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<SEC-DOCUMENT>0000950123-10-107795.txt : 20101122
<SEC-HEADER>0000950123-10-107795.hdr.sgml : 20101122
<ACCEPTANCE-DATETIME>20101122160131
ACCESSION NUMBER:		0000950123-10-107795
CONFORMED SUBMISSION TYPE:	PRE 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20110111
FILED AS OF DATE:		20101122
DATE AS OF CHANGE:		20101122

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PURE CYCLE CORP
		CENTRAL INDEX KEY:			0000276720
		STANDARD INDUSTRIAL CLASSIFICATION:	WATER SUPPLY [4941]
		IRS NUMBER:				840705083
		STATE OF INCORPORATION:			CO
		FISCAL YEAR END:			0831

	FILING VALUES:
		FORM TYPE:		PRE 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-08814
		FILM NUMBER:		101208776

	BUSINESS ADDRESS:	
		STREET 1:		500 E 8TH AVE
		CITY:			DENVER
		STATE:			CO
		ZIP:			80203
		BUSINESS PHONE:		3032923456

	MAIL ADDRESS:	
		STREET 1:		500 E 8TH AVE
		CITY:			DENVER
		STATE:			CO
		ZIP:			80203
</SEC-HEADER>
<DOCUMENT>
<TYPE>PRE 14A
<SEQUENCE>1
<FILENAME>c08843pre14a.htm
<DESCRIPTION>PRELIMINARY PROXY STATEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>Preliminary Proxy Statement</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="center" style="font-size: 14pt; margin-top: 6pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>SCHEDULE 14A</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 12pt">Proxy Statement Pursuant to Section&nbsp;14(a) of the Securities<BR>
Exchange Act of 1934 (Amendment No. <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>)</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Filed by the Registrant <FONT face="wingdings" size="2">&#254;</FONT><BR>
Filed by a Party other than the Registrant <FONT face="wingdings" size="2">&#111;</FONT>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check the appropriate box:

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#254;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Preliminary Proxy Statement</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD><B>Confidential, for Use of the Commission Only (as permitted by Rule&nbsp;14a-</B><B>6(e)(2)</B><B>)</B></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Definitive Proxy Statement</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Definitive Additional Materials</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Soliciting Material Pursuant to &#167;240.14a-12</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt">&nbsp;</DIV>

<DIV align="center">
PURE CYCLE CORPORATION</DIV>
<DIV align="center" style="font-size: 10pt"><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
(Name of Registrant as Specified In Its Charter)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">&nbsp;</DIV>

<DIV align="center">
</DIV>
<DIV align="center" style="font-size: 10pt"><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payment of Filing Fee (Check the appropriate box):

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#254;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>No fee required.</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(1) and 0-11.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(1)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Title of each class of securities to which transaction applies:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(2)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Aggregate number of securities to which transaction applies:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(3)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule&nbsp;0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(4)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Proposed maximum aggregate value of transaction:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(5)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Total fee paid:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Fee paid previously with preliminary materials.</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="1%" nowrap align="left" valign="top">
<FONT face="wingdings" size="2">&#111;</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD>Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(1)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Amount Previously Paid:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(2)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Form, Schedule or Registration Statement No.:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(3)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Filing Party:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">(4)</TD>
<TD width="1%">&nbsp;</TD>
<TD>Date Filed:</TD>
</TR>

<TR>
<TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
<TD width="2%">&nbsp;</TD>
<TD width="3%">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD style="font-size: 10pt"><DIV align="left">

</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="2%" style="background: transparent">&nbsp;</TD>
<TD width="3%" nowrap align="left">&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">NOTICE OF ANNUAL MEETING OF SHAREHOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">ABOUT THE MEETING</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">DIRECTORS AND EXECUTIVE OFFICERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">CORPORATE GOVERNANCE AND BOARD MATTERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">EXECUTIVE COMPENSATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">REPORT OF THE AUDIT COMMITTEE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">ELECTION OF DIRECTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">ISSUANCE OF SHARES OF COMMON STOCK UPON CONVERSION OF CONVERTIBLE NEGOTIABLE PROMISSORY NOTE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">ACTION TO BE TAKEN UNDER THE PROXY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#012">OTHER INFORMATION</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>





<DIV align="center" style="font-size: 10pt; margin-top: 10pt">PURE CYCLE CORPORATION<BR>
500 E. 8<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Ave, Suite&nbsp;201<BR>
Denver, CO 80203<BR>
(303)&nbsp;292-3456
</DIV>
<!-- link1 "NOTICE OF ANNUAL MEETING OF SHAREHOLDERS" -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt">NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 0pt">
To be held on January&nbsp;11, 2011
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">TO PURE CYCLE&#146;S SHAREHOLDERS:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">You are cordially invited to attend the annual meeting of the shareholders of Pure Cycle
Corporation (the &#147;Company&#148;). The meeting will be held at 1550 Seventeenth Street, Suite&nbsp;500,
Denver, Colorado 80202, at the offices of Davis Graham &#038; Stubbs LLP, on January&nbsp;11, 2011 at
2:00 p.m. Mountain Time for the following purposes:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">To elect a board of seven directors to serve until the next annual meeting of
shareholders, or until their successors have been duly elected and qualified;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">To ratify the appointment of GHP Horwath, P.C. as the Company&#146;s independent registered
public accounting firm for the 2011 fiscal year;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">To approve the issuance of shares of common stock upon conversion of a $5.2&nbsp;million
Convertible Negotiable Promissory Note payable by the Company to PAR Investment Partners,
L.P., a 5% or greater shareholder of the Company; and</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">To transact such other business as may properly come before the meeting or any
adjournment(s) or postponement(s) thereof.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Only shareholders of record as of 5:00 p.m. Mountain Time on November&nbsp;22, 2010 will be entitled to
notice of or to vote at this meeting or any adjournment(s) thereof.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Whether or not you plan to attend, please vote promptly by following the instructions on the
Important Notice Regarding the Availability of Proxy Materials or, if you requested a printed set
of proxy materials, by completing, signing and dating the enclosed proxy and returning it in the
accompanying postage-paid envelope. Shareholders who attend the meeting may revoke their proxies
and vote in person if they so desire.</B>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">BY ORDER OF THE BOARD OF DIRECTORS<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Scott E. Lehman
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Scott E. Lehman, Secretary&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">December&nbsp;2, 2010

</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PURE CYCLE CORPORATION<BR>
500 E. 8</B><B><SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Ave, Suite&nbsp;201<BR>
Denver, CO 80203<BR>
(303)&nbsp;292-3456</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PROXY STATEMENT FOR THE<BR>
ANNUAL MEETING OF SHAREHOLDERS<BR>
To be held on January&nbsp;11, 2011</B>
</DIV>

<!-- link1 "ABOUT THE MEETING" -->
<DIV align="left"><A NAME="001"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>ABOUT THE MEETING</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">This proxy statement is being made available to shareholders in connection with the solicitation of
proxies by the board of directors of PURE CYCLE CORPORATION (the &#147;Company&#148;) for use at the annual
meeting of shareholders of the Company (the &#147;Meeting&#148;) to be held at 1550 Seventeenth Street,
Suite&nbsp;500, Denver, Colorado 80202, at the offices of Davis Graham &#038; Stubbs LLP on January&nbsp;11, 2011
at 2:00 p.m. Mountain Time or at any adjournment thereof. The cost of soliciting proxies is being
paid by the Company. The Company&#146;s officers, directors, and other regular employees may, without
additional compensation, solicit proxies personally or by other appropriate means.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Why did I receive a one-page notice in the mail regarding the Internet availability of proxy
materials instead of a full set of proxy materials?</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Pursuant to the rules adopted by the Securities and Exchange Commission (&#147;SEC&#148;), the Company is
required to provide access to its proxy materials via the Internet. Accordingly, the Company
furnished proxy materials to its shareholders primarily via the Internet, rather than mailing these
materials to each shareholder. On or about December&nbsp;2, 2010, the Company mailed to each
shareholder of record and beneficial owners (other than those who previously requested electronic
delivery) an Important Notice Regarding the Availability of Proxy Materials.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>How can I get access to the proxy materials?</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Instructions on how to access the proxy materials, including this proxy statement and the Company&#146;s
Annual Report on Form 10-K, on-line may be found in the Important Notice Regarding the Availability
of Proxy Materials, as well as instructions to request a printed set of such materials. You may
also request the proxy materials by contacting the Company&#146;s transfer agent: Computershare Trust
Company, Inc., 350 Indiana Street, Suite #800, Golden, Colorado 80401, telephone: (303)&nbsp;262-0600
or 1-800-962-4284, or by writing the Company&#146;s Secretary at the Company&#146;s address set forth above.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">If you would like to receive the Important Notice Regarding the Availability of Proxy Materials via
email rather than regular mail in future years, please follow the instructions in the Notice.
Choosing to receive future notices by email will help the Company reduce the costs and
environmental impact of the Company&#146;s shareholder meetings.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>What is the purpose of the Meeting?</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">At the Meeting, shareholders are asked to act upon the matters outlined above in the Notice of
Annual Meeting of Shareholders and as described in this proxy statement. The matters to be
considered are (i)&nbsp;the election of directors, (ii)&nbsp;the ratification of the appointment of the
Company&#146;s independent auditors for the fiscal year ending August&nbsp;31, 2011, (iii)&nbsp;the approval of
the issuance of shares of common stock upon conversion of a $5.2&nbsp;million note payable, and (iv)
such other matters as may properly come before the Meeting. Management will be available to
respond to appropriate questions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Who is entitled to vote?</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Only shareholders of record as of 5:00 p.m. Mountain Time on November&nbsp;22, 2010 (the &#147;Record Date&#148;),
are entitled to vote on matters presented at the Meeting. On the Record Date, there were
22,055,499 shares of the Company&#146;s 1/3 of $.01 par value common stock (&#147;common stock&#148;) issued and
outstanding.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 1 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>What are my voting rights?</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">If you were a shareholder of record on the Record Date you will be entitled to vote all of the
shares you held on the Record Date at the Meeting or any postponements or adjournments thereof. If
your shares are held in an account at a bank, brokerage firm, or other nominee, then you are the
beneficial owner of shares held in &#147;street name.&#148; If you wish to vote in person at the Meeting,
you must obtain a valid proxy from the nominee that holds your shares. Whether you hold shares
directly as the shareholder of record or beneficially in street name, you may direct how your
shares are voted without attending the Meeting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Each outstanding share of the Company&#146;s common stock will be entitled to one vote on each matter
acted upon. There is no cumulative voting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>How do I vote?</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">If you are the shareholder of record, you may vote your shares by following the instructions in the
Important Notice Regarding the Availability of Proxy Materials mailed on or about December&nbsp;2, 2010
or, if you have received a printed set of the proxy materials, you may vote your shares by
completing, signing and dating the enclosed proxy card and then mailing it to the Company&#146;s
transfer agent in the pre-addressed envelope provided. You may also vote your shares by calling
the transfer agent at the number listed on the proxy card. If your shares are held beneficially in
street name, you may vote your shares by following the instructions provided by your broker.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Can I change or revoke my vote?</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">A proxy may be revoked by a shareholder any time prior to the exercise thereof by written notice to
the Secretary of the Company, by submission of another proxy bearing a later date or by attending
the Meeting and voting in person.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Is my vote confidential?</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Proxy instructions, ballots and voting tabulations that identify individual shareholders are
handled in a manner that protects your voting privacy. Your vote will not be disclosed within the
Company or to third parties, except: (1)&nbsp;as necessary to meet applicable legal requirements, (2)&nbsp;to
allow for the tabulation of votes and certification of the vote, and (3)&nbsp;to facilitate a successful
proxy solicitation. Occasionally shareholders provide written comments on their proxy cards, which
are forwarded to management of the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Will my shares held in street name be voted if I do not provide my proxy?</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">If you hold your shares through a bank, broker, or other nominee, your shares must be voted by the
nominee. If you do not provide voting instructions, under the rules of the securities exchanges,
the nominee&#146;s discretionary authority to vote your shares is limited to &#147;routine&#148; matters.
Proposal 1 for the election of directors and proposal 3 for the conversion of the promissory note
are not considered routine matters for this purpose, so if you do not provide your proxy, your
shares will not be voted at the Meeting with respect to the election of directors or proposal 3.
In this case your shares will be treated as &#147;broker non-votes&#148; and will not be counted for purposes
of determining the election of directors or whether proposal 3 has been approved.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">A &#147;broker non-vote&#148; occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power with respect to
that item and has not received voting instructions from the beneficial owner.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>What is a quorum?</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The presence, in person or by proxy, of the holders of a majority of the outstanding shares of
common stock constitutes a quorum at the Meeting for the election of directors and for the other
proposals. Abstentions and broker non-votes are counted for the purposes of determining whether a
quorum is present at the Meeting.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>How many votes are required to approve the proposals?</I></B>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>Election of Directors &#151; </I>The election of directors requires the affirmative vote of a
plurality of the votes cast by shares represented in person or by proxy and entitled to vote
for the election of directors. This means that the nominees receiving the most votes from
those eligible to vote will be elected. You may vote &#147;FOR&#148; all of the nominees or your vote
may be &#147;WITHHELD&#148; with respect to one or more of the nominees; however, a &#147;withheld&#148; vote or a
broker non-vote (defined above) will have no effect on the outcome of the election.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>Ratification of auditors, conversion of note payable to common stock and other matters </I>-
The number of votes cast in favor of the proposal at the Meeting must exceed the number of
votes cast against the proposal for the approval of proposals 2 and 3 and other matters. For
proposals 2 and 3 and any other business matters to be voted on, you may vote &#147;FOR,&#148;
&#147;AGAINST,&#148; or you may &#147;ABSTAIN.&#148; Abstentions and broker non-votes will not be counted as
votes for or against a proposal and, therefore, have no effect on the vote.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">If no specification is made, then the shares will be voted &#147;FOR&#148; the directors nominated by the
board of directors and &#147;FOR&#148; proposals 2 and 3 and otherwise, in accordance with the
recommendations of the board of directors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Does the Company expect there to be any additional matters presented at the Meeting?</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Other than the items of business described in this proxy, the Company is not aware of any other
business to be acted upon at the Meeting. If you grant a proxy, the persons named as
proxy-holders, Mark W. Harding and Harrison H. Augur, have the discretion to vote your shares on
any additional matter properly presented for a vote at the Meeting. If for any unforeseen reason
any of the director nominees are not available for election at the date of the Meeting, the named
proxy-holders will vote your shares for such other candidates as may be nominated by the board.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>When will the results of the voting being announced?</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company will announce preliminary results at the Meeting and will publish final results in a
current report on Form 8-K to be filed within 4&nbsp;days of the date of the Meeting.
</DIV>
<!-- link1 "VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF" -->
<DIV align="left"><A NAME="002"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The following table sets forth information as of November&nbsp;22, 2010, as to the beneficial ownership
of shares of the Company&#146;s common stock by (i)&nbsp;each person (or group of affiliated persons) known
to the Company to own beneficially 5% or more of the common stock, (ii)&nbsp;each director of the
Company and each nominee for director, (iii)&nbsp;each executive officer and (iv)&nbsp;all directors and
executive officers as a group. All information is based on information filed by such persons with
the SEC and other information provided by such persons to the Company. Except as otherwise
indicated, the Company believes that each of the beneficial owners listed has sole investment and
voting power with respect to such shares. On November&nbsp;22, 2010, there were 22,055,499 shares
outstanding. Shares not outstanding but deemed beneficially owned by virtue of the right of a
person to acquire shares within 60&nbsp;days of November&nbsp;22, 2010, are included as outstanding and
beneficially owned for that person, but are not treated as outstanding for the purpose of computing
the percentage ownership of any other person.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amount and nature of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name and address of beneficial owner</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">beneficial ownership</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">class</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark W. Harding **</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">727,243</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Harrison H. Augur **</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">122,384</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Arthur G.
Epker III - One International Place, Suite&nbsp;2401, Boston, MA 02110</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">3</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Richard L. Guido **</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">4</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Peter C. Howell **</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">5</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">George M. Middlemas - 225 W. Washington, #1500, Chicago, IL 60606</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">6</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">H. Hunter White - 301 St. Charles Ave., 3rd Floor, New Orleans, LA 70130</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3,000,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">7</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>All officers and directors as a group (7 persons)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>3,920,127 </I></TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">8</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17.7</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PAR Capital Management, Inc. / PAR Investment Partners, L.P. / PAR Group, L.P.
One International Place, Suite&nbsp;2401, Boston, MA 02110</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4,000,871</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">9</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">High Plains A&#038;M, LLC - 301 St. Charles Ave., 3rd Floor, New Orleans, LA 70130</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3,000,000</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">10</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wellington Management Company, LLP - 75 State Street, Boston, MA 02109</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,158,195</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">11</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trigran Investments, Inc. / Trigran Investments, L.P.
630 Dundee Road, Suite&nbsp;230, Northbrook, IL 60062</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,923,944</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">12</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.7</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">RMB Capital Management, LLC - 115 S. LaSalle Street, 34th Floor, Chicago, IL 60603</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,442,262</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">13</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tealwood Asset Management, Inc. - 80 South 8th Street, Suite&nbsp;1225, Minneapolis, MN
55402</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,367,579</TD>
    <TD nowrap> <SUP style="font-size: 85%; vertical-align: text-top">14</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.2</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Less than 1%</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Address is the Company&#146;s address: 500 E. 8th Ave, Suite&nbsp;201, Denver, CO 80203</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">1.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes 210,000 shares of common stock held by SMA Investments, LLLP, a limited liability
limited partnership controlled by Mr.&nbsp;Harding.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">2.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes 20,000 shares purchasable by Mr.&nbsp;Augur under currently exercisable options.
Includes 10,000 shares of common stock held by Patience Partners, L.P., a limited partnership
in which a foundation controlled by Mr.&nbsp;Augur is a 60% limited partner and Patience Partners
LLC is a 40% general partner. Patience Partners LLC is a limited liability company in which
Mr.&nbsp;Augur owns a 50% membership interest. Includes 46,111 shares of common stock held by
Auginco, a Colorado partnership, which is owned 50% by Mr.&nbsp;Augur and 50% by his wife.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">3.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes 12,500 shares purchasable by Mr.&nbsp;Epker under currently exercisable options.
Excludes 4,000,871 shares of common stock held directly by PAR Investment Partners, L.P.
(&#147;PIP&#148;). PAR Capital Management, Inc. (&#147;PCM&#148;), as the general partner of PAR Group, L.P.
(&#147;PGL&#148;), which is the general partner of PIP, has investment discretion and voting control
over shares held by PIP. No shareholder, director, officer or employee of PCM has beneficial
ownership (within the meaning of Rule&nbsp;13d-3 promulgated under the Securities Exchange Act of
1934 (the &#147;Exchange Act&#148;)) of any shares held by PIP. The shares held by PIP are part of a
portfolio managed by Mr.&nbsp;Epker. As an officer of PCM, Mr.&nbsp;Epker has the authority to trade
the securities held by PIP, however, Mr.&nbsp;Epker disclaims beneficial ownership of the shares
held by PIP.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">4.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes 20,000 shares purchasable by Mr.&nbsp;Guido under currently exercisable options.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">5.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes 17,500 shares purchasable by Mr.&nbsp;Howell under currently exercisable options.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">6.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes 20,000 shares purchasable by Mr.&nbsp;Middlemas under currently exercisable options.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">7.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">By reason of his status as a member and manager of High Plains A&#038;M, LLC, (&#147;HP A&#038;M&#148;), Mr.
White has voting authority and investment power over the 3,000,000 shares issued to HP A&#038;M.
Mr.&nbsp;White disclaims beneficial ownership of the shares held by HP A&#038;M except to the extent of
his pecuniary interest therein, which is approximately 66% or approximately 2,000,000 shares
of common stock. HP A&#038;M has pledged 2,250,000 of its shares of common stock. Mr.&nbsp;White&#146;s
interest in the shares pledged would equate to a pledge of approximately 1,500,000 of the
shares in which he claims pecuniary interest.</DIV></TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 4 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">8.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes the following shares:</DIV></TD>
</TR>

</TABLE>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">210,000 shares held by SMA Investments, LLLP as described in number 1 above,</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">90,000 shares purchasable by directors and officers under exercisable options,
and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">10,000 shares of common stock held by Patience Partners, L.P., and 46,111
shares of common stock held by Auginco, as described in number 2 above.</DIV></TD>
</TR>

</TABLE>
</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">9.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">This disclosure is based on the Schedule&nbsp;13D/A filed by PIP, PGL and PCM on October&nbsp;8, 2010.
PIP owns directly 4,000,871 shares. PGL, through its control of PIP as general partner, has
sole voting and dispositive power with respect to all 4,000,871 shares owned beneficially by
PIP. PCM, through its control of PGL as general partner, has sole voting and dispositive
power with respect to all 4,000,871 shares owned beneficially by PIP.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">10.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">This disclosure is based on a Schedule&nbsp;13G filed by HP A&#038;M on September&nbsp;11, 2006. By reason
of the status of each of H. Hunter White, Mark D. Campbell and M. Walker Baus as a member and
manager of HP A&#038;M, each of them is deemed a beneficial owner of these shares. Each of them
disclaims beneficial ownership of the shares held by HP A&#038;M except to the extent of his
pecuniary interest in the limited liability company.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">11.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">This disclosure is based on a Schedule&nbsp;13G/A filed by Wellington Management Company, LLP
(&#147;Wellington&#148;) on February&nbsp;12, 2010. Wellington, in its capacity as investment adviser, may
be deemed to beneficially own shares owned of record by clients of Wellington. Wellington
shares dispositive power over 2,158,195 shares and voting power over 1,499,695 shares.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">12.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">This disclosure is based on a Schedule&nbsp;13G/A filed by Trigran Investments, Inc. (&#147;TII&#148;),
Trigran Investments, L.P. (&#147;TIL&#148;), Douglas Granat, Lawrence A. Oberman and Steven G. Simon on
February&nbsp;12, 2010. It includes 1,198,640 shares of common stock owned by TIL. By reason of
its role as the general partner of TIL, TII may be considered the beneficial owner of the
shares owned by TIL. By reason of their role as controlling shareholders and sole directors
of TII, each of Douglas Granat, Lawrence A. Oberman and Steven G. Simon may be considered the
beneficial owners of shares beneficially owned by TII.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">13.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">This disclosure is based on a Schedule&nbsp;13G filed by RMB Capital Management, LLC on February
5, 2010.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">14.</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">This disclosure is based on a Schedule&nbsp;13G filed by Tealwood Asset Management, Inc.
(&#147;Tealwood&#148;) on November&nbsp;3, 2010. Tealwood has sole dispositive power over 1,367,579 and
voting power over 1,085,318 shares.</DIV></TD>
</TR>

</TABLE>

<!-- link1 "DIRECTORS AND EXECUTIVE OFFICERS" -->
<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>DIRECTORS AND EXECUTIVE OFFICERS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The following table sets forth the Company&#146;s directors, director nominees, and executive officer
and their positions currently held with the Company.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Age</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Position</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark W. Harding
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, President, CEO and CFO *</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Harrison H. Augur
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">68</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board *</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Arthur G. Epker III
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director *</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Richard L. Guido
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">66</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director *</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Peter C. Howell
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director *</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">George M. Middlemas
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">64</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director *</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">H. Hunter White
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">*</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Director nominee</DIV></TD>
</TR>

</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The principal occupation and other information about each of the individuals listed above,
including the period during which each has served as director or officer can be found beginning on
page 15.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 5 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">
<!-- link1 "CORPORATE GOVERNANCE AND BOARD MATTERS" -->
<DIV align="left"><A NAME="004"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>CORPORATE GOVERNANCE AND BOARD MATTERS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Board Leadership Structure</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company&#146;s board of directors has chosen to separate the positions of Chief Executive
Officer and Chairman of the board. Keeping these positions separate allows the Company&#146;s Chief
Executive Officer to focus on developing and implementing the Company&#146;s business plans and
supervising the Company&#146;s day-to-day operations and allows the Company&#146;s Chairman to lead the board
of directors in its oversight and advisory roles. Because of the many responsibilities of the
board of directors and the significant time and effort required by each of the Chairman and the
Chief Executive Officer to perform their respective duties, the Company believes that having
separate persons in these roles enhances the ability of each to discharge those duties effectively
and, as a corollary, enhances the Company&#146;s prospects for success. The board of directors also
believes that having separate positions provides a clear delineation of responsibilities for each
position and fosters greater accountability of management.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Board Risk and Oversight</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Our board of directors, as a whole and through its committees, has responsibility for the oversight
of risk management. With the oversight of the Company&#146;s full board of directors, the Company&#146;s
executive officer is responsible for the day-to-day management of the material risks the Company
faces. In its oversight role, the board of directors has the responsibility to satisfy itself that
the risk management processes designed and implemented by management are adequate and functioning
as designed. Annually, the board of directors holds strategic planning sessions with management to
discuss strategies, key challenges, risks and opportunities for the Company. This involvement of
the board of directors in setting the Company&#146;s business strategy is a key part of its oversight of
risk management, its assessment of management&#146;s appetite for risk, and its determination of what
constitutes an appropriate level of risk for the Company. Additionally, the board of directors
regularly receives updates from management regarding certain risks the Company faces, including
various operating risks. Management attends meetings of the board of directors and its committees
on a regular basis, and as is otherwise needed, and are available to address any questions or
concerns raised by the board on risk management and any other matters.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Audit Committee is responsible for overseeing risk management of financial matters, financial
reporting, the adequacy of the Company&#146;s risk-related internal controls, internal investigations,
and enterprise risks, generally. The Nominating Committee oversees the Company&#146;s corporate
governance guidelines and governance-related risks, such as board independence, as well as
management and director succession planning. The Compensation Committee oversees risks related to
compensation policies and practices, and is responsible for establishing and maintaining
compensation policies and programs designed to create incentives consistent with the Company&#146;s
business strategy that do not encourage excessive risk-taking.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Board Membership and Director Independence</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Director Independence </I></B><I>- </I>At least a majority of the members of the board and all members of the
board&#146;s Audit, Compensation, and Nominating Committees must be independent in accordance with the
listing standards of The NASDAQ Stock Market. The board has determined that four of the six
current members, Messrs.&nbsp;Augur, Guido, Howell, and Middlemas, are independent pursuant to the
standards of The NASDAQ Stock Market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Terms of Directors and Officers </I></B><B>- </B>All directors are elected for one-year terms which expire at the
annual meeting of shareholders or when their successors are duly elected and qualified. The
Company&#146;s officers are elected annually by the board of directors and hold office until their
successors are duly elected and qualified.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Family Relationships of Directors and Officers </I></B>- None of the current directors or officers, or
nominees for director, is related to any other officer or director of the Company or to any nominee
for director.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I><b>Board
meetings held</b> </I><B><I>- </I></B>The board of directors and each of the standing committees described below
meet throughout the year on a set schedule. They also hold special meetings and act by written
consent from time to time as appropriate. The Company&#146;s non-management directors meet regularly in
executive sessions without management present. The executive sessions of non-management directors
are held in conjunction with each regularly scheduled board meeting.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 6 -<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">During the fiscal year ended August&nbsp;31, 2010, the board of directors held five (5)&nbsp;meetings. All
board members attended 75% or more of the aggregate of the total number of meetings of the board of
directors and the total number of meetings held by all committees of the board on which the
director served except Mr.&nbsp;Middlemas. All of the Company&#146;s board members are expected to attend
the annual meetings. All of the Company&#146;s board members attended the 2010 Annual Meeting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Committees</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Board has three standing committees: Audit Committee, Compensation Committee and Nominating
and Corporate Governance Committee (the &#147;Nominating Committee&#148;). Each of the committees regularly
reports on its activities and actions to the full board of directors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Membership in the standing committees for 2010 is set forth below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Fiscal 2010 Committee Membership</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Audit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Nominating</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Director</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Committee</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Committee</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Committee</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">M. Harding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">H. Augur</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">X</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">X</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">X</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">A. Epker</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">X</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">X</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R. Guido</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">X</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chair</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">P. Howell</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chair</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">G. Middlemas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chair</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Audit Committee </I></B><B>- </B>The Audit Committee consists of Mr.&nbsp;Howell (Chair) and Messrs.&nbsp;Augur and
Guido. The board of directors has determined that all of the members of the Audit Committee are
&#147;independent&#148; within the meaning of the listing standards of The NASDAQ Stock Market and the SEC
rules governing audit committees. In addition, the board has determined that Mr.&nbsp;Howell meets the
SEC criteria of an &#147;audit committee financial expert&#148; by reason of his understanding of Accounting
Principles Generally Accepted in the United States of America (&#147;GAAP&#148;) and the application of GAAP,
his education, his experiences as an auditor and chief financial officer, and his understanding of
financial statements. See Mr.&nbsp;Howell&#146;s biography under <I>Election of Directors (Proposal No.&nbsp;1) </I>for
additional information.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The functions to be performed by the Audit Committee include the appointment, retention,
compensation and oversight of the Company&#146;s independent auditors, including pre-approval of all
audit and non-audit services to be performed by such auditors. The Audit Committee Charter is
available on the Company&#146;s website at www.purecyclewater.com. The Audit Committee held six (6)
meetings during the fiscal year ended August&nbsp;31, 2010.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Compensation Committee </I></B>- The Compensation Committee consists of Mr.&nbsp;Middlemas (Chairman) and
Messrs.&nbsp;Augur and Epker. The board of directors has determined that all members of the Compensation
Committee are &#147;independent&#148; with the meaning of the listing standards of The NASDAQ Stock Market.
The functions to be performed by the Compensation Committee include establishing the compensation
of officers, evaluating the performance of officers and key employees, and administering employee
incentive compensation plans. The Compensation Committee typically meets with the Chief Executive
Officer to obtain information about employee performance and compensation recommendations. It also
has the authority to engage outside advisors to assist the committee with its functions. The
Compensation Committee has the power to delegate authority to the CEO or a subcommittee to make
certain determinations with respect to compensation for employees who are not executive officers.
The Company&#146;s Compensation Committee Charter is available on the Company&#146;s website at
www.purecyclewater.com. The Compensation Committee held two (2)&nbsp;meetings during the fiscal year
ended August&nbsp;31, 2010.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 7 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Nominating and Corporate Governance Committee </I></B>- The Nominating Committee consists of Messrs.&nbsp;Guido
(Chairman), Epker and Augur. The board of directors has determined that all the members of the
Nominating Committee are &#147;independent&#148; within the meaning of the listing standards of The NASDAQ
Stock Market. The principal responsibilities of the Nominating Committee are to identify and
nominate qualified individuals to serve as members of the board and to make recommendations to the
board with respect to director compensation. In addition, the Nominating Committee is responsible
for establishing the Company&#146;s Corporate Governance Guidelines and evaluating the board and its
processes. In selecting nominees for the board, the Nominating Committee is seeking a board with a
variety of experience and expertise, and in selecting nominees it will consider business experience
in the industry in which the Company operates, financial expertise, independence from the Company,
experience with publicly traded companies, experience with relevant regulatory matters in which the
Company is involved, and a reputation for integrity and professionalism. The Company does not have
a formal policy with respect to the consideration of diversity in identifying director nominees,
but it considers diversity as part of its overall assessment of the board&#146;s functions and needs.
Nominees must be at least 21&nbsp;years of age and less than 70. Identification of prospective board
members is done by a combination of methods, including word-of-mouth in industry circles, inquiries
of outside professionals and recommendations made to the Company. The Nominating Committee Charter
is available on the Company&#146;s website at www.purecyclewater.com. The Nominating Committee held two
(2)&nbsp;meetings during the fiscal year ended August&nbsp;31, 2010.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Nominating Committee will consider nominations for director made by shareholders of record
entitled to vote. In order to make a nomination for election at the 2012 annual meeting, a
shareholder must provide notice, along with supporting information (discussed below) regarding such
nominee, to the Company&#146;s Secretary by August&nbsp;4, 2011, in accordance with the Company&#146;s bylaws.
The Nominating Committee evaluates nominees recommended by shareholders utilizing the same criteria
it uses for other nominees.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Each shareholder recommendation should be accompanied by the following:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The full name, address, and telephone number of the person making the recommendation, and
a statement that the person making the recommendation is a shareholder of record (or, if the
person is a beneficial owner of the Company&#146;s shares but not a record holder, a statement
from the record holder of the shares verifying the number of shares beneficially owned), and
a statement as to whether the person making the recommendation has a good faith intention to
continue to hold those shares through the date of the Company&#146;s next annual meeting;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The full name, address, and telephone number of the candidate being recommended,
information regarding the candidate&#146;s beneficial ownership of the Company&#146;s equity
securities, any business or personal relationship between the candidate and the person making
the recommendation, and an explanation of the value or benefit the person making the
recommendation believes the candidate would provide as a director;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A statement signed by the candidate that he or she is aware of and consents to being
recommended to the Nominating Committee and will provide such information as the Nominating
Committee may request for its evaluation of candidates;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A description of the candidate&#146;s current principal occupation, business or professional
experience, previous employment history, educational background, and any areas of particular
expertise;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Information about any business or personal relationships between the candidate and any of
the Company&#146;s customers, suppliers, vendors, competitors, directors or officers, or other
persons with any special interest regarding any transactions between the candidate and the
Company; and</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Any information in addition to the above about the candidate that would be required to be
included in the Company&#146;s proxy statement (including without limitation information about
legal proceedings in which the candidate has been involved within the past ten years).</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Compensation Committee Interlocks and Insider Participation </I></B>- No interlocking relationship exists
between any member of the board of directors or the Compensation Committee and any other company&#146;s
board of directors or compensation committee.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 8 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Code of Business Conduct and Ethics</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company has adopted a Code of Business Conduct and Ethics for its directors, officers and
employees, which is available on the Company&#146;s website at www.purecyclewater.com.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Shareholder Communications with the Board</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The board of directors has adopted a policy for shareholders to send communications to the board.
The policy is available on the Company&#146;s website. Shareholders wishing to send communications to
the board may contact the Chairman of the board at the Company&#146;s principal place of business or
e-mail chairman@purecyclewater.com. All such communications shall be shared with the members of
the board, or if applicable, a specified committee or director.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Director Compensation</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Directors who are employees of the Company receive no fees for board service. Currently,
Mr.&nbsp;Harding is the only director who is also an employee. Each non-employee director receives a
payment of $10,000 for each full year in which he or she serves as a director, with an additional
payment of $1,000 for each committee on which he or she serves, and $1,000 for serving as chairman
of the board. Directors receive $500 for attendance at each board meeting and, if committee
meetings are held separate from board meetings, each director receives $500 for attendance at such
committee meetings.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The following table sets forth summary information concerning the compensation paid to the
Company&#146;s non-employee directors in fiscal 2010 for services to the Company:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="28" style="border-bottom: 1px solid #000000">Director Compensation </TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Change in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Pension Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fees</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">and Nonqualified</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Earned or</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Option</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Non-Equity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Deferred</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Paid in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Awards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Incentive Plan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">All Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Cash</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Awards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(d)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(e)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(f)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(g)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(h)</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">H. Augur (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">A. Epker (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R. Guido (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">P. Howell (5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">G. Middlemas (6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,700</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">In addition to cash compensation, as part of the 2004 Incentive Plan approved by shareholders
at the 2004 annual meeting of shareholders, each non-employee director receives an option to
purchase 5,000 shares of common stock upon initial election or appointment to the board (which
vest one half at each of the first and second anniversary dates of the grant), and an option
to purchase 2,500 shares for each subsequent full year in which he or she serves as a
director, which options vest one year from the date of grant. The amounts in this column
represent the total dollar amount that will be recognized as expense for financial reporting
purposes with respect to the options granted during the Company&#146;s fiscal year ended August&nbsp;31,
2010. For more information about how the Company values and accounts for share-based
compensation see <I>Note 8 &#151; Shareholders&#146; Equity </I>in the Company&#146;s August&nbsp;31, 2010 Annual Report
on Form 10-K.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The $17,500 earned by Mr.&nbsp;Augur is comprised of: $10,000 for serving on the board, $1,000 for
being the chairman of the board, $3,000 for serving on three committees, $3,500 for attendance
at
board and committee meetings ($500 per meeting). Mr.&nbsp;Augur had 20,000 options outstanding as
of August&nbsp;31, 2010, all of which are exercisable within 60&nbsp;days of the filing of this proxy
statement.</DIV></TD>
</TR>

</TABLE>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 9 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The $14,500 earned by Mr.&nbsp;Epker is comprised of: $10,000 for serving on the board, $2,000 for
serving on two committees and $2,500 for attendance at board and committee meetings ($500 per
meeting). Mr.&nbsp;Epker had 12,500 options outstanding as of August&nbsp;31, 2010, all of which are
exercisable within 60&nbsp;days of the filing of this proxy statement.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The $15,500 earned by Mr.&nbsp;Guido is comprised of: $10,000 for serving on the board, $2,000 for
serving on two committees and $3,500 for attendance at board and committee meetings ($500 per
meeting). Mr.&nbsp;Guido had 20,000 options outstanding as of August&nbsp;31, 2010, all of which are
exercisable within 60&nbsp;days of the filing of this proxy statement.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The $15,500 earned by Mr.&nbsp;Howell is comprised of: $10,000 for serving on the board, $1,000
for serving on one committee and $4,500 for attendance at board and committee meetings ($500
per meeting). Mr.&nbsp;Howell had 17,500 options outstanding as of August&nbsp;31, 2010, all of which
are exercisable within 60&nbsp;days of the filing of this proxy statement.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The $12,500 earned by Mr.&nbsp;Middlemas is comprised of: $10,000 for serving on the board, $1,000
for serving on one committee and $1,500 for attendance at board and committee meetings ($500
per meeting). Mr.&nbsp;Middlemas had 20,000 options outstanding as of August&nbsp;31, 2010, all of
which are exercisable within 60&nbsp;days of the filing of this proxy statement.</DIV></TD>
</TR>

</TABLE>

<!-- link1 "EXECUTIVE COMPENSATION" -->
<DIV align="left"><A NAME="005"></A></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>EXECUTIVE COMPENSATION</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Compensation Discussion and Analysis</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Compensation Philosophy</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company&#146;s executive compensation program is administered by the Compensation Committee of the
board of directors. The Compensation Committee is composed of Messrs.&nbsp;Middlemas, Augur and Epker,
three non-employee directors. The Compensation Committee reviews the performance and compensation
level for the executive officer and determines equity grants under the 2004 Incentive Plan. The
executive officer may provide information to the Compensation Committee regarding his compensation;
however, the Compensation Committee makes the final determination on executive compensation. Final
compensation determinations, including equity awards, are generally made in August at the end of
the Company&#146;s fiscal year. The following outlines the philosophy and objectives of the Company&#146;s
compensation plan.
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>Q.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>What are the objectives of the Company&#146;s compensation plan?</I></DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The objectives of the Company&#146;s compensation plan are to correlate executive compensation
with the Company&#146;s objectives and overall performance and to enable the Company to attract,
retain and reward executive officers who contribute to its long-term growth and success.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>Q.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>What is the Company&#146;s compensation plan designed to do?</I></DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company&#146;s compensation plan is designed to attract, retain and motivate quality executive
talent critical to the Company&#146;s growth and success. The compensation plan is designed to
reward the executive officer of the Company with competitive total pay opportunities through a
compensation mix that emphasizes cash and non-cash incentives and merit-based salary
increases, while de-emphasizing entitlements and perquisites. The compensation plan is
designed to create a mutuality of interest between executive and shareholders through equity
ownership programs and to focus the executive&#146;s attention on overall corporate objectives, in
addition to the executive&#146;s personal objectives.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>Q.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>What are the goals of the Compensation Committee?</I></DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The goal of the Compensation Committee is to provide a compensation package that is
competitive with compensation practices of companies with which the Company competes, provides
variable
compensation that is linked to achievement of financial and individual performance goals, and
aligns the interests of the executive officer and employees with those of the shareholders of
the Company by providing them with equity ownership in the Company. Additionally, the
Compensation Committee&#146;s goal is to design compensation packages which fall within the mid-range
of the packages provided to executives of similarly sized corporations in like industries.</DIV></TD>
</TR>

</TABLE>
</DIV><P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 10 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>Q.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>What are the basic elements of the executive officer&#146;s pay and how do those fit into the
Company&#146;s compensation plan?</I></DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Generally the executive officer receives a base cash salary, cash bonus (if the Compensation
Committee elects to award one), and long-term equity incentives. The mixture of these cash
and non-cash compensation items is designed to provide the executive with a competitive total
compensation package while not using an excessive amount of the Company&#146;s cash or overly
diluting the equity positions of its shareholders. The compensation plan for the President is
described below.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>Q.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>Does the Company offer any benefit plans to its executive officer?</I></DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The executive officer is eligible for the same benefits available to all Company employees.
Currently, this includes participation in a tax-qualified 401(k) plan, health and dental
plans.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>Q.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><I>Does the Company offer any perquisites to its executive officer?</I></DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company&#146;s executive officer does not receive any perquisites or personal benefits.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Compensation of the Company&#146;s President</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The current compensation program for the Company&#146;s President consists of the following:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Base Salary&#151;</I>The Compensation Committee reviewed and approved a salary for the President during the
year ending August&nbsp;31, 2010. His base salary was established by the Compensation Committee based
upon competitive compensation data for similarly sized public companies, job responsibilities,
level of experience, individual performance and contribution to the business throughout his career
with the Company. In making the base salary decision, the committee exercised its discretion and
judgment based upon these factors. No specific formula was applied to determine the weight of each
factor. While the Compensation Committee reviewed competitive compensation data, it did not
benchmark Mr.&nbsp;Harding&#146;s compensation to that of any other company. Mr.&nbsp;Harding&#146;s base salary
remained unchanged from last year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Incentive Bonus&#151;</I>The Compensation Committee&#146;s goal in granting incentive bonuses is to tie a portion
of the President&#146;s compensation to the performance of the Company and to the President&#146;s individual
contribution to the Company. Due to the difficult market for real estate developments, the primary
market for the Company&#146;s water rights, and the lack of completion of significant transactions in
fiscal 2010, no incentive bonus was granted to the President during the year ended August&nbsp;31, 2010.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>Long-Term Stock Incentives&#151;</I>The Compensation Committee has previously provided the Company&#146;s
President with long-term equity incentive compensation through grants of stock options and
restricted stock. The goal of the long-term stock incentives has been to align the interests of
the President with those of the Company&#146;s shareholders and to provide the President with a
long-term incentive to manage the Company from the perspective of an owner with an equity stake in
the business. It is the belief of the Compensation Committee that stock options and restricted
stock grants directly motivate an executive to maximize long-term shareholder value. The
philosophy of administering the long-term stock incentive plan is to tie the number of stock
options and restricted stock awarded to each employee in the plan to the performance of the Company
and to the individual contribution of each employee in the plan.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">No long-term stock incentives were granted during the fiscal year ended August&nbsp;31, 2010. However,
the Compensation Committee tasked the Chairman of the Compensation Committee with investigating
long-term incentive awards for consideration by the Compensation Committee in fiscal 2011.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 11 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Discussion with Respect to Qualifying Compensation for Deductibility</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Section&nbsp;162(m) of the Internal Revenue Code imposes a limit on tax deductions for annual
compensation (other than performance-based compensation) in excess of one million dollars paid by a
corporation to its chief executive officer and its other four most highly compensated executive
officers. The Company has not established a policy with regard to Section 162(m) of the Code,
because the Company does not currently anticipate paying cash compensation in excess of one million
dollars per annum to any employee. The Compensation Committee will continue to assess the impact
of Section 162(m) on its compensation practices and determine what further action, if any, is
appropriate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Compensation Tables</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company&#146;s President, Mr.&nbsp;Harding, is the Principal Executive Officer and the Principal
Financial Officer of the Company. Therefore, all tables contained in this section relate solely to
Mr.&nbsp;Harding.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="36" style="border-bottom: 1px solid #000000">Summary Compensation Table</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Change in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Pension Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">and Non-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Qualified</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Non-Equity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Deferred</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Base</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Option</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Incentive Plan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">All Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left">Name and principal</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fiscal</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Salary</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Bonus</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Awards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Awards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">position</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">($)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(d)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(e)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(f)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(g)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(h)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(i)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(j)</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark W. Harding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">President,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEO and CFO</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Grants of Plan Based Awards </I></B>- The Company did not grant any plan based awards to Mr.&nbsp;Harding
during the year ended August&nbsp;31, 2010. Therefore, the Company omitted the Grants of Plan Based
Awards Table.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Outstanding
Equity Awards at Fiscal Year-End - </I></B>Mr.&nbsp;Harding did not have any outstanding equity
awards at August&nbsp;31, 2010. Therefore, the Company omitted the Outstanding Equity Awards at Fiscal
Year-End table.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Option
Exercise and Stock Vested - </I></B>Mr.&nbsp;Harding did not exercise any options or have any stock vest
during the year ended August&nbsp;31, 2010. Therefore, the Company omitted the Option Exercise and
Stock Vested table.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Pension Benefits </I></B>- The Company does not offer pension benefits. Therefore, the Company omitted
the Pension Benefits Table.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Non-Qualified Deferred Compensation </I></B>- The Company does not have any non-qualified deferred
compensation plans. Therefore, the Company has omitted the Non-Qualified Deferred Compensation
Table.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Termination or Change-in-Control Payments </I></B>- The Company does not have any plan or arrangement that
provides for payments to the executive officer in connection with a termination or change of
control.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 12 -<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Compensation Committee Report</B><SUP style="FONT-size: 85%; vertical-align: text-top"><B>1</B></SUP>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with
management, and based on the Committee&#146;s review and discussion with management, has recommended to
the full board of directors that the Compensation Discussion and Analysis be included in the
Company&#146;s Proxy Statement for the Annual Meeting.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Respectfully submitted by the Compensation Committee of the Board of Directors
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">/s/ George M. Middlemas (Chairman)<BR>
/s/ Harry H. Augur<BR>
/s/ Arthur G. Epker III

</DIV>

<!-- link1 "REPORT OF THE AUDIT COMMITTEE" -->
<DIV align="left"><A NAME="006"></A></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>REPORT OF THE AUDIT COMMITTEE</B><SUP style="FONT-size: 85%; vertical-align: text-top"><B>1</B></SUP>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Audit Committee of the board of directors is comprised of independent directors and operates
under a written charter adopted by the board of directors. The Audit Committee charter is
reassessed and updated as needed in accordance with applicable rules of the SEC and The NASDAQ
Stock Market.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Audit Committee serves in an oversight capacity. Management is responsible for the Company&#146;s
internal controls over financial reporting. The independent auditors are responsible for performing
an independent audit of the Company&#146;s financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (&#147;PCAOB&#148;) and issuing a report thereon. The Audit
Committee&#146;s primary responsibility is to monitor and oversee these processes and to select and
retain the Company&#146;s independent auditors. In fulfilling its oversight responsibilities, the Audit
Committee reviewed with management the Company&#146;s audited financial statements and discussed not
only the acceptability but also the quality of the accounting principles, the reasonableness of the
significant judgments and estimates, critical accounting policies and the clarity of disclosures in
the audited financial statements prior to issuance.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Audit Committee reviewed and discussed the audited financial statements as of and for the year
ended August&nbsp;31, 2010 with the Company&#146;s independent auditors, GHP Horwath P.C. (&#147;GHP&#148;), and
discussed not only the acceptability but also the quality of the accounting principles, the
reasonableness of the significant judgments and estimates, critical accounting policies and the
clarity of disclosures in the audited financial statements prior to issuance. The Audit Committee
meets with GHP, with and without management present, to discuss the results of their examination
and their evaluation of the Company&#146;s internal controls, and the overall quality of the Company&#146;s
financial reporting. The Audit Committee discussed and reviewed with GHP all communications
required by generally accepted auditing standards, including those described in Statement on
Auditing Standards (SAS)&nbsp;No.&nbsp;61, as amended (AICPA, <I>Professional Standards, Vol. 1</I>, AU
Section&nbsp;380), as adopted by the PCAOB in Rule&nbsp;3200T. GHP also provided the Audit Committee the
written disclosures and the letter required by the applicable requirements of the PCAOB for
independent auditor communications with the Audit Committee concerning independence. The Audit
Committee also confirmed GHP&#146;s independence with GHP.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Based on the foregoing, the Audit Committee recommended to the board of directors that the
Company&#146;s audited financial statements be included in the Company&#146;s Form 10-K for the fiscal year
ended August&nbsp;31, 2010.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">/s/ Peter C. Howell<BR>
/s/ Harrison H. Augur<BR>
/s/ Richard L. Guido

</DIV>


<DIV align="left">
<DIV style="font-size: 10pt; margin-top: 1pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="FONT-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">These reports are not &#147;soliciting material,&#148;
are not deemed &#147;filed&#148; with the Commission and are not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, irrespective of
any general incorporation language in any such filing, except to the extent the
Company specifically references one of these reports.</DIV></TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 13 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->
<DIV align="left"><A NAME="007"></A></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Agreements with Related Parties</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Tap Participation Fee Payments </I></B><B>- </B>On August&nbsp;31, 2006, pursuant to an Asset Purchase Agreement (the
&#147;Arkansas River Agreement&#148;) with HP A&#038;M, the Company purchased approximately 60,000 acre feet of
water rights in the Arkansas River and other related assets. As consideration for these assets,
the Company issued HP A&#038;M 3,000,000 shares of its common stock. The Company also granted HP A&#038;M
the right to receive ten percent (10%) of gross proceeds, or the equivalent thereof, from the sale
of the next 40,000 water taps (the &#147;Tap Participation Fee&#148;), which was valued at approximately
$45.6&nbsp;million at the acquisition date. The Tap Participation Fee is due and payable once the
Company sells a water tap and receives the consideration due for such water tap. The Company did
not sell any water taps during the year ended August&nbsp;31, 2010 or 2009. However, during fiscal
2009, the Company did make Tap Participation Fee payments to HP A&#038;M as a result of non-irrigated
land sales which are discussed in greater detail in <I>Note 7 &#151; Long-Term Debt and Operating Lease </I>to
the Company&#146;s 2010 Annual Report on Form 10-K. As a result of the acquisition, HP A&#038;M owns 13.6%
of the outstanding shares of common stock of the Company.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Convertible Negotiable Promissory Note </I></B>- Effective September&nbsp;28, 2010, the Company issued a
Convertible Negotiable Promissory Note to PIP, an approximately 18% shareholder of the Company.
See Proposal 3 for a detailed description of this transaction.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Stock Purchase Pursuant to the Company&#146;s Public Offering </I></B>- In connection with the Company&#146;s
September&nbsp;28, 2010, offering of 1,923,931 shares of the Company&#146;s common stock, the Company&#146;s
Chairman of the board, Mr.&nbsp;Augur, proposed to purchase 13,333 shares (or $40,000) in the offering
and PIP proposed to purchase 930,633 shares (or $2,791,899) in the offering at the offering price
of $3.00 per share. The Audit Committee discussed and evaluated the proposed purchases in
accordance with the Company&#146;s Code of Business Conduct and Ethics and the Audit Committee Charter,
as described below. The Audit Committee approved the purchases after determining that the terms
and conditions of the purchases were fair to the Company and its shareholders and that the
purchases were in the Company&#146;s best interest.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Review and Approval of Related Party Transactions</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">It is the Company&#146;s policy as set forth in its Code of Business Conduct and Ethics that actual or
apparent conflicts of interest are to be avoided if possible and must be disclosed to the board of
directors. Pursuant to the Code of Business Conduct and Ethics, any transaction involving a
related party must be reviewed and approved by the Audit Committee. Additionally, the Audit
Committee Charter requires the Audit Committee to review any transaction involving the Company and
a related party at least once a year or upon any significant change in the transaction or
relationship. The Code also provides non-exclusive examples of conduct which would involve a
potential conflict of interest and requires any material transaction involving a potential conflict
of interest to be approved in advance by the board. If a waiver from the Code is granted to an
executive officer or director, the nature of the waiver will be disclosed on the Company&#146;s website,
in a press release, or on a current report on Form 8-K.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company annually requires each of its directors and executive officers to complete a directors&#146;
and officers&#146; questionnaire that solicits information about related party transactions. The
Company&#146;s board of directors and outside legal counsel review all transactions and relationships
disclosed in the directors&#146; and officers&#146; questionnaire, and the board makes a formal determination
regarding each director&#146;s independence. If a director is determined to no longer be independent,
such director, if he or she serves on any of the Audit Committee, the Nominating Committee, or the
Compensation Committee, will be removed from such committee prior to (or otherwise will not
participate in) any future meeting of the committee. If the transaction presents a conflict of
interest, the board of directors will determine the appropriate response.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 14 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">



<!-- link1 "ELECTION OF DIRECTORS" -->
<DIV align="left"><A NAME="008"></A></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>ELECTION OF DIRECTORS<BR>
(Proposal No.&nbsp;1)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">As of the date of the Meeting, the number of members of the board of directors will be fixed at
seven. The board of directors nominates the following persons currently serving on the board for
reelection to the board: Mark W. Harding, Harrison H. Augur, Arthur G. Epker III, Richard L.
Guido, Peter C. Howell, George M. Middlemas and H. Hunter White III.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Set forth below are the names of all nominees for director, all positions and offices with the
Company held by each such person, the period during which each has served as such, and the
principal occupations and employment of such persons during at least the last five years, as well
as additional information regarding the skills, knowledge and experience with respect to each
nominee which has led the board of directors to conclude that each such nominee should be elected
or re-elected as a director of the Company.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Mark W. Harding. </I></B>Mr.&nbsp;Harding joined the Company in April&nbsp;1990 as Corporate Secretary and Chief
Financial Officer. He was appointed President of the Company in April&nbsp;2001, Chief Executive
Officer in April&nbsp;2005, and a member of the board of directors in February&nbsp;2004. Mr.&nbsp;Harding brings
a background in investment banking and public finance, having worked from 1988 to 1990 for Price
Waterhouse&#146;s management consulting services where he assisted clients in public finance and other
investment banking related services. In determining Mr.&nbsp;Harding&#146;s qualifications to on the board of
directors, the board of directors considered, among other things, that Mr.&nbsp;Harding is the President
and a board member of the Rangeview Metropolitan District and serves on a number of advisory boards
relating to water and wastewater issues in the Denver region, including a statewide roundtable
created by the Colorado legislature charged with identifying ways in which Colorado can address the
water shortages facing Front Range cities including Denver and Colorado Springs. Mr.&nbsp;Harding earned
a B.S. Degree in Computer Science and a Masters in Business Administration in Finance from the
University of Denver.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Harrison H. Augur. </I></B>Mr.&nbsp;Augur joined the board and was elected Chairman in April&nbsp;2001. For more than
20&nbsp;years, Mr.&nbsp;Augur has been involved with investment management and venture capital investment
groups. Mr.&nbsp;Augur has been a general partner of CA Partners since 1987, and general partner of
Patience Partners LLC since 1999. Mr.&nbsp;Augur received a Bachelor of Arts degree from Yale
University, an LLB degree from Columbia University School of Law, and an LLM degree from New York
University School of Law. In determining Mr.&nbsp;Augur&#146;s qualifications to serve on the board of
directors, the board of directors has considered, among other things, his extensive experience and
expertise in finance and law.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Arthur G. Epker III. </I></B>Mr.&nbsp;Epker was appointed to the board in August&nbsp;2007. Since 1992, Mr.&nbsp;Epker
has been a Vice President and partner of PAR Capital Management, Inc., a private investment company
located in Boston, MA. Mr.&nbsp;Epker is also a portfolio manager over a portion of the assets of PAR
Investment Partners, L.P., a private 3(c)7 investment company. Mr.&nbsp;Epker received his
undergraduate degree in computer science and economics with highest distinction from the University
of Michigan and received a Master of Business Administration from Harvard Business School. In
determining Mr.&nbsp;Epker&#146;s qualifications to serve on the board of directors, the board of
directors has considered, among other things, his extensive experience and expertise in finance and
investment management.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Richard L. Guido</I></B>. Mr.&nbsp;Guido served as a member of the Company&#146;s board from July&nbsp;1996 through
August&nbsp;31, 2003, and rejoined the board in 2004. Mr.&nbsp;Guido was an employee of Inco Limited, a
Canadian mining company (now known as Vale Inco), from 1980 through February&nbsp;2004. He previously
served on the Company&#146;s board pursuant to a voting agreement between Inco and the Company. That
agreement is no longer in effect. Mr.&nbsp;Guido was Associate General Counsel of DeltaCom, Inc., a
telecommunications company, from March&nbsp;2006 to March&nbsp;2007, and prior to that Mr.&nbsp;Guido was
Associate General Counsel of Inco Limited and President, Chief Legal Officer and Secretary of Inco
United States, Inc., now known as Vale Inco Americas, Inc. Mr.&nbsp;Guido received a Bachelor of
Science degree from the United States Air Force Academy, a Master of Arts degree from Georgetown
University, and a Juris Doctor degree from the Catholic University of
America. In determining Mr.&nbsp;Guido&#146;s qualifications to serve on the board of directors, the board of directors has
considered, among other things, his extensive experience and expertise in finance, law and natural
resource development.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 15 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Peter C. Howell. </I></B>Mr.&nbsp;Howell was appointed to fill a vacancy on the board in February&nbsp;2005. From
1997 to present, Mr.&nbsp;Howell has served as an advisor to various business enterprises in the area of
acquisitions, marketing and financial reporting. From August&nbsp;1994 to August&nbsp;1997, Mr.&nbsp;Howell served
as the Chairman and Chief Executive Officer of Signature Brands USA, Inc. (formerly known as
Health-O-Meter), and from 1989 to 1994 Mr.&nbsp;Howell served as Chief Executive Officer and a director
of Mr.&nbsp;Coffee, Inc. Mr.&nbsp;Howell is a member of the board of directors of Libbey, Inc., Global Lite
Array Inc. (a subsidiary of Global-Tech Advanced Innovations Inc.) and two private companies.
Mr.&nbsp;Howell received a Master of Arts degree in Economics from Cambridge University. In
determining Mr.&nbsp;Howell&#146;s qualifications to serve on the board of directors, the board of
directors has considered, among other things, his extensive experience and expertise in finance and
financial reporting as well as his general business expertise.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>George M. Middlemas. </I></B>Mr.&nbsp;Middlemas has been a director since April&nbsp;1993. Mr.&nbsp;Middlemas has been a
general partner with Apex Venture Partners, a diversified venture capital management group, since
1991. From 1985 to 1991, Mr.&nbsp;Middlemas was Senior Vice President of Inco Venture Capital
Management, primarily involved in venture capital investments for Inco Securities Corporation. From
1979 to 1985, Mr.&nbsp;Middlemas was Vice President and a member of the Investment Committee of Citicorp
Venture Capital Ltd., where he sourced, evaluated and completed investments for Citicorp. Mr.
Middlemas is a member of the Pennsylvania State University-Library Development Board and Athletic
Committee and is a board member of the Joffrey Ballet of Chicago. Mr.&nbsp;Middlemas received a
Bachelor&#146;s degree in History and Political Science from Pennsylvania State University, a Masters
degree in Political Science from the University of Pittsburgh and a Master of Business
Administration from Harvard Business School. In determining Mr.&nbsp;Middlemas&#146;s qualifications to
serve on the board of directors, the board of directors has considered, among other things, his
extensive experience and expertise in finance and investment management.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>H. Hunter White, III. </I></B>Mr.&nbsp;White is a director nominee not currently serving on the board. Mr.
White is a founder of HP A&#038;M, established in 2001, and since that date he has been the manager of
HP A&#038;M. HP A&#038;M is a developer of tributary and non-tributary water and water related assets in
Colorado. Since 1978 Mr.&nbsp;White has been an independent investor involved in a wide variety of
business ventures. Mr.&nbsp;White is primarily a natural resources developer, including real estate
development, oil and gas exploration and production, and water resources. Mr.&nbsp;White is also active
with cellular telephone start ups, radio station ownership, hotel development, and buyouts and
business startups. Mr.&nbsp;White serves on the board of directors for one private company. Mr.&nbsp;White
is involved in a number of civic and cultural organizations and is a current board member and past
Vice President of the New Orleans Museum of Art. Mr.&nbsp;White received a bachelor&#146;s degree from
Louisiana State University. In determining Mr.&nbsp;White&#146;s qualifications to serve on the board
of directors, the board of directors has considered, among other things, his extensive experience
and expertise in investment management, real estate development and water resource development.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The proxy cannot be voted for more than the seven nominees named. Directors are elected for
one-year terms or until the next annual meeting of the shareholders and until their successors are
elected and qualified. All of the nominees have expressed their willingness to serve, but if
because of circumstances not contemplated, one or more nominees is not available for election, the
proxy holders named in the enclosed proxy card intend to vote for such other person or persons as
the Nominating Committee may nominate.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>HP A&#038;M Director Nominee</I></B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Arkansas River Agreement obligates the Company to nominate and solicit proxies for a director
nominee designated by HP A&#038;M through the earlier of (i)&nbsp;the date on which the Company fully
discharges its obligation to pay the Tap Participation Fee or (ii)&nbsp;August&nbsp;31, 2011. In addition,
Mr.&nbsp;Harding agreed to vote his shares of common stock in favor of the director nominee of HP A&#038;M
pursuant to a Voting Agreement for the same period that the Company is obligated to solicit proxies
for the HP A&#038;M director nominee. HP A&#038;M designated Mr.&nbsp;White as its nominee to the board of
directors for this election.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE &#147;FOR&#148; THE ELECTION AS DIRECTORS OF THE
SEVEN PERSONS NOMINATED.</B>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 16 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<!-- link1 "RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS" -->
<DIV align="left"><A NAME="009"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS<BR>
(Proposal No.&nbsp;2)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Action is to be taken by the shareholders at the Meeting with respect to the ratification and
approval of the selection by the Audit Committee of the Company&#146;s board of directors of GHP
Horwath, P.C. (&#147;GHP&#148;) to be the independent auditors of the Company for the fiscal year ending
August&nbsp;31, 2011. In the event of a negative vote on such ratification, the Audit Committee of the
board of directors will reconsider its selection. A representative of GHP is expected to be
present at the Meeting. The GHP representative will have the opportunity to make a statement if he
or she desires to do so, and is expected to be available to respond to appropriate questions.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Audit Committee reviews and approves in advance the audit scope, the types of non-audit
services, if any, and the estimated fees for each category for the coming year. For each category
of proposed service, GHP is required to confirm that the provision of such services does not impair
their independence. Before selecting GHP, the Audit Committee carefully considered that firm&#146;s
qualifications as an independent registered public accounting firm for the Company. This included a
review of its performance in prior years, as well as its reputation for integrity and competence in
the fields of accounting and auditing. The Audit Committee has expressed its satisfaction with GHP
in all of these respects. The Audit Committee&#146;s review included inquiry concerning any litigation
involving GHP and any proceedings by the SEC against the firm.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">GHP reported that the Company maintained, in all material respects, effective internal control over
financial reporting as of August&nbsp;31, 2010, based on criteria established in <I>Internal
Control&#151;Integrated Framework </I>issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">GHP has no direct or indirect financial interest in the Company and does not have any connection
with the Company in the capacity of promoter, underwriter, voting trustee, director, officer or
employee. Neither the Company, nor any officer, director nor associate of the Company has any
interest in GHP.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Fees </I></B>- For the fiscal years ended August&nbsp;31, 2010 and 2009, the Company was billed the following
audit, audit-related, tax and other fees by its independent registered public accountant. The
Audit Committee approved 100% of these fees in accordance with the Audit Committee Charter. The
audit related fees are comprised entirely of fees for assistance with consultations with the Staff
of the Office of the Chief Accountant of the SEC.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Fiscal year ended August 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">57,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit Related Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All Other Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B><I>Pre-Approval Policy </I></B>- The Audit Committee has established a pre-approval policy in its charter. In
accordance with the policy, the Audit Committee pre-approves all audit, non-audit and internal
control related services provided by the independent auditors prior to the engagement of the
independent auditors with respect to such services.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>THE BOARD OF DIRECTORS RECOMMENDS A VOTE &#147;FOR&#148; THE RATIFICATION OF THE APPOINTMENT OF THE
INDEPENDENT AUDITORS.</B>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 17 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">


<!-- link1 "ISSUANCE OF SHARES OF COMMON STOCK UPON CONVERSION OF CONVERTIBLE NEGOTIABLE PROMISSORY NOTE" -->
<DIV align="left"><A NAME="010"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>ISSUANCE OF SHARES OF COMMON STOCK UPON CONVERSION OF CONVERTIBLE NEGOTIABLE PROMISSORY NOTE<BR>
(Proposal No.&nbsp;3)</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Effective September&nbsp;28, 2010, the Company issued a Convertible Negotiable Promissory Note (the
&#147;Note&#148;) to PIP, an approximately 18% shareholder of the Company. The Note: (i)&nbsp;has a face value of
$5.2&nbsp;million, (ii)&nbsp;accrues simple interest at 10% per annum, (iii)&nbsp;interest from the issuance date
of the Note through April&nbsp;1, 2011 is due on April&nbsp;1, 2011 with monthly interest payments due the
first day of each month following April&nbsp;1, 2011 until the Note matures on January&nbsp;15, 2012, (iv)
is unsecured, and (v)&nbsp;if approved by the Company&#146;s shareholders, will be converted to unregistered
common stock of the Company at a conversion price of $2.70 per share. The conversion price was set
at 90% of the price per share at which the Company priced shares in its public offering which
commenced on the same date. The board of directors determined that a discount of 10% of the
offering price was appropriate because the shares which would be issued upon conversion are
unregistered and therefore subject to limitations on transferability. The last reported sales
price of the common stock on The NASDAQ Stock Market on September&nbsp;27, 2010, the day before the Note
was issued was $2.70 per share.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company received $5.2&nbsp;million from PIP upon issuance of the Note. The $5.2&nbsp;million, along with
the approximately $5.5&nbsp;million raised in the public offering, were used to finance the Company&#146;s
acquisition of a note payable and deed of trust granted by Sky Ranch, LLC, which ultimately enabled
the Company to obtain title to approximately 940 acres of land known as &#147;Sky Ranch.&#148; The Sky Ranch
acquisition is described in more detail in the Company&#146;s 2010 Annual Report on Form 10-K. The
proceeds remaining after the Sky Ranch acquisition will be used for working capital and other
corporate purposes. The issuance of the Note was approved by the Audit Committee after it
determined that the issuance was fair to the Company and its shareholders and in the Company&#146;s best
interest, in accordance with the provisions of the Company&#146;s Code of Business Conduct and Ethics
and the Audit Committee Charter applicable to related party transactions.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Shareholder approval of the issuance of the shares upon conversion of the Note is required pursuant
to the rules of The NASDAQ Stock Market. If the shareholders approve conversion of the Note at the
Meeting on January&nbsp;11, 2011, the $5.2&nbsp;million Note, plus unpaid and accrued interest of $151,667
(total principal and interest of $5,351,667), would convert into 1,982,099 shares of the Company&#146;s
common stock. Following this conversion, the Company would have 24,037,596 shares outstanding, of
which PAR would own 5,982,970 or 24.9% of the Company&#146;s outstanding shares.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">If the Company&#146;s shareholders do not approve the conversion of the Note to common stock, the Note
would require the following payments:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Fiscal Year Ending:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Principal Payments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest Payments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total Payments</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">August&nbsp;31, 2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">486,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">486,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">August&nbsp;31, 2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,397,900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">684,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,884,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">If the conversion is not approved, the Company may be required to seek additional debt or equity
financing to repay the Note when it becomes due. In conjunction with the Note, the Company granted
PAR one demand right and certain piggyback rights to register the shares of common stock issuable
upon conversion of the Note. There are no preemptive rights associated with the Company common
stock.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>THE BOARD OF DIRECTORS RECOMMENDS A VOTE &#147;FOR&#148; THE CONVERSION OF THE NOTE TO COMMON STOCK.</B>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 18 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">


<!-- link1 "ACTION TO BE TAKEN UNDER THE PROXY" -->
<DIV align="left"><A NAME="011"></A></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>ACTION TO BE TAKEN UNDER THE PROXY</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The proxy will be voted &#147;FOR&#148; approval of proposals 2 and 3, and &#147;FOR&#148; the directors nominated by
the board, unless the proxy is marked in such a manner as to withhold authority to so vote. The
proxy will also be voted in connection with the transaction of such other business as may properly
come before the Meeting or any adjournment or adjournments thereof. Management knows of no other
matters, other than the matters set forth above, to be considered at the Meeting. If, however, any
other matters properly come before the Meeting or any adjournment thereof, the persons named in the
accompanying proxy will vote such proxy in accordance with their best judgment on any such matter.
The persons named in the accompanying proxy will also, if in their judgment it is deemed to be
advisable, vote to adjourn the Meeting from time to time.
</DIV>

<!-- link1 "OTHER INFORMATION" -->
<DIV align="left"><A NAME="012"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>OTHER INFORMATION</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Section&nbsp;16 (a)&nbsp;Beneficial Ownership Reporting Compliance</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company&#146;s directors and executive officers and persons who are beneficial owners of more than
10% of common stock are required to file reports of their holdings and transactions in common stock
with the SEC and furnish the Company with such reports. Based solely upon the review of the copies
of the Section 16(a) reports received by the Company and written representations from these
persons, the Company believes that during the fiscal year ended August&nbsp;31, 2010, all the directors,
executive officers and 10% beneficial owners complied with the applicable Section 16(a) filing
requirements, except that the stock purchase made by Mr.&nbsp;Augur on September&nbsp;28, 2010 in the
Company&#146;s registered stock offering was reported late on a Form&nbsp;4 filed on October&nbsp;6, 2010. The
Company files the Form&nbsp;4 with respect to stock purchases made on behalf of the directors.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Shareholder Proposals</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Shareholder proposals for inclusion in the Proxy Statement for the 2012 annual meeting of
shareholders must be received at the principal executive offices of the Company by August&nbsp;4, 2011
but not before June&nbsp;5, 2011. For more information refer to the Company&#146;s Bylaws which were filed
as Appendix&nbsp;C to the Registration Statement on Form SB-2/A filed with the SEC on June&nbsp;10, 2004.
The Company is not required to include proposals received outside of these dates in the proxy
materials for the 2012 annual meeting of shareholders, and any such proposals shall be considered
untimely. The persons named in the proxy will have discretionary authority to vote all proxies
with respect to any untimely proposals.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Delivery of Materials to Shareholders with Shared Addresses</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company utilizes a procedure approved by the SEC called &#147;householding&#148;, which reduces printing
and postage costs. Shareholders who have the same address and last name will receive one copy of
the Important Notice Regarding the Availability of Proxy Materials or one set of printed proxy
materials unless one or more of these shareholders has provided contrary instructions.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">If you wish to receive a separate copy of the proxy statement or the Notice of the Company&#146;s Annual
Report on Form 10-K, or if you are receiving multiple copies and would like to receive a single
copy, please contact the Company&#146;s transfer agent at Computershare Trust Company, Inc., 350 Indiana
St., Suite #800, Golden, Colorado 80401, telephone (303)&nbsp;262-0600 or 1-800-962-4284, or write to or
call the Company&#146;s Secretary at the Company&#146;s address or phone number set forth above, and the
Company will undertake to deliver such documents promptly. If your shares are owned through a
bank, broker or other nominee, you may request householding by contacting the nominee.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Form&nbsp;10-K and Related Exhibits</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company&#146;s Annual Report on Form 10-K is available, free of charge, at the Company&#146;s website,
www.purecyclewater.com, or at the SEC&#146;s website, www.sec.gov. In addition, the Company will
furnish a copy of its Form 10-K to any shareholder free of charge and a copy of any exhibit to the
Form 10-K upon payment of the Company&#146;s reasonable expenses incurred in furnishing such exhibit(s).
You may request a copy of the Form 10-K or any exhibit thereto by writing the Company&#146;s Secretary
at: Pure Cycle
Corporation, 500 E. 8<SUP style="FONT-size: 85%; vertical-align: text-top">th</SUP> Ave, Suite&nbsp;201, Denver, CO 80203, or by sending an email to
info@purecyclewater.com. The information on the Company&#146;s website is not part of this proxy
statement.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 19 -<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">




<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Documents Incorporated by Reference</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Shareholders should review the following items included in the Company&#146;s 2010 Annual Report on Form
10-K, which is provided with this proxy statement, and such items are incorporated by reference
herein:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><I>Item&nbsp;7 &#151; Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><I>Item&nbsp;7A &#151; Quantitative and Qualitative Disclosures About Market Risk</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><I>Item&nbsp;8 &#151; Financial Statements and Supplementary Data</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><I>Item&nbsp;9 &#151; Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</I>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 20 -<!-- /Folio -->
</DIV>




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