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LAWMA - Water Rights Purchase Agenda Item 20b July 28-29, 2003 LAWMA LAWMA is a non-profit corporation formed pursuant to the Colorado Non-Profit Corporation Act, as amended, and pursuant to the Ditch and Reservoir Company Act, as amended. LAWMA's powers and authorities are set forth in its Restated and Amended Articles of Incorporation and Bylaws. The control and management of the business and affairs of LAWMA are vested in its Board of Directors which consists of seven shareholders. The duties and responsibilities of LAWMA's Board of Directors are set forth in LAWMA's Restated and Amended Articles of Incorporation and Bylaws. Under LAWMA's Bylaws, there are currently two types of membership class, shareholders and non- shareholders. LAWMA has 213 shareholder members. Under LAWMA's Bylaws, the rights and obligations relating directly to augmentation for the wells and other structures of non-shareholder members is established by written contract between the non-shareholder members and LAWMA. There are currently 18,495 shares of LAWMA stock outstanding. Water Riahts/ProDosed Purchase Costs for land and water rights acquisition are eligible for CWCB funding under Policy #8, which states: The costs of land and water rights acquisition are eligible for CWCB funding as part of an authorized project. When no project is proposed, the costs of water right acquisition is eligible for a CWCB loan if the purchase satisfies an existing water need or shortage. Acquisition of water rights that promote growth will not be eligible for a CWCB loan. Keesee Water Richt The Keesee Ditch is located on the mainstem of the Arkansas River approximately five miles downstream of John Martin Reservoir. The Keesee Ditch shares a common diversion dam with the Fort Bent Canal, and diverts from the south bank of the Arkansas River. Three priorities are decreed to be diverted through the Keesee Ditch. Those priorities are NO.1 for 9.0 cubic feet per second (cfs) with an appropriation date of March 31,1871 which is senior to all water rights downstream on the Arkansas River, and Priority No.4 for 4.5 cfs with an appropriation date of December 31, 1883 is senior to all but 24.75 cfs of water rights downstream on the Arkansas River. Accordingly, these two water rights, totaling 13.5 cfs, generally are not affected by downstream river calls and can.therefore provide a consistent supply of replacement water to LAWMA even in dry years. The Keesee ditch also includes Priority No. 1918-4 for 15.0 cfs with an appropriation date of September 3, 1893, and the Keesee Ditch has an Article II Storage Account in John Martin Reservoir which is allocated conservation storage water on an annual basis. The three priorities decreed to the Keesee ditch are decreed for irrigation of 1,400 acres. Under the purchase agreement, LAWMA would acquire one- half of the Keesee water rights, and one-half of the Keesee Article II Storage Account in John Martin Reservoir, and one-half of the land historically irrigated under the Keesee ditch would be dried-up. Appraisal - An "Estimate of the Fair Market Value of One-Half Interest in the Keesee .Ditch Water Rights, Including One Half of the Keesee Ditch's Article II Storage Account in John Martin Reservoir", has been provided by Mr. William Paddock, Esq, of Carlson, Hammond & Paddock, L.L.C. and Mr. Bill Milenski, Certified General Appraiser. Their estimated fair market value of one- half of the Keesee water rights, as of July 14, 2003, is $2,431,500. As part of the purchase, LAWMA will also, acquire property rights in the form of 1) a real covenant for dry-up of historically irrigated land; and 2) a real covenant for revegetation of dry-up lands, that is the responsibility of the seller. Page 4 of 9