacities of any and all export water transmission lines on the premises. --------------------------------------------------------------------- ASSUMING 4 FPS FLOW VEL*; NEW SCHED 40 STEEL PIPE --------------------------------------------------------------------- Pipeline Nominal Total Capacity Right to Use Diameters ------------------ ----------------- (Inches) (GPM) (AF/yr) (GPM) (AF/yr) ---------------- ----- ------- ----- ------- 4 159 256 79 128 6 353 568 195 314 8 627 1,009 275 442 10 980 1557 347 558 12 1411 2271 431 694 14 1920 3091 510 820 16 2508 4037 588 946 18 3174 5110 666 1072 20 3918 6308 745 1199 24 5642 9084 1723 2772 30 8816 14194 3173 5105 ---------------------------------------------------------------------- ASSUMING 5 FPS FLOW VEL*; NEW SCHED 40 STEEL PIPE ---------------------------------------------------------------------- Pipeline Mominal Total Capacity Right to Use Diameter ------------------- ----------------- (Inches) (GPM) (AF/yr) (GPM) (AF/yr) ---------------- ----- ------- ----- ------- 4 198 319 99 159 6 441 710 243 391 8 784 1262 343 552 10 1224 1969 439 707 12 1764 2839 539 867 14 2400 3864 637 1025 16 3135 5047 735 1183 18 3967 6387 833 1341 20 4898 7885 931 1498 24 7053 11355 2157 3470 30 11020 17742 3969 6387 The right to use the capacities described above shall be at no cost, except for a proportional share (based on actual use) of operation, maintenance and replacement costs once use of such capacity has begun. * (the flow rates of 4 fps and 5 fps shown on this exhibit are projected but not required rates. If different flow rates are used, the capacities to which Rangeview, the Service Provider or the Land Board, as applicable, are entitled shall be adjusted proportionately). EXHIBIT F TO EXHIBIT 1 OF DOCUMENT 10.1 ======================================= Exhibit F RIGHT-OF-WAY , BOOK THIS INDENTURE, made this day of , , between the STATE OF COLORADO, acting by and through the STATE BOARD OF LAND COMMISSIONERS ("Land Board"), and, RANGEVIEW METROPOLITAN DISTRICT ("Rangeview") whose address is COLORADO : WHEREAS, Rangeview was granted the Amended and Restated Lease Agreement (Lease No. S-37280) ("Lease") by the Land Board effective , 1996 and WHEREAS, pursuant to the Lease, Rangeview has applied to the Land Board for a right-of-way over, upon, under and across the surface of certain portions of school lands as hereinafter described, for the purpose of constructing, reconstructing, operating, repairing, removing and maintaining a and WHEREAS, the Land Board has agreed to grant such right-of-way for the purpose aforesaid and none other, upon the terms and conditions set forth herein. NOW, THEREFORE, the Land Board, in consideration of the premises and the sum of ($ ), paid to the Land Board, the receipt whereof is acknowledged, and in further consideration of the terms and conditions of the Lease does grant and convey to Rangeview, its successors and assigns, a non- exclusive right-of-way for the purpose of constructing, reconstructing, operating, and maintaining (describe scope & purpose) , upon, over, under and across the surface of those certain portions of school lands described as follows: [insert legal description here], (the "Premises") Subject to the following conditions: 1. This grant is made with the understanding that Rangeview must begin construction of these facilities described above within five years from date hereof, failing in which this grant may be subject to cancellation of the unconstructed portions at the option of the Land Board. If the Land Board extends the construction period, the Land Board may fix additional consideration based on the terms of the Lease. 2. All rights to any and all minerals, ores, and metals of any kind and character, and all coal, asphaltum, oil, gas, geothermal resources, or other substances in or under the Premises are reserved to the State of Colorado. 3. In the event the Land Board should at any time desire to occupy or use or permit the occupancy or use of the Premises which are subject to the right-of-way herein granted or any portions thereof, for any purpose with which the aforesaid facilities would interfere, including the mining, removing, or recovering of all minerals, ores, and metals of every kind and character and all coal, asphaltum, geothermal steam, and other substances, in or under said Premises, then the Land Board may require Rangeview to relocate, raise, lower, disconnect, or otherwise adjust the facilities described above at any location or locations where said facilities pass over and across the Premises after first, in each case, receiving not less than 180-days' prior written notice from the Land Board. In such event, Rangeview shall be furnished a similar right-of- way to relocate, raise, lower, disconnect or otherwise adjust said facilities The expense of said relocation, movement, or rebuilding shall be paid according to the Lease. 4. This grant of right-of-way is made subject to any and all leases, easements, rights-of-way and other interests heretofore legally granted and now in full force and effect, if any there be. 5. The Land Board reserves the right to cultivate, use, develop, occupy, and sell, lease or otherwise dispose of the Premises and to use the Premises for all purposes, including the issuance of additional rights to third parties, except as necessarily limited by the facilities described above; provided that Rangeview's rights to the Premises are not unreasonably impaired by the exercise of this right by the Land Board. 6. The Land Board reserves the right to require, at Rangeview's cost, the burial of any power lines and, to the extent reasonable, other facilities when, in the Land Board's discretion, development of the adjoining property or other circumstances warrant burial. Rangeview shall be given not less than (180) days written notice of such requirement. 7. This right-of-way is made for the sole and only purpose as herein set forth and no other and does not give Rangeview exclusive possession of any part of the land above described. If Rangeview or its successors, assigns or licensees shall at any time use or attempt to use the same for any other purpose whatsoever, then this right-of-way shall become void and of no effect, and any and all such rights and privileges herein granted shall revert to the Land Board, subject to any right to cure which may exist under the Lease. 8. Rangeview shall have the right to trim trees and shrubbery upon this right-of-way only if such trees and shrubbery should interfere with or endanger the proper operation, construction and maintenance of said facilities. 9. This right-of-way in itself does not grant rights, express or implied, to water. Such rights shall be and remain subject to the Lease. 10. Rangeview shall not transfer, issue licenses from, or assign this right-of-way except as permitted by the Lease. As to those licenses permitted by the Lease, Rangeview shall not charge the Licensee any additional consideration beyond the amount which Rangeview pays to the Land Board for this right-of-way. This shall not preclude Rangeview from charging administrative and legal expenses associated with issuing a license or costs associated with reviewing licensees' plans and operations with respect to the right-of-way. Any other consideration, license, transfer or assignment, either executed or attempted, transfer or assignment of this agreement or any of the rights hereby granted shall be absolutely void and, at the option of the Land Board and subject to any right to cure which may exist under the Lease, shall terminate this agreement. 11. Rangeview shall provide drainage and erosion control structures, fences, gates, cattleguards, or any other facilities reasonably necessary to protect state land. 12. Rangeview shall not unreasonably fence or obstruct free and open access to and travel upon, over and across the Premises, without written authorization of the Land Board. 13. Rangeview shall have such rights of ingress and egress as may be necessary for the construction, reconstruction, operation, maintenance, and removal of said facilities, but shall not leave open, or permit to be left open, any fences, bars or gates not owned by Rangeview or its licensees. All such fences, bars or gates which may be damaged or disturbed in any way shall be fully restored by Rangeview. 14. In the event that the facilities for which this right- of-way is granted are to be materially enlarged, replaced, relocated, or added to in the future, Rangeview shall advise the Land Board of such change and furnish surveys, plats, and description of the proposed change to the Land Board. Any such changes and the consideration required therefor, shall be controlled by the Lease. 15. The rights herein granted shall expire when the Lease expires, or otherwise terminates, but no later than May 1, 2081; however, any-right-of way for the "Export Water", as that term is defined in the Lease, may continue for so long as, and to the extent that, rights to Export Water extend beyond 2081. If the facilities are abandoned or discontinued all rights hereunder shall automatically terminate . Normal non-use of the approved facility or facilities constructed that is consistent with the prudent operation of a municipal water delivery system shall not constitute abandonment of the facility. 16. Except as permitted by the Lease, Rangeview may not remove its facilities or related improvements without the permission of the Land Board. 17. If this right-of-way is terminated for any cause whatsoever, Rangeview shall restore the Premises, as near as practicable, to their original condition, if requested to do so by the Land Board. 18. Rangeview agrees to assume all liability arising from the exercise of the right-of-way herein granted in accordance with the terms of the Lease. 19. Rangeview will pay to the Land Board the full amount necessary to compensate the Land Board for damages to its property, rights, franchises or privileges, including legal liabilities and damages to crops of lessees, resulting from acts or omissions of Rangeview, its agents, employees, or licensees or from the exercise of the right-of-way herein granted. 20. Upon completion of construction or reconstruction of the herein described facility, Rangeview agrees to restore the Premises surrounding the facility, as near as practicable, to its original condition, unless otherwise agreed to, in writing, by the Land Board. 21. Rangeview shall be responsible for and shall pay all taxes, fees, assessments and other charges, if any, in connection with its work, improvements, materials, or facilities to be utilized in accomplishing its activities pursuant to this grant of right-of-way. 22. This grant shall extend to and be binding upon the successors, licensees and assigns of the parties hereto, and the use of it shall be subject in all respects to the Lease. Any conflict between this grant and the Lease shall be governed by the terms of the Lease. IN WITNESS WHEREOF, The State of Colorado has executed this grant, by the State Board of Land Commissioners, and has caused the seal of the State Board of Land Commissioners to be hereunto affixed; and Rangeview, by its , has accepted this grant and affixed its corporate seal hereto, the day and year first above written. STATE BOARD OF LAND COMMISSIONERS By: Title: RANGEVIEW METROPOLITAN DISTRICT By: Title:___________________________________ EXHIBIT G TO EXHIBIT 1 OF DOCUMENT 10.1 ======================================= Exhibit G LICENSE AGREEMENT TO USE RIGHT-OF-WAY (SERVICE PROVIDER) This License Agreement, made this ______ day of _______________, by and between Rangeview Metropolitan District ("Rangeview"), a quasi-municipal corporation and subdivision of the State of Colorado and [Service Provider] ("Licensee"), a ____________________ Corporation _______________. WHEREAS: 16. Rangeview and the State Board of Land Commissioners ("Land Board") entered into their Amended and Restated Lease Agreement dated April ______, 1996 ("Lease"). 17. The Lease gives Rangeview rights to use water on and under certain state lands in Arapahoe County (which lands are more fully described in the Lease); and allows Rangeview to obtain from the Land Board certain rights-of-way to exercise its rights and obligations under the Lease. C. The Land Board has issued to Rangeview that certain right-of- way dated _________, 1996. D. The Lease, in turn, permits Rangeview to license certain rights to use the right-of-way to the [Service Provider]. E. Rangeview and [Service Provider] entered into a [Service Agreement] dated _______________ _____, 1996. F. The [Service Agreement] calls for the issuance of a license from Rangeview to [Service Provider] to use a portion of Rangeview's interests in the rights-of-way which Rangeview receives from the Land Board. NOW, THEREFORE, in consideration of the covenants contained herein, it is agreed as follows: (1) This license is subject in all ways to the Lease and the right-of-way. In the event of a conflict between this license and the right-of-way, the right-of-way shall prevail. In the event of a conflict between this license and the Lease, the terms of the Lease shall prevail. In the event of a conflict between the right-of-way and the Lease, the Lease shall prevail. In particular, the Licensee shall comply with all standards, conditions, reservations, requirements and all other terms set forth in the Lease and the right-of-way. Licensee agrees that it has reviewed and takes subject to notice of the Lease and the right-of-way upon which this license is based. (2) In consideration of __________________ ($________), Rangeview grants to Licensee a non-exclusive license to use a portion of Rangeview's right-of-way for the purposes and at the locations described on Exhibit A attached hereto. [Exhibit A to describe scope, purpose, legal description, etc.] (3) This license shall expire upon the earlier of the expiration of the right-of-way, the Lease or the Service Agreement. Except as provided herein, Licensee shall have no title or interest in the land that is subject to this license or subject to the right-of-way or the Lease. (4) Except as granted by the Lease or the right-of-way, the Land Board reserves all rights incident to its ownership of the land involved, including those rights reserved in the Lease and the right-of-way. (5) Licensee may not assign or grant to others any right or interest in this license, the right-of-way or the Lease. In Witness whereof, the parties have executed this agreement as of the ______ of _______________, 1996. RANGEVIEW METROPOLITAN DISTRICT By: Title LICENSEE By: Title EXHIBIT H TO EXHIBIT 1 OF DOCUMENT 10.1 ======================================= Exhibit H LICENSE AGREEMENT TO USE RIGHT-OF-WAY (EXPORT WATER) This License Agreement, made this ______ day of _______________, by and between Rangeview Metropolitan District ("Rangeview"), a quasi-municipal corporation and subdivision of the State of Colorado and [Export Water Purchaser] ("Licensee"), a ____________________ corporation ______________. WHEREAS: _ Rangeview and the State Board of Land Commissioners ("Land Board") entered into their Amended and Restated Lease Agreement, dated April ______, 1996 ("Lease"). _ B. The Lease gives Rangeview rights to use water on and under certain state lands in Arapahoe County (which lands are more fully described in the Lease); and allows Rangeview to obtain from the Land Board certain rights-of-way in land to exercise Rangeview's rights and obligations under the lease. C. The Land Board has issued to Rangeview that certain right-of- way dated _____________, 1996. _ The Lease, in turn, permits Rangeview to license certain rights to use the right-of-way to the [Export Water Purchaser]. _ Rangeview and [Export Water Purchaser] purchased Export Water pursuant to ________________________ dated _______________ ______, 1996, which agreement provides for Rangeview to license certain rights in the right-of-way to the Export Water Purchaser. NOW THEREFORE, in consideration of the covenants contained herein, it is agreed as follows: (6) This license is subject in all ways to the Lease and the right-of-way. In the event of a conflict between this license and the right-of-way, the right-of-way shall prevail. In the event of a conflict between this license and the Lease, the terms of the Lease shall prevail. In the event of a conflict between the right-of-way and the Lease, the Lease shall prevail. In particular, the Licensee shall comply with all standards, conditions, reservations, requirements and all other terms set forth in the Lease and the right-of-way. Licensee agrees that it has reviewed and takes subject to notice of the Lease and the right-of-way upon which this license is based. (7) In consideration of __________________ ($________), Rangeview grants to Licensee a non-exclusive license to use Rangeview's right-of-way for the purposes and at the locations described on Exhibit A attached hereto. [Exhibit A to describe scope, purposes, legal description, etc.] (8) This license shall expire upon the earlier of the expiration or termination of the right under the lease to take Export Water, the abandonment under the Lease of the Export Water facilities, or the termination or expiration of the right-of-way. Except as provided herein, Licensee shall have no title or interest in the land that is subject to this license or subject to the right-of-way or the Lease. (9) Except as granted by the Lease and the right-of-way, the Land Board reserves all rights incident to its ownership of the land involved, including those rights reserved in the Lease and the right-of-way. In witness whereof, the parties have executed this Agreement as of the ______ of _______________, 1996. RANGEVIEW METROPOLITAN DISTRICT By: Title: LICENSEE [Export Water Purchaser] By: Title: EXHIBIT I TO EXHIBIT 1 OF DOCUMENT 10.1 ======================================= GUARANTY Subject to approval of this Guaranty at an election held pursuant to Article X, Section 20, of the Colorado Constitution, Rangeview Metropolitan District, a quasi-municipal corporation and political subdivision of the State of Colorado ("Rangeview"), hereby guarantees to the State of Colorado, acting through its State Board of Land Commissioners (the "Land Board"), the timely performance by Rangeview's water activity enterprise established by resolution of Rangeview adopted at a public meeting of Rangeview's board of directors on September 11, 1995, and effective as of the date of its adoption (the "Enterprise") of all obligations under the Amended and Restated Lease Agreement dated April 11, 1996, between the Land Board and the Enterprise (the "Lease"). After providing the Enterprise with any notice and cure rights provided in the Lease, the Land Board may proceed to enforce this Guaranty directly against Rangeview without any further notice or cure rights. Rangeview agrees that it shall submit this Guaranty to an election of its voters in November, 1996. IN WITNESS WHEREOF, Rangeview has executed this Guaranty as of the 11th day of April, 1996. RANGEVIEW METROPOLITAN DISTRICT By: Title: EXHIBIT 2 OF DOCUMENT 10.1 ========================== DISTRICT COURT, CITY AND COUNTY OF DENVER, STATE OF COLORADO Case No. 94CV5405, Courtroom No. 1 ORDER AND JUDGMENT APEX INVESTMENT FUND, II, L.P. et al., Plaintiffs, v. COLORADO STATE BOARD OF LAND COMMISSIONERS, et al., Defendants, and COLORADO STATE BOARD OF LAND COMMISSIONS, ROBERT R. MAILANDER, LUCY BLACK CREIGHTON, JOHN S. WILKES, III, and the STATE OF COLORADO ex rel. ATTORNEY GENERAL GALE A. NORTON, Counterclaimants, Crossclaimants and Third-Party Plaintiffs, v. OAR INCORPORATED, COLORADO FINANCIAL CONSULTANTS, INC. WILLIARD G. OWENS, H.F. RIEBESELL, JR., CARLTON E. ALLDERDICE, and JOHN and JANE DOES 1-50, Third Party Defendants. This matter has come before the Court pursuant to the Motion for Entry of Order and Judgment ("Motion"). After having reviewed the pleadings filed in this action as well as the Motion and Settlement Agreement, this Court being duly advised in the premises and pursuant to C.R.C.P. 41(a)(2), hereby finds and concludes as follows: (10) This Court has jurisdiction over the subject matter and the parties to this action. (11) Each of the parties has the power and authority to enter into the Settlement Agreement and all of the documents required to be executed pursuant to the Settlement Agreement, including without limitation, the Amended and Restated Lease Agreement between the Land Board and Rangeview. (12) The Amended and Restated Lease Agreement, the Settlement Agreement, and all documents which are part of the Settlement Agreement are legal, valid, binding and enforceable, will produce optimum long term revenue and otherwise fully comply with the requirements of C.R.S. 36-1-118(1)(e) and Article IX, 10 of the Colorado Constitution. (13) The terms, conditions and provisions of the Settlement Agreement and all of the documents required to be executed pursuant to the Settlement Agreement including, without limitation, the Amended and Restated Lease Agreement, fairly and reasonably settle the disputes amongst the parties, including those set forth in the Complaint, Counterclaims, Crossclaims and Third Party Claims. IT IS THEREFORE ORDERED AS FOLLOWS: (14) The Settlement Agreement, including all documents which are a part of the Settlement Agreement, are approved. (15) All claims, cross-claims, counterclaims and third party claims shall be dismissed with prejudice and each party shall bear its own costs, expenses and attorney fees. (16) Based upon the stipulations and representations of the parties as set forth in the Settlement Agreement, the Amended and Restated Lease Agreement, the Settlement Agreement, and all documents which are a part of the Settlement Agreement are legal, valid, binding and enforceable in accordance with their terms, will produce optimum long term revenue and otherwise fully comply with the requirements of C.R.S. 36-1-118(1)(e) and Article IX, 10 of the Colorado Constitution. This Court shall not have any continuing jurisdiction over this matter, nor shall this Court or any other Court exercise its contempt power to enforce this Order and Judgment. (17) The funds presently held in the Court Registry shall be distributed to Rangeview and the Land Board pursuant to Article 10 of the Amended and Restated Lease Agreement and the Clerk shall distribute the principle sum of $108,800 to Rangeview and $83,200 to the Land Board, together with any interest that may have accrued on such amounts which shall be distributed on a pro- rata basis. (18) This Order and Judgment shall be deemed final pursuant to Rule 54(b) of the Colorado Rules of Civil Procedure. Dated and Signed this _______ day of ______________, 1996. By the Court: Larry J. Naves District Court Judge EXHIBIT 3 OF DOCUMENT 10.1 - DOES NOT EXIST =========================================== EXHIBIT 4 OF DOCUMENT 10.1 ========================== ASSIGNMENT The undersigned irrevocably assigns to Pure Cycle Corporation, a Delaware corporation, this 11th day of April, 1996, all of the undersigned's right, title and interest in the following: (1) Escrow Agreement, by and among OAR, Incorporated, Willard G. Owens in his individual and representative capacities, Colorado Water Consultants, Incorporated, INCO Securities Corporation, Richard F. Meyers in his individual and representative capacities, Carlton Allderdice, H. F. Riebesell, and Colorado National Bank of Denver as Escrow Agent, dated as of August 12, 1991, and those certain Escrow Closing Instructions, amended and restated as of August 12, 1992; (2) Option and Purchase Agreement by and among OAR, Incorporated, a Colorado corporation, and INCO Securities Corporation, a Delaware corporation, as amended by Amendment No. 1 on February 12, 1991 and Amendment No. 2 on August 12, 1992 (the "OAR Option Agreement"); (3) Option and Purchase Agreement, by and between Colorado Water Consultants, Incorporated, a Colorado corporation, and INCO Securities Corporation, a Delaware corporation, dated as of November 8, 1990, as amended by Amendment No. 1 on February 12, 1991 and Amendment No. 2 on August 12, 1992 (the "CWC Option Agreement"); (4) Option Agreement for Sale and Operation of Production Right, by and between Rangeview Metropolitan District, a quasi- municipal corporation and political subdivision of the State of Colorado, and INCO Securities Corporation, dated as of November 14, 1990, as amended by Amendment No. 1 on February 12, 1991; (5) All of the undersigned's rights to receive all accrued but unpaid interest owed by the Rangeview Metropolitan District, Arapahoe County, Colorado, associated with the Lowry Range Metropolitan District Water Revenue Notes, Series 1987 A-D, dated August 7, 1987, to the extent of $63,000; (6) All of the undersigned's rights to receive all accrued but unpaid interest owed by the Rangeview Metropolitan District, Arapahoe County, Colorado, associated with the Rangeview Metropolitan District Water Revenue Notes, Series 1988 A-D, dated December 7, 1988, to the extent of $27,000; (7) Right of First Refusal Agreement by and among INCO Securities Corporation and Richard F. Meyers, Mark W. Harding, Thomas P. Clark, Thomas Lamm and Rowena Rogers dated August 12, 1992; and (8) The assignment to Pure Cycle Corporation hereunder includes the right of Pure Cycle Corporation to exercise the options granted under the OAR Option Agreement and the CWC Option Agreement and INCO Securities Corporation waives performance of the provisions of Section 5.04 of the Water Rights Commercialization Agreement dated as of December 11, 1990, amended February 12, 1991, and further amended August 12, 1992. IN WITNESS WHEREOF, this Assignment has been executed as of the date first set forth above. INCO SECURITIES CORPORATION By: Title: EXHIBIT 5 OF DOCUMENT 10.1 ========================== For Exhibit 5 to the Settlement Agreement, which consists of an Amended and Restated Option and Purchase Agreement among OAR, Incorporated, the Company, and Inco Securities Corporation, see DOCUMENT 10.4. EXHIBIT 6 OF DOCUMENT 10.1 ========================== For Exhibit 6 to the Settlement Agreement, which consists of an Amended and Restated Option and Purchase Agreement among the State of Colorado, acting by the State Board of Land Commissioners, H.F. Riebesell, Jr., the Company and Inco Securities Corporation, see DOCUMENT 10.5. EXHIBIT 7 OF DOCUMENT 10.1 ========================== For Exhibit 7 to the Settlement Agreement, which consists of Amended Escrow Instructions among OAR, Incorporated, the Company, State of Colorado State Board of Land Commissioners, H. F. Riebesell, Jr., and Colorado National Bank, see DOCUMENT 10.6. EXHIBIT 8 OF DOCUMENT 10.1 ========================== For Exhibit 8 to the Settlement Agreement, which consists of Comprehensive Amendment Agreement No. 1 among Inco Securities Corporation, the Company, the State of Colorado, acting through the State Board of Land Commissioners, and others, see DOCUMENT 10.7. EX-10 4 ============= DOCUMENT 10.2 ============= SERVICE AGREEMENT between PURE CYCLE CORPORATION and RANGEVIEW METROPOLITAN DISTRICT, ACTING BY AND THROUGH ITS WATER ACTIVITY ENTERPRISE TABLE OF CONTENTS Page RECITALS 1 AGREEMENT 4 ARTICLE I Definitions 4 1.1 Lowry Range 4 1.2 Non-Export Water 4 1.3 Definitions 4 1.4 Intent of This Agreement 4 ARTICLE II Grant and East Cherry Creek Revenues 5 2.1 Appointment of Agent 5 2.2 East Cherry Creek Revenues 5 ARTICLE III Rangeview Representations and Covenants 5 3.1 Lease 5 3.2 Conflicts of Interest 5 ARTICLE IV Construction of Facilities 6 4.1 Construction 6 4.2 Quality 7 4.3 Rules and Regulations of Rangeview 7 ARTICLE V Coordination of Export and Non-Export Water 7 5.1 Substitution of Facilities 7 5.2Right to Use Transmission Lines; Infrastructure 7 ARTICLE VI Ownership, Operation, and Maintenance of Facilities 8 6.1 Ownership Prior to Termination 8 6.2 Ownership Post-Expiration 8 6.3 Ownership Post-Termination 8 ARTICLE VII Obligations of Pure Cycle 8 7.1 Water System 8 7.2 Control 8 7.3 Phased Development 9 7.4 Administration 9 7.5 Records 9 7.6 Services 9 7.7 Recharge 10 7.8 Compliance with Laws 10 7.9 Permits and Licenses 10 7.10 Taxes 10 7.11 Limitations on Use of Non-Export Water 10 7.12 Financing 10 7.13 Reporting 10 7.14 Access 11 ARTICLE VIII Billing and Rates 11 8.1 Rates 11 8.2 Billing 11 8.3 Renegotiation 12 8.4 Reserves 12 8.5 Reports and Audits 13 ARTICLE IX Management of Non-Export Water 14 9.1 Use of Non-Export Water 14 9.2 Insufficient Non-Export Water 14 ARTICLE X Rights-of-Way 15 10.1 Master Plan 15 10.2 Rights-of-Way 15 10.3 Fees for Rights-of-Way 15 10.4Condemnation of Land Not Owned by the Land Board 15 ARTICLE XI Indemnification 16 11.1 General 16 11.2 Liens 16 11.3 Mutual Indemnity 16 ARTICLE XII Financing 16 12.1 Review by Land Board 16 ARTICLE XIII Insurance and Bonds 17 13.1 Insurance 17 13.2 Bonds 17 13.3 Bond of Contractors 17 ARTICLE XIV Term, Default and Termination 18 14.1 Effective Date 18 14.2 Term 18 14.3 Default and Termination 18 14.4 Declaration of Forfeiture 19 14.5 Pure Cycle Right of Termination 20 14.6 Termination of Lease 20 ARTICLE XV General Provisions 20 15.1 Assignment 20 15.2 Third Party Beneficiaries 20 15.3 Notice 20 15.4 Construction 21 15.5 Entire Agreement 21 15.6 Authority 21 15.7 Copies 22 15.8 Counterparts 22 15.9 Amendment 22 15.10 Compliance with Law 22 15.11 Binding Effect 22 15.12 Severability 22 15.13Duty of Good Faith and Fair Dealing; Regular Consultation 22 15.14 Further Assurance 22 15.15 Governing Law 23 15.16 Arbitration 23 15.17 Litigation and Attorneys' Fees 23 15.18 Force Majeure 23 SERVICE AGREEMENT THIS SERVICE AGREEMENT (the "Agreement") is entered into as of the 11th day of April, 1996, by and between PURE CYCLE CORPORATION, a Delaware corporation ("Pure Cycle"), and RANGEVIEW METROPOLITAN DISTRICT, a quasi-municipal corporation and political subdivision of the State of Colorado, acting by and through its water activity enterprise ("Rangeview"). RECITALS 18. Rangeview is a special district organized pursuant to Title 32 of the Colorado Revised Statutes with the power, among others, to supply water for domestic and other public and private purposes. Rangeview's water activity enterprise was established by resolution of the district adopted at a public meeting of its board of directors on September 11, 1995, and effective as of the date of its adoption. 19. Pure Cycle is a corporation involved in the acquisition and development of water. 20. In November 1990, Inco Securities Corporation ("Inco") entered into (i) option agreements (the "Bond Options") which collectively granted Inco the right to purchase Rangeview Metropolitan District Water Revenue Bonds, Series 1988 M, in the principal amount of $17,771,200, Rangeview Metropolitan District Water Revenue Notes, Series 1987 A-L, in the principal amount of $5,000,000, and Rangeview Metropolitan District Water Revenue Notes, Series 1988 A-L, in the principal amount of $2,142,858 (collectively the "Rangeview Bonds and Notes"), which constituted substantially all of the outstanding debt of Rangeview. In addition, Inco entered into an Option Agreement For Sale and Operation of Production Right with Rangeview, dated as of November 14, 1990, as amended ("Inco Water Option Agreement"), pursuant to which Inco acquired an option to acquire certain rights to 10,000 acre-feet of water per year (the "Inco Water Rights") from Rangeview. 21. Pure Cycle and Inco entered into a certain Water Rights Commercialization Agreement, dated as of December 11, 1990, as amended (the "Commercialization Agreement") pursuant to which Inco and Pure Cycle agreed to jointly develop and market the Inco Water Rights and to share in the profits therefrom and Pure Cycle obtained certain rights to become the assignee of Inco's rights under the Bond Options and the Inco Water Option Agreement. 22. Pure Cycle sold portions of its right to profits from the Inco Water Rights under the Commercialization Agreement and certain of the Rangeview Bonds and Notes which it acquired pursuant to the Bond Options to finance (i) partial exercises of the Bond Options, (ii) extensions of the Inco Water Option Agreement, (iii) marketing efforts to sell the Inco Water Rights, and (iv) loans to Rangeview to finance administrative and legal expenses of Rangeview. 23. Rangeview's right to sell the Inco Water Rights derived from a Lease between Rangeview and the State of Colorado, acting through the State Board of Land Commissioners (the "Land Board") denominated Lease Number S-37280, dated April 26, 1982, as amended (the "Original Lease"). 24. A lawsuit was filed in the District Court in and for the City and County of Denver (the "Denver District Court") on October 28, 1994 styled Apex Investment Fund II. L.P., et al. v. Colorado State Board of Land Commissioners, et al., Case No. 94-CV-5405 (Courtroom I) (the "Denver Lawsuit") by Pure Cycle, Inco and a number of investors who acquired interests in the Rangeview Bonds and Notes from Pure Cycle to resolve various claims relating to the status and validity of the Original Lease, the Inco Water Option Agreement, and the Rangeview Bonds and Notes. 25. As part of the settlement of the Denver Lawsuit, Inco assigned its remaining rights and obligations under the Bond Options and the Inco Water Option Agreement to Pure Cycle. 26. As part of the settlement of the Denver Lawsuit, the Land Board and Rangeview have entered into an Amended and Restated Lease Agreement dated the date hereof (the "Lease") which supersedes the Original Lease. A copy of this Agreement is attached to the Lease as Exhibit B. 27. As part of the settlement of the Denver Lawsuit, Pure Cycle, Inco and Rangeview have agreed to supersede the Inco Water Option Agreement with an Agreement for Sale of Export Water between Rangeview and Pure Cycle, dated the date hereof (the "Export Water Agreement"). 28. Article 9 of the Lease provides that Rangeview may enter into a contract in the form of this Agreement with a service provider to provide water services to surface tenants, occupants, developers, landowners and all other water users on the Lowry Range (as defined in Section 1.1) (collectively "Water Users"), subject to the terms and conditions set forth in the Lease. 29. Subject to entry of a judgment in the Denver Lawsuit in conformance with the terms of the settlement, Pure Cycle has purchased all remaining Rangeview Bonds and Notes not already owned by Pure Cycle. 30. As part of the settlement of the Denver Lawsuit, Rangeview is required to acquire and retire the Rangeview Bonds and Notes. 31. Pure Cycle is willing to convey the Rangeview Bonds and Notes to Rangeview provided Pure Cycle obtains the Export Water (as defined in the Lease) pursuant to the Export Water Agreement and the rights granted under this Agreement in exchange for such Rangeview Bonds and Notes. In order to assure that future revenues of Rangeview are sufficient to compensate Pure Cycle for the conveyance of its Rangeview Bonds and Notes hereunder, including any interest due on such bonds and notes, Pure Cycle is willing to provide water services, pursuant to the terms and conditions set forth in the Lease and herein, to Water Users in exchange for the revenues described in Sections 2.2 and 8.2 of this Agreement. 32. The Export Water Agreement provides for the conveyance by Pure Cycle of the Rangeview Bonds and Notes to Rangeview for retirement in exchange for the rights granted to Pure Cycle hereunder and under the Export Water Agreement. 33. Rangeview believes that settlement of the Denver Lawsuit is in the best interest of Rangeview and is desirous of acquiring and retiring the Rangeview Bonds and Notes in exchange for (i) Pure Cycle's acquisition of the Export Water pursuant to the Export Water Agreement; and (ii) Pure Cycle's commitment to construct, maintain and operate the infrastructure necessary to deliver water service to Water Users and to provide such water service to Water Users as Rangeview's agent in accordance with the terms of the Lease and this Agreement. 34. Rangeview has determined that it is in the best interest of Rangeview to settle the Denver Lawsuit on the terms proposed and to engage Pure Cycle to provide water services to Water Users for a number of reasons, including the following: (1) The Rangeview Bonds and Notes were to be repaid from revenues received from selling water under the Original Lease to water users on the Lowry Range; however, the Land Board has not yet sold or developed the Lowry Range and Rangeview has no assurance that the Land Board will ever do so. Due to the lack of development on the Lowry Range, Rangeview has been unable to pay principal and interest on the Rangeview Bonds and Notes and, therefore, they have accrued over $15,000,000 in interest. Therefore, Rangeview views a settlement which results in a retirement of the Rangeview Bonds and Notes as beneficial to the district. (2) Pure Cycle has a long-term relationship with Rangeview and is very familiar with the Water Rights (as that term is defined in the Lease). (3) Pure Cycle has expertise in the area of water development, including the financial feasibility of such development. (4) Rangeview has obligations under the Lease to develop the Water Rights and to acquire additional water, if necessary. Rangeview does not have the financial ability or expertise to develop the Water Rights or acquire additional water. By utilizing Pure Cycle's financial and development expertise, Rangeview will be able to meet its obligations under the Lease. AGREEMENT In consideration of the foregoing, the covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE I Definitions (2) Lowry Range. "Lowry Range" shall mean the approximately 24,567.21 acres, more or less, according to U.S. Government survey, in Arapahoe County, Colorado more particularly described as follows: Township 5 South, Range 64 West, Sections 7 through 10: all; Sections 15 through 22: all; Sections 27 through 34: all. Township 4 South, Range 65 West, Sections 33: all; and 34: all. Township 5 South, Range 65 West, Section 3: all; Sections 10 through 15: all, less certain surface rights granted for (but including the water under) the Aurora Reservoir) in Section 15; Sections 22 through 27: all, less certain surface rights granted for (but including the water under) the Aurora Reservoir in Section 22; Sections 35 and 36: all; Section 34: north 2,183.19 feet. Township 5 South, Range 66 West, Section 36: all. (3) Non-Export Water. "Non-Export Water" shall have the meaning set forth in the Lease. (4) Definitions. Capitalized terms used but not defined herein shall be defined as set forth in the Lease. (5) Intent of This Agreement. This Agreement is intended to provide the terms and conditions under which Pure Cycle will act as Rangeview's agent to provide water service to Water Users consistent with the obligations of Rangeview under the Lease. ARTICLE II Grant and East Cherry Creek Revenues (6) Appointment of Agent. During the term of this Agreement and subject to the terms of the Lease (which terms are incorporated herein by reference), Rangeview hereby grants to Pure Cycle the sole and exclusive right to use the Non-Export Water as its agent for the sole purpose of providing water services to the Water Users. To the extent, if any, that the terms of this Agreement are contrary to, or inconsistent with, the terms of the Lease, the provisions of the Lease shall control and govern the conduct of the parties hereto. By execution of this Agreement, Pure Cycle, as service provider to Rangeview, consents and agrees to be bound by the Lease provisions relative to the service provider. (7) East Cherry Creek Revenues. Rangeview acknowledges that Pure Cycle has loaned funds to Rangeview to operate the district, which loans are documented in a promissory note dated April 17, 1995 (the "Note"). The outstanding principal balance on the Note as of the date of this Agreement is $192,600. Rangeview agrees that it will apply any revenue received by Rangeview pursuant to the East Cherry Creek Agreement (i) toward payment to the Land Board of its share of such revenues pursuant to Section 10.1 of the Lease, (ii) to establish a fund for Rangeview's budget for the district's current calendar year operations, (iii) to establish and maintain the reserve required by Section 8.9 of the Lease, and (iv) remaining revenues, if any, toward repayment of the Note, and once the Note has been repaid in full, Rangeview agrees to pay to Pure Cycle ninety-five percent (95%) of Rangeview's share of any remaining revenue received by Rangeview pursuant to the East Cherry Creek Agreement. ARTICLE III Rangeview Representations and Covenants (8) Lease. Rangeview represents and warrants that all terms and conditions of the Lease have been complied with by it and, to its knowledge, by the Land Board. Rangeview shall not enter into any amendments to the Lease that affect Pure Cycle's rights and/or obligations under this Agreement without Pure Cycle's prior written approval. Rangeview agrees that it will comply with the terms of the Lease, including paying all rents and royalties due under the Lease, and maintain it in effect during the term of this Agreement. It shall not be a breach of this covenant if Rangeview's failure to maintain the Lease in effect is due to a breach of this Agreement or the Lease by Pure Cycle. (9) Conflicts of Interest. The parties hereto acknowledge that certain members of the board of directors of Rangeview are either officers, directors or employees of Pure Cycle and may have conflicts of interest with regard to this transaction. Rangeview represents and warrants that such board members have, pursuant to 24-18-110, C.R.S., filed all necessary disclosure statements with Rangeview and the Colorado Secretary of State, that Rangeview has provided copies of such disclosure statements to the Land Board, and that those members with conflicts have abstained from voting on this Agreement. Pure Cycle represents and warrants that the members of Pure Cycle's board of directors who also serve on the Rangeview board of directors have fully disclosed such interests to the disinterested board members of Pure Cycle prior to obtaining board approval of this Agreement and those members with potential conflicts have abstained from voting on this Agreement. ARTICLE IV Construction of Facilities (10) Construction. Pure Cycle shall cause construction of a Water System (as defined below) to provide water service to meet the demand for water of Water Users and shall do so in a commercially reasonable time and manner consistent with prudent water service practice in Colorado and consistent with Article 9 of the Lease, subject to the receipt of all necessary governmental approvals. Upon receiving a written request for water service from a Water User, Rangeview shall give Pure Cycle written notice of such request. Within thirty (30) days after receipt of all information necessary to establish the service needs of the Water User, Rangeview and Pure Cycle shall establish a schedule identifying the scope of improvements and the timing of construction ("Construction Schedule") for such Water User. Upon execution of a tap purchase agreement with such Water User or some other agreement which secures the Water User's commitment to purchase water taps or receive water service, which tap purchase agreement shall indicate that Rangeview's commitment for service is subject to the completion of the improvements identified in the Construction Schedule or such other time as would be consistent with the Lease, Pure Cycle shall cause construction of the identified improvements pursuant to the time frame set forth in the Construction Schedule. Once construction is completed, Pure Cycle will provide Rangeview with copies of the plans for the improvements as built. The term "Water System" shall mean wells, intake lines, pumps, treatment facilities, transmission systems, storage facilities and all other components of a water supply system to provide Non-Export Water to Water Users. Pure Cycle shall cause the Water System to be completed in a workmanlike manner and in compliance with the plans approved by Rangeview, which approval will not be unreasonably withheld or delayed. Pure Cycle shall make available to Rangeview copies of any and all construction contracts and related documents concerning the Water System. Twenty-one (21) days prior to the execution of any construction contract related to the Water System in excess of One Million Dollars ($1,000,000), Pure Cycle shall provide Rangeview with a copy of such contract (a draft being acceptable if finals are not available) and information regarding how the improvements will be financed and how such financing obligation will be paid. Rangeview shall review such information for the sole purposes of determining whether such contract is commercially reasonable and in compliance with prudent water provider practice in Colorado and whether the project is fiscally viable. Rangeview shall be deemed to have consented to the contract unless, within fourteen (14) days of the date of delivery of the contract, it delivers to Pure Cycle a notice specifically stating the reasons for its determination that the proposed contract is not commercially reasonable, is not in compliance with prudent water provider practice in Colorado, or the project is not fiscally viable. Disputes, if any, as to matters under this Section will be submitted to arbitration pursuant to Section 15.16, and a hearing shall be held within fourteen (14) days of submission of the matter to arbitration. (11) Quality. Pure Cycle shall cause the Water System to be designed to comply with applicable requirements of the federal Safe Drinking Water Act or such other similar or successor laws (the "Safe Drinking Water Act") in effect at the time the Water System is constructed. In addition, Pure Cycle shall operate and maintain the Water System, and to the extent necessary, modify or upgrade the Water System, such that the water provided through the Water System complies with the Safe Drinking Water Act; provided, however, that it shall not be a default of this Section if at any time the water fails to comply with the requirements of the Safe Drinking Act, Pure Cycle cures such noncompliance within thirty (30) days of learning of such noncompliance, or if more than thirty (30) days is reasonably required to cure such noncompliance, Pure Cycle commences to correct the problem within thirty (30) days and thereafter prosecutes the same to completion with reasonable diligence. (12) Rules and Regulations of Rangeview. All construction, operation, and maintenance of the Water System shall be performed in accordance with the Rangeview Metropolitan District Rules and Regulations, as adopted from time to time (the "Rules and Regulations") which shall not be inconsistent with the terms of the Lease. ARTICLE V Coordination of Export and Non-Export Water (13) Substitution of Facilities. In connection with the provision of Non-Export Water to Water Users, Pure Cycle shall (i) be entitled, at Pure Cycle's option subject to Rangeview's consent which shall not be unreasonably withheld, to exercise Rangeview's right to substitute facilities and (ii) have the obligation to provide substitute facilities on Rangeview's behalf to the Export Water Purchaser as provided in Section 8.3 of the Lease. (14) Right to Use Transmission Lines; Infrastructure. Pursuant to the Lease, all contracts for the sale of Export Water will provide for construction of excess capacity in Export Water transmission lines only within the Lowry Range, so as to accommodate the transmission of water for on-site use within that portion of the Lowry Range which may be served by those lines. Ownership of the excess capacity needed for use on the Lowry Range will be transferred to Rangeview at such time as such capacity is utilized, under agreements which provide for the payment by Rangeview of a proportionate share of operation, maintenance and replacement costs. Rangeview agrees to provide such excess capacity to Pure Cycle to provide the services contemplated hereunder and Pure Cycle agrees to assume Rangeview's obligations with respect to operation, maintenance and replacement costs under the excess capacity agreements for so long as this Agreement is in effect. ARTICLE VI Ownership, Operation, and Maintenance of Facilities (15) Ownership Prior to Termination. Rangeview shall own the Water System, Pure Cycle shall operate and be responsible for the maintenance of the Water System. Subject to Pure Cycle's obligations under Section 8.2, Rangeview shall own, operate, and be responsible for maintenance of meters installed to measure the quantity of Non-Export Water delivered to Water Users in accordance with Section 7.1. (16) Ownership Post-Expiration. In the event this Agreement expires pursuant to Section 14.2 or terminates pursuant to Section 14.6, title to any rights-of-way on the Lowry Range used exclusively for delivering Non-Export Water and any interest of Pure Cycle in the Water System or shared facilities for delivery of Non-Export Water pursuant to agreements described in Section 5.2 or otherwise, shall automatically, without the necessity of any further action by the parties, revert and be transferred to the Land Board as of the date of such expiration or termination in accordance with Section 14.1 of the Lease. (17) Ownership Post-Termination. In the event this Agreement is terminated by Rangeview pursuant to Section 14.3 or by Pure Cycle pursuant to Section 14.5, Pure Cycle shall surrender all of Pure Cycle's interest in rights-of-way on the Lowry Range used exclusively for delivering Non-Export Water and any interest of Pure Cycle in the Water System or shared facilities for delivery of Non-Export Water pursuant to agreements described in Section 5.2 or otherwise, to Rangeview in accordance with Section 14.4 of this Agreement. ARTICLE VII Obligations of Pure Cycle (18) Water System. At its cost, Pure Cycle shall provide a Water System for Water Users in a commercially reasonable manner consistent with prudent water provider practice in Colorado in order to meet the demand of Water Users for water subject to the terms and conditions of the Lease and this Agreement. In addition, Pure Cycle shall install meters, in accordance with the Rules and Regulations, capable of measuring the quantity of Non- Export Water delivered to Water Users. Pure Cycle acknowledges that unless expressly agreed to by the Land Board in writing, the Non-Export Water, the Water System and the rights-of-way on and aquifers under the Lowry Range required to deliver Non-Export Water and any other rights granted with respect to the Non-Export Water under the Lease, shall not be used for any business or other purpose except to provide water service consistent with this Agreement, the Lease and the water decrees by which such water has been or may be adjudicated. (19) Control. Pure Cycle shall have the responsibility for and control over the details and means for providing the services hereunder subject to the requirement that the services be provided in a commercially reasonable time and manner consistent with prudent water service practice in Colorado and in accordance with the Lease, this Agreement and the Rules and Regulations. (20) Phased Development. Pure Cycle may phase the installation of the Water System in accordance with the needs of Water Users, it being understood that additional Water Users will be generated or created only upon the development of the Lowry Range. Pure Cycle shall have no obligation whatsoever to install or create access to a Water System in advance of the need for such facilities, such need to be based upon commercially reasonable standards for similar development projects. To the extent portions of the Lowry Range have been sold by the Land Board, Pure Cycle agrees to provide Rangeview with a reasonable long range development plan for such land. (21) Administration. Pure Cycle shall operate, maintain and administer the Water System, including billing (but not collecting) all charges for water services in accordance with Article VIII and issuing taps on behalf of Rangeview. Taps for Non-Export Water shall not be issued based on "unused cumulative rights under the decrees" (as that phrase is defined in the Lease). (22) Records. Pure Cycle shall keep and maintain accurate files of all contracts concerning the Water System and all other records necessary to the orderly administration and operation of the Water System which are required to be kept by local, state or federal statutes, ordinances or regulations or which are necessary to comply with the Lease. Pure Cycle shall provide a copy of each executed contract concerning the Water System within three days. (23) Services. Pure Cycle shall employ or contract with such engineers and qualified operators as it deems appropriate, to perform the duties of operating the Water System, including the following: 1. cooperating with Rangeview and other state, county, local and federal authorities in providing such tests as are necessary to maintain compliance with appropriate governmental standards; 2. supervising the connection of lines to private development and recording such connections for billing proposes in accordance with Section 8.2; 3. coordinating construction with various utility companies to ensure minimum interference with the Water System; 4. performing all maintenance and repairs necessary to continue the efficient operation of the Water System; 5. providing for the services of subcontractors necessary to maintain and continue the efficient operation of the Water System; and 6. providing for emergency preparedness to provide response to emergencies, including, but not limited to, interruption of services because of line breaks, freeze-up or other mechanical problems. To the extent Pure Cycle engages contractors, it shall require such contractors to maintain bonds and insurance, including workers' compensation insurance, in compliance with applicable laws, the Lease, and the Rules and Regulations. (24) Recharge. Pure Cycle shall have the right to artificially recharge (but only as to the provision of water to Water Users pursuant to this Agreement) and to store the recharged water in the aquifers from which such Non-Export Water is withdrawn (but only to the extent all or some of the Non- Export Water has been withdrawn from the aquifers by Pure Cycle) and to withdraw such artificially recharged and stored water in accordance with Section 6.2(a) of the Lease. (25) Compliance with Laws. Pure Cycle shall comply with all applicable government statutes, regulations, ordinances, permits and orders, including the Rules and Regulations and, if applicable, Colo. Rev. Stat. 24-91-103, 103.5 and 103.6 (1995 Supp.), in its performance under this Agreement. (26) Permits and Licenses. Pure Cycle shall, at its own expense, apply for and obtain all necessary building, occupancy, well and other permits and licenses which may be required by any governmental entity which has jurisdiction over the operations to be performed by Pure Cycle pursuant to this Agreement. All well permits shall be obtained in the name of the Land Board and, if necessary, Rangeview as lessee. (27) Taxes. Pure Cycle shall be solely responsible for and shall pay all taxes, fees, charges and assessments, if any, in connection with the work or the materials to be utilized in accomplishing the activities of Pure Cycle pursuant to this Agreement. (28) Limitations on Use of Non-Export Water. Pure Cycle shall not use, transfer, or otherwise dispose of Non-Export Water, including any re-use or successive use of such Non-Export Water, outside the boundaries of the Lowry Range without the express written consent of the Land Board in accordance with the Lease. (29) Financing. Pure Cycle shall be responsible for financing its obligations hereunder with the funds it receives pursuant to this Agreement or from such other sources as it deems desirable subject to Section 4.1 hereof and the terms of the Lease. (30) Reporting. In addition to the reports required pursuant to Section 8.5, Pure Cycle agrees to provide Rangeview with annual budgets and business plans with respect to the Water System and such other information as Rangeview may reasonably request in order to assure itself that the demands of Water Users are being adequately provided for and to assist Rangeview in its long-term planning efforts. Pure Cycle shall also provide courtesy copies of annual budgets and business plans to the Land Board. Pure Cycle shall also supply Rangeview with such information as Rangeview may reasonably require to comply with its obligations to state, county, local and federal authorities, including, for example, the results of tests on the quality of the water and information concerning compliance with health and safety regulations. (31) Access. Pure Cycle agrees to permit the Land Board access to the Lowry Range to the same extent Rangeview is required to grant the Land Board access under Section 5.1(b) of the Lease. ARTICLE VIII Billing and Rates (32) Rates. Rangeview will establish the tap fees, usage charges, and service charges, including late payment charges, to be imposed upon the Water Users for the water services provided by Pure Cycle hereunder consistent with Section 8.2 of the Lease. (33) Billing. 1. Pure Cycle shall read the meters and bill the Water Users for water services provided hereunder, including all tap fees, usage charges, and service charges, on behalf of Rangeview and in accordance with the Rules and Regulations. The bills shall provide that payment shall be made by Water Users to Rangeview at an address designated by Rangeview. Rangeview shall have the option, upon sixty (60) days written notice to Pure Cycle, to assume the obligation of reading meters and billing hereunder. Pure Cycle shall have the option upon sixty (60) days written notice to Rangeview to relinquish the obligation of reading meters and billing hereunder. In either case, Pure Cycle shall deliver to Rangeview the records necessary to enable Rangeview to perform such services. Pure Cycle shall thereafter continue to perform all obligations hereunder except those pertaining to billing. If Rangeview's costs are significantly impacted by the transfer of billing responsibilities, the amounts paid to Pure Cycle under this Agreement shall be subject to renegotiation under Section 8.3. 2. Rangeview shall be responsible for collection efforts on delinquent accounts. To the extent necessary to enable Rangeview to determine royalties due under the Lease, Pure Cycle shall code the bills in a manner which will enable Rangeview to distinguish which bills are for recharged water and of such bills which are to Title 32 water districts or similar municipal entities supplying water for public use ("Public Entities"). After deducting the amount required to be paid or accrued to pay the royalties required for Non-Export Water under the Lease, Rangeview shall pay Pure Cycle on or before the 15th day of each month ninety-five percent (95%) of all remaining amounts collected by Rangeview from Water Users in the previous month. Such payment will be accompanied by a report from Rangeview specifying the amount received by Rangeview from Public Entities for recharged water and the amount received by Rangeview from other Water Users in the previous month. Once the royalty obligation set forth in Section 7.3(b) of the Lease becomes applicable, Pure Cycle shall provide Rangeview with a report on or before the 10th day of each month specifying those costs and expenses of Pure Cycle for the preceding month which are components of Net Profits (as that term is defined in the Lease) in order to enable Rangeview to determine the royalties payable under the Lease and the amount payable to Pure Cycle for the previous month. (34) Renegotiation. The parties acknowledge that due to the fact that the Lowry Range has not yet been developed and Water Users and the Water System do not yet exist, the operating costs of Rangeview and Pure Cycle with respect to the water service to be provided hereunder are unknown. Therefore, notwithstanding the provisions of Section 8.2, if the five percent (5%) of revenues retained by Rangeview are insufficient to cover Rangeview's costs relating to the provision of water service with respect to Non-Export Water, including, without limitation, the proportionate share of Rangeview's reasonable general, legal, administrative, engineering, regulatory compliance, and long-term planning costs attributable to provision of water service with respect to Non-Export Water and Rangeview's reserve requirements pursuant to Section 8.9 of the Lease, Pure Cycle and Rangeview shall negotiate an amendment to Section 8.2 in good faith which provides Rangeview with sufficient revenues from this Agreement to cover its costs relating to the provision of water service with respect to Non-Export Water. During any period of renegotiation, each party shall continue to perform its obligations under this Agreement. Disputes as to an appropriate amendment to provide Rangeview with sufficient revenues under this Section will be settled by arbitration pursuant to Section 15.16 of this Agreement. (35) Reserves. 1. Rangeview shall utilize the five percent (5%) of revenues retained by it pursuant to Section 8.2 and, if applicable, the five percent (5%) of revenues retained by it pursuant to Section 2.2 from the East Cherry Creek Agreement, (i) to pay proper and necessary expenses related to the functions of Rangeview, (ii) to build and maintain the reserve required by Section 8.9 of the Lease (which reserve is equal to thirty-three percent (33%) of the Operating Expenses budgeted by Rangeview and Pure Cycle for the then current calendar year), (iii) to establish a fund for Rangeview's budget for the following calendar year, and (iv) to increase the reserve fund described in (ii) above to an amount equal to fifty (50%) of the Operating Expenses budgeted by Rangeview and Pure Cycle for the then current year. The reserve fund shall be continuously maintained and may be utilized by Rangeview solely for paying lawful obligations relating to the provision of Non-Export Water to Water Users as required by Section 8.1 of the Lease. 2. Pure Cycle agrees that if and to the extent at any time monies are not available to Rangeview to fund the reserve which Rangeview is required to maintain pursuant to Section 8.9 of the Lease or if monies in such reserve are withdrawn (for a purpose permitted by Section 8.4(a) above and by Section 8.9 of the Lease) such that the amount of the reserve drops below the amount which Rangeview is required to maintain pursuant to the Lease and such reserve cannot reasonably be expected to be reestablished from anticipated income to Rangeview within one year, then within thirty (30) days of receipt of notice from Rangeview of such fact, Pure Cycle shall deliver funds to Rangeview sufficient to replenish the reserve fund to the level required pursuant to the Lease. Notwithstanding the fact that the reserve can reasonably be expected to be reestablished within one year, Pure Cycle agrees to deliver funds to Rangeview sufficient to replenish the reserve fund to the level required pursuant to the Lease at the time this Agreement terminates. If Pure Cycle has given notice to Rangeview pursuant to Section 14.5 of Pure Cycle's election to terminate this Agreement, any use by Rangeview of the reserve fund in a manner which would cause Pure Cycle to be required to replenish the fund pursuant to the foregoing sentence because the termination date of this Agreement will occur sooner than the date on which the reserves are reasonably expected to be reestablished shall require the prior written consent of Pure Cycle, which consent shall not be withheld to the extent it is necessary to make such expenditure at that time. 3. Any dispute as to the necessity of an expenditure or whether the reserve fund can reasonably be expected to be reestablished from anticipated income within one year shall be submitted to arbitration pursuant to Section 15.16 of this Agreement. (36) Reports and Audits. 1. Within twenty-five (25) days after the end of each calendar year, until such time as Rangeview notifies Pure Cycle that production of Export Water and/or Non-Export Water has reached 500 acre feet in any calendar year, and thereafter on or before the twenty-fifth (25th) day following the end of each calendar quarter during the term of this Agreement, Pure Cycle shall deliver a report to Rangeview which specifies the quantity of Non-Export Water (including any recharged or stored water pursuant to Section 6.2(a) of the Lease) delivered by Pure Cycle, the amount of Gross Revenues or, if applicable, Retail Sales Price relating to the sale or other disposition of Non-Export Water, and, if applicable, the costs and expenses of Pure Cycle for such period which are components of Net Profits and such other information as may be necessary in order to enable Rangeview to comply with its reporting obligations to the Land Board regarding the accuracy of royalties paid under the Lease. 2. Pure Cycle shall prepare and keep full, complete, and proper books, records and accounts of all Non-Export Water (including any recharged or stored water pursuant to Section 6.2(a) of the Lease) sales or dispositions and, if applicable, expenses of Pure Cycle included in the calculation of Net Profits and shall document such transactions as may be required by law. Said books, records, and accounts of Pure Cycle shall be open at all reasonable times, upon three (3) days prior written notice, to the inspection of Rangeview and its representatives, and upon ten (10) days prior written notice, to the inspection of the Land Board and its representatives, who may, at Rangeview's or the Land Board's expense, as applicable, copy or extract all or a portion of said books, records, and accounts for a period of five (5) years after the date such books, records and accounts are made. Rangeview or the Land Board may, upon no less than fourteen (14) days' prior written notice to Pure Cycle, cause a partial or complete audit to be made at Rangeview's or the Land Board's expense, as applicable, by an auditor selected by Rangeview or the Land Board, as applicable, of the entire records and operations of Pure Cycle for a five (5) year period preceding the date of the audit relating to the Lowry Range and Non-Export Water use pursuant to this Agreement. Within fourteen (14) days following receipt of such a notice, Pure Cycle shall make available to the auditor the books and records the auditor reasonably deems necessary or desirable for the purpose of making the audit. If the results of the audit reveal a deficiency in the amounts paid by Rangeview to the Land Board under the Lease as a result of inaccurate reports provided by Pure Cycle to Rangeview, then Pure Cycle shall refund the revenues it received from Rangeview under Section 8.2 which should have been paid to the Land Board together with interest thereon at the rate of two percent (2%) per month from the date or dates such amounts should have been paid to the Land Board. If such inaccuracies resulted in a deficiency to the Land Board in excess of two percent (2%) of the royalties previously computed by Rangeview for the period covered by the audit, then Pure Cycle shall also pay the actual cost of the audit. 3. Rangeview shall prepare and keep full, complete, and proper books, records and accounts of all collections with respect to Non-Export Water (including any recharged or stored water pursuant to Section 6.2(a) of the Lease) sales or dispositions and, if applicable, expenses of Rangeview included in the calculation of Net Profits and shall document such transactions as may be required by law. Said books, records, and accounts of Rangeview shall be open at all reasonable times to the inspection of Pure Cycle and its representatives who may also, at Pure Cycle's expense, audit, copy or extract all or a portion of said books, records, and accounts for a period of five (5) years after the date such books, records and accounts are made. Pure Cycle may, upon fourteen (14) days' prior written notice to Rangeview, cause a partial or complete audit to be made at Pure Cycle's expense, by an auditor selected by Pure Cycle, of the entire records and operations of Rangeview relating to the Lowry Range and Non-Export Water collections and expenses pursuant to this Agreement. Within fourteen (14) days following receipt of such a notice, Rangeview shall make available to the auditor the books and records the auditor deems necessary or desirable for the purpose of making the audit. Any deficiency in the payment of amounts due Pure Cycle pursuant to Section 8.2 determined by such audit shall be immediately due and payable by Rangeview together with interest thereon at the rate of two percent (2%) per month from the date or dates such amounts should have been paid. If such deficiency is in excess of two percent (2%) of the amounts previously computed by Rangeview for the period covered by the audit, then Rangeview shall pay the actual cost of the audit, at the time the deficiency is paid. ARTICLE IX Management of Non-Export Water (37) Use of Non-Export Water. All use of Non-Export Water by Pure Cycle hereunder, including any re-use or successive use, shall be done in a commercially reasonable manner consistent with prudent water provider practice in Colorado in accordance with the Lease and the decrees adjudicating such water. (38) Insufficient Non-Export Water. To the extent that Non- Export Water is insufficient to provide water service to Water Users, Rangeview is obligated under the Lease to locate additional sources of water for Water Users. Pure Cycle agrees to locate such additional sources of water for Rangeview. The parties acknowledge that if Rangeview acquires such additional water, it shall not be subject to the provisions of the Lease except to the extent required by the Lease. In recognition of the fact that it will be more efficient and economical to have only one service provider and to limit the number of parties jointly using and expanding the Water System, Rangeview agrees that if it acquires such additional water, it shall give Pure Cycle the first opportunity to negotiate a service provider agreement with respect to any additional water. To the extent Pure Cycle desires to be the service provider for such additional water but the parties are unable to reach an agreement on the terms of such service provider agreement, the missing terms shall be settled by arbitration in accordance with Section 15.16. In establishing such terms, the parties agree that the arbitrator shall take into consideration prudent water provided practices in Colorado. The terms of this Agreement may be considered by the arbitrator in determining what terms would be consistent with prudent water provider practice in Colorado except to the extent such terms are influenced or dictated by the terms of the Lease. Pure Cycle agrees that if Rangeview does not acquire additional water, Pure Cycle shall permit the Land Board, as required by the Lease, to jointly use and expand the Water System to the same extent Pure Cycle would have used and expanded such facilities consistent with prudent water provider practices in Colorado if Rangeview had acquired additional water to provide service to Water Users requesting service after the Non-Export Water is committed. ARTICLE X Rights-of-Way (39) Master Plan. As set forth in Exhibit D to the Lease, a master plan of rights-of-way, has been agreed upon with respect to the Lowry Range, subject to certain rights of the Land Board to amend the master plan. (40) Rights-of-Way. When a right-of-way on or under the Lowry Range is reasonably necessary to enable Pure Cycle to perform the services contemplated by this Agreement, Pure Cycle shall notify Rangeview. Rangeview shall file a request for the right-of-way with the Land Board in accordance with the Lease. Upon grant of a right-of-way by the Land Board, Rangeview shall promptly notify Pure Cycle and, to the extent necessary to enable Pure Cycle to perform its services hereunder, Rangeview shall grant a license to Pure Cycle to use the right-of-way granted by the Land Board. Such license shall be in the form of the license attached to the Lease as Exhibit G. (41) Fees for Rights-of-Way. Pure Cycle shall pay the costs (including, if applicable, legal and engineering fees) associated with obtaining rights-of-way. Pure Cycle acknowledges that pursuant to the Lease, the Land Board shall receive Fifty Dollars ($50.00) per acre of the Lowry Range utilized as a right-of-way. The Fifty Dollars ($50.00) is to be increased every five years proportionately to the five-year increase in the Index (as that term is defined in the Lease). (42) Condemnation of Land Not Owned by the Land Board. Upon Pure Cycle's request, Rangeview agrees to use its governmental powers of condemnation if condemnation is reasonably necessary to enable Pure Cycle to perform the services contemplated by this Agreement. Rangeview agrees to grant Pure Cycle a right-of-way in such condemned property substantially in the form attached hereto as Exhibit A. The fee for such right-of-way shall be based on the fair market value of the right-of-way at the time of the grant assuming this Agreement will expire at the end of the term set forth in Section 14.2. Pure Cycle shall be responsible for the costs associated with Rangeview's condemnation of such land. Nothing herein shall grant power to condemn land owned by the Land Board or to interfere with the Land Board's rights under the Lease. ARTICLE XI Indemnification (43) General. Pure Cycle agrees that it shall jointly and severally with Rangeview indemnify and hold harmless the Land Board against and from all liabilities, claims and demands, settlement or litigation expenses and related attorneys' fees (hereafter "Indemnified Items") for personal injury or property damage arising out of, or caused by, any act or omission of Rangeview, Pure Cycle, their contractors, agents or employees. (44) Liens. Except with respect to liens or encumbrances expressly permitted under the Lease, Pure Cycle agrees that it shall jointly and severally with Rangeview indemnify and hold the Land Board harmless from and against all Indemnified Items relating to liens or claims of right to enforce liens arising from actions of Rangeview or Pure Cycle, its contractors and agents. (45) Mutual Indemnity. As between Pure Cycle and Rangeview, each party shall indemnify and hold harmless the other, to the extent permitted by law, against and from all Indemnified Items (i) for personal injury or property damage arising out of, or caused by, any act or omission of such party, its contractors, agents or employees or (ii) relating to liens or claims of right to enforce liens arising from actions of such party, its contractors and agents. The party whose actions caused such liens to arise shall promptly cause any such lien to be removed notwithstanding the fact that such party may believe that there is a valid defense to any such claim. Such party shall retain the right to pursue any claims against the person filing the lien after any such lien is removed. ARTICLE XII Financing (46) Review by Land Board. Pursuant to Section 9.1(c) the Lease, Pure Cycle agrees to provide the Land Board with courtesy copies of any construction or financing contracts in excess of Five Hundred Thousand Dollars ($500,000) entered into by Pure Cycle related to the provision of Non-Export Water to Water Users (including contracts for the disposal of effluent, sewage or sewerage) ten (10) days prior to the execution of any such contracts (drafts being acceptable if finals are not yet available). ARTICLE XIII Insurance and Bonds (47) Insurance. Pure Cycle shall at all times carry insurance in amounts and with carriers acceptable to Rangeview for workers' compensation coverage fully covering all persons engaged in the performance of this Agreement in accordance with Colorado law, and for public liability insurance covering death and bodily injury with limits of not less than $1,500,000 for one person and $5,000,000 for any one accident or disaster, and property damage coverage with limits of not less than $500,000, which insurance shall name Rangeview and the Land Board as additional insureds. Pure Cycle acknowledges that under the Lease, the Land Board has reserved the right to reasonably increase the required limits of insurance as the Land Board may deem appropriate from time to time. Rangeview shall give notice to Pure Cycle within five (5) days of receipt of a request from the Land Board to increase the limits of insurance. Pure Cycle shall promptly obtain such increased coverage and shall furnish the Land Board with proof of such coverage; provided that, if Pure Cycle disputes the reasonableness of such request, Pure Cycle shall have the right to submit such dispute to arbitration in accordance with Sections 15.2(b) and 15.16 of the Lease. (48) Bonds. No operations are to be commenced on the Lowry Range until Pure Cycle has filed good and sufficient bonds, consistent with the requirements of 38-26-106 and 36-1-129, with the Land Board, and listing Rangeview as a coinsured, in an amount fixed by the Land Board to secure the payment for damages, losses or expenses caused by Pure Cycle as a result of operations on or under the Lowry Range. Pure Cycle acknowledges that, pursuant to the Lease, the Land Board may require that the bonds be held in full force and in effect for one year after cessation of the operations for which the bonds were intended. In addition, Pure Cycle shall comply with the Rules and Regulations with respect to bonds required by Rangeview. (49) Bond of Contractors. Bonds provided by contractors for construction activities to Pure Cycle may list the Land Board and Rangeview as coinsureds. As long as such bonds otherwise comply with Section 13.2 above and list the Land Board and Rangeview as coinsureds, the contractors shall not be required to obtain any other bonds for the Land Board or Rangeview. ARTICLE XIV Term, Default and Termination (50) Effective Date. Rangeview's rights under the Lease are subject to entry of a final non-appealable order in the Denver Lawsuit. The parties to the Lawsuit have reached a settlement agreement, to which the Lease is attached as Exhibit 1 (the "Settlement Agreement"). This Agreement shall be binding on the date that it is fully executed and dulivered by both parties hereto, subject only as a condition subsequent to the occurrence of the Effective Date (as that term is defined in the Settlement Agreement). If the Settlement Agreement is terminated, this Agreement shall be null and void ab initio and shall have no force and effect. (51) Term. This Agreement shall commence on the Effective Date and, unless sooner terminated pursuant to this Article, shall expire at 12:00 noon on May 1, 2081. (52) Default and Termination. 1. The following events shall constitute events of default under this Agreement: a. The filing by a party of a petition in bankruptcy, insolvency or for reorganization under the bankruptcy laws of he United States or under any insolvency act of any state, the dissolution of a party, or a party making an assignment for the benefit of creditors; b. The taking of the Lease or the Non-Export Water or any part thereof by execution or other process of law or the subjection of the Lease or the Non-Export Water or any part thereof to attachment, which attachment is not discharged or disposed of within sixty (60) days after the levy thereof; c. The institution against a party of involuntary proceedings under any such bankruptcy law or insolvency act or for dissolution, or the appointment of a receiver or trustee for all or substantially all of the property of a party, which proceeding is not dismissed or receivership or trusteeship is not vacated within sixty (60) days after such institution or appointment; or d. The material default in the performance of any material term, covenant or condition in this Agreement which default shall continue and not be cured for a period of thirty (30) days after written notice specifically setting forth the nature of the default has been given by the non-defaulting party to the defaulting party, or if more than thirty (30) days is reasonably required to cure such matter complained of, if the defaulting party shall fail to commence to correct the same within said thirty (30) day period and shall thereafter fail to prosecute the same to completion with reasonable diligence. 2. If an event of default shall occur, then the non- defaulting party may, at its option, without any prejudice to any other remedies it may have, (i) terminate this Agreement upon giving written notice of termination to the defaulting or breaching party, and, if Rangeview is the non-defaulting party, at its option, exercise its rights under Section 14.4, and/or (ii) commence an action for specific performance of the obligations of the defaulting party and/or damages proximately caused by the default or breach and its costs and reasonable attorneys' fees (including costs incurred to cure such default pursuant to Section 14.3(c)). 3. If either party shall act or fail to act in a manner which would constitute an Event of Default (as that term is defined in the Lease) under the Lease, immediately, with the passage of time, with notice, or any of the foregoing, the non- defaulting party may, at its option, without prejudice to any other remedies it may have, cure such Event of Default and seek reimbursement from the defaulting party for any costs and damages associated therewith or offset such costs and damages from any amounts owed to the defaulting party under this Agreement or otherwise without waiting for the thirty-day period provided for in Section 14(a)(iv) to run. (53) Declaration of Forfeiture. If an event of default occurs and Rangeview terminates this Agreement or in the event of a termination pursuant to Section 14.5, Rangeview shall have the right, in connection with such termination, to enter onto the Lowry Range and any part thereof (subject to any existing licenses related to delivery of Export Water), and to expel Pure Cycle from the premises and those claiming through or under Pure Cycle pursuant to this Agreement, and remove the effects of both or either, without being deemed guilty of any manner of trespass and without prejudice to any other remedies. In the event of such termination, Pure Cycle shall surrender and peacefully deliver to Rangeview the above described land and the Non-Export Water, and such land as was in Pure Cycle's possession or control shall be returned to Rangeview in good condition (subject to any existing licenses related to the delivery of Export Water), and Rangeview shall be entitled to the return of all Non-Export Water, plus any interest of Pure Cycle in all infrastructure built to divert or withdraw and deliver the Non-Export Water and any interest in shared facilities for use with the Non-Export Water, plus the revenue stream associated with such Non-Export Water and the East Cherry Creek Agreement. Subject to the following sentence, title to such assets will be conveyed to Rangeview free and clear of all security interests, liens and encumbrances existing at the time of delivery to Rangeview. Notwithstanding the foregoing, Pure Cycle shall have the right to encumber the revenues it receives pursuant to this Agreement in connection with the construction and development of the Water System. Upon such termination, if Pure Cycle shall remain in possession of any part of the Lowry Range (subject to any existing licenses related to delivery of Export Water) or Non- Export Water, Pure Cycle shall be guilty of an unlawful detainer and shall be subject to eviction or removal, forcibly or otherwise, to the extent provided by law. (54) Pure Cycle Right of Termination. Pure Cycle may terminate this Agreement at any time without cause upon giving one year's prior written notice to Rangeview. During the one- year period, Pure Cycle shall continue to discharge all of its obligations under this Agreement and shall be entitled to the benefits of this Agreement, unless Rangeview and the Land Board, at their option, require Pure Cycle to discontinue providing services hereunder prior to the expiration of the one-year notice period. (55) Termination of Lease. If Rangeview's rights to the Non-Export Water are terminated under the Lease, this Agreement shall terminate. ARTICLE XV General Provisions (56) Assignment. Pure Cycle may assign its interest in this Agreement, but only upon terms expressly approved in writing by Rangeview, which approval may not be unreasonably withheld. Rangeview shall not be deemed to be unreasonable in withholding consent if it is unable to obtain the consent required from the Land Board pursuant to Section 9.1(a) of the Lease for such assignment. Any attempted assignment in contravention of this Section shall be null and void. Notwithstanding the foregoing, Pure Cycle may contract with third parties to perform portions of its obligations under this Agreement and such action on Pure Cycle's part shall not be deemed an assignment of its interest in this Agreement. (57) Third Party Beneficiaries. It is not the intent of the parties, nor shall it be the effect of this Agreement, to vest rights of any nature or form in individuals or entities not executing this Agreement as a party except to the extent that this Agreement specifically contemplates vesting rights in the Land Board. (58) Notice. All notices required by this Agreement shall be in writing and shall be delivered to the person to whom the notice is directed, in person, by courier service or by United States mail as a certified item, return receipt requested, addressed to the address stated below. Notices delivered in person or by courier service shall be deemed given when delivered to the person to whom the notice is directed. Notices delivered by mail shall be deemed given on the date of delivery as indicated on the return receipt. The parties may change the stated address by giving ten (10) days' written notice of such change pursuant to this Section. If to Rangeview: Rangeview Metropolitan District 141 Union Boulevard, Suite 150 Lakewood, Colorado 80228 Attention: President With copies to the Land Board when required by this Agreement: Board of Land Commissioners 620 Centennial Building 1313 Sherman Street Denver, Colorado 80203 Attention: President and Office of the Attorney General 1525 Sherman Street, Fifth Floor Denver, Colorado 80203 Attention: State Land Board Attorney If to Pure Cycle: Pure Cycle Corporation 5650 York Street Commerce City, Colorado 80022 Attention: President (59) Construction. Where required for proper interpretation, words in the singular shall include the plural, and the masculine gender shall include the neuter and the feminine, and vice versa, as is appropriate. The article and section headings are for convenience and are not a substantive portion of the Agreement. The Agreement shall be construed as if it were equally drafted in all aspects by all parties. (60) Entire Agreement. This Agreement, including the items referenced herein or to be attached in accordance with the provisions of this Agreement, constitutes the entire agreement among the parties pertaining to the subject matter of this Agreement and supersedes all prior and contemporaneous agreements and understandings of the parties as to the subject matter of this Agreement. No representation, warranty, covenant, agreement or condition not expressed in this Agreement shall be binding upon the parties or shall change or restrict the provisions of this Agreement. (61) Authority. Each of the parties represents and warrants that it has all requisite power, corporate and otherwise, to execute, deliver and perform its obligations pursuant to this Agreement, that the execution, delivery and performance of this Agreement and the documents to be executed and delivered pursuant to this Agreement have been duly authorized by it, and that upon execution and delivery, this Agreement and all documents to be executed and delivered pursuant to this Agreement will constitute its legal, valid and binding obligation, enforceable against it in accordance with their terms. (62) Copies. Numerous copies of this Agreement have been executed by the parties. Each such executed copy shall have the full force and effect of an original, executed Agreement. (63) Counterparts. This Agreement may be executed in one or more counterparts, all of which together shall constitute one and the same instrument. (64) Amendment. This Agreement shall not be amended except by a writing executed by both parties and, to the extent required by Section 9.1(a) of the Lease, no such amendment shall be made without the written consent of the Land Board, which consent shall not be unreasonably withheld. (65) Compliance with Law. Rangeview and Pure Cycle covenant and agree that during the continuance of this Agreement, they shall comply fully with all provisions, terms, and conditions of all laws whether state or federal, and orders issued thereunder, which may be in effect during the continuance hereof, which in any manner affect their operations and the Lowry Range and Non- Export Water. (66) Binding Effect. The benefits and terms and obligations of this Agreement shall extend to and be binding upon the successors or permitted assigns of the respective parties hereto. (67) Severability. If any clause or provision of this Agreement is illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, then, and in that event, it is the intention of the parties hereto that the remainder of this Agreement shall not be affected thereby. It is also agreed that in lieu of each clause or provision of this Agreement that is illegal, invalid or unenforceable, there shall be added as a part of this Agreement a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. (68) Duty of Good Faith and Fair Dealing; Regular Consultation. The parties acknowledge and agree that each party has a duty of good faith and fair dealing in its performance of this Agreement. Pure Cycle will advise Rangeview of its activities no less than annually until such time as Rangeview notifies Pure Cycle that production of Export Water and/or Non- Export Water has reached five hundred (500) acre feet in any calendar year and thereafter, quarterly during the term of this Agreement and will respond to reasonable requests of Rangeview for additional information on Pure Cycle's activities affecting the Lowry Range. (69) Further Assurance. Each of the parties hereto, at any time and from time to time, will execute and deliver such further instruments and take such further action as may reasonably be requested by the other party hereto, in order to cure any defects in the execution and delivery of, or to comply with or accomplish the covenants and agreements contained in this Agreement and/or any other agreements or documents related thereto. (70) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado and applicable federal law. (71) Arbitration. Any controversy or claim arising out of or relating to the computation of amounts due pursuant to Section 8.2 under this Agreement and all other controversies or claims which the parties have expressly agreed herein shall be submitted to arbitration or which relate to matters which the parties to the Lease have agreed shall be submitted to arbitration, shall be settled by arbitration administered by the American Arbitration Association in accordance with its commercial rules, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Rangeview and Pure Cycle agree that the Land Board may participate directly in any arbitration which affects the Land Board's rights and/or obligations with respect to the Non-Export Water; provided such Land Board agrees to be bound by the arbitration award to the same extent as Rangeview and Pure Cycle. (72) Litigation and Attorneys' Fees. Except as provided in Section 15.16 above, in the event of claims, disputes or other disagreements between the parties which the parties are not able to resolve amicably, either party may bring suit in a court of competent jurisdiction seeking resolution of the matter. The prevailing party in any arbitration or suit shall be entitled to recover its reasonable attorneys' fees and costs from the other party. (73) Force Majeure. Should either party be unable to perform any obligation required of it under this Agreement, other than the payment of money, because of any cause beyond its control (including, but not limited to war, insurrection, riot, civil commotion, shortages, strikes, lockout, fire, earthquake, calamity, windstorm, flood, material shortages, failure of any suppliers, freight handlers, transportation vendors or like activities, or any other force majeure), then such party's performance of any such obligation shall be suspended for such period as the party is unable to perform such obligation. IN WITNESS WHEREOF, the parties hereto have executed this Service Agreement on the date first written above. ATTEST: RANGEVIEW METROPOLITAN DISTRICT, ACTING BY AND THROUGH ITS WATER ACTIVITY ENTERPRISE By: By: Title: Title: ATTEST: PURE CYCLE CORPORATION By: By: Title: Title: EXHIBIT A TO DOCUMENT 10.2 ========================== Exhibit A RIGHT-OF-WAY , BOOK , PAGE THIS INDENTURE is made this day of , 19 , between Rangeview Metropolitan District, acting by and through its water activity enterprise ("Rangeview"), whose address is , and Pure Cycle Corporation, a Delaware corporation ("Pure Cycle"), whose address is 5650 York Street, Commerce City, Colorado 80022. WHEREAS, Rangeview and Pure Cycle entered into a Service Agreement effective _________________, 1996, pursuant to which Pure Cycle is to construct, operate and maintain a water system on Rangeview's behalf (the "Service Agreement"); WHEREAS, pursuant to the Service Agreement, Pure Cycle has applied to Rangeview for a right-of-way over, upon, under and across the surface of certain portions of land owned by Rangeview as hereinafter described, for the purpose of constructing, reconstructing, operating, repairing, removing and maintaining a ; and WHEREAS, Rangeview has agreed to grant such right-of- way for the purpose aforesaid and none other, upon the terms and conditions set forth herein. NOW, THEREFORE, Rangeview, in consideration of the premises and the sum of Dollard ($ ), paid to Rangeview, the receipt of which is hereby acknowledged, and in further consideration of the terms and conditions of the Service Agreement, does grant and convey to Pure Cycle, its successors and assigns, a non-exclusive right-of- way for the purpose of constructing, reconstructing, operating, and maintaining (describe scope and purpose) , upon, over, under and across the surface of those lands described as follows: [insert legal description here], (the "Premises"). Subject to the following conditions: 1. This grant is made with the understanding that Pure Cycle must begin construction of these facilities described above within five years from the date hereof, failing which this grant may be subject to cancellation of the unconstructed portions at the option of Rangeview. 2. In the event Rangeview should at any time desire to occupy or use or permit the occupancy or use of the Premises, which are subject to the right-of-way herein granted, or any portions thereof, for any purpose with which the aforesaid facilities would interfere, then Rangeview may require Pure Cycle to relocate, raise, lower, disconnect, or otherwise adjust the facilities described above at any location or locations where said facilities pass over and across the Premises after first, in each case, receiving not less than 180 days prior written notice from Rangeview. In such event, Pure Cycle shall be furnished a similar right-of-way to relocate, raise, lower, disconnect or otherwise adjust said facilities. The expense of said relocation, movement, or rebuilding shall be paid by Rangeview according to the Service Agreement. 3. This grant of right-of-way is made subject to any and all leases, easements, rights-of-way and other interests heretofore legally granted and now in full force and effect, if any there be. 4. Rangeview reserves the right to cultivate, use, develop, occupy, sell, lease or otherwise dispose of the Premises and to use the Premises for all purposes, including the issuance of additional rights to third parties, except as necessarily limited by the facilities described above; provided that Pure Cycle's rights to the Premises are not unreasonably impaired by the exercise of this right by Rangeview. 5. Rangeview reserves the right to require, at Pure Cycle's cost, the burial of any power lines and, to the extent reasonable, other facilities when, in Rangeview's discretion, development of the adjoining property or other circumstances warrant burial. Rangeview shall be given not less than 180 days written notice of such requirement. 6. This right-of-way is made for the sole and only purpose as herein set forth and no other and does not give Pure Cycle exclusive possession of any part of the land above described. If Pure Cycle or its successors, assigns or licensees shall at any time use or attempt to use the same for any other purpose whatsoever, then this right-of-way shall become void and of no effect, and any and all such rights and privileges herein granted shall revert to Rangeview, subject to any right to cure which may exist under the Service Agreement. 7. Pure Cycle shall have the right to trim trees and shrubbery upon this right-of-way only if such trees and shrubbery should interfere with or endanger the proper operation, construction and maintenance of said facilities. 8. Pure Cycle shall not transfer or assign this right-of-way except as permitted by the Service Agreement. 9. Pure Cycle shall provide drainage and erosion control structures, fences, gates, cattleguards, or any other facilities reasonably necessary to protect the Premises. 10. Pure Cycle shall not unreasonably fence or obstruct free and open access to and travel upon, over and across the Premises, without written authorization of Rangeview. 11. Pure Cycle shall have such rights of ingress and egress as may be necessary for the construction, reconstruction, operation, maintenance, and removal of said facilities, but shall not leave open, or permit to be left open, any fences, bars or gates not owned by Pure Cycle. All such fences, bars or gates which may be damaged or disturbed in any way shall be fully restored by Pure Cycle. 12. In the event that the facilities for which this right-of-way is granted are to be materially enlarged, replaced, relocated, or added to in the future, Pure Cycle shall advise Rangeview of such change and furnish surveys, plats, and a description of the proposed change to Rangeview. Any such changes and the consideration required therefor, shall be controlled by the Service Agreement. 13. The rights herein granted shall expire when the Service Agreement expires, or otherwise terminates, but no later than May 1, 2081. If the facilities are abandoned or discontinued, all rights hereunder shall automatically terminate. Normal non- use of the approved facility or facilities constructed that is consistent with the prudent operation of a municipal water delivery system shall not constitute abandonment of the facility. 14. Except as permitted by the Service Agreement, Pure Cycle may not remove its facilities or related improvements without the permission of Rangeview. 15. If this right-of-way is terminated for any cause whatsoever, Pure Cycle shall restore the Premises, as near as reasonably practicable, to their original condition, if requested to do so by Rangeview. 16. Pure Cycle agrees to assume all liability arising from the exercise of the right-of-way herein granted in accordance with the terms of the Service Agreement. 17. Upon completion of construction or reconstruction of the herein described facility, Pure Cycle agrees to restore the Premises surrounding the facility, as near as reasonably practicable, to its original condition, unless otherwise agreed to in writing by Rangeview. 18. Pure Cycle shall be responsible for and shall pay all taxes, fees, assessments and other charges, if any, in connection with its work, improvements, materials, or facilities to be utilized in accomplishing its activities pursuant to this grant of right- of-way. 19. This grant shall extend to and be binding upon the successors, licensees and assigns of the parties hereto, and the use of it shall be subject in all respect to the Service Agreement. Any conflict between this grant and the Service Agreement shall be governed by the terms of the Service Agreement. IN WITNESS WHEREOF, Rangeview Metropolitan District, acting by and through its water activity enterprise, has executed this grant, and has caused its seal to be hereunto affixed; and Pure Cycle Corporation has accepted this grant and affixed its corporate seal hereto, the day and year first above written. RANGEVIEW METROPOLITAN DISTRICT, acting by and through its water activity enterprise By: Title: PURE CYCLE CORPORATION By: Title: STATE OF COLORADO ) ) SS. COUNTY OF ) The foregoing grant of right-of-way was acknowledged before me this day of , 199_, by , as of Rangeview Metropolitan District, acting by and through its water activity enterprise. WITNESS my hand and official seal. My commission expires: . Notary Public [SEAL] STATE OF COLORADO ) ) SS. COUNTY OF ) The foregoing grant of right-of-way was acknowledged before me this day of , 199_, by , as of Pure Cycle Corporation, a Delaware corporation. WITNESS my hand and official seal. My commission expires: . Notary Public [SEAL] EX-10 5 ============= DOCUMENT 10.3 ============= AGREEMENT FOR SALE OF EXPORT WATER THIS AGREEMENT FOR SALE OF EXPORT WATER ("Agreement") is made and entered into as of the 11th day of April, 1996, by and among RANGEVIEW METROPOLITAN DISTRICT, a quasi-municipal corporation and political subdivision of the State of Colorado, acting by and through its water activity enterprise ("Rangeview"), and PURE CYCLE CORPORATION, a Delaware corporation ("Pure Cycle"). RECITALS (74) On November 14, 1990, Rangeview and Inco Securities Corporation ("Inco") entered into an Option Agreement for Sale and Operation of Production Right which was subsequently amended by Amendment Agreement No. 1 on February 12, 1991 and by a Rangeview board resolution in December 1993 (collectively, the "Option Agreement"). (75) Pursuant to the Option Agreement, Inco had the right to purchase certain water rights which were leased to Rangeview pursuant to a lease entered into between OAR Incorporated, a Colorado corporation ("OAR"), and the State of Colorado, acting by and through the State Board of Land Commissioners (the "Land Board"), denominated Lease Number S-37280, dated April 26, 1982 and amended at various subsequent times (the "Original Lease"). OAR transferred and assigned its rights and obligations under the Original Lease to Rangeview. (76) Inco has assigned its rights and obligations under the Option Agreement to Pure Cycle. (77) On October 28, 1994, a lawsuit entitled Apex Investment Fund II, L.P., et al. v. Colorado State Board of Land Commissioners, et al., Case No. 95CV5405, was filed in the District Court of the City and County of Denver (the "Lawsuit") to resolve certain rights under the Original Lease. (78) As part of the settlement of the Lawsuit, the Land Board and Rangeview have entered into an Amended and Restated Lease (the "Lease") which supersedes the Original Lease. A copy of this Agreement is attached to the Lease as Exhibit C. As part of the settlement of the Lawsuit, Pure Cycle, Inco and Rangeview have agreed to supersede the Option Agreement with this Agreement. AGREEMENT In consideration of the mutual promises, covenants, representations and warranties set forth herein, the existence and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 35. Certain Definitions (1) CFC Agreement. "CFC Agreement" shall mean the Amended and Restated Option and Purchase Agreement among the Land Board, H.F. Riebesell, Jr. ("Riebesell"), Pure Cycle and Inco, attached to the Settlement Agreement (as defined below) as Exhibit 6. (2) Comprehensive Amendment Agreement. "Comprehensive Amendment Agreement" shall mean the Comprehensive Amendment Agreement No. 1 among Pure Cycle, Inco, the Land Board and others, attached to the Settlement Agreement as Exhibit 8. (3) Effective Date. This Agreement shall be binding on the date that it is fully executed and delivered by both parties hereto subject only, as a condition subsequent, to the occurrence of the Effective Date (as that term is defined in the Settlement Agreement). (4) Export Water. "Export Water" shall have the meaning set forth in the Lease. (5) Export Water Purchaser. "Export Water Purchaser" shall have the meaning set forth in the Lease. (6) Lowry Range. "Lowry Range" shall mean have the meaning set forth in the Lease. (7) Memorandum. "Memorandum" shall mean the Memorandum of Agreement among Pure Cycle, OAR and Riebesell which is attached to the CFC Agreement as Exhibit C and to the OAR Agreement (as defined below) as Exhibit C. (8) OAR Agreement. "OAR Agreement" shall mean the Amended and Restated Option and Purchase Agreement among OAR, Pure Cycle and Inco attached to the Settlement Agreement as Exhibit 5. (9) Rangeview Bonds and Notes. "Rangeview Bonds and Notes" shall mean Rangeview Metropolitan District Water Revenue Bonds, Series 1988 M, in the principal amount of $17,771,000, Rangeview Metropolitan District Water Revenue Notes, Series 1987 A-L, in the principal amount of $5,000,000, and Rangeview Metropolitan District Water Revenue Notes, Series 1988 A-L, in the principal amount of $2,142,858. (10) Service Agreement. "Service Agreement" shall mean the agreement attached to the Lease as Exhibit B entitled Service Agreement pursuant to which Rangeview engages Pure Cycle to provide water service to Water Users, subject to the terms and conditions set forth in the Lease. (11) Settlement Agreement. "Settlement Agreement" shall mean the settlement agreement for the Lawsuit dated the date hereof to which the Lease is attached as Exhibit A. (12) Water Rights. "Water Rights" shall have the meaning set forth in the Lease. (13) Water Users. "Water Users" shall have the meaning set forth in the Lease. All capitalized terms used herein and not otherwise defined herein shall have the meaning set forth in the Lease. 36. Export Water Purchase and Sale (1) Export Water Purchase and Sale. Subject to the terms and conditions set forth in this Agreement and subject to rights of first refusal, if any such rights exist, to the Export Water (as defined below) which may be held by Arapahoe County or East Cherry Creek Valley Water and Sanitation District ("ECCV"), Rangeview hereby agrees to sell, convey, assign, transfer, and deliver to Pure Cycle, and Pure Cycle hereby agrees to purchase from Rangeview as of the Effective Date, the right to divert and sell outside the Lowry Range the use of up to a total gross volume of 1,165,000 acre feet of Export Water included in the Water Rights. The Export Water to be conveyed pursuant to this Agreement shall include all rights afforded to and be subject to all obligations imposed upon such Export Water under the Lease and the Deed (as defined in Section 3.2(a)). The parties are specifically not acknowledging the validity of any rights of first refusal in the Export Water which may be asserted by Arapahoe County and ECCV. (2) Title. Rangeview hereby represents and warrants that it has the right to sell the Export Water, subject to the terms of the Lease, and the Export Water is free and clear of all security interests, liens, pledges, charges and encumbrances granted by Rangeview. (3) Purchase Price. In exchange for the Export Water and the rights granted to Pure Cycle hereunder and under the Service Agreement, Pure Cycle hereby agrees to convey, assign, transfer and deliver, as of the Effective Date, the Rangeview Bonds and Notes to Rangeview for retirement in accordance with the Settlement Agreement. 37. Closing (1) Closing. The closing hereunder (the "Closing") shall be held at a mutually agreeable time, date and place which is coincident with the date the Settlement Agreement is executed. It shall be a condition precedent to the Closing that the following documents shall have been executed and delivered by all parties thereto: 1. the Settlement Agreement; 2. the Lease; 3. the OAR Agreement; 4. the CFC Agreement; 5. the Comprehensive Amendment Agreement; and 6. the Memorandum. (2) Closing Documents. At the Closing, the following items (collectively the "Closing Documents") shall be delivered to Davis, Graham & Stubbs LLP ("DGS"), to be held in trust for distribution on the Effective Date: 1. This Agreement and the Service Agreement shall be executed and delivered by both parties. 2. All Rangeview Bonds and Notes not currently being held by Colorado National Bank ("CNB") pursuant to the Escrow Agreement among CNB, Inco, OAR, Colorado Water Consultants, Incorporated ("CWC"), and others dated August 12, 1991 (the "Escrow Agreement"), shall be delivered by Pure Cycle along with an assignment of such Bonds and Notes in the form attached hereto as Exhibit A (the "Bond Assignment"). 3. A deed in the form attached hereto as Exhibit B (the "Deed") executed by the Land Board and Rangeview conveying the Export Water to Pure Cycle shall be delivered by Rangeview. 4. A title opinion from a law firm reasonably acceptable to Pure Cycle, substantially in the form attached hereto as Exhibit C, verifying that Rangeview and the Land Board have good and marketable title to the Export Water (the "Title Opinion") shall be delivered by Rangeview. 5. Three original mortgages in the form attached to the CWC Agreement as Exhibit E (the "Mortgage") granting a mortgage in favor of the Land Board shall be executed and delivered by Pure Cycle. (3) Delivery. 1. On the Effective Date, DGS shall deliver the Closing Documents as follows: a. An executed original of this Agreement and the Service Agreement shall be delivered to each of Pure Cycle and Rangeview. delivered to Rangeview. c. The Title Opinion and the Deed shall be delivered to Pure Cycle. d. The Deed and the Mortgage shall be delivered to the clerk and recorder's office of Arapahoe County and to the Colorado Department of Natural Resources-State Engineer Division of Water Resources for recording and the third original Mortgage shall be filed with the Secretary of State's Office in the Uniform Commercial Code records. In addition, DGS shall deliver the documents and consideration described in Section 3.3 of each of the OAR Agreement and the CFC Agreement. 2. If the Settlement Agreement is terminated, DGS shall return the Bond Assignment to Pure Cycle and the Rangeview Bonds and Notes delivered by Pure Cycle pursuant to Section 3.2(b) to Pure Cycle, or, if applicable, to the person who delivered such bonds and notes to Pure Cycle pursuant to the Settlement Agreement, and DGS shall destroy all other Closing Documents. 38. Royalties As between Rangeview and Pure Cycle, Pure Cycle shall be responsible for and shall timely pay directly to the Land Board all royalties payable to the Land Board by the Export Water Contractor pursuant to the Lease. Notwithstanding the foregoing, Rangeview may, at its option, pay to the Land Board any royalties due but not paid by Pure Cycle on the Export Water in order to prevent a default under the Lease. In such case, Rangeview shall be entitled to interest on any royalties paid by Rangeview on the Export Water at the rate of two percent (2%) per month from the date paid by Rangeview and Rangeview may exercise any other remedies it may have, including its termination rights under Section 6.6 of the Lease. 39. Representations and Warranties (1) Authority. Each of the parties represents and warrants that it has all requisite power, corporate and otherwise, to execute, deliver and perform its obligations pursuant to this Agreement, that the execution, delivery and performance of this Agreement and the documents to be executed and delivered pursuant to this Agreement have been duly authorized by it, and that upon execution and delivery, this Agreement and all documents to be executed and delivered pursuant to this Agreement will constitute its legal, valid and binding obligation, enforceable against it in accordance with their terms. Except as otherwise described in this Agreement, the execution, delivery and performance of this Agreement do not and will not require any further consent of any person or entity other than those from which the parties have, prior to the Closing, acquired consents and approvals. Each party hereto shall provide the other party prior to the Closing with any corporate, district or other documents reasonably required to verify this representation. (2) Compliance with Other Laws and Agreements. To the best of its knowledge, Rangeview represents and warrants that the execution, delivery and performance of this Agreement by Rangeview (a) is of the type contemplated by law and is within the authority of Rangeview under existing laws governing Rangeview; (b) will not violate any provision of law; (c) will not, with or without the giving of notice or the passage of time, conflict with or result in any breach of any of the terms or conditions of, or constitute a default under, the organizational documents, bylaws, rules and regulations, or other contracts or obligations of Rangeview; or (d) will not conflict with, violate, result in a breach of, constitute a default under, result in an acceleration, termination, cancellation or forfeiture of, or give rise to a right of power in any third party to declare any of the foregoing under, any mortgage, lease, agreement, indebtedness, or other instrument, order, judgment or decree to which Rangeview is a party or by which Rangeview or its assets are bound. Rangeview further represents and warrants that the execution, delivery and performance of this Agreement will not result in the creation of any security interest, lien, pledge, charge, claim or encumbrance upon its assets except as expressly set forth herein. (3) Litigation. To the best of its knowledge and except as disclosed to Pure Cycle and acknowledged by Pure Cycle's attorneys, Rangeview represents and warrants that except for the Lawsuit, there are no outstanding judgments, actions, suits, proceedings, orders or investigations against it and there is no litigation, action, suit, proceeding or investigation pending or threatened, or, to its knowledge, contemplated against or affecting Rangeview which individually or in the aggregate might materially and adversely affect the actions contemplated herein, or which questions the validity of any action taken or to be taken pursuant to or in connection with the provision of this Agreement, and Rangeview has no reason to believe any of the foregoing are threatened or contemplated. (4) Representations Accurate. Rangeview and Pure Cycle represent and warrant that all statements, including the Recitals, contained in this Agreement and in any certificate, schedule, exhibit, or other instrument given or to be given to Pure Cycle by Rangeview or to Rangeview by Pure Cycle in or pursuant to this Agreement are or will be true, accurate and complete in all material respects, and no certificate, schedule, exhibit, or other instrument given or to be given to Pure Cycle by Rangeview or to Rangeview by Pure Cycle pursuant hereto contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. (5) Brokerage. Each party hereto represents and warrants to the other party that it has not incurred any obligations or liabilities, contingent or otherwise, for brokerage or finder's fees or agent's commissions or other like payment in connection with this Agreement or the transactions contemplated hereby for which any party will have any liability. (6) Review. Rangeview hereby represents and warrants that it shall give Pure Cycle the opportunity to review all documents pertinent to this Agreement in its possession prior to the Closing hereunder. (7) Quantity of Water. To Rangeview's knowledge, based upon the decrees, Rangeview hereby represents and warrants that the amount of water purchased is available for itle Opinion EXHIBIT A OF DOCUMENT 10.3 ========================== ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, transfers and assigns unto Rangeview Metropolitan District $17,771,000 of Rangeview Metropolitan District Water Revenue Bonds, Series 1988 M, and all rights thereunder and hereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: April ___, 1996 PURE CYCLE CORPORATION, a Delaware corporation Insert Social Security number By: or other Thomas P. Clark, President identifying number of assignee NOTE: The signature to this assignment must correspond with the name as it appears on the face of this Bond in every particular, without alteration or any change whatsoever. Signature Guaranteed By: EXHIBIT B OF DOCUMENT 10.3 ========================= BARGAIN AND SALE DEED This Bargain and Sale Deed (the "Deed") is dated the 11th day of April, 1996, among the State of Colorado, acting by and through the State Board of Land Commissioners (the "Land Board"), whose address is 620 Centennial Building, 1313 Sherman Street, Denver, Colorado 80203, and Rangeview Metropolitan District, a quasi-municipal corporation and political subdivision of the State of Colorado, acting by and through its water activity enterprise ("Rangeview"), whose address is 141 Union Boulevard, Suite 150, Lakewood, Colorado 80228 (Rangeview and Land Board being collectively referred to herein as "Grantors"), and Pure Cycle Corporation, a Delaware corporation ("Grantee"), whose address is 5650 York Street, Commerce City, Colorado 80022. WITNESSETH, that Rangeview, for and in consideration of delivery from Pure Cycle to Rangeview of Rangeview Metropolitan District Water Revenue Bonds, Series 1988M, Rangeview Metropolitan District Water Revenue Notes, Series 1988A-L, Rangeview Metropolitan District Water Revenue Notes, Series 1987A-L, and other good and valuable consideration, the receipt of which is hereby acknowledged by Rangeview; and the Land Board, for and in consideration of (a) Rangeview's agreement to obtain and extinguish all said notes and bonds, (b) other consideration contained in the Amended and Restated Lease Agreement No. S-37280, dated April 11, 1996 between Rangeview and the Land Board, which Lease is recorded with the Arapahoe County Clerk and Recorder at Book No. _______, Page No. _______ (Reception No. _________) (the "Lease"), and (c) other good and valuable consideration, the receipt of which is hereby acknowledged by the Land Board; do hereby severally grant, bargain, sell, convey, assign and confirm unto Grantee, its successors and assigns forever, the Export Water (as that term is defined in the Lease) which is located on and under that certain real property consisting of approximately 24,567.21 acres, more or less, according to U.S. Government survey, in Arapahoe County, Colorado, more particularly described as follows (the "Lowry Range"): Township 5 South, Range 64 West of the 6th P.M., Sections 7 through 10: all; Sections 15 through 22: all; Sections 27 through 34: all. Township 4 South, Range 65 West of the 6th P.M., Sections 33: all and 34: all. Township 5 South, Range 65 West of the 6th P.M., Section 3: all; Sections 10 through 15: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 15; Sections 22 through 27: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 22; Sections 35 and 36: all; Section 34: north 2,183.19 feet. Township 5 South, Range 66 West of the 6th P.M., Section 36: all (a street address of the Lowry Range does not exist); TOGETHER WITH all rights afforded to the Export Water under the Lease; SUBJECT TO the reservations, exceptions, terms, and conditions, including, without limitation, provisions concerning royalty payments, quality of water, abandonment, shared use of transmission lines and facilities, default and termination of rights to Export Water, set forth in the Lease, which reservations, exceptions terms and conditions, and the rights of the Land Board and Rangeview with respect thereto, shall not be modified or superseded by any provision in this Deed, it being understood and agreed that the provisions hereof are merely cumulative of the provisions of the Lease; FURTHER SUBJECT TO rights of first refusal, if any such rights exist, to the Export Water which may be held by the County of Arapahoe, Colorado, or East Cherry Creek Valley Water and Sanitation District; AND SUBJECT FURTHER TO the covenants, conditions and restrictions set forth herein and in the water decrees by which such water is adjudicated, which decrees shall remain in the name of the Land Board subject to the provisions of the Lease; TO HAVE AND TO HOLD the Export Water, and its appurtenances, unto Grantee, its successors and assigns forever. 40. Decrees Rangeview represents that the following water decrees currently adjudicate the water rights of which the Export Water is a part: Case Nos. 83CW330, 83CW373, 89CW048, and 89CW164, District Court, Water Division 1, and plan for augmentation to allow use of not nontributary Denver aquifer groundwater as pending in Case No. 94CW048, and application to change decreed well locations as pending in Case No. 94CW049, District Court, Water Division 1. 41. Royalties and Reporting (1) Payment to Land Board. As between Rangeview and Grantee, Grantee shall be responsible for and shall timely pay directly to the Land Board all royalties payable to the Land Board by the Export Water Purchaser (as that term is defined in the Lease) pursuant to the Lease. Notwithstanding the foregoing, Rangeview may, at its option, pay to the Land Board any royalties due but not paid by Grantee on the Export Water in order to prevent a default under the Lease. In such case, Rangeview shall be entitled to interest on any royalties paid by Rangeview on the Export Water at the rate of two percent (2%) per month from the date paid by Rangeview and Rangeview may exercise any other remedies it may have, including its termination rights under Section 6.6 of the Lease. (2) Reporting. In addition to any requirements under the Lease, Grantee shall prepare the following reports: 1. Grantee shall report to Rangeview the quantity of Export Water delivered (including any recharged or stored water pursuant to Section 6.2(a) of the Lease), the exact amount of Gross Revenues or, if applicable, Retail Sales Price (as those terms are defined in the Lease) relating to the sale or other disposition of Export Water, and the entity to whom the Export Water was delivered. The report shall be due within twenty (20) days after the end of each calendar year, until such time as Rangeview notifies Grantee that production of Export Water and Non-Export Water (as defined in the Lease) has reached 500 acre feet in a calendar year, and thereafter, on or before the twentieth (20th) day following the end of each calendar quarter during the term of the Lease. 2. Grantee shall prepare and keep full, complete, and proper books, records and accounts of all Export Water (including any recharged or stored water pursuant to Section 6.2(a) of the Lease) sales or dispositions and shall document such transactions as may be required by law. Said books, records, and accounts of Grantee shall be open at all reasonable times, upon ten (10) days' prior written notice, to the inspection of Rangeview, the Land Board and their respective representatives who may, at Rangeview's or the Land Board's expense, as applicable, copy or extract all or a portion of said books, records, and accounts for a period of up to five (5) years after the date such books, records and accounts are made. The Land Board's right to inspection shall not prejudice the Land Board's right to collect payments due pursuant to the Lease. Rangeview or the Land Board may, upon no less than fourteen (14) days' prior written notice to Grantee, cause a partial or complete audit of the entire records and operations of Grantee for a five (5) year period preceding the date of the audit relating to the use of Export Water pursuant to this Deed to be made at Rangeview's or the Land Board's expense, as applicable, by an auditor selected by Rangeview or the Land Board, as applicable. Within fourteen (14) days following Rangeview's or the Land Board's notice, as applicable, Grantee shall make available to Rangeview's or the Land Board's auditor, as applicable, the books and records the auditor reasonably deems necessary or desirable for the purpose of making the audit. Any deficiency in the payment of royalties determined upon such audit shall be immediately due and payable to the Land Board, together with interest thereon at the rate of two percent (2%) per month from the date or dates such amounts should have been paid. If such deficiency is in excess of two percent (2%) of the royalty previously paid, then Grantee shall pay to the auditing party the actual cost of the audit at the time the deficiency is paid. 42. General Provisions (1) Notice. All notices required by this Deed or the Lease shall be in writing and shall be delivered to the person to whom the notice is directed at the address set forth below, either in person, by courier service or by United States mail as a certified item, return receipt requested, addressed to the address stated below. Notices delivered in person or by courier service shall be deemed given when delivered to the person to whom the notice is directed. Notices delivered by mail shall be deemed given on the date of delivery as indicated on the return receipt. The parties may change the stated address by giving ten (10) days' written notice of such change pursuant to this Section. If to Rangeview: Rangeview Metropolitan District 141 Union Boulevard, Suite 150 Lakewood, Colorado 80228 Attention: President If to the Land Board: Board of Land Commissioners Attention: President 620 Centennial Building 1313 Sherman Street Denver, Colorado 80203 and Office of the Attorney General Attention: State Land Board Attorney 1525 Sherman Street, Fifth Floor Denver, Colorado 80203 If to Grantee: Pure Cycle Corporation 5650 York Street Commerce City, Colorado 80022 Attention: President (2) Construction. Where required for proper interpretation, words in the singular shall include the plural, and the masculine gender shall include the neuter and the feminine, and vice versa, as is appropriate. The article and section headings are for convenience and are not a substantive portion of this Deed. This Deed shall be construed as if it were equally drafted in all aspects by all parties. All capitalized terms herein not otherwise defined shall have the same meaning as provided with respect to such terms in the Lease. (3) Severability. If any clause or provision of this Deed is illegal, invalid or unenforceable under present or future laws, then, and in that event, it is the intention of the parties hereto that the remainder of this Deed shall not be affected thereby. It is also agreed that in lieu of each clause or provision of this Deed that is illegal, invalid or unenforceable, there shall be added as a part of this Deed a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. (4) Governing Law. This Deed shall be governed by and construed in accordance with the laws of the State of Colorado and applicable federal law. (5) No Oral Amendment or Modifications. No amendments, waivers or modifications of the terms and provisions contained in this Deed, and no acceptances, consents or waivers by the Land Board or Rangeview under this Deed, shall be valid or binding unless in writing and executed by the party to be bound thereby. Any covenant, condition or restriction contained in this Deed may be terminated, extended, modified or amended, as to the whole of the Export Water or any portion thereof, only by the written consent of the Land Board and Rangeview. No such termination, extension, modification or amendment shall be effective unless and until a proper instrument in writing has been executed and recorded in the records of the Clerk and Recorder of Arapahoe County. (6) Binding Effect. This Deed shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The covenants, conditions, and restrictions contained in this Deed and, where applicable, the Lease, shall be construed as covenants running with the Export Water, and every person who now or hereafter owns or acquires any right, title, estate or interest in or to the Export Water is and shall be conclusively deemed to have consented and to have agreed to every covenant, condition, and restriction contained in this Deed and, where applicable, the Lease, whether or not any reference to such covenant, condition, or restriction is contained in the instrument by which such person acquires an interest in the Export Water. IN WITNESS WHEREOF, the Land Board has caused this Deed to be executed by the State Board of Land Commissioners and sealed with the official seal of the Land Board. Rangeview has similarly executed this Deed this _____ day of April, 1996. STATE OF COLORADO STATE BOARD OF LAND COMMISSIONERS Maxine F. Stewart, President APPROVED AS TO FORM: GALE A. NORTON, Attorney General STEPHEN K. ERKENBRACK, Chief Deputy Attorney General TIMOTHY M. TYMKOVICH, Solicitor General Richard A. Westfall Special Deputy Solicitor General State of Colorado RANGEVIEW METROPOLITAN DISTRICT, ACTING BY AND THROUGH ITS WATER ACTIVITY ENTERPRISE ATTEST: By: By: Title: Title: STATE OF COLORADO ) ) ss. COUNTY OF ______________ ) The foregoing instrument was acknowledged before me this _____ day of April, 1996 by Maxine F. Stewart, as President, of the State of Colorado, State Board of Land Commissioners. Witness my hand and official seal. My commission expires: Notary Public STATE OF COLORADO ) ) ss. COUNTY OF ______________ ) The foregoing instrument was acknowledged before me this _____ day of April, 1996 by ____________________, as President, and by ____________________, as Secretary, of Rangeview Metropolitan District. Witness my hand and official seal. My commission expires: Notary Public EXHIBIT C OF DOCUMENT 10.3 ========================== Exhibit C April 22, 1996 Board of Directors Rangeview Metropolitan District 141 Union Boulevard, Suite 150 Lakewood, Colorado 80228-1556 Ladies and Gentlemen: At your request, we have examined title to water rights underlying certain property in Arapahoe County, Colorado, as described in Exhibit A hereto (hereinafter the "Subject Property"). This opinion is provided pursuant to paragraph 3.2 of that certain Agreement for Sale of Export Water, between Rangeview Metropolitan District, acting by and through its water activity enterprise, and Pure Cycle Corporation, a Delaware corporation, dated April , 1996. Pursuant to that agreement, Rangeview Metropolitan District is to convey to Pure Cycle Corporation, the right to divert and sell outside the Subject Property the use of up to a total gross volume of 1,165,000 acre- feet of the non-tributary and not non-tributary water included in the Water Rights known as the Export Water. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Lease (as defined in paragraph (c) below). DOCUMENTS REVIEWED Our opinion is based on the review of the following materials: (a) Arapahoe County Clerk and Recorder's Grantor/Grantee Index beginning January 1, 1937 through April 22, 1996. (b) Records at the office of the State Engineer. (c) Amended and Restated Lease Agreement between the State of Colorado, acting by and through the State Board of Land Commissioners, Lessor, and Rangeview Metropolitan District, acting by and through its water activity enterprise, Lessee, dated April, 1996, (the "Lease") and Agreement for Sale of Export Water described above. (d) Findings of Fact, Conclusions of Law and decree of the Water Court entered in Case No. 83CW330 by the District Court, Water Division No. 1 on June 28, 1985. (e) Findings of Fact, Conclusions of Law and Judgment and Decree entered in Case No. 83CW373 by the District Court, Water Division No. 1, on September 1, 1987. (f) Findings of Fact, Conclusions of Law and Judgment and Decree entered in Case No. 89CW048 by the District Court, Water Division No. 1, on April 16, 1993. (g) Findings of Fact, Conclusions of Law and Judgment and Decree entered in Case No. 89CW164 by the District Court, Water Division No. 1, on November 3, 1995. (h) District Court, Water Division No. 1, records for the cases described above. CONCLUSIONS The Colorado Supreme Court has adopted the following definition of "marketable title:" The term "marketable title," when applied to real estate, means a title free from reasonable doubt . . .. It means a title that is reasonably free from such doubts as will affect the market value of the estate; one which a reasonably prudent person with knowledge of all the facts and their legal bearing would be willing to accept. Morley v. Gieseker, 142 Colo. 490, 351 P.2d 392, 393 (1960); White v. Evans, 120 Colo. 200, 208 P.2d 922, 926 (1949); Federal Farm Mortgage Corp. v. Schmidt, 109 Colo. 467, 126 P.2d 1036, 1038 (1942). "The title must be such as to make it reasonably certain that it will not be called into question in the future so as to subject the purchaser to the hazard of litigation with reference thereto." Morley, 351 P.2d at 393; White, 208 P.2d at 926 (quoting Simpson v. Klipstein, 89 N.J. Eq. 543, 105 A. 218, 219 (1918)). Based on our review of the documents described above, as of April 22, 1996, it is our opinion that Rangeview Metropolitan District, as Lessee, and the State of Colorado, acting by and through the State Board of Land Commissioners, as owner of the Subject Property and Lessor, have good and marketable title to the Export Water as described in the Agreement for Sale of Export Water, subject to the validity of and the terms and conditions contained in the following: (a) Lease No. S-37280 granted by the State of Colorado, acting by and through its State Board of Land Commissioners to OAR, Incorporated, dated April 26, 1982, and amendments thereto dated February 22, 1983, December 19, 1983, and November 26, 1984, and recorded at Book 5059, Page 261; Book 5059, Page 267; Book 5059, Page 268 and Book 5059, Page 273, and amendment dated June 6, 1986. (b) The Consent Judgment entered by the District Court of the City and County of Denver in Apex Investment Fund II, L.P., et al. v. Colorado State Board of Land Commissioners, et al., as filed in the District Court of the City and County of Denver in Case No. 95CV5405. (c) The Lease. (d) Agreement for Sale of Export Water, between Rangeview Metropolitan District and Pure Cycle Corporation, a Delaware corporation dated June 11, l988. (e) Right of first refusal, if any, of East Cherry Creek Valley Water and Sanitation District to any part of the Export Water. This letter does not include analysis or opinions with respect to the physical availability or quality of the Export Water. Very truly yours, HOLLY I. HOLDER, P.C. EXHIBIT D OF DOCUMENT 10.3 ========================== Exhibit D Aquifers Exhibit D Aquifers Arapahoe Dawson Denver Laramie Fox-Hills EX-10 6 ============= DOCUMENT 10.4 ============= AMENDED AND RESTATED OPTION AND PURCHASE AGREEMENT This Amended and Restated Option and Purchase Agreement (this "Agreement") is made and entered into as of the 11th day of April, 1996, by and among OAR, Incorporated, a Colorado corporation ("Seller"), Pure Cycle Corporation, a Delaware corporation ("Buyer"), and INCO Securities Corporation ("INCO"). RECITALS 43. On November 8, 1990, Seller and INCO entered into an Option and Purchase Agreement which was subsequently amended by Amendment Agreement No. 1 on February 12, 1991 and by Amendment Agreement No. 2 on August 12, 1992 (collectively, the "Original Agreement"). 44. On October 28, 1994, a lawsuit entitled Apex Investment Fund II, L.P., et al. v. Colorado State Board of Land Commissioners, et al., Case No. 95CV5405, was filed in the District Court of the City and County of Denver (the "Lawsuit"). The counterclaims in the Lawsuit question the validity of the OAR Bonds and Notes (as defined in Section 1.1). 45. On the date hereof, INCO assigned all of its rights and obligations under the Original Agreement to Buyer. 46. The parties desire to amend and restate the Original Agreement to facilitate settlement of the Lawsuit. AGREEMENT In consideration of the mutual promises, covenants, representations and warranties set forth herein, the existence and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows: 47. DEFINITIONS AND PRIOR CLOSINGS (1) "OAR Bonds" consist of Water Revenue Bonds, Series 1988 M, issued by the Rangeview Metropolitan District, a quasi- municipal corporation and political subdivision of the State of Colorado (the "District"), dated December 7, 1988, in the principal amount of $12,439,840. The "OAR Notes" consist of Water Revenue Notes, Series 1987 A-L, issued by Lowry Range Metropolitan District (now the District) on August 3, 1987 in the original aggregate principal amount of $5,000,000. The "OAR Second Closing Assets" are a portion of the OAR Bonds with a face value of $1,046,390. The "OAR Interim Closing Assets" are a portion of the OAR Bonds with a face value of $2,124,490. The "August 12, 1992 Closing Assets" are a portion of the OAR Bonds with a face value of $3,640,000. (2) The parties agree that an option to purchase the OAR Bonds and the OAR Notes (the "Option") was acquired on November 8, 1990 by payment of an option payment in accordance with the Original Agreement, that the OAR Second Closing Assets were purchased in accordance with the Original Agreement on February 12, 1991, that the OAR Interim Closing Assets were purchased in accordance with the Original Agreement on August 13, 1991, and that the August 12, 1992 Closing Assets were purchased in accordance with the Original Agreement on August 12, 1992. On August 12, 1992, the option extension fee required by the Original Agreement was also paid and Seller extended until on or before August 12, 2007 the Option to purchase all or any portion of the remaining OAR Bonds with a collective face value of $5,628,960 and the remaining OAR Notes with a collective face value of $5,000,000 (the "OAR Closing Assets"), at a price of $5,658,800, plus 9% per annum from August 12, 1992 to the date of the purchase. In light of the foregoing, the parties acknowledge that all references to events related to the closings of the purchase of the Option, the Second Closing Assets, the Interim Closing Assets, and the August 12, 1992 Closing Assets have been deleted in this Agreement. (3) This Agreement amends and restates the Original Agreement with respect to remaining performance rights and obligations, but does not supersede the Original Agreement to the extent that the Original Agreement governed the prior closings hereunder or contained provisions which were intended to survive through or beyond the purchase of the OAR Closing Assets. (4) Subject to the terms and conditions set forth in this Agreement, Seller agrees to sell Buyer the OAR Closing Assets for the Closing Consideration set forth in Article 2. 49. PURCHASE PRICE At the Closing (as defined in Section 3.1), Buyer and Seller shall enter into the agreement attached hereto as Exhibit A entitled Comprehensive Amendment Agreement No. 1 pursuant to which the Buyer grants Seller a right to a portion of the proceeds from the sale of certain water rights (the "Closing Consideration") which right shall represent the consideration for the OAR Closing Assets. In addition, the parties shall enter into the Second Amended and Restated Closing Escrow Instructions attached hereto as Exhibit B (the "Amended Escrow Instructions") which shall supersede and replace the Escrow Instructions entered into pursuant to the Original Agreement. Buyer shall also sign an agreement in the form of Schedule 3 to the Amended Escrow Instructions to assume the fees and expenses of the Escrow Agent (as defined in the Amended Escrow Instructions). Buyer and Seller shall also enter into a Memorandum of Agreement in the form attached hereto as Exhibit C (the "MOA") which is to be recorded in the real property records of Arapahoe County and the records of the Colorado Department of Natural Resources State Engineer, Division of Water Resources, regarding Seller's rights in the Closing Consideration and a release of the MOA in the form attached hereto as Exhibit D (the "Termination"). 50. CLOSING (1) The closing (the "Closing") hereunder shall be held on a mutually agreeable time and date which is coincident with the date the settlement agreement for the Lawsuit, to which this Agreement is attached as Exhibit 5, is executed (the "Settlement Agreement"). (2) The Closing shall be held in the offices of Davis, Graham & Stubbs LLP ("DGS") at 370 17th Street, Suite 4700, Denver, Colorado 80202, or at such other place as the parties shall mutually agree. (3) This Agreement, the Closing Consideration, the Amended Escrow Instructions and all other documents delivered in connection with the Closing shall be held in trust by DGS for distribution on the Effective Date (as defined in the Settlement Agreement). On the Effective Date, DGS shall deliver (i) the Amended Escrow Instructions to the Escrow Agent along with the letter required by the Amended Escrow Instructions from DGS to authorize release of the OAR Closing Assets to the District on Buyer's behalf, (ii) the Closing Consideration to Seller, (iii) the MOA to the clerk and recorder's office of Arapahoe County, Colorado and the Colorado Department of Natural Resources State Engineer, Division of Water Resources, for recordation, (iv) the Termination to Hopper and Kanouff, a professional corporation ("H and K"), c/o Ward E. Terry, Jr., Seller's counsel, and (v) a set of original closing documents to each party. H and K agrees to deliver the Termination (or partial terminations provided pursuant to Section 8.7, if applicable) to DGS in exchange for the payments to Seller required under Section 2.1(a) of the Closing Consideration. If the Settlement Agreement is terminated, DGS shall destroy all documents delivered at the Closing and this Agreement, except for the obligations of DGS hereunder, shall be null and void ab initio and shall have no force and effect. 51. SELLER'S REPRESENTATIONS AND COVENANTS (1) Seller represents and warrants that it has good and marketable title to the OAR Closing Assets, free and clear of all security interests, liens, pledges, charges, claims, and encumbrances, other than the terms and conditions of that certain Indenture of Mortgage and Trust between the District and Central Bank of Denver dated December 7, 1988 (the "Trust Indenture"), a copy of which was attached as Exhibit F to the Original Agreement. (2) Seller represents and warrants that (a) it is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado and (b) it has all requisite corporate power and authority to own and operate its properties and to carry on its business as and where now being conducted. (3) Seller represents and warrants that (a) all necessary consents and approvals have been obtained by it for the execution and delivery of this Agreement; (b) the execution and delivery of this Agreement by Seller has been duly and validly authorized and approved by all necessary corporate action of Seller, including all required resolutions of its board of directors and shareholders; and (c) this Agreement is a valid and binding obligation of Seller, enforceable against it in accordance with its terms. (4) Seller represents and warrants that it has duly and timely paid all taxes, assessments, governmental charges and penalties due and payable by it, and there are no suits, actions, claims, investigations, inquiries or proceedings pending or threatened, or to its knowledge, contemplated against such Seller in respect of any taxes, assessments, governmental charges or penalties. 52. BUYER'S REPRESENTATIONS AND COVENANTS (1) Buyer represents that it is acquiring the OAR Closing Assets for its own account without view to the distribution of any portion thereof, except for the transfer of the OAR Closing Assets to the District in compliance with the terms of the Settlement Agreement for cancellation, and that Buyer has no present intention of selling or otherwise disposing of any portion thereof in any transaction which would be in violation of any federal or state securities law. (2) Buyer represents that (a) it is aware that no federal or state agency has made any finding or determination as to the fairness of this investment, nor any recommendation or endorsement with respect to this investment; (b) Buyer, by virtue of its own investment acumen and business experience is, or together with its advisor is, capable of evaluating the hazards and merits of participating in this investment; (c) Buyer can bear the economic risk of this investment; and (d) Buyer warrants that it was not organized or reorganized for the specific purpose of acquiring the OAR Closing Assets. (3) Buyer understands that the OAR Closing Assets have not been registered under the Securities Act of 1933, as amended (the "Act"), or any state securities laws. Buyer agrees that it will not sell the OAR Closing Assets unless such assets subsequently are registered under the Act and any applicable state securities laws or exemptions from such registration requirements are available. (4) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has all requisite corporate power and authority to own and operate its properties and to carry on its business as now being conducted. (5) Buyer represents and warrants that the execution and delivery of this Agreement by Buyer has been duly and validly authorized and approved by all necessary corporate action of Buyer, including appropriate resolutions of the board of directors of Buyer, and that this Agreement is a valid and binding obligation of Buyer, enforceable against it in accordance with its terms. 53. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS TO CLOSE The obligations of Buyer under this Agreement with respect to the purchase and sale of the OAR Closing Assets shall be subject to the fulfillment on or prior to the date of the Closing of each of the following conditions: 1. All of the representations and warranties by Seller contained in this Agreement shall be true and correct at and as of the date of the Closing as if restated on and as of such date. Seller shall have complied with and performed all of the agreements, covenants and conditions required by this Agreement to be performed or complied with by it on or prior to the date of the Closing. 2. Seller shall have delivered to Buyer a copy of a certificate as to the due incorporation and good standing of Seller in Colorado certified as of a recent date by the appropriate governmental authority. 3. The Settlement Agreement shall have been executed and delivered by all parties thereto. 4. There shall not have been instituted by any creditor of the Seller or other third party any suit or proceeding to restrain or invalidate this transaction or the transactions contemplated by the Amended and Restated Option and Purchase Agreement entered into among Buyer, the State of Colorado State Board of Land Commissioners and H.F. Riebesell, Jr., and INCO (the "CFC Agreement"). 5. All conditions precedent set forth in Article 6 of the CFC Agreement to Buyer's obligations to purchase the CFC Closing Assets (as that term is defined in the CFC Agreement) shall have been satisfied. 54. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE The obligations of Seller under this Agreement with respect to the purchase and sale of the OAR Closing Assets shall be subject to the fulfillment on or prior to the date of the Closing of each of the following conditions: 1. All of the representations and warranties by Buyer contained in this Agreement shall be true and correct at and as of the date of the Closing as if restated on and as of such date. Buyer shall have complied with and performed all of the agreements, covenants and conditions required by this Agreement to be performed and complied with by it on or prior to the date of the Closing. 2. Buyer shall have delivered to Seller a copy of a certificate as to the due incorporation and good standing of Buyer in Delaware certified as of a recent date by the appropriate governmental authority. 3. The Settlement Agreement shall have been executed and delivered by all parties thereto. 4. There shall not have been instituted by any creditor of the Buyer or INCO or other third party any suit or proceeding to restrain or invalidate this transaction or the transactions contemplated by the CFC Agreement. 5. All conditions precedent set forth in Article 7 of the CFC Agreement to obligations of the Sellers (as defined in the CFC Agreement) to sell the CFC Closing Assets shall have been satisfied. 55. MISCELLANEOUS (1) All notices and other communications required or permitted to be given hereunder shall be in writing and shall be delivered or sent by first class mail, registered or certified, postage prepaid, by telecopy or by overnight courier to any other party at its address set forth below or to such other address as may from time to time be provided by one party to the others in accordance with this Section 8.1. 1. If to INCO: INCO Securities Corporation One New York Plaza New York, New York 10004 Attention: Richard L. Guido Telecopy: (212) 612-5873 2. If to Buyer: Pure Cycle Corporation 5650 York Street Commerce City, Colorado 80022 Attention: Mark W. Harding Telecopy: (303) 292-3475 3. If to OAR: OAR, Incorporated 3525 Diane Place Greeley, CO 80634 Attention: Willard G. Owens Notices delivered personally shall be effective upon delivery. Notices transmitted by telecopy shall be effective when received. Notices delivered by registered or certified mail or by overnight courier shall be effective on the date such notice is delivered to a proper address to which it is addressed, as set forth on the receipt of such registered or certified mail or of such courier. (2) All agreements made and entered into in connection with this transaction shall be binding upon and inure to the benefit of the parties hereto, their successors and assigns. Seller hereby consents to the assignment by INCO to Buyer. (3) This Agreement (including the Exhibits hereto) and the Original Agreement, to the extent not superseded hereby, constitute the entire agreement and understanding between the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings oral and written, between the parties with respect to the subject matter hereof. No alteration, modification or change of this Agreement shall be valid except by an agreement in writing executed by the parties hereto. No failure or delay by any party hereto in exercising any right, power or privilege hereunder (and no course of dealing between or among any of the parties) shall operate as a waiver of any such right, power or privilege. No waiver of any default on any one occasion shall constitute a waiver of any subsequent or other default. No single or partial exercise of any such right, power or privilege shall preclude the further or full exercise thereof. (4) This Agreement may be executed in one or more counterparts, each of which when so executed shall be an original, but all of which together shall constitute one agreement. (5) If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. (6) This Agreement shall be interpreted, governed and construed in accordance with the internal laws of the State of Colorado. (7) If the payments required under Section 2.1(a) of the Closing Consideration are made in amounts necessitating partial terminations of the MOA, Seller agrees to execute partial terminations substantially in the form of the Partial Termination of Memorandum of Agreement attached hereto as Exhibit E and to provide such partial terminations to H and K for delivery to DGS in exchange for such installment payments. (8) The representations and warranties herein shall survive for a period of three years following the Effective Date. IN WITNESS WHEREOF the parties have executed this Amended and Restated Option and Purchase Agreement as of the day and year first above written. INCO: INCO SECURITIES CORPORATION By: Title: SELLER: OAR, INCORPORATED, a Colorado corporation By: Willard G. Owens, President BUYER: PURE CYCLE CORPORATION, a Delaware corporation By: Thomas P. Clark, President For purposes of Section 3.3: DAVIS, GRAHAM & STUBBS LLP By: Wanda J. Abel, Partner For purposes of Section 3.3 HOPPER AND KANOUFF, a professional corporation By: Title: EXHIBITS Exhibit A Comprehensive Amendment Agreement No. 1 Exhibit B Amended Escrow Instructions Exhibit C Memorandum of Agreement Exhibit D Termination of Memorandum of Agreement Exhibit E Partial Termination of Memorandum of Agreement EXHIBIT A TO DOCUMENT 10.4 ========================== For Exhibit A to the Amended and Restated Option Purchase Agreement, which consists of Comprehensive Amendment Agreement No. 1 among Inco Securities Corporation, the Company, the State of Colorado acting through the State Board of Land Commissioners, and others, see DOCUMENT 10.7. EXHIBIT B TO DOCUMENT 10.4 ========================== For Exhibit B to the Amended and Restated Option Purchase Agreement, which consists of Amended Escrow Instructions among OAR, Incorporated, the Company, the State of Colorado State Board of Land Commissioners, H.F. Riebesell, Jr., and Colorado National Bank, see DOCUMENT 10.6. EXHIBIT C TO DOCUMENT 10.4 ========================== MEMORANDUM OF AGREEMENT THIS MEMORANDUM OF AGREEMENT ("Memorandum") is made this 11th day of April, 1996, among Pure Cycle Corporation, a Delaware corporation ("Pure Cycle"), 5650 York Street, Commerce City, Colorado 80022, OAR, Incorporated, a Colorado corporation ("OAR"), 3525 Diane Place, Greeley, Colorado 80634, and H.F. Riebesell, Jr., 5290 DTC Parkway, #150, Englewood, Colorado 80111. WITNESSETH 56. Pure Cycle, OAR, Riebesell and certain other persons have entered into a Comprehensive Amendment Agreement No. 1 dated the date hereof (the "Agreement") pursuant to which OAR, Riebesell and the State of Colorado, acting through the State Board of Land Commissioners (the "State"), are entitled to certain payments upon the sale by Pure Cycle of certain water (the "Export Water") conveyed to Pure Cycle by the State and Rangeview Metropolitan District, a quasi-municipal corporation and political subdivision of the State of Colorado ("Rangeview"), pursuant to a deed dated the date hereof (the "Deed"). 57. As more particularly described in and subject to the Deed, the Export Water consists of the right to divert, sell and use up to a total gross volume of 1,165,000 acre feet of non- tributary and not non-tributary water on and under the approximately 24,567.21 acres, more or less, according to U.S. Government survey, in Arapahoe County, Colorado more particularly described as follows (the "Lowry Range"): Township 5 South, Range 64 West of the 6th P.M., Sections 7 through 10: all; Sections 15 through 22: all; Sections 27 through 34: all. Township 4 South, Range 65 West of the 6th P.M., Sections 33: all; and 34: all Township 5 South, Range 65 West of the 6th P.M., Section 3: all; Sections 10 through 15: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 15; Sections 22 through 27: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 22; Sections 35 and 36: all; Section 34: north 2,183.19 feet. Township 5 South, Range 66 West of the 6th P.M., Section 36: all. 58. Pursuant to Section 2.1(a) of the Agreement and provided all Obligations to the State (as such term is defined in Section 4.1 of the Agreement) then due and payable have been paid, the first $8,000,000 in Gross Proceeds (as such term is defined in Section 2.4 of the Agreement) from the sale or other disposition of the Export Water only is to be paid into a trust account with Davis, Graham & Stubbs LLP, 370 Seventeenth Street, Suite 4700, Denver, Colorado 80202 for disbursement to OAR, Riebesell and the State in accordance with their interests as set forth in Section 2.1(a) of the Agreement. 59. Until disbursement of $8,000,000 has been made to OAR, Riebesell and the State, in accordance with their interest therein as set forth in Section 2.1(a) of the Agreement and all Obligations of the State then due and payable have been paid, sales or other dispositions of the Export Water shall only be made in the manner and upon the terms set forth in Section 4.1 of the Agreement. OAR and the other Investors (as defined in the Agreement) have certain cure rights if the Obligations to the State have not been paid. 60. Upon disbursement of $8,000,000 to OAR, Riebesell and the State, in accordance with their interests under Section 2.1(a) of the Agreement, this Memorandum shall have no force and effect and the parties agree to file a termination of this Memorandum. IN WITNESS WHEREOF, the parties have duly executed this Memorandum of Agreement as of the date noted above for the purpose of providing an instrument for recording. PURE CYCLE CORPORATION By: Thomas P. Clark, President OAR, INCORPORATED By: Willard G. Owens, President H.F. Riebesell, Jr. STATE OF COLORADO ) ) ss. COUNTY OF ________ ) The foregoing instrument was acknowledged before me this _____ day of ________________, 1996 by Thomas P. Clark, as President of Pure Cycle Corporation, a Delaware corporation. Witness my hand and official seal. My commission expires: . Notary Public STATE OF COLORADO ) ) ss. COUNTY OF _______ ) The foregoing instrument was acknowledged before me this _____ day of ________________, 1996 by Willard G. Owens, as President of OAR, Incorporated, a Colorado corporation. Witness my hand and official seal. My commission expires: . Notary Public STATE OF COLORADO ) ) ss. COUNTY OF ________ ) The foregoing instrument was acknowledged before me this _____ day of ________________, 1996 by H.F. Riebesell, Jr. Witness my hand and official seal. My commission expires: . Notary Public EXHIBIT D TO DOCUMENT10.4 ========================= TERMINATION OF MEMORANDUM OF AGREEMENT THIS TERMINATION OF MEMORANDUM OF AGREEMENT ("Termination") is made this ___ day of __________, 199___, among Pure Cycle Corporation, a Delaware corporation ("Pure Cycle"), 5650 York Street, Commerce City, Colorado 80022, OAR, Incorporated, a Colorado corporation ("OAR"), 3525 Diane Place, Greeley, Colorado 80634, and H.F. Riebesell, Jr., 5290 DTC Parkway, #150, Englewood, Colorado 80111, or their respective successors and assigns. WITNESSETH 61. Pure Cycle, OAR, Riebesell and certain other persons have entered into a Comprehensive Amendment Agreement No. 1 dated April __, 1996 (the "Agreement") pursuant to which OAR, Riebesell and the State of Colorado, acting through the State Board of Land Commissioners (the "State") were entitled to certain payments upon the sale by Pure Cycle of certain water (the "Export Water") conveyed to Pure Cycle by the State and Rangeview Metropolitan District, a quasi-municipal corporation and political subdivision of the State of Colorado ("Rangeview"), pursuant to a deed dated April __, 1996 (the "Deed"). 62. On __________, 1996, the parties filed a Memorandum of Agreement in the clerk and recorder's office of Arapahoe County, Colorado at Book ____, Page ____, and in the Colorado Department of Natural Resources_Division of Water Resources, describing certain provisions of the Agreement (the "Memorandum"). 63. As more particularly described in and subject to the Deed, the Export Water consists of the right to divert, sell and use up to a total gross volume of 1,165,000 acre feet of non- tributary and not non-tributary water on and under the approximately 24,567.21 acres, more or less, according to U.S. Government survey, in Arapahoe County, Colorado more particularly described as follows (the "Lowry Range"): Township 5 South, Range 64 West of the 6th P.M., Sections 7 through 10: all; Sections 15 through 22: all; Sections 27 through 34: all. Township 4 South, Range 65 West of the 6th P.M., Sections 33: all and 34: all. Township 5 South, Range 65 West of the 6th P.M., Section 3: all; Sections 10 through 15: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 15; Sections 22 through 27: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 22; Sections 35 and 36: all; Section 34: north 2,183.19 feet. Township 5 South, Range 66 West of the 6th P.M., Section 36: all. 64. Pursuant to Section 2.1(a) of the Agreement and provided all Obligations to the State (as such term is defined in Section 4.1 of the Agreement) then due and payable have been paid, the first $8,000,000 in Gross Proceeds (as such term is defined in Section 2.4 of the Agreement) from the sale or other disposition of the Export Water was to be paid into a trust account with Davis, Graham & Stubbs LLP, 370 Seventeenth Street, Suite 4700, Denver, Colorado 80202 for disbursement to OAR, Riebesell and the State in accordance with Section 2.1(a) of the Agreement. 65. In accordance with the terms of the Agreement, $8,000,000 has now been disbursed to OAR, Riebesell and the State and, as of the date of the payment of the full amount of such disbursements, all Obligations to the State due and payable as of such date, which are due and payable prior to the payments contemplated in Section 2.1(a) of the Agreement, have been paid in full to the State. The conditions of the Agreement have been fulfilled and the purpose of the Memorandum has been satisfied. Therefore, the Memorandum is hereby terminated and released of record. IN WITNESS WHEREOF, the parties have duly executed this Termination of Memorandum of Agreement effective as of the date noted above for the purpose of providing an instrument for recording. PURE CYCLE CORPORATION By: Thomas P. Clark, President OAR, INCORPORATED By: Willard G. Owens, President H.F. Riebesell, Jr. STATE OF COLORADO ) ) ss. COUNTY OF ________ ) The foregoing instrument was acknowledged before me this _____ day of ________________, 1996 by Thomas P. Clark, as President of Pure Cycle Corporation, a Delaware corporation. Witness my hand and official seal. My commission expires: . Notary Public STATE OF COLORADO ) ) ss. COUNTY OF _______ ) The foregoing instrument was acknowledged before me this _____ day of ________________, 1996 by Willard G. Owens, as President of OAR, Incorporated, a Colorado corporation. Witness my hand and official seal. My commission expires: . Notary Public STATE OF COLORADO ) ) ss. COUNTY OF ________ ) The foregoing instrument was acknowledged before me this _____ day of ________________, 1996 by H.F. Riebesell, Jr. Witness my hand and official seal. My commission expires: . Notary Public EXHIBIT E OF DOCUMENY 10.4 ========================== PARTIAL TERMINATION OF MEMORANDUM OF AGREEMENT THIS PARTIAL TERMINATION OF MEMORANDUM OF AGREEMENT ("Partial Termination") is made this ___ day of __________, 199___, among Pure Cycle Corporation, a Delaware corporation ("Pure Cycle"), 5650 York Street, Commerce City, Colorado 80022, OAR, Incorporated, a Colorado corporation ("OAR"), 3525 Diane Place, Greeley, Colorado 80634, and H.F. Riebesell, Jr., 5290 DTC Parkway, #150, Englewood, Colorado 80111, or their respective successors or assigns. WITNESSETH 66. Pure Cycle, OAR, Riebesell and certain other persons have entered into a Comprehensive Amendment Agreement No. 1 dated April __, 1996 (the "Agreement") pursuant to which OAR, Riebesell and the State of Colorado, acting through the State Board of Land Commissioners (the "State"), were entitled to certain payments upon the sale by Pure Cycle of certain water (the "Export Water") conveyed to Pure Cycle by the State and Rangeview Metropolitan District, a quasi-municipal corporation and political subdivision of the State of Colorado ("Rangeview"), pursuant to a deed dated April __, 1996 (the "Deed"). 67. On __________, 1996, the parties filed a Memorandum of Agreement in the clerk and recorder's office of Arapahoe County, Colorado at Book ____, Page ____, and in the Colorado Department of Natural Resources_Division of Water Resources, describing certain provisions of the Agreement (the "Memorandum"). 68. As more particularly described in and subject to the Deed, the Export Water consists of the right to divert, sell and use up to a total gross volume of 1,165,000 acre feet of non- tributary and not non-tributary water on and under the approximately 24,567.21 acres, more or less, according to U.S. Government survey, in Arapahoe County, Colorado more particularly described as follows (the "Lowry Range"): Township 5 South, Range 64 West of the 6th P.M., Sections 7 through 10: all; Sections 15 through 22: all; Sections 27 through 34: all. Township 4 South, Range 65 West of the 6th P.M., Sections 33: all and 34: all. Township 5 South, Range 65 West of the 6th P.M., Section 3: all; Sections 10 through 15: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 15; Sections 22 through 27: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 22; Sections 35 and 36: all; Section 34: north 2,183.19 feet. Township 5 South, Range 66 West of the 6th P.M., Section 36: all. 69. Pursuant to Section 2.1(a) of the Agreement and provided all Obligations to the State (as such term is defined in Section 4.1 of the Agreement) then due and payable have been paid, the first $8,000,000 in Gross Proceeds (as such term is defined in Section 2.4 of the Agreement) from the sale or other disposition of the Export Water was to be paid into a trust account with Davis, Graham & Stubbs LLP, 370 Seventeenth Street, Suite 4700, Denver, Colorado 80202 for disbursement to OAR, Riebesell and the State in accordance with Section 2.1(a) of the Agreement. OAR and the other Investors (as defined in the Agreement) have certain cure rights if the Obligations to the State have not been paid. 70. In accordance with the terms of the Agreement, $___________ has now been disbursed to OAR, Riebesell and the State and as of the date of such disbursements all Obligations to the State due and payable as of such date, which are due and payable prior to the payments contemplated in Section 2.1(a) of the Agreement, have been paid in full to the State. Certain conditions of the Agreement have been partially fulfilled and the purpose of the Memorandum has been partially satisfied. Accordingly the Memorandum is effective hereafter only with respect to Gross Proceeds of $____________ and the Memorandum shall hereafter so reflect. IN WITNESS WHEREOF, the parties have duly executed this Partial Termination of Memorandum of Agreement effective as of the date noted above for the purpose of providing an instrument for recording. PURE CYCLE CORPORATION By: Thomas P. Clark, President OAR, INCORPORATED By: Willard G. Owens, President H.F. Riebesell, Jr. STATE OF COLORADO ) ) ss. COUNTY OF ________ ) The foregoing instrument was acknowledged before me this _____ day of ________________, 1996 by Thomas P. Clark, as President of Pure Cycle Corporation, a Delaware corporation. Witness my hand and official seal. My commission expires: . Notary Public STATE OF COLORADO ) ) ss. COUNTY OF _______ ) The foregoing instrument was acknowledged before me this _____ day of ________________, 1996 by Willard G. Owens, as President of OAR, Incorporated, a Colorado corporation. Witness my hand and official seal. My commission expires: . Notary Public STATE OF COLORADO ) ) ss. COUNTY OF ________ ) The foregoing instrument was acknowledged before me this _____ day of ________________, 1996 by H.F. Riebesell, Jr. Witness my hand and official seal. My commission expires: . Notary Public EX-10 7 ============= DOCUMENT 10.5 ============= AMENDED AND RESTATED OPTION AND PURCHASE AGREEMENT This Amended and Restated Option and Purchase Agreement (this "Agreement") is made and entered into as of the 11th day of April, 1996, by and among the State of Colorado acting by the State Board of Land Commissioners (the "State") and H.F. Riebesell, Jr. ("Riebesell") (collectively, "Sellers"), and Pure Cycle Corporation, a Delaware corporation ("Buyer"), and INCO Securities Corporation ("INCO"). RECITALS 71. On November 8, 1990, the State's predecessor-in- interest, Colorado Water Consultants, Incorporated, now known as Colorado Financial Consultants, Inc. ("CFC"), and INCO entered into an Option and Purchase Agreement which was subsequently amended by Amendment Agreement No. 1 on February 12, 1991 and by Amendment Agreement No. 2 on August 12, 1992 (collectively, the "Original Agreement"). Pursuant to Amendment Agreement No. 2, Carlton Allderdice ("Allderdice") and Riebesell were added as parties to the Original Agreement. On April 26, 1995, CFC and Allderdice each assigned to the State all of their remaining right, title, and interest in the CFC Bonds and Notes (as defined in Section 1.1) subject to, among other things, the Original Agreement. 72. On the date hereof, INCO assigned all of its rights and obligations under the Original Agreement to Buyer. 73. On October 28, 1994, a lawsuit entitled Apex Investment Fund II, L.P., et al. v. Colorado State Board of Land Commissioners, et al., Case No. 95CV5405, was filed in the District Court of the City and County of Denver (the "Lawsuit"). The counterclaims in the Lawsuit question the validity of the CFC Bonds and Notes. 74. The parties (other than the State) desire to amend and restate the Original Agreement to facilitate settlement of the Lawsuit and the State as owner of certain CFC Bonds and Notes subject to the Original Agreement is willing to sell such CFC Bonds and Notes to Buyer in exchange for the consideration described herein to facilitate settlement of the Lawsuit. AGREEMENT In consideration of the mutual promises, covenants, representations and warranties set forth herein, the existence and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows: 75. DEFINITIONS AND PRIOR CLOSINGS (1) "CFC Bonds" consist of Water Revenue Bonds, Series 1988 M, issued by the Rangeview Metropolitan District, a quasi- municipal corporation and political subdivision of the State of Colorado (the "District"), dated December 7, 1988, in the principal amount of $5,331,360. The "CFC Notes" consist of Water Revenue Notes, Series 1988 A-L, issued by the District, dated December 7, 1988, in the original aggregate principal amount of $2,142,858. The "CFC Second Closing Assets" are a portion of the CFC Bonds with a face value of $448,453. The "CFC Interim Closing Assets" are a portion of the CFC Bonds with a face value of $910,496. The "August 12, 1992 Closing Assets" are a portion of the CFC Bonds with a face value of $1,560,000 ($780,000 in face value owned by each of Allderdice and Riebesell). (2) The parties agree that an option to purchase the CFC Bonds and the CFC Notes (the "Option") was acquired on November 8, 1990 by payment of an option payment in accordance with the Original Agreement, that the CFC Second Closing Assets were purchased in accordance with the Original Agreement on February 12, 1991, that the CFC Interim Closing Assets were purchased in accordance with the Original Agreement on August 13, 1991, and that the August 12, 1992 Closing Assets were purchased in accordance with the Original Agreement on August 12, 1992. On August 12, 1992, the option extension fee required by the Original Agreement was also paid and CFC, Allderdice and Riebesell extended until on or before August 12, 2007 the Option to purchase all or any portion of the remaining CFC Bonds with a collective face value of $2,412,411 and the remaining CFC Notes with a collective face value of $2,142,858 (in the aggregate $942,858-CFC, $1,806,206-Allderdice, and $1,806,205-Riebesell) (the "CFC Closing Assets"), at an aggregate price of $2,425,200 ($502,016-CFC, $961,592-Allderdice, and $961,592-Riebesell), plus 9% per annum from August 12, 1992 to the date of the purchase. In light of the foregoing, the parties acknowledge that all references to events related to the closings of the purchase of the Option, the Second Closing Assets, the Interim Closing Assets, and the August 12, 1992 Closing Assets have been deleted in this Agreement. (3) This Agreement amends and restates the Original Agreement with respect to remaining performance rights and obligations, but does not supersede the Original Agreement to the extent that the Original Agreement governed the prior closings hereunder or contained provisions which were intended to survive through or beyond the purchase of the CFC Closing Assets. (4) Subject to the terms and conditions set forth in this Agreement, Sellers agree to sell to Buyer the CFC Closing Assets for the Closing Consideration set forth in Article 2. 77. PURCHASE PRICE At the Closing (as defined in Section 3.1), Buyer and Sellers shall enter into the agreement attached hereto as Exhibit A entitled Comprehensive Amendment Agreement No. 1 (the "Comprehensive Agreement") pursuant to which the Buyer grants Sellers a right to a portion of the proceeds from the sale of certain water rights, which right shall represent the consideration for the CFC Closing Assets. In addition, the parties, other than INCO, shall enter into the Second Amended and Restated Closing Escrow Instructions attached hereto as Exhibit B (the "Amended Escrow Instructions") which shall supersede and replace the Escrow Instructions entered into pursuant to the Original Agreement. Buyer shall also sign an agreement in the form of Schedule 3 to the Amended Escrow Instructions to assume the fees and expenses of the Escrow Agent (as defined in the Amended Escrow Instructions). Buyer and Riebesell shall also enter into two Memorandum Agreements in the form attached hereto as Exhibit C (the "MOA") which are to be recorded in the real property records of Arapahoe County and the records of the Colorado Department of Natural Resources - State Engineer Division of Water Resources regarding Riebesell's rights in the Closing Consideration and two releases of the MOA in the form attached hereto as Exhibit D (the "MOA Releases"). Buyer and the State shall also enter into three originals of a Mortgage in the form attached hereto as Exhibit E (the "Mortgage") which are to be recorded in the real property records of Arapahoe County, Colorado, with the Colorado Department of Natural Resources State Engineer Division of Water Resources, and in the Uniform Commercial Code records of the Colorado Secretary of State's Office, regarding the State's rights in certain water rights in the event Buyer defaults under the Closing Consideration, and three original releases of the Mortgage in the form attached hereto as Exhibit F (the "Mortgage Releases"). 78. CLOSING (1) The closing (the "Closing") hereunder shall be held on a mutually agree-able time and date which is coincident with the date the settlement agreement for the Lawsuit, to which this Agreement is attached as Exhibit 6, is executed (the "Settlement Agreement"). (2) The Closing shall be held in the offices of Davis, Graham & Stubbs LLP ("DGS"), at 370 Seventeenth Street, Suite 4700, Denver, Colorado 80202, or at such other place as the parties shall mutually agree. (3) This Agreement, the Comprehensive Agreement, the Amended Escrow Instructions and all other documents delivered in connection with the Closing shall be held in trust by DGS for distribution on the Effective Date (as defined in the Settlement Agreement). On the Effective Date, DGS shall deliver (i) the Amended Escrow Instructions to the Escrow Agent, along with the letter from DGS required by the Amended Escrow Instructions to authorize release of the CFC Closing Assets to the District on Buyer's behalf; (ii) the Comprehensive Agreement to Seller; (iii) the MOA and the Mortgage to the clerk and recorder's office of Arapahoe County, Colorado and the Colorado Department of Natural Resources State Engineer Division of Water Resources for recordation and the third original mortgage to the Colorado Secretary of State's Office for filing in the Uniform Commercial Code records; (iv) the MOA Releases and the Mortgage Releases to the Attorney General of the State of Colorado (the "Attorney General"); and (v) a set of original closing documents to each party. The Attorney General agrees to deliver the MOA Releases (or partial releases provided pursuant to Section 8.7, if applicable) to DGS in exchange for the payments to Riebesell required under Section 2.1(a) of the Comprehensive Agreement and the Mortgage Releases (or partial releases provided pursuant to Section 8.7, if applicable) to DGS in exchange for the payments to the State required under Sections 2.1(a) and (b) of the Comprehensive Agreement. If the Settlement Agreement is terminated, DGS shall destroy all documents delivered at the Closing and this Agreement, except for the obligations of DGS hereunder, shall be null and void ab initio and shall have no force and effect. 79. SELLERS' REPRESENTATIONS AND COVENANTS (1) Riebesell represents and warrants that it has good and marketable title to the CFC Closing Assets, free and clear of all security interests, liens, pledges, charges, claims, and encumbrances, other than the terms and conditions of that certain Indenture of Mortgage and Trust between the District and Central Bank of Denver dated July 15, 1989 (the "Trust Indenture"), a copy of which was attached as Exhibit F to the Original Agreement. (2) The State represents that it has not granted any security interest, lien, pledge, charge, claim or encumbrance on the CFC Closing Assets. (3) Each Seller represents and warrants that (a) all necessary consents and approvals have been obtained by it for the execution and delivery of this Agreement; (b) the execution and delivery of this Agreement by such Seller has been duly and validly authorized and approved by all necessary administrative action of such Seller, including all required resolutions of administrative officials and of its officers and board of directors, as applicable; provided, however, that the State does not represent that it has authority to amend the Original Agreement or to enter into the Amended Escrow Instructions, except to the extent such authority may exist by virtue of its ownership of a portion of the CFC Closing Assets; and (c) this Agreement is a valid and binding obligation of such Seller, enforceable against it in accordance with its terms provided the Settlement Agreement becomes effective. (4) Each Seller represents and warrants that it has duly and timely paid all taxes, assessments, governmental charges and penalties due and payable by it, and there are no suits, actions, claims, investigations, inquiries or proceedings pending or threatened, or to its knowledge, contemplated against such Seller in respect of any taxes, assessments, governmental charges or penalties. 80. BUYER'S REPRESENTATIONS AND COVENANTS (1) Buyer represents that it is acquiring the CFC Closing Assets for its own account without view to the distribution of any portion thereof, except for the transfer of the CFC Closing Assets to the District in compliance with the terms of the Settlement Agreement for cancellation, and that Buyer has no present intention of selling or otherwise disposing of any portion thereof in any transaction which would be in violation of any federal or state securities law. (2) Buyer represents that (a) it is aware that no federal or state agency has made any finding or determination as to the fairness of this investment, nor any recommendation or endorsement with respect to this investment; (b) Buyer, by virtue of its own investment acumen and business experience is, or together with its advisor is, capable of evaluating the hazards and merits of participating in this investment; (c) Buyer can bear the economic risk of this investment; and (d) Buyer warrants that it was not organized or reorganized for the specific purpose of acquiring the CFC Closing Assets. (3) Buyer understands that the CFC Closing Assets have not been registered under the Securities Act of 1933, as amended (the "Act"), or any state securities laws. Buyer agrees that it will not sell the CFC Closing Assets unless such assets subsequently are registered under the Act and any applicable state securities laws or exemptions from such registration requirements are available. (4) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has all requisite corporate power and authority to own and operate its properties and to carry on its business as now being conducted. (5) Buyer represents and warrants that the execution and delivery of this Agreement by Buyer has been duly and validly authorized and approved by all necessary corporate action of Buyer, including appropriate resolutions of the board of directors of Buyer, and that this Agreement is a valid and binding obligation of Buyer, enforceable against it in accordance with its terms. 81. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS TO CLOSE The obligations of Buyer under this Agreement with respect to the purchase and sale of the CFC Closing Assets shall be subject to the fulfillment on or prior to the date of the Closing of each of the following conditions: 1. All of the representations and warranties by each Seller contained in this Agreement shall be true and correct at and as of the date of the Closing as if restated on and as of such date. Each Seller shall have complied with and performed all of the agreements, covenants and conditions required by this Agreement to be performed or complied with by it on or prior to the date of the Closing. 2. The Settlement Agreement shall have been executed and delivered by all parties thereto. 3. There shall not have been instituted by any creditor of either Seller or other third party any suit or proceeding to restrain or invalidate this transaction or the transactions contemplated by the Amended and Restated Option and Purchase Agreement entered into among Buyer, OAR, Incorporated and INCO (the "OAR Agreement"). 4. All conditions precedent set forth in Article 6 of the OAR Agreement to Buyer's obligations to purchase the OAR Closing Assets (as that term is defined in the OAR Agreement) shall have been satisfied. 82. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE The obligations of each Seller under this Agreement with respect to the purchase and sale of the CFC Closing Assets shall be subject to the fulfillment on or prior to the date of the Closing of each of the following conditions: 1. All of the representations and warranties by Buyer contained in this Agreement shall be true and correct at and as of the date of the Closing as if restated on and as of such date. Buyer shall have complied with and performed all of the agreements, covenants and conditions required by this Agreement to be performed and complied with by it on or prior to the date of the Closing. 2. Buyer shall have delivered to Sellers a copy of a certificate as to the due incorporation and good standing of Buyer in Delaware certified as of a recent date by the appropriate governmental authority. 3. The Settlement Agreement shall have been executed and delivered by all parties thereto. 4. There shall not have been instituted by any creditor of Buyer or Inco or other third party any suit or proceeding to restrain or invalidate this transaction or the transactions contemplated by the OAR Agreement. 5. All conditions precedent set forth in Article 7 of the OAR Agreement to obligations of the Seller (as defined in the OAR Agreement) to sell the OAR Closing Assets shall have been satisfied. 83. MISCELLANEOUS (1) All notices and other communications required or permitted to be given hereunder shall be in writing and shall be delivered or sent by first class mail, registered or certified, postage prepaid, by telecopy or by overnight courier to any other party at its address set forth below or to such other address as may from time to time be provided by one party to the others in accordance with this Section. 1. If to INCO: INCO Securities Corporation One New York Plaza New York, New York 10004 Attention: Richard L. Guido Telecopy: (212) 612-5873 2. If to Buyer: Pure Cycle Corporation 5650 York Street Commerce City, Colorado 80022 Attention: Mark W. Harding Telecopy: (303) 292-3475 3. If to Sellers: If to the State: Colorado State Board of Land Commissioners 620 Centennial Building 1313 Sherman Street Denver, Colorado 80203 Attention: President Telecopy: ___________________ with a copy to: Office of the Attorney General 1525 Sherman Street, Fifth Floor Denver, Colorado 80203 Attention: State Land Board Attorney Telecopy: ___________________ If to Riebesell: H.F. Riebesell, Jr. Hall & Evans, L.L.C. 1200 Seventeenth Street, Suite 1200 Telecopy: (303) 628-3368 Notices delivered personally shall be effective upon delivery. Notices transmitted by telecopy shall be effective when received. Notices delivered by registered or certified mail or by overnight courier shall be effective on the date such notice is delivered to a proper address to which it is addressed, as set forth on the receipt of such registered or certified mail or of such courier. (2) All agreements made and entered into in connection with this transaction shall be binding upon and inure to the benefit of the parties hereto, their successors and assigns. Each Seller hereby consents to the assignment by INCO to Buyer. INCO and Buyer hereby consent to the assignments of rights by Allderdice and CFC to the State and agree that they will not look to the State for the enforcement of obligations of CFC or Allderdice, by claim, setoff or otherwise. (3) This Agreement (including the Exhibits hereto) and the Original Agreement, to the extent not superseded hereby, constitute the entire agreement and understanding between the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings oral and written, between the parties with respect to the subject matter hereof. No alteration, modification or change of this Agreement shall be valid except by an agreement in writing executed by the parties hereto. No failure or delay by any party hereto in exercising any right, power or privilege hereunder (and no course of dealing between or among any of the parties) shall operate as a waiver of any such right, power or privilege. No waiver of any default on any one occasion shall constitute a waiver of any subsequent or other default. No single or partial exercise of any such right, power or privilege shall preclude the further or full exercise thereof. (4) This Agreement may be executed in one or more counterparts, each of which when so executed shall be an original, but all of which together shall constitute one agreement. (5) If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. (6) This Agreement shall be interpreted, governed and construed in accordance with the internal laws of the State of Colorado. (7) If the payments required under Section 2.1(a) to Riebesell and the payments required under Sections 2.1(a) and (b) to the State under the Comprehensive Agreement are made in amounts necessitating partial releases of the MOA and the Mortgage, Riebesell and the State agree to execute partial releases substantially in the forms attached hereto as Exhibit G and Exhibit H, respectively, and to provide such partial releases to the Attorney General for delivery to DGS in exchange for such installment payments. (8) The parties acknowledge that the State does not have knowledge as to the accuracy of Recitals A and B except the last sentence of Recital A or as to the accuracy of the factual statements in Section 1.1 and 1.2. (9) Pure Cycle further agrees to indemnify and hold harmless the State against and from all damages, claims, costs, and expenses (including reasonable attorneys' fees) based upon any claims which OAR, Owens, Riebesell or any party to the Comprehensive Agreement or the Escrow Agent may have or assert against CFC or Allderdice as a result of the State's ownership of the CFC Closing Assets. If Allderdice or CFC should challenge the validity of the State's actions under this Agreement, the Amended Escrow Instructions or the Comprehensive Agreement, Pure Cycle and the State shall jointly seek a declaratory judgment of the State's rights under such agreements and of the rights of Guaranty Bank and Trust. If at the time of such challenge or thereafter the funds become available to make the payments contemplated by the Comprehensive Agreement, Pure Cycle and the Escrow Agent may interplead such funds in an appropriate court proceeding. If a declaratory judgment is entered against the State, the State shall turn over any funds already received from Pure Cycle pursuant to the Comprehensive Agreement to Allderdice or Guaranty Bank and Trust in accordance with their interests as determined by the declaratory judgment. In no event shall Pure Cycle be required to pay both the State and Allderdice. IN WITNESS WHEREOF the parties have executed this Amended and Restated Option and Purchase Agreement as of the day and year first above written. INCO: INCO SECURITIES CORPORATION By: Title: SELLERS: THE STATE OF COLORADO STATE BOARD OF LAND COMMISSIONERS APPROVED AS TO FORM: President Gale A. Norton, Attorney General Engineer of the State of Colorado Register H.F. Riebesell, Jr. BUYER: PURE CYCLE CORPORATION, a Delaware corporation By: Thomas P. Clark, President For purposes of Section 3.3 and applicable portions of Section 8.9 DAVIS, GRAHAM & STUBBS LLP By: Wanda J. Abel, Partner For purposes of Section 3.3 ATTORNEY GENERAL OF THE STATE OF COLORADO GALE A. NORTON Attorney General STEPHEN ERKENBRACK Chief Deputy Attorney General TIMOTHY J. TYMKOVICH Solicitor General Richard A. Westfall Special Deputy Solicitor General EXHIBITS Exhibit A Comprehensive Amendment Agreement No. 1 Exhibit B Amended Escrow Instructions Exhibit C Memorandum of Agreement Exhibit D MOA Release Exhibit E Mortgage Exhibit F Mortgage Release Exhibit G Partial MOA Release Exhibit H Partial Mortgage Release EXHIBIT A TO DOCUMENT 10.5 ========================== For Exhibit A to the Amended and Restated Option Purchase Agreement, which consists of Comprehensive Amendment Agreement No. 1 among Inco Securities Corporation, the Company, the State of Colorado acting through the State Board of Land Commissioners, and others, see DOCUMENT 10.7. EXHIBIT B TO DOCUMENT 10.5 ========================== For Exhibit B to the Amended and Restated Option Purchase Agreement, which consists of Amendment Escrow Instructions among OAR, Incorporated, the Company, the State of Colorado State Board of Land Commissioners, H.F. Riebesell, Jr., and Colorado National Bank, see DOCUMENT 10.6. EXHIBIT C TO DOCUMENT 10.5 ========================== For Exhibit C to the Amended and Restated Option Purchase Agreement, which consists of a Memorandum of Agreement, see Exhibit C to DOCUMENT 10.4. EXHIBIT D TO DOCUMENT 10.5 ========================== For Exhibit D to the Amended and Restated Option Purchase Agreement, which consists of a Termination of Memorandum of Agreement, see Exhibit D to DOCUMENT 10.4. EXHIBIT E TO DOCUMENT 10.5 ========================== MORTGAGE DEED, SECURITY AGREEMENT, AND FINANCING STATEMENT This Mortgage Deed, Security Agreement, and Financing Statement ("Mortgage Deed") is dated the 11th day of April, 1996, between the State of Colorado, acting by and through the State Board of Land Commissioners (the "Land Board" or "Mortgagee"), whose address is 620 Centennial Building, 1313 Sherman Street, Denver, Colorado 80203, and Pure Cycle Corporation, a Delaware corporation ("Pure Cycle" or "Mortgagor"), whose address is 5650 York Street, Commerce City, Colorado 80022. The Land Board is the Secured Party/Creditor and Pure Cycle is the Debtor. WITNESSETH, that in order to secure the payment of certain obligations under an agreement entitled Comprehensive Amendment Agreement No. 1 among Pure Cycle, the Land Board, and others dated April 11, 1996 (the "Comprehensive Agreement"), the Mortgagor does hereby grant, bargain, sell, convey, and assign unto the Mortgagee, its successors and assigns, the Export Water (as that term is defined in the Amended and Restated Lease Agreement No. S-38280, dated April 11, 1996, between Rangeview Metropolitan District, a quasi-municipal corporation and political subdivision of the State of Colorado, acting by and through its water activity enterprise, and the Land Board recorded with the Arapahoe County Clerk and Recorder at Book No. ________, Page No. ________ (Reception No. ________), which definition of Export Water is incorporated by this reference) which Export Water is located on and under that certain real property consisting of approximately 24,567.21 acres, more or less, according to U.S. Government Survey, in Arapahoe County, Colorado, more particularly described as follows (the "Lowry Range"): Township 5 South, Range 64 West of the 6th P.M., Sections 7 through 10: all; Sections 15 through 22: all; Sections 27 through 34: all. Township 4 South, Range 65 West of the 6th P.M., Sections 33: all and 34: all. Township 5 South, Range 65 West of the 6th P.M., Section 3: all; Sections 10 through 15: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 15; Sections 22 through 27: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 22; Sections 35 and 36: all; Section 34: north 2,183.19 feet. Township 5 South, Range 66 West of the 6th P.M., Section 36: all (a street address of the Lowry Range does not exist); TO HAVE AND TO HOLD the same, together with all and singular the privileges and appurtenances thereunto belonging forever; provided always, that if the Mortgagor or its successor or assigns shall pay or cause to be paid to the Mortgagee, or its successors or assigns, the obligations under the Comprehensive Agreement in accordance with the terms of the Comprehensive Agreement and shall in the meantime keep and perform the covenants and agreements herein contained, then these presents shall be null and void, but otherwise remain in full force and effect. This Mortgage Deed shall constitute a security agreement and financing statement, in accordance with the Uniform Commercial Code of Colorado, with respect to all personal property and fixtures included within the Export Water located on and under the Lowry Range. Mortgagor, as Debtor, does hereby grant a security interest in the Export Water, and all its substitutions, additions, replacements and proceeds, to the Mortgagee, as Secured Party. That the Mortgagor, for itself and its successors and assigns, covenants and agrees to and with the Mortgagee, its successors and assigns, that it holds the said premises free and clear of all liens and encumbrances, that the Mortgagor will pay in due season all taxes and assessments levied on said premises; that it will pay the costs and attorneys' fees incurred by the Mortgagee, or its successors and assigns in any foreclosure action, other suit or proceeding, by reason hereof; and that upon default in the payment of the obligations under the Comprehensive Agreement or any part thereof, or upon the breach of any of the covenants or agreements herein contained; this Mortgage Deed may be forthwith foreclosed. IN WITNESS WHEREOF, the Mortgagor has executed this Mortgage Deed on the date set forth above. PURE CYCLE CORPORATION Attest: By: By: Mark W. Harding, Secretary Thomas P. Clark, President Tax Payer ID No. STATE OF COLORADO ) ) ss. COUNTY OF ______________ ) The foregoing instrument was acknowledged before me this _____ day of April, 1996, on behalf of Pure Cycle Corporation, by Thomas P. Clark, as President, and by Mark W. Harding, as Secretary. Witness my hand and official seal. My commission expires: Notary Public EXHIBIT F TO DOCUMENT 10.5 ========================== RELEASE OF MORTGAGE AND TERMINATION STATEMENT This Release of Mortgage and Termination Statement ("Release") is dated the ____ day of __________________, 19____, between the State of Colorado, acting by and through the State Board of Land Commissioners (the "Land Board" or Mortgagee"), whose address is 620 Centennial Building, 1313 Sherman Street, Denver, Colorado 80203, and Pure Cycle Corporation, a Delaware corporation ("Pure Cycle" or "Mortgagor"), whose address is 5650 York Street, Commerce City, Colorado 80022. WHEREAS, the Mortgagor conveyed and granted a security interest in certain real property, personal property, and fixtures to the Mortgagee as described in the Mortgage Deed, Security Agreement, and Financing Statement dated April 11, 1996, and recorded with the Arapahoe County Clerk and Recorder at Book ________, Page No. ________ (Reception No. __________) (the "Mortgage Deed") to secure the payment of certain obligations under an agreement entitled Comprehensive Amendment Agreement No. 1, among PureCycle, the Land Board and others, dated April 11, 1996 (the "Comprehensive Agreement"); and WHEREAS, the obligations under the Comprehensive Agreement have been fully paid and satisfied in accordance with the Comprehensive Agreement; NOW, THEREFORE, in consideration of the premises and the payment as provided in the Comprehensive Agreement, the receipt and sufficiency of which are hereby acknowledged, the undersigned does hereby remise, release and forever quitclaim unto the present owner or owners of said real property, its successors and assigns forever, all of the right, title and interest which the undersigned has by virtue of the above described Mortgage Deed in and to the Export Water (as that term is defined in the Amended and Restated Lease Agreement No. S-38280, dated April 11, 1996, between Rangeview Metropolitan District, a quasi-municipal corporation and political subdivision of the State of Colorado, acting by and through its water activity enterprise, and the Land Board) which is located on and under that certain real property consisting of approximately 24,567.21 acres, more or less, according to U.S. Government Survey, in Arapahoe County, Colorado, more particularly described as follows (the "Lowry Range"): Township 5 South, Range 64 West of the 6th P.M., Sections 7 through 10: all; Sections 15 through 22: all; Sections 27 through 34: all. Township 4 South, Range 65 West of the 6th P.M., Sections 33: all and 34: all. Township 5 South, Range 65 West of the 6th P.M., Section 3: all; Sections 10 through 15: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 15; Sections 22 through 27: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 22; Sections 35 and 36: all; Section 34: north 2,183.19 feet. Township 5 South, Range 66 West of the 6th P.M., Section 36: all (a street address of the Lowry Range does not exist); TO HAVE AND TO HOLD THE SAME, together with all and singular the privileges and appurtenances thereunto belonging forever. By this Release, the said Mortgage Deed is to be considered fully and absolutely released, cancelled, and forever discharged. This Release shall further constitute a termination of all security interests and of the Mortgage Deed as a financing statement. PURE CYCLE CORPORATION ATTEST: By: By: Title: Title: Tax Payer ID No. STATE OF COLORADO STATE BOARD OF LAND COMMISSIONERS President APPROVED AS TO FORM: Attorney General of the State of Colorado STATE OF COLORADO ) ) ss. COUNTY OF ______________ ) The foregoing instrument was acknowledged before me this _____ day of __________, _______, by ____________________, as President, of the State of Colorado, State Board of Land Commissioners. Witness my hand and official seal. My commission expires: Notary Public STATE OF COLORADO ) ) ss. COUNTY OF ______________ ) The foregoing instrument was acknowledged before me this _____ day of _______________, ________, by ____________________, as President, and by ____________________, as Secretary, of Pure Cycle Corporation. Witness my hand and official seal. My commission expires: Notary Public EXHIBIT G TO DOCUMENT 10.5 ========================== For Exhibit G to the Amended and Restated Option Purchase Agreement, which consists of a Partial Termination of Memorandum Agreement, see Exhibit E to DOCUMENT 10.4. EXHIBIT H TO DOCUMENT 10.5 ========================== C&S 512628.3 Exhibit H PARTIAL RELEASE OF MORTGAGE AND TERMINATION STATEMENT This Release of Mortgage and Termination Statement ("Release") is dated the ____ day of __________________, 19____, between the State of Colorado, acting by and through the State Board of Land Commissioners (the "Land Board" or Mortgagee"), whose address is 620 Centennial Building, 1313 Sherman Street, Denver, Colorado 80203, and Pure Cycle Corporation, a Delaware corporation ("Pure Cycle" or "Mortgagor"), whose address is 5650 York Street, Commerce City, Colorado 80022. WHEREAS, the Mortgagor conveyed and granted a security interest in certain real property, personal property, and fixtures to the Mortgagee as described in the Mortgage Deed, Security Agreement, and Financing Statement dated April 11, 1996, and recorded with the Arapahoe County Clerk and Recorder at Book ________, Page No. ________ (Reception No. __________) (the "Mortgage Deed") to secure the payment of certain obligations under an agreement entitled Comprehensive Amendment Agreement No. 1, among Pure Cycle, the Land Board and others, dated April 11, 1996 (the "Comprehensive Agreement"); and WHEREAS, the obligations under the Comprehensive Agreement have been partially paid and satisfied to the extent of $__________ in accordance with the Comprehensive Agreement; NOW, THEREFORE, in consideration of the premises and the payment as provided in the Comprehensive Agreement, the receipt and sufficiency of which are hereby acknowledged, the undersigned does hereby remise, release and forever quitclaim unto the present owner or owners of said real property, its successors and assigns forever, all of the right, title and interest which the undersigned has by virtue of the above described Mortgage Deed in and to a total gross volume of __________ acre feet of the Export Water (as that term is defined in the Amended and Restated Lease Agreement No. S-38280, dated April 11, 1996, between Rangeview Metropolitan District, a quasi- municipal corporation and political subdivision of the State of Colorado, acting by and through its water activity enterprise, and the Land Board) which is located on and under that certain real property consisting of approximately 24,567.21 acres, more or less, according to U.S. Government Survey, in Arapahoe County, Colorado, more particularly described as follows (the "Lowry Range"): Township 5 South, Range 64 West of the 6th P.M., Sections 7 through 10: all; Sections 15 through 22: all; Sections 27 through 34: all. Township 4 South, Range 65 West of the 6th P.M., Sections 33: all and 34: all. Township 5 South, Range 65 West of the 6th P.M., Section 3: all; Sections 10 through 15: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 15; Sections 22 through 27: all, less certain surface rights granted for the Aurora Reservoir (but including the water under the Aurora Reservoir) in Section 22; Sections 35 and 36: all; Section 34: north 2,183.19 feet. Township 5 South, Range 66 West of the 6th P.M., Section 36: all (a street address of the Lowry Range does not exist); TO HAVE AND TO HOLD THE SAME, together with all and singular the privileges and appurtenances thereunto belonging forever. By this Partial Release, the said Mortgage Deed is to be considered released, cancelled, and forever discharged with respect to a total gross volume of __________ acre feet of the Export Water but shall remain in effect with respect to the remaining Export Water. This Release shall further constitute a partial termination of all security interests and of the Mortgage Deed as a financing statement. ATTEST: PURE CYCLE CORPORATION By: By: Title: Title: Tax Payer ID No. APPROVED AS TO FORM: STATE OF COLORADO STATE BOARD OF LAND COMMISSIONERS Attorney General of the State of Colorado President STATE OF COLORADO ) ) ss. COUNTY OF ______________ ) The foregoing instrument was acknowledged before me this _____ day of __________, _______, by ____________________, as President, of the State of Colorado, State Board of Land Commissioners. Witness my hand and official seal. My commission expires: Notary Public STATE OF COLORADO ) ) ss. COUNTY OF ______________ ) The foregoing instrument was acknowledged before me this _____ day of _______________, ________, by ____________________, as President, and by ____________________, as Secretary, of Pure Cycle Corporation. Witness my hand and official seal. My commission expires: Notary Public EX-10 8 ============= DOCUMENT 10.6 ============= AMENDED ESCROW INSTRUCTIONS April 11, 1996 Colorado National Bank 950 17th Street, Suite 2410 Denver, Colorado 80202 Attention: Corporate Trust Services Re: Second Amended and Restated Closing Escrow Instructions -- Willard Owens Transaction Ladies and Gentlemen: This letter contains instructions to Colorado National Bank (the "Escrow Agent") with respect to the closing of certain transactions described in the Option and Purchase Agreement by and between OAR, Incorporated and INCO Securities Corporation (the "OAR Agreement"); the Option and Purchase Agreement by and between Colorado Water Consultants, Incorporated and INCO Securities Corporation (the "CWC Agreement") each dated November 8, 1990, and amended August 12, 1991, August 12, 1992, and the date hereof. Subject to Paragraph D, this letter completely amends and restates the Amended and Restated Closing Escrow Instructions -- Willard Owens Transaction dated August 12, 1992 (the "1992 Instructions"), but specifically does not amend or restate the Escrow Agreement dated August 12, 1991, by and between the Escrow Agent, OAR, Incorporated ("OAR"), Willard G. Owens ("Owens"), Colorado Water Consultants, Incorporated ("CWC"), INCO Securities Corporation ("INCO") and the other parties listed in the signature page thereof (the "Escrow Agreement"). The transaction originally consisted of the sale and conveyance of $8,041,371 of Rangeview Metropolitan District Water Revenue Bonds, Series 1988 M (the "Rangeview Bonds"); $5,000,000 Lowry Range Metropolitan Water District Revenue Notes, Series 1987 A-L (the "Lowry Notes"); and $2,142,858 of Rangeview Metropolitan District Water Revenue Notes, Series 1988 A-L (the "Rangeview Notes") by OAR, CWC, Carlton Allderdice ("Allderdice") and H.F. Riebesell, Jr. ("Riebesell") to INCO. The State of Colorado, acting by and through the State Board of Land Commissioners (the "State"), is the assignee of all rights of Allderdice and CWC, now known as Colorado Financial Consultants, Inc., in the Rangeview Bonds, Lowry Notes and Rangeview Notes. A copy of such assignment is attached hereto as Schedule 1. Pure Cycle Corporation ("Pure Cycle") is the assignee of all rights and obligations of INCO pursuant to the OAR Agreement, the CWC Agreement and the Escrow Agreement. A copy of such assignment is attached hereto as Schedule 2. In addition, Pure Cycle has agreed to assume the obligation of OAR, the State (formerly CWC and Allderdice) and Owens set forth in paragraph 7 of the Escrow Agreement to pay one-half of the Escrow Agent's Fees and Expenses (as those terms are defined in the Escrow Agreement). A copy of such assumption is attached hereto as Schedule 3. Pursuant to paragraph 8 of the Escrow Agreement, the State, Pure Cycle and Riebesell hereby notify the Escrow Agent that their new addresses for notice are as set forth on Schedule 4 attached hereto. If any date referenced herein as a deadline for the delivery of any documents required to be delivered hereunder is a Saturday, Sunday or federal legal holiday, such deadline shall be extended until the end of the next day which is not a Saturday, Sunday or federal legal holiday. It is specifically acknowledged by all of the parties hereto that the Escrow Agent is not a party to and shall not be bound by any agreements between any or all of the parties hereto except the Escrow Agreement and this Second Amended and Restated Closing Escrow Instructions -- Willard Owens Transaction. 84. SALE AND CONVEYANCE OF FINAL CLOSING BONDS (1) Parties to Sale and Conveyance of Final Closing Bonds. The parties involved in the sale and conveyance of the Rangeview Bonds, the Lowry Notes and the Rangeview Notes (collectively, the "Bonds") are OAR, the State and Riebesell (collectively, "Bond Sellers"); Pure Cycle; Escrow Agent; the Attorney General of the State of Colorado ("State's Attorney"); and Davis, Graham & Stubbs LLP ("Pure Cycle's Attorney"). (2) Documents. The following fully executed original documents (the "Documents") have been delivered to Escrow Agent. 1. Rangeview Bonds a. Certificate or certificates, issued in the name of OAR, representing Rangeview Bonds in the face amount of $5,628,960. b. Certificate or certificates, issued in the name of Riebesell, representing Rangeview Bonds in the face amount of $1,206,205. c. Certificate or certificates, issued in the name of Carlton E. Allderdice ("Allderdice"), representing Rangeview Bonds in the face amount of $1,206,206. d. Assignment or assignments signed by OAR, with a signature guaranty assigning Rangeview Bonds in the face amount of $5,628,960 in blank ("Rangeview Bond OAR Assignments"). e. Assignment or assignments signed by Riebesell with a signature guaranty assigning Rangeview Bonds in the face amount of $1,206,205 in blank ("Rangeview Bonds Riebesell Assignments"). f. Assignment or assignments signed by Allderdice with a signature guaranty assigning Rangeview Bonds in the face amount of $1,206,206 in blank (the "Rangeview Bonds Allderdice Assignments"). 2. Lowry Notes a. Certificate or certificates, issued in the name of OAR, representing Lowry Notes in the face amount of $5,000,000. b. Assignment or Assignments signed by OAR with a signature guaranty assigning Lowry Notes in the face amount of $5,000,000 in blank ("Lowry Assignments"). 3. Rangeview Notes a. Certificate or certificates, issued in the name of Colorado Water Consultants, Incorporated ("CWC"), representing Rangeview Notes in the face amount of $942,858. b. Assignment or Assignments signed by CWC with a signature guaranty assigning Rangeview Notes in the face amount of $942,858 in blank ("Rangeview Notes CWC Assignment or Assignments"). c. Certificate or certificates, issued in the name of Allderdice, representing Rangeview Notes in the face amount of $600,000. d. Assignment or assignments signed by Allderdice with a signature guaranty assigning Rangeview Notes in the face amount of $600,000 in blank ("Rangeview Notes Allderdice Assignments"). e. Certificate or certificates, issued in the name of Riebesell, representing Rangeview Notes in the face amount of $600,000. f. Assignment or assignments signed by Riebesell with a signature guaranty assigning Rangeview Notes in the face amount of $600,000 in blank ("Rangeview Notes Riebesell Assignments"). 4. Letter from Jensen Byrne Parsons Ruh & Tilton P.C. identifying any and all encumbrances on the Bonds or stating that no encumbrances exist ("Bond Encumbrance Letter"). (3) Closing Instructions. Escrow Agent is authorized, directed and agrees to take the following actions: Upon (i) notification to Escrow Agent by fax or original writing, in the form attached hereto as Schedule 5, from State's Attorney and Pure Cycle's Attorney to proceed with the Closing Instructions in accordance with this Section C and (ii) receipt of a release from Guaranty Bank and Trust Company releasing the encumbrance identified in the Bond Encumbrance Letter, Escrow Agent shall deliver the certificates representing the Rangeview Bonds, the Lowry Notes and the Rangeview Notes, together with the Rangeview Bonds OAR Assignments, the Rangeview Bonds Riebesell Assignments, the Rangeview Bonds Allderdice Assignments, the Lowry Assignments, the Rangeview Notes CWC Assignments, the Rangeview Notes Riebesell Assignments and the Rangeview Notes Allderdice Assignments, to the Rangeview Metropolitan District at the following address: 141 Union Boulevard, Suite 150 Lakewood, Colorado 80228 (4) Termination. The parties to the original transaction are parties in a lawsuit pending in the District Court for the City and County of Denver, State of Colorado, styled Apex Investment Fund II, L.P. et al. v. Colorado State Board of Land Commissioners, et al., Case No. 94-CV-5405, Courtroom I (the "Litigation"). The parties to the Litigation have reached a settlement agreement (the "Settlement Agreement") which is subject to certain conditions. If those conditions do not occur, the Settlement Agreement will be terminated, and these instructions will not be required. Therefore, if, (a) Escrow Agent receives notification by fax or original writing from State's Attorney and Pure Cycle's Attorney that the Settlement Agreement has been terminated or (b) on or before 5:00 p.m. on August 12, 1996, notifications from the State's Attorney and Pure Cycle's Attorney and the release from Guaranty Bank and Trust Company have not been received by Escrow Agent in accordance with Section C Closing Instructions, whichever is earlier, these instructions shall be null and void ab initio and shall have no force and effect. Escrow Agent shall thereafter continue to hold the Documents in accordance with the 1992 Instructions. Please indicate your acceptance of and agreement to the terms and provisions of these Second Amended and Restated Closing Escrow Instructions by signing nine copies hereof and returning the same to the undersigned. Sincerely, OAR, Incorporated By: Willard G. Owens, President Pure Cycle Corporation By: Thomas P. Clark, President Approved as to Form: State of Colorado State Board of Land Commissioners ___________________________ Gale A. Norton Attorney General of the President State of Colorado Engineer Register H.F. Riebesell, Jr. ACCEPTED AND AGREED to this ______ day of April, 1996. COLORADO NATIONAL BANK as Escrow Agent By:_______________________________ Title:____________________________ SCHEDULE 1 TO DOCUMENT 10.6 =========================== ASSIGNMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the undersigned do hereby assign to The Colorado State Board of Land Commissioners (or its designee), hereinafter the "Assignee," all of the undersigneds' right, title and interest in and to any and all Rangeview Metropolitan District Water Revenue Bonds and Notes, and also any other direct or indirect interest that they or either of them presently may have in the exploration, developing or leasing of the ground water resources which are the subject of that certain civil action filed in the District Court, City and County of Denver, State of Colorado, bearing Case No. 94-CV-5405. The foregoing shall include, without limitation: 85. Certificate or Certificates, issued in the name of Carlton Allderdice, representing Rangeview Bonds in the face amount of $1,206,206.00 (including, without limitation, the Bond identified as Series 1988M); 86. Certificate or Certificates, issued in the name of Carlton Allderdice, representing Rangeview Notes in the face amount of $600,000.00 (including, without limitation, the Note identified as Series 1988L); 87. Certificate or Certificates, issued in the name of Colorado Water Consultants, Inc. (now named Colorado Financial Consultants, Inc.), representing Rangeview Notes in the face amount of $942,858.00 (including, without limitation, the notes identified as Series 1988A-K, inclusive). The foregoing assignment is subject to (1) that certain Option Purchase Agreement entered into as of November 8, 1990, and amended as of February 12, 1991, and as of August 12, 1992, that certain Escrow Agreement dated August 12, 1991, those certain Escrow Closing Instructions, amended and restated as of August 12, 1992 and certain related and closing documents, (2) the lien of the Guaranty Bank and Trust Company which is the subject of that certain "Bond Encumbrance Letter" from Jensen Byrne Parsons Ruh & Tilton, P.C. to INCO Securities Corporation dated August 12, 1991, and also (3) the $27,000 assignment described in that certain letter agreement dated August 12, 1992 between INCO Securities Corporation, OAR Incorporated, and Colorado Water Consultants, Incorporated. The Assignee specifically does not assume or agree to perform any of the obligations of the undersigned with respect to any of the documents or agreements referred to herein. Dated: April 28, 1995. COLORADO FINANCIAL CONSULTANTS, INC. By: /s/ Carlton E. Allderdice, President Carlton E. Allderdice, President /s/ Carlton E. Allderdice Carlton E. Allderdice SCHEDULE 2 TO DOCUMENT 10.6 =========================== ASSUMPTION Pure Cycle Corporation, a Delaware Corporation, hereby assumes all obligations of any party to that certain Escrow Agreement, by and among OAR, Incorporated, Willard G. Owens in his individual and representative capacities, Colorado Water Consultants, Incorporated, INCO Securities Corporation, Richard F. Meyers, in his individual and representative capacities, Carlton Allderdice, H. F. Riesbesell, and Colorado National Bank of Denver as Escrow Agent, dated as of August 12, 1991 ("Agreement"), to pay all fees and expenses of the Escrow Agent under the Agreement which have not been paid as of the date of this Assumption and which hereafter accrue and become due and payable. Executed and delivered this ___ day of April, 1996. PURE CYCLE CORPORATION By: Thomas P. Clark, President SCHEDULE 3 TO DOCUMENT 10.6 =========================== ASSUMPTION Pure Cycle Corporation, a Delaware Corporation, hereby assumes all obligations of any party to that certain Escrow Agreement, by and among OAR, Incorporated, Willard G. Owens in his individual and representative capacities, Colorado Water Consultants, Incorporated, INCO Securities Corporation, Richard F. Meyers, in his individual and representative capacities, Carlton Allderdice, H. F. Riesbesell, and Colorado National Bank of Denver as Escrow Agent, dated as of August 12, 1991 ("Agreement"), to pay all fees and expenses of the Escrow Agent under the Agreement which have not been paid as of the date of this Assumption and which hereafter accrue and become due and payable. Executed and delivered this ___ day of April, 1996. PURE CYCLE CORPORATION By: Thomas P. Clark, President ASSIGNMENT The undersigned irrevocably assigns to Pure Cycle Corporation, a Delaware corporation, this 11th day of April, 1996, all of the undersigned's right, title and interest in the following: (1) Escrow Agreement, by and among OAR, Incorporated, Willard G. Owens in his individual and representative capacities, Colorado Water Consultants, Incorporated, INCO Securities Corporation, Richard F. Meyers in his individual and representative capacities, Carlton Allderdice, H. F. Riebesell, and Colorado National Bank of Denver as Escrow Agent, dated as of August 12, 1991, and those certain Escrow Closing Instructions, amended and restated as of August 12, 1992; (2) Option and Purchase Agreement by and among OAR, Incorporated, a Colorado corporation, and INCO Securities Corporation, a Delaware corporation, as amended by Amendment No. 1 on February 12, 1991 and Amendment No. 2 on August 12, 1992 (the "OAR Option Agreement"); (3) Option and Purchase Agreement, by and between Colorado Water Consultants, Incorporated, a Colorado corporation, and INCO Securities Corporation, a Delaware corporation, dated as of November 8, 1990, as amended by Amendment No. 1 on February 12, 1991 and Amendment No. 2 on August 12, 1992 (the "CWC Option Agreement"); (4) Option Agreement for Sale and Operation of Production Right, by and between Rangeview Metropolitan District, a quasi- municipal corporation and political subdivision of the State of Colorado, and INCO Securities Corporation, dated as of November 14, 1990, as amended by Amendment No. 1 on February 12, 1991; (5) All of the undersigned's rights to receive all accrued but unpaid interest owed by the Rangeview Metropolitan District, Arapahoe County, Colorado, associated with the Lowry Range Metropolitan District Water Revenue Notes, Series 1987 A-D, dated August 7, 1987, to the extent of $63,000; (6) All of the undersigned's rights to receive all accrued but unpaid interest owed by the Rangeview Metropolitan District, Arapahoe County, Colorado, associated with the Rangeview Metropolitan District Water Revenue Notes, Series 1988 A-D, dated December 7, 1988, to the extent of $27,000; (7) Right of First Refusal Agreement by and among INCO Securities Corporation and Richard F. Meyers, Mark W. Harding, Thomas P. Clark, Thomas Lamm and Rowena Rogers dated August 12, 1992; and (8) The assignment to Pure Cycle Corporation hereunder includes the right of Pure Cycle Corporation to exercise the options granted under the OAR Option Agreement and the CWC Option Agreement and INCO Securities Corporation waives performance of the provisions of Section 5.04 of the Water Rights Commercialization Agreement dated as of December 11, 1990, amended February 12, 1991, and further amended August 12, 1992. IN WITNESS WHEREOF, this Assignment has been executed as of the date first set forth above. INCO SECURITIES CORPORATION By: Title: SCHEDULE 4 TO DOCUMENT 10.6 =========================== SCHEDULE 4 Notices: 88. If to State: Board of Land Commissioners Attn: Register 620 Centennial Building 1313 Sherman Street Denver, Colorado 80203 Telecopy: (303) ___-____ With a copy to: Office of Attorney General Attn: State Land Board Attorney 1525 Sherman Street, Fifth Floor Denver, Colorado 80203 Attn: David F. Steinhoff Telecopy: (303) 866-3558 89. If to Pure Cycle: Pure Cycle Corporation 5650 York Street Commerce City, Colorado 80022 Attn: Mark W. Harding Telecopy: (303) 292-3475 90. If to Riebesell: H.F. Riebesell, Jr., Esq. Hall & Evans, L.L.C. 1200 Seventeenth Street, Suite 1700 Denver, Colorado 80202 Telecopy: (303) 628-3368 EX-10 9 ============= DOCUMENT 10.7 ============= COMPREHENSIVE AMENDMENT AGREEMENT NO. 1 THIS COMPREHENSIVE AMENDMENT AGREEMENT NO. 1 (the "Agreement") is made and entered into as of the 11th day of April, 1996, by and among Inco Securities Corporation, a Delaware corporation ("INCO"), Pure Cycle Corporation, a Delaware corporation ("PureCycle"), Landmark Water Partners, L.P., a Delaware limited partnership ("Landmark I"), Landmark Water Partners II, L.P., a Delaware limited partnership ("Landmark II"), Warwick Partners, L.P., a Delaware partnership ("Warwick"), Auginco, a Colorado general partnership ("Auginco"), Gregory M. Morey ("Morey"), Amy Leeds ("Leeds"), Anders C. Brag ("Brag"), Newell Augur, Jr. ("Augur"), Bill Peterson ("Peterson"), Stuart Sundlun ("Sundlun"), Alan C. Stormo ("Stormo"), D.W. Pettyjohn ("Pettyjohn"), Beverly A. Beardslee ("BAB"), Bradley Kent Beardslee ("BKB"), Robert Douglas Beardslee ("RDB"), Apex Investment Fund II, L.P., a Delaware limited partnership ("Apex"), The Environmental Venture Fund, L.P., a Delaware limited partnership ("EV Fund"), The Environmental Private Equity Fund II, L.P., a Delaware limited partnership ("EV Fund II"), Productivity Fund II, L.P., a Delaware limited partnership ("PFund"), Proactive Partners, L.P., a California limited partnership ("Proactive"), Asra Corporation, a Delaware corporation ("ASRA"), and International Properties, Inc., a Delaware corporation ("IPI"), OAR, Incorporated, a Colorado corporation ("OAR"), Willard G. Owens ("Owens"), H.F. Riebesell, Jr. ("Riebesell"), and the State of Colorado acting through the State Board of Land Commissioners (the "State"). Apex, EV Fund, EV Fund II, and PFund are collectively referred to herein as the "Apex Group." The Apex Group, Landmark II, Warwick, Auginco, Morey, Leeds, and Brag are collectively referred to herein as the "August 1992 Funding Group". ASRA, IPI, Apex, EV Fund, and PFund are collectively referred to herein as the "PureCycle Funding Group." Apex, EV Fund II, Auginco, Brag, Augur, Peterson, Sundlun, and Proactive are collectively referred to herein as the "Series A Stockholders." Par Def: 1=A.RECITALS 91. INCO and OAR are parties to a certain Option and Purchase Agreement dated as of November 8, 1990, amended February 12, 1991, and further amended August 12, 1992, and INCO, PureCycle and OAR are parties to an Amended and Restated Option Purchase Agreement dated April 11, 1996, pursuant to which INCO has assigned all of its rights and obligations under the Option Purchase Agreement to PureCycle and PureCycle, in consideration of the sale of the OAR Closing Assets (as defined in the Amended and Restated Option Purchase Agreement) to it by OAR as part of the settlement of the Lawsuit (as defined in Recital F), is granting OAR the right to a portion of the proceeds from the sale of certain water rights as provided in this Agreement (the Option and Purchase Agreement, as amended, and the Amended and Restated Option Agreement are collectively referred to herein as the "OAR Option Agreement") and INCO is a party to a certain Option and Purchase Agreement dated as of November 8, 1990, amended February 12, 1991, further amended August 12, 1992, and further amended April 11, 1996, between INCO and Colorado Water Consultants, Incorporated (the "CWC Option Agreement" and, together with the OAR Option Agreement, the "Rangeview Option Agreements"), pursuant to which INCO has acquired an option to purchase certain outstanding bonds and notes issued by the Rangeview Metropolitan District in an aggregate principal amount of $24,914,058 (which notes and bonds are referred to as the "Rangeview Bonds"), a quasi-municipal corporation and political subdivision of the State of Colorado (the "District"). Colorado Water Consultants, Incorporated ("CWC"), has assigned its rights to a portion of the Rangeview Bonds to Carlton Allderdice ("Allderdice") and Riebesell. Carlton Allderdice and CWC have assigned their remaining rights in the Rangeview Bonds to the State. The State has assumed no obligations of CWC or Allderdice under the CWC Option Agreement or any other agreement to which CWC or Allderdice is a party. 92. INCO is a party to a certain Option Agreement For Sale and Operation of Production Right with the District, dated as of November 14, 1990 and amended by Amendment No. 1 on February 12, 1991 and by a District board resolution in December 1993 (the "Inco Agreement"), pursuant to which INCO has acquired certain rights to 10,000 acre-feet of water per year (the "Original Water Rights"). By executing this Agreement, the State does not concede that INCO acquired such rights, which issue has been resolved by the Settlement Agreement (as defined in Recital F). 93. PureCycle and INCO entered into a certain Water Rights Commercialization Agreement (the "Commercialization Agreement") dated as of December 11, 1990, amended February 12, 1991, and further amended August 12, 1992, providing for, among other things, the development and marketing of the Original Water Rights and an agreed upon distribution of proceeds in the event of a sale of the Original Water Rights. 94. PureCycle has sold a portion of its profit interest in the Commercialization Agreement pursuant to the following agreements: (a) Interim Funding Agreement (the "Interim Funding Agreement") entered into August 12, 1991 among INCO, PureCycle, Landmark I, and CPV, Inc. ("CPV") (CPV's interest in the Interim Funding Agreement has since been acquired by Owens); (b) Investment Agreement entered into September 23, 1991 among PureCycle, Stormo, and Pettyjohn; (c) Investment Agreement entered into September 30, 1991 between PureCycle and BAB; (d) Investment Agreement entered into September 30, 1991 among PureCycle, BKB, and RDB; (e) Investment Agreement entered into November 20, 1991 between PureCycle and ASRA; (f) Investment Agreement entered into November 20, 1991 between PureCycle and IPI; (g) Investment Agreement entered into December 10, 1991 among PureCycle, Apex, EV Fund, and PFund; (h) Funding Agreement (the "Funding Agreement") entered into August 12, 1992 among INCO, PureCycle, and the August 1992 Funding Group; (i) Stock Purchase Agreement (the "Stock Purchase Agreement") entered into May 25, 1994 among PureCycle and the Series A Stockholders. The Investment Agreements described in (b) through (g) above are collectively referred to herein as the "Investment Agreements." The Interim Funding Agreement, the Investment Agreements, the Funding Agreement, and the Stock Purchase Agreement are collectively referred to herein as the "Rangeview Profit Agreements." 95. Pursuant to the conveyance of the OAR Closing Assets and the CWC Closing Assets (as defined in the CWC Agreement) under the OAR Option Agreement and the CWC Option Agreement as part of the settlement of the Lawsuit, the Interim Funding Agreement, the Funding Agreement, and an Agreement dated October 27, 1994 among PureCycle, the Apex Group, Proactive, Auginco, Brag, Leeds and Pettyjohn (the "Assignment Agreement"), the following parties own Rangeview Bonds in the following amounts: Bondholders Face Value of Rangeview Bonds INCO $2,101,841 PureCycle $16,836,966 Landmark I $1,213,994 Owens $1,213,994 Landmark II $728,000 Warwick $520,000 Apex $802,833 EV Fund $288,629 EV Fund II $555,056 PFund $244,225 Proactive $222,022 Auginco $ 42,184 Brag $ 55,506 Leeds $ 44,404 Pettyjohn $ 44,404 $24,914,058 The foregoing parties are collectively referred to herein as the "Rangeview Bondholders." 96. The District's right to sell the Original Water Rights derive from a lease between the District and the State denominated Lease Number S-37280, dated April 26, 1982 and amended at various subsequent times (the "Lease"). A lawsuit was filed in the District Court in and for the City and County of Denver, State of Colorado (the "Denver District Court") on October 28, 1994 styled Apex Investment Fund II, L.P., et al. v. Colorado State Board of Land Commissioners, et al., Case No. 94-CV-5405 (Courtroom I) (the "Lawsuit"), in which the parties have asserted various claims relating to the status and validity of the Lease and the Rangeview Bonds. The parties to the Lawsuit have reached a settlement agreement, to which this Agreement is attached as Exhibit 8 (the "Settlement Agreement"), which requires, among other things, (i) an amended and restated Lease which is attached to the Settlement Agreement as Exhibit 1 (the "Amended and Restated Lease"), (ii) superseding the Inco Agreement with a new agreement for sale of export water (the "Export Water Agreement") which is attached to the Amended and Restated Lease as Exhibit C, (iii) amending the Rangeview Profit Agreements, and (iv) conveyance of the Rangeview Bonds by PureCycle to the District for cancellation. 97. Pursuant to a deed granted pursuant to the Export Water Agreement (the "Export Water Deed"), PureCycle will acquire certain rights to 1,165,000 acre-feet of water (the "Export Water") in lieu of the Original Water Rights. 98. The parties hereto believe the settlement of the Lawsuit is in their best interest because it will, among other things, enable the Export Water to be marketed and sold without further dispute from the State; and therefore, the parties are desirous of entering into this Agreement to facilitate the settlement of the Lawsuit. AGREEMENT Now, therefore, in consideration of the recitals, covenants herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 99. Effective Date. This Agreement shall be binding on the date it is fully executed and delivered by the parties hereto subject only, as a condition subsequent, to the occurrence of the Effective Date (as that term is defined in the Settlement Agreement). If the Settlement Agreement is terminated, this Agreement shall be null and void ab initio and shall have no force and effect. 100. Application of Rangeview Proceeds. (1) The first $32,026,232 of Gross Proceeds (as defined in Section 2.4) from the marketing, sale or other disposition of the Export Water by INCO, PureCycle, or the Export Water Contractor (as defined in Section 6.1 of the Amended and Restated Lease), after payment of royalties pursuant to the Amended and Restated Lease, shall, as a condition of any sales documents entered into between the Export Water Contractor and the Export Water Purchaser (as defined in the Amended and Restated Lease), be deposited by the Export Water Purchaser directly into a trust account with Davis, Graham & Stubbs LLP ("DGS") (or a successor who shall be appointed in accordance with the procedures set forth in Section 16 of the Settlement Agreement) who shall disburse the proceeds within ten (10) business days in the following manner and order: 1. the first $8,000,000 - to OAR (provided OAR has provided DGS with the Termination of Memorandum required by the OAR Option Agreement), Riebesell (provided Riebesell has provided DGS with the release required by the CWC Option Agreement), and the State (provided the State has provided DGS with a release of its mortgage on the Export Water to the extent of such payment) on a pro rata basis with 70% of all funds available for distribution going to OAR, 11.895% going to Riebesell, and 18.105% going to the State until OAR has received $5,600,000, Riebesell has received $951,600, and the State has received $1,448,400; 2. the next $1,110,232 - to the State; 3. the next $2,450,000 - to INCO, Landmark I, and Owens (the "Interim Funding Group") on a pro rata basis with 59.2% of all funds available for distribution going to INCO, 20.4% going to Landmark I, and 20.4% going to Owens until INCO has received $1,450,000 and Landmark I and Owens have each received $500,000; 4. the next $200,000 - to Stormo and Pettyjohn on a pro rata basis with 50% of all funds available for distribution going to Stormo and 50% going to Pettyjohn until each has received $100,000; 5. the next $50,000 - to BAB; 6. the next $50,000 - to BKB and RDB on a pro rata basis with 50% of all funds available for distribution going to BKB and 50% going to RDB until each has received $25,000; 7. the next $300,000 - to ASRA and IPI on a pro rata basis with 50% of all funds available for distribution going to ASRA and 50% going to IPI until each has received $150,000; 8. the next $175,500 - to PureCycle 9. the next $3,475,000 - to the August 1992 Funding Group on a pro rata basis with 71.94% of all funds available for distribution going to the Apex Group, 10.07% going to Landmark II, 7.19% going to Warwick, 2.16% going to Auginco, 2.88% going to Morey, 2.88% going to Leeds, and 2.88% going to Brag until the Apex Group has received $2,500,000, Landmark II has received $350,000, Warwick has received $250,000, Auginco has received $75,000, Morey has received $100,000, Leeds has received $100,000 and Brag has received $100,000; 10. the next $2,450,000 - to the members of the Interim Funding Group on a pro rata basis as described in (c) above; 11. the next $200,000 - to Stormo and Pettyjohn on a pro rata basis as described in (d) above; 12. the next $50,000 - to BAB; 13. the next $50,000 - to BKB and RDB on a pro rata basis as described in (f) above; 14. the next $300,000 - to ASRA and IPI on a pro rata basis as described in (g) above; 15. the next $74,500 - to PureCycle; 16. the next $101,000 - to Apex, EV Fund, and PFund on a pro rata basis with 66 2/3% of all funds available for distribution going to Apex, 20% going to EV Fund, AND 13 1/3% going to PFund until Apex has received $67,333.67, EV Fund has received $20,200.00, and PFund has received $13,466.33; 17. the next $1,150,000 - to Apex, EV Fund, and PFund on a pro rata basis with 66 2/3% of all funds available for distribution going to Apex, 20% going to EV Fund, and 13 1/3% going to PFund until Apex has received $766,670.50, EV Fund has received $230,000.00, and PFund has received $153,329.50; 18. the next $2,850,000 - to the August 1992 Funding Group on a pro rata basis as described in (i) above until the Apex Group has received $2,050,290, Landmark II has received $286,995, Warwick has received $204,915, Auginco has received $61,560, Morey has received $82,080, Leeds has received $82,080 and Brag has received $82,080. The remaining up to $8,990,000 of proceeds shall be divided 50% to the August 1992 Funding Group and the other parties described in (t) below in the proportions described in (t) below and the remaining 50% shall be divided equally among (i) INCO, (ii) the members of the Interim Funding Group, and (iii) the members of the PureCycle Funding Group and paid on an equal basis with no group or party having priority over the other as set forth in the following example: 19. (i) $1,498,334 - to INCO; a. $1,498,334 - to the members of the Interim Funding Group on a pro rata basis with 20% of all funds available for distribution going to INCO, 40% going to Landmark I, and 40% going to Owens until INCO has received $299,667 and Landmark I and Owens have each received $599,333; b. $1,498,333 - to the members of the PureCycle Funding Group and the then current holders of PureCycle Series A Convertible Preferred Stock on a pro rata basis with 22.69% of all funds available for distribution going to ASRA, 22.69% going to IPI, 34.26% going to Apex, 10.28% going to EV Fund, 6.85% going to PFund and 3.23% going to the then current holders of PureCycle Series A Convertible Preferred Stock until ASRA and IPI have each received $339,966.50, Apex has received $513,269.23, EV Fund has received $153,980.00, PFund has received $102,650.77, and the then current holders of PureCycle Series A Convertible Preferred Stock have received $48,500; 20. (i) $4,495,000 - to the August 1992 Funding Group, the then current holders of PureCycle Series A Convertible Preferred Stock, and PureCycle on a pro rata basis with 10% of all funds available for distribution going to the Apex Group, 9.19% going to Landmark II, 6.56% going to Warwick, .3% going to Auginco, .4% going to Morey, .4% going to Leeds, .4% going to Brag, and 70.11% going to the then current holders of PureCycle Series A Convertible Preferred Stock, and 2.64% going to PureCycle until the Apex Group has received $449,710, Landmark II has received $413,005, Warwick has received $295,085, Auginco has received $13,440, Morey has received $17,920, Leeds has received $17,920, Brag has received $17,920, the then current holders of PureCycle Series A Convertible Preferred Stock have received $3,151,500, and PureCycle has received $118,500. Upon payment to a party hereto of the amounts specified in Section 2.1, the Rangeview Profit Agreements applicable to such party and this Agreement shall be terminated with respect to such party and such party shall not have any further interest in the Rangeview Profit Agreements, this Agreement, or the projects related to the Export Water contemplated thereby and hereby. Nothing in the preceding sentence shall affect the rights of the State under the Amended and Restated Lease. (2) As of the Effective Date, each Rangeview Bondholder (other than PureCycle) hereby sells, transfers and assigns unto PureCycle all right, title and interest free and clear of all liens, security interests, and other encumbrances in and to Rangeview Bonds in the principal amount set forth opposite such Rangeview Bondholder's name in Recital E hereof, plus all accrued interest thereon. Each Rangeview Bondholder further agrees to execute any further documentation (such as an assignment form with the signature guaranteed under the Securities Transfer Agents Medallion Program) which may be required to effectively transfer title and record ownership in such Rangeview Bonds to PureCycle. Upon execution of this Agreement, each Rangeview Bondholder (other than PureCycle) shall deliver such bondholders' Rangeview Bonds and any assignments requested pursuant to this section to PureCycle to be delivered to the Escrow Agent (as that term is defined in the Settlement Agreement) to be held pursuant to the terms of the Settlement Agreement. (3) Sections 2.1 and 2.2 amend and supersede Sections 6.02 and 6.05 of the Commercialization Agreement, Section 5 of the Interim Funding Agreement, Section 1.3 of the Investment Agreements, Section 4 of the Funding Agreement, and Exhibit B to the Stock Purchase Agreement in their entirety. In addition, Section 1.2 supersedes Section 4 of the Assignment Agreement. Any reference to Sections 6.02 or 6.05 in the Commercialization Agreement, Section 5 in the Interim Funding Agreement, Section 1.3 in the Investment Agreements, Section 4 in the Funding Agreement, and Exhibit B in the Stock Purchase Agreement shall hereafter be deemed to be a reference to Sections 2.1 and 2.2 of this Agreement. Except as specifically set forth herein, the Rangeview Profit Agreements remain in full force and effect. The parties acknowledge that OAR represents that it is not a party to the Commercialization Agreement or the Rangeview Profit Agreements, nor shall it be deemed a party to such agreements as a result of executing this Agreement. OAR assumes no obligations under any agreements to which it is not a party by entering into this Agreement. OAR's rights to distributions under Section 2.1(a) arise out of this Agreement, the OAR Option Agreement and the Settlement Agreement. (4) For purposes of this Agreement, the term "Gross Proceeds" shall mean the total funds received from the sale of Export Water to one or more Export Water Purchasers for Cash Equivalent (as defined Section 4.1 hereof) reduced only by the amount of the Obligations to the State (as defined in Section 4.1). The term "Gross Revenues" as defined and used in the Amended and Restated Lease shall control the determination of the Obligations to the State but otherwise shall have no bearing and effect on the definition of Gross Proceeds used in this Agreement. In the case of an installment sale of the Export Water, Gross Proceeds shall be deemed to be received only to the extent of actual funds (but not including negotiable promissory notes evidencing such installment sale) deposited in the trust account maintained by DGS as provided in Section 2.1 hereof. The parties hereto agree that, notwithstanding the definition of "Gross Revenues" as set forth in Article I and Section 7.2(c) of the Amended and Restated Lease, no costs (other than the Obligations to the State) directly or indirectly incurred in connection with the withdrawal, treatment, delivery, marketing or sale of the Export Water shall be deducted from the Gross Proceeds so long as the amount set forth in Section 2.1 remains unpaid. 101. PureCycle Series A Convertible Preferred Stock. Each Series A Stockholder acknowledges that the remaining adjusted purchase price of the Rangeview Bonds pursuant to the Option Agreements (as that term is defined in the Certificate of Designations, Powers, Preferences and Rights of Series A Convertible Preferred Stock filed by PureCycle with the Secretary of State of Delaware on May 25, 1994 (the "Series A Certificate")) with PPI or Purchase Price Interest (as those terms are defined in the Series A Certificate) is $9,110,232 and that PPI is $1,026,232. Each Series A Stockholder agrees that such Series A Stockholder will not transfer the shares of PureCycle Series A Convertible Preferred Stock owned by such Series A Stockholder until the transferee of such shares acknowledges that PPI is $1,026,232. Each Series A Stockholder further agrees to return the stock certificate(s) representing such stockholder's PureCycle Series A Convertible Preferred Stock to PureCycle to be legended with a reference to the foregoing agreements. 102. Conditions on Sale of Export Water; Lease Amendments. (1) The parties, including PureCycle, agree that until Gross Proceeds in an amount of $8,000,000 have been deposited in the trust account with DGS and have been distributed by DGS in accordance with Section 2.1(a) hereof and all payments then due and payable to the State for royalties as provided under the Amended and Restated Lease have been paid in full ("Obligations to the State"), the Export Water shall be sold or otherwise disposed of to one or more purchasers only for cash, cashier's check, certified funds, wire transfer or negotiable promissory note(s) adequately secured by a perfected security interest in the Export Water sold to cover any amount owed under such note(s) (referred to herein collectively as "Cash Equivalent") in either (i) a lump sum payment or (ii) installment payments providing for a down payment of not less than the Obligations to the State then due with respect to the sales, plus (a) twenty percent (20%) of the total contract price or (b) twenty percent (20%) of $8,000,000, if less than the contract price, with the final payment being required to be made no later than five (5) years after the closing date of such sale. (2) PureCycle further agrees that it will not sell or otherwise dispose of the Export Water in a transaction where the price received per acre foot for the portion of the Export Water sold or otherwise disposed of would result in Gross Proceeds of less than $8,000,000, if all of the Export Water were sold at that price. (3) Pursuant to the Export Water Deed, the District has agreed that it shall not enter into any amendments to the Amended and Restated Lease that affect PureCycle's rights and/or obligations under the Export Water Deed without PureCycle's prior written approval. PureCycle agrees that it will not approve of any amendments to the Amended and Restated Lease which would adversely affect the right of the parties to receive the payments contemplated pursuant to Section 2.1(a) of this Agreement. (4) PureCycle shall provide the parties in Section 2.1(a) with written notice of and access to contemplated sales documents for the sale or other disposition of the Export Water ten (10) days in advance of such sale or other disposition. (5) The provisions of this Section 4 may be amended or waived only with the consent of all of the parties entitled to payment of the proceeds to be paid pursuant to Section 2.1(a). 103. Records. PureCycle shall prepare and keep full, complete, and proper books, records and accounts of all Export Water sales or dispositions and shall document such transactions. Said books, records, and accounts shall be open at all reasonable times, upon fourteen (14) days' prior written notice, to the inspection of a designated representative of the parties hereto other than PureCycle (collectively, the "Investors") for the purpose of verifying the accuracy of payments made pursuant to Section 2.1. The designated representative may, at the Investors' expense, copy, extract and/or audit all or a portion of said books, records, and accounts for a period of up to five (5) years after the date such books, records and accounts are made. Any deficiency in the payment of amounts due pursuant to Section 2.1 determined upon such inspection or audit shall be immediately due and payable by PureCycle, together with interest at the prime rate specified in the Wall Street Journal, Western Edition (the "Prime Rate"), plus two percent (2%) from the date or dates such amounts should have been paid. 104. Right to Cure. In the event PureCycle takes or fails to take any action which, unless cured, would result in a termination of PureCycle's rights to any portion of the Export Water, PureCycle shall provide written notice to a designated representative of the Investors within five (5) days following the occurrence of any such action or failure, and the Investors, or any of them, may, without prejudice to any other remedies such Investors may have, cure such action or failure on PureCycle's behalf and shall be entitled to reimbursement from PureCycle for any amount paid to cure such action or failure plus all costs and damages associated therewith and interest at the Prime Rate, plus two percent (2%), from the date or dates such amounts were paid. 105. No Agency, Partnership or Joint Venture. The parties hereto are independent contractors and nothing contained in this Agreement shall be deemed to create the relationship of partners, joint venturers, or of principal and agent, or of any association or relationship between the parties other than as expressly provided in this Agreement. Each party acknowledges that it does not have, and it shall not make representations to any third party, either directly or indirectly, indicating that it has any authority to act for or on behalf of any other party or to obligate them in any way whatsoever. 106. Press Releases. (1) Each party shall limit any comments to the public or the press regarding this Agreement to the terms and benefits of the Settlement Agreement. (2) This Section 8 shall not, however, be construed to (i) prohibit disclosure to the Denver District Court as contemplated by the Settlement Agreement, (ii) prohibit any party from making any disclosures which it is required to make by law, rule, regulation or court order (including applicable securities laws) or which it is advised by counsel to make to comply with such law, rule, regulation or court order or from filing this Agreement with, or disclosing the terms of this Agreement to, any institutional lender to such party, and (iii) prohibit any party from disclosing to its partners, investors and broker/dealers such terms of this transaction as would customarily be disclosed to them in connection with transactions of the type contemplated hereby. 107. Release. Upon execution of this Agreement, each party to this agreement who is not a party to the Settlement Agreement shall execute and deliver to PureCycle a release in the form of Exhibit A attached hereto. Such releases shall be delivered by PureCycle to the Escrow Agent to be held pursuant to the terms of the Settlement Agreement. 108. Brokers. Each party represents to the others that it has not engaged a broker in connection with this transaction, and no brokerage fees are payable by any party on account hereof. 109. Expenses. All legal and other costs and expenses incurred in connection with the preparation of this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such expenses. 110. Successors and Assigns. The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. 111. Amendment. This Agreement may be amended only by a writing signed by the parties affected by such amendment. 112. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall together constitute one and the same instrument. 113. Governing Law. With respect to relationships among PureCycle, OAR, Riebesell, and the State, this Agreement shall be governed by Colorado law. With respect to relationships between PureCycle and each other party, the governing law provision of the applicable Rangeview Profit Agreement shall govern. 114. Attorneys' Fees. In the event any party finds it necessary to employ legal counsel or to bring an action at law or other proceeding against another party to enforce any of the terms, covenants, or conditions of this Agreement, the party prevailing in any such action or other proceeding shall be paid all reasonable attorneys' fees by such other party, and in the event any judgment is secured by such prevailing party, all such attorneys' fees, as determined by a court and not by jury, shall be included in any such judgment. 115. Recitals. The parties acknowledge that the State represents that it is not a party to the Rangeview Profit Agreements, the Commercialization Agreement or the Rangeview Option Agreements except the April __, 1996 amendment to the CWC Option Agreement and that the State represents that it does not have knowledge as to the accuracy of the Recitals except with respect to the last two sentences of Recital A, the last sentence of Recital B and Recitals F-H. 116. State Obligations. The parties acknowledge and agree that the State is a party to this Agreement merely to facilitate the contemplated amendments and to receive the payments under Sections 2.1(a) and (b) and that the State assumes no obligations under any agreements to which it is not a party. 117. Inconsistencies. To the extent any provisions of this Agreement are inconsistent with the provisions of the Commercialization Agreement or the Rangeview Profit Agreements, the terms of this Agreement shall control. 118. Indemnity. PureCycle, its successors and assigns, shall indemnify, defend and hold harmless the Investors, their respective officers, directors, shareholders, partners, successors and assigns ("Indemnitees") from and against all claims and costs (including reasonable attorneys' fees) actually incurred by any such Indemnitee as a result of a breach by PureCycle, its successors and assigns, of this Agreement, the Export Water Agreement or the payment of Obligations to the State which results in a nonpayment of Gross Proceeds to the Investors under Section 2.1 of this Agreement when such Gross Proceeds are or were available from the sale or other disposition of Export Water. IN WITNESS WHEREOF, this Comprehensive Amendment Agreement No. 1 has been executed on behalf of each of the parties hereto as of the day and date first above written. INCO SECURITIES CORPORATION, a Delaware corporation By: Title: PURE CYCLE CORPORATION, a Delaware corporation By: Thomas P. Clark, President LANDMARK WATER PARTNERS, L.P. By: COMPTON CAPITAL, LTD., its general partner By: Earl A. Samson, III, President LANDMARK WATER PARTNERS II, L.P., a Delaware limited partnership By: COMPTON CAPITAL PARTNERS, INC., its general partner By: Earl A. Samson, III, President WARWICK PARTNERS, L.P., a Delaware limited partnership By: PROVIDENCE PARTNERS, L.P., its general partner By: PACIFIC EQUITY LIMITED, its general partner By: Herbert A. Denton, authorized officer AUGINCO, a Colorado general partnership By: Harrison H. Augur, general partner Gregory M. Morey Amy Leeds Anders C. Brag Newell Augur, Jr. Bill Peterson Stuart Sundlun Alan C. Stormo D.W. Pettyjohn Beverly A. Beardslee Robert Douglas Beardslee Bradley Kent Beardslee APEX INVESTMENT FUND II, L.P., a Delaware limited partnership By: Apex Management Partnership, L.P., General Partner of Apex Investment Fund II, L.P. By: George Middlemas, General Partner THE ENVIRONMENTAL VENTURE FUND, L.P., a Delaware limited partnership By: Environmental Venture Management, L.P., General Partner of The Environmental Venture Fund, L.P. By: First Analysis Corporation, General Partner of Environmental Venture Management, L.P. By: Bret Maxwell, General Partner THE ENVIRONMENTAL PRIVATE EQUITY FUND II, L.P., a Delaware limited partnership By: Environmental Private Equity Management II, L.P., General Partner of The Environmental Private Equity Fund II, L.P. By: First Analysis EPEF Management II, L.P., General Partner of Environmental Private Equity Management II, L.P. By: First Analysis Corporation, General Partner of First Analysis EPEF Management II, L.P. By: Bret Maxwell, General Partner PRODUCTIVITY FUND II, L.P., a Delaware limited partnership By: First Analysis Management Company II, L.P., General Partner of Productivity Fund II, L.P. By: First Analysis Corporation, General Partner of First Analysis Management Company II, L.P. By: Bret Maxwell, General Partner PROACTIVE PARTNERS, L.P., a California limited partnership By: Charles McGettigan, General Partner ASRA CORPORATION, a Delaware corporation By: Title: INTERNATIONAL PROPERTIES, INC., a Delaware corporation By: Title: OAR, Incorporated, a Colorado corporation By: Willard G. Owens, President Willard G. Owens H. F. Riebesell, Jr. STATE OF COLORADO STATE BOARD OF LAND COMMISSIONERS President Engineer Register Approved as to form: GALE A. NORTON Attorney General of the State of Colorado STEPHEN K. ERKENBRACK Chief Deputy Attorney General TIMOTHY M. TYMKOVICH Solicitor General Richard A. Westfall Special Deputy Solicitor General For purposes of Section 2 only: DAVIS GRAHAM & STUBBS LLP By: Wanda J. Abel, Partner EXHIBIT A TO DOCUMENT 10.7 ========================== Exhibit A RELEASE In consideration for ten dollars ($10.00) and other consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned on behalf of themselves, their parents, subsidiaries, affiliates and all other related companies and their successors, and assigns, fully, finally and unequivocally release the Colorado State Board of Land Commissioners, the past and present Land Board Commissioners, the State of Colorado, and Rangeview Metropolitan District, and their directors, employees, agents, attorneys, advisors, successors, and assigns, from any and all claims, controversies, actions, causes of actions, suits, demands, obligations, debts, losses, damages, or liabilities which may exist in law or equity, whether known or unknown, fixed or contingent, asserted or unasserted, presently existing or arising in the future, including, but not limited to claims which are or could have been raised based on acts or omissions to date, of any kind and nature whatsoever arising out of or in any way connected with (1) any matters that were or could have been raised in the lawsuit pending in the District Court for the City and County of Denver, styled Apex Investment Fund II L.P., et al. v. Colorado State Board of Land commissioners, et al., Case No. 94-CV-5405 (the "Litigation"), and (2) any matters arising out of or in any way related to the Lease between the Land Board and Rangeview Metropolitan District and its predecessor OAR, Incorporated, the Rangeview Notes and Bonds, the Lowry Range, and the Rangeview Metropolitan District. This Release shall be effective on the Effective Date of the Settlement Agreement and Mutual Release dated ____________________ between the Land Board and the other parties to the Litigation. Dated:____________________ By: Its: RELEASE In consideration for ten dollars ($10.00) and other consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned on behalf of themselves, their parents, subsidiaries, affiliates and all other related companies and their successors, and assigns, fully, finally and unequivocally release the Colorado State Board of Land Commissioners, the past and present Land Board Commissioners, the State of Colorado, and Rangeview Metropolitan District, and their past and present directors, employees, agents, attorneys, advisors, successors, and assigns, from any and all claims, controversies, actions, causes of actions, suits, demands, obligations, debts, losses, damages, or liabilities which may exist in law or equity, whether known or unknown, fixed or contingent, asserted or unasserted, presently existing or arising in the future, including, but not limited to claims which are or could have been raised based on acts or omissions to date, of any kind and nature whatsoever arising out of or in any way connected with (1) any matters that were or could have been raised in the lawsuit pending in the District Court for the City and County of Denver, styled Apex Investment Fund II L.P., et al. v. Colorado State Board of Land commissioners, et al., Case No. 94-CV-5405 (the "Litigation"), and (2) any matters arising out of or in any way related to the Lease between the Land Board and Rangeview Metropolitan District and its predecessor OAR, Incorporated, the Rangeview Notes and Bonds, the Lowry Range, and the Rangeview Metropolitan District. This Release shall be effective on the Effective Date of the Settlement Agreement and Mutual Release dated ____________________ between the Land Board and the other parties to the Litigation. Dated:____________________ By: Its: -----END PRIVACY-ENHANCED MESSAGE-----