1. Palmer Divide HOA Meeting

2. Agenda Future Development Brief Flying Horse Sundance Ranch PD C&R Situation Overview Facts Assumptions Self Governance Execution Voting Way Ahead COA’s Meetings Landowner Discussion Dave Diedrich Colorado Division of Resources

3. Future Development Flying Horse at Shamrock Ranch – 283 home sites from Hwy 83 to Black Forest Rd – 18 hole golf course – Current design does not use Connaught drive as an access to Black Forest Road –.7 AC of water usage per household = 228,000 gallons – Development usage for house holds would be 198.1 AC – The developer estimates that it will take 25 years build out

4. Future Development Sundance Ranch – Requesting to develop 100 Home sites – Separated water rights from the land – Sold water rights to Cherokee Water district Cherokee Water District is or has the ability to mine water from the area – Dawson 1246 AC – Denver 1488 AC – Arapahoe 775 AC – Lar-Fox 199 AC » 3708 AC per year = 1,208,808,000 Gallons per year Palmer Divide homes are allotted.6 AC = 195,600 gal This is a Major Problem with a short timetable – mid April

5. Future Development Options – Need a consolidated strategic approach High Forest Ranch Cathedral Pines Black Forestland Use Committee Other HOA’s/areas – State Engineer engagement – State/county representative engagement – 1041 filing Colorado House Bill 1041 development may only proceed if consistent with the environmental and developmental goals of the local communities – Water attorney Cost? – Public Opinion/News Panic Drop in home values long lead time to generate action Feasibility estimate mid March – Lawyer estimate of probability of success – Cost

6. Well Sites for Shamrock Ranch

7. PD C&R Situation Overview Palmer Divide subdivision Covenants and Restrictions, Architecture Committee is governed by the original developer. The Palmer Divide Home Owners Association is inactive and the developer has not maintained the required state HOA filings and reporting required by the water decree to the state of Colorado. The Developer owns no property, has no monetary vested interest and has abdicated his responsibilities both to the State of Colorado and to the landowners of Palmer Divide. The Developer has exercised his right as declared in the covenants to act as the Architecture Committee. Up until this time the required steps to perform self governance by the Landowners of the Palmer Divide subdivision has not been advanced. The current situation is untenable and not in compliance with state regulations for both the landowners and the developer and must be corrected. A Homeowners meeting has been called. The intent of the meeting is to present information concerning the Palmer Divide Covenants in regards to the Architecture Committee, the Homeowners Association, and the Water Decree. Propose and lay the ground work to develop a viable agreed upon course of action and develop a plan in order to execute the necessary actions to accomplish the assumption of self governance. The following slides are provided in order to have a productive meeting that is not derailed by emotions from previous experiences and personnel desires.

8. Situation Facts Since 2005 Palmer Divide Subdivision has been subjected to the Covenants and Restrictions established by the Developer Grant Langdon – Restrictions and Covenants for Palmer Divide Subdivision filed in El Paso County, CO #205084214 These Covenants are binding to each purchaser of property within Palmer Divide – 53. MEMBERSHIP. The owner of a Lot shall automatically become a member of the Palmer Divide Home Owners Association, Inc., a non-profit, non-stock corporation organized under the laws of the State of Colorado (the “Association”). By acceptance of the deed or other instrument of conveyance, the owner or owners of each Lot consent to such owner’s or owners’ membership in the Association. Membership in the Association is appurtenant to each Lot. Each owner of a Lot shall automatically be entitled to the benefits and subject to the burdens relating to such membership in the Association. Membership in the Association shall be limited to the fee simple owners of the Lots, except that in case of an installment land contract where the seller holds title until fully paid, the purchaser, and not the seller, shall be a member – By Laws ARTICLE I MEMBERS: Section 1.1 Eligibility. Each Owner of a Lot, by virtue of the ownership of a Lot, shall be a Member of the Association. Each Owner of a Lot shall be entitled to vote on the basis of one vote for each Lot then existing in the Community Area.. When there is more than one Owner of a Lot, the Owners shall determine which of them is to act as member of the Association and exercise the privileges of membership for that Lot in accordance with the Covenants. Developer is otherwise entitled to vote as a Member with respect to the Lots owned by it in accordance with the provisions set forth above as to each Owner of a Lot. The Developer is the sole member of the Architecture Committee and has sole discretion of building structures within Palmer Divide – 42. MEMBERSHIP. While the Developer owns any Lot subject to these Restrictions and Covenants, the Architectural Committee shall consist of the Developer. The Developer may appoint an agent to act in its place as the Architectural Committee. When the Developer no longer owns any Lot subject to these Restrictions and Covenants, the Architectural Committee shall be the board of directors of the Association.

9. Situation Facts The Developer did not maintain a current HOA filing with the state of Colorado or as directed in the covenants and by laws – https://www.colorado.gov/.../hoa-information-and-resource-center https://www.colorado.gov/.../hoa-information-and-resource-center – http://www.brianwess.com/HomeOwnerAssociations – Section 2.1 Annual Meeting. The Association shall hold at least one meeting of the Members annually for the transaction of Association business, to include approval of the budget for the following year and the appointment or election of directors, as applicable. The annual meeting will be held on or about the 1st day of December of each year, or on such other date as the Board of Directors may determine and as shall be specified in the notice of the meeting. The Developer does not own any property within Palmer Divide – http://land.elpasoco.com/SearchResults.aspx?lastname=&firstname=&street=connaught&type=&dir =&from=0&to=999999 The Developer has not kept any records of any Fences, Ancillary buildings within Palmer Divide – Email between Mike Webb and Grant Langdon dated Feb 3 2016 The Developer intended for the landowners to assume control of the Palmer Divide HOA upon the time that fifteen lots were sold* – *This number is listed three different times in the covenants and with three different numbers (28, 19, 15) with 15 being the lowest denominator. At this time all 23 lots have been sold. – http://land.elpasoco.com/SearchResults.aspx?lastname=&firstname=&street=connaught&type=&dir =&from=0&to=999999

10. Situation Facts The Developer abdicated his responsibility in executing the decision set forth in the water decree – Each land owner is contacted on or about Oct 31 st to report water usage by the state, this is actually a function of the HOA which can not be abdicated – The Association shall be responsible for the accounting and replacement requirements under the replacement plan as described in the Augmentation Plan portion of the Water Court decree referenced above. Said requirements include maintaining records showing the metered withdrawals from all Dawson aquifer wells on an annual basis, on the accounting form required by the Water Division District 2 Engineer, submitting the form to the Water Division 2 Engineer annually. – The covenants and restrictions regarding water in paragraphs 61-67 shall not terminate unless the requirements of the Water Decree are also terminated by order of the appropriate Water Court. The covenants and restrictions in paragraphs 61-67 may be amended in the manner provided for amendments to other covenants and restrictions, provided that the amendments are consistent with the requirements of the Water Decree or any Water Court approved amendments thereto and further provided that prior written approval of the proposed amendment is obtained from the Board of County Commissioners of El Paso County. – Water rights to the Dawson Aquifer and the post pump plan were deeded to the HOA at the time the Palmer Divide Plat was recorded – El Paso county #20584215

11. Situation Facts – The Association shall be conveyed 40.1 acre-feet per year, or a total of 4,010 acre-feet of nontributary ground water owned by the Developer. This ground water shall be reserved and shall be the source of replacement of modeled stream depletions that occur after well pumping permanently ceases. At such time, the Association may be required to construct wells into the Arapahoe and/or the Laramie-Fox Hills aquifers to withdraw such reserved nontributary ground water for such purpose. What this means is one the HOA has a long term obligation outside of just reporting water usage. – As insane as this will sound the meaning of the above paragraph is after 300 years at the end of term or if Dawson dries up the landowners of Palmer Divide are required to pay for the drilling and pumping of the water out of the aquifer’s and disperse upon the ground surface in order to replenish the loss of water in the Dawson aquifer.

12. Situation Facts The Covenants were a cut and paste from another development of similar construct but do not necessarily fully apply to Palmer Divide – jbf/real estate 2553.001 Forest Gate Covenants Sep 9 04 8 – Covenants state “No animals kept on a Lot by an owner may be allowed to run loose off of the Lot.” – This has a different interpretation to different people. Does this require dogs to be leashed or positive control with the owner present? – The law in El Paso county is that Palmer Divide is outside of city jurisdiction therefore there is no law requiring owners to keep animals contained, it is the landowners responsibility to build a fence or a barrier to keep unwanted animals off your property – This is statement unenforceable Changes to the covenants required two thirds landowner approval. (if a landowner doesn’t vote the abstention still counts to the total number) – 73. AMENDMENT. These Restrictions and Covenants may be amended, modified or added to at any time upon the approval, in writing, of the Developer, if it still owns any Lot, or, if it does not, with the approval of two-thirds of the owners, provided that no amendment may repeal any government- imposed requirements for Palmer Divide. All amendments shall be recorded in the records of El Paso County, Colorado.

13. HOA Construct Each Landowner is part of the Palmer Divide HOA and became so automatically when they closed on their property – 53. MEMBERSHIP. The owner of a Lot shall automatically become a member of the Palmer Divide Home Owners Association, Inc., a non-profit, non-stock corporation jbf/real estate 2553.001 Forest Gate Covenants Sep 9 04 13 organized under the laws of the State of Colorado (the “Association”). By acceptance of the deed or other instrument of conveyance, the owner or owners of each Lot consent to such owner’s or owners’ membership in the Association. Membership in the Association is appurtenant to each Lot. Each owner of a Lot shall automatically be entitled to the benefits and subject to the burdens relating to such membership in the Association. Membership in the Association shall be limited to the fee simple owners of the Lots, except that in case of an installment land contract where the seller holds title until fully paid, the purchaser, and not the seller, shall be a member – By Laws ARTICLE I MEMBERS: Section 1.1 Eligibility. Each Owner of a Lot, by virtue of the ownership of a Lot, shall be a Member of the Association. Each Owner of a Lot shall be entitled to vote on the basis of one vote for each Lot then existing in the Community Area.. When there is more than one Owner of a Lot, the Owners shall determine which of them is to act as member of the Association and exercise the privileges of membership for that Lot in accordance with the Covenants. Developer is otherwise entitled to vote as a Member with respect to the Lots owned by it in accordance with the provisions set forth above as to each Owner of a Lot.

14. HOA Construct Each land owner is entitled to one vote – 54. VOTING OF OWNERS. Subject to the terms, conditions and limitations contained in the Articles of Incorporation and Bylaws of the Association, the owner or owners of each Lot shall be entitled to one vote as members of the Association for each such Lot owned. An election for members of the Board of Directors of the Association shall be held at such time as twenty-eight (28) Lots have been sold by Developer. 10% of the land owners can call a quorum via official mail – Section 2.2 Special Meetings. Special meetings of the Members may be called by the President, by a majority of the Board of Directors or by Members holding at least ten percent (10%) of the total number of votes of the Members. Grant Langdon as the President called the meeting Mike Webb only requested and offered to host. See Notice of Meeting. – Section 2.3 Notice of Meeting. Written notice of a meeting stating the place, day and hour of the meeting, and the agenda for the meeting, shall be delivered personally or by U. S. Mail, postage prepaid, to each Owner not less than 10 nor more than 50 days before the date of the meeting. – Section 2.4 Quorum. Except as otherwise specified in the Covenants, holders of at least ten percent (10%) of all the votes of the Members shall constitute a quorum. If a quorum is present in person or by proxy, a majority of the votes entitled to be cast by the Members present or represented by proxy shall be the act of the Members, except as otherwise provided by the Articles of Incorporation, Covenants or these Bylaws.

15. HOA Construct The business conducted at the quorum is voted on by members present or via proxy. Resolutions are passed by majority vote of members either in person or via proxy – Section 2.4 Quorum. Except as otherwise specified in the Covenants, holders of at least ten percent (10%) of all the votes of the Members shall constitute a quorum. If a quorum is present in person or by proxy, a majority of the votes entitled to be cast by the Members present or represented by proxy shall be the act of the Members, except as otherwise provided by the Articles of Incorporation, Covenants or these Bylaws. – 56. PROXY VOTING. Any member, including Developer, may give a dated, revocable written proxy to any person authorizing the latter to cast the member’s votes on any matter or a particular matter. Such written proxy shall be executed by the member or a duly authorized attorney-in-fact. A proxy may be revoked by giving notice to the Association’s board or by the member’s physical presence at the meeting. – Section 1.2 Proxies. An Owner may vote in person or by written, revocable proxy executed by the Owner or a duly authorized attorney-in-fact and submitted to the Association prior to the vote to which the proxy is given. Proxies may be revoked by giving notice to the Board or by the Member’s physical presence at the meeting.

16. Key Assumptions Leaving authority for the management of the covenants, the AC and the HOA with Grant Langdon is untenable The Land owners of Palmer Divide can/should take the necessary actions to perform self governance Very contentious subject among landowners with many differing opinions, assumptions, desires. During the informal casting of votes via email chains the opinions of most landowners are on common ground There is not an overwhelming desire to establish a Palmer Divide HOA The covenants are written so that the neighborhood will remain aesthetically pleasing and retain property values The covenants also prevent any one landowner imposing their will upon another as long as they are within the boundaries of the covenants, county or state law. – E.g ancillary buildings (there is no size limitation listed in the covenants) I can not find a reference to an approved shed/outbuilding size therefore if the building is not in the form of a detached garage, no matter the size they are all ancillary/outbuildings and must be approved by Grant Langdon The covenants can/should be adjusted to current situation

17. Why we need an HOA Obligated by the Covenants and Restrictions Legally obligated by the Water Decree The HOA (Landowners collectively own the water rights to the Dawson aquifer below the 120 acres of Palmer Divide) – The water rights were deeded from Grant Langdon to the Palmer Divide HOA El Paso county #20584215 – We are only authorized to pull from the Dawson aquifer Grant Langdon did not convey the remaining water rights to the Association. – Our Water Rights can not be exercised as individual landowners but only through a HOA Board of Director’s Governance in upholding the covenants – May not be needed or believed to be not needed with current residents but maybe required in the future Provides consolidated representation and receives notifications from official entities and developers vice individual landowners – Case in point: Flying Horse at Shamrock Ranch and Sundance Ranch

18. Assumption of Control In order to remove Grant Langdon as the sole arbiter acting as both the Architecture Committee and the HOA the Landowners of Palmer Divide must elect an initial Board of director’s – Section 3.2 Number. Except for the initial board of directors, the number of directors of the Association shall be not less than three (3) nor more than seven (7), with the exact number to be set by the Board. Directors shall be appointed by Developer or elected, as applicable, at a regular meeting of the Owners and shall, except for the directors of the initial board, serve for a term of three years from the date of the meeting of the Members at which they were elected or appointed. The terms of the members of the initial elected board shall be staggered. If we can get through the above and elect an initial board of directors for a short time frame, not to exceed in office past the annual meeting on or about December 1 st. The Landowners in self governance can bring a resolution forward to amend the covenants. – Section 2.1 Annual Meeting. The Association shall hold at least one meeting of the Members annually for the transaction of Association business, to include approval of the budget for the following year and the appointment or election of directors, as applicable. The annual meeting will be held on or about the 1st day of December of each year, or on such other date as the Board of Directors may determine and as shall be specified in the notice of the meeting.

19. Voting All votes will be done by secret ballot Allows landowners to vote conscience without repercussion Paragraph 56 in the Palmer Divide outline the procedures for proxy voting. Written revocable vote. This vote can be accepted via single direct email titled with your Name and address/Proxy vote in the subject line and your cast vote/comments in the text or via letter – E.g. Webb 6610/Proxy Vote – The proxy vote will be cast in the landowners wishes as a secret ballot with and recorded in the minutes of the meeting and filed for further reference – Positions and opinions change as facts or other avenues are presented to take an email chain as your actual vote would be negligent. – No one is denied or being denied voting as implied in one of the email chains.

20. Way Ahead The next few slides are proposed Courses of Action they are meant for discussion and will provide a template to deviate from. We will most likely end up with a hybrid of some type.

21. COA 1 Full HOA Establishment Accept Covenants and bylaws as currently written Vote in Board of Director’s Establish HOA Incorporate all facets of the Covenants and Bylaws Enforce Pro’s – Already established as County Records – Brings Palmer Divide subdivision within legal guidelines Con’s – Enforcement – Due’s and fee’s – Not widely popular – Landowner’s feel it pits against one another

22. COA 2 POA/AC Vote in initial Board of Directors for a short term no longer than time it takes to accomplish rewrites/amendments to the covenants but to serve no longer than on or about Dec 1 st which would be the timeframe for an annual HOA meeting where at this time a new a limited capacity board named Property Owners Association (distinguish it from the HOA) exercising our water decree obligations and to act as the AC can be elected. Proposed Changes to Amend Covenants – Remove all references to the developer only reference the Architecture Committee. Each land owner is required to submit plans to the AC. The AC would have the ability to approve the building requirements set forth in the covenants and deviations/waivers can be granted if in best interest of the community. – Remove other such paragraphs/sentences as voted upon – Add verbiage to covenants and by laws to establish a limited capacity Property Owners Association (POA) to fulfill the responsibilities set forth in the water decree and the AC – Replace the HOA paragraph (s) with verbiage to allow the expansion of powers of HOA and bylaws to current filings with 51% land owner approval – Allow special/specific case representation by the limited capacity POA Board of Directors for situations such as representation on County Water Boards or the Black Forest Land Board. – Although an HOA/POA is not necessarily wanted right now. This COA allows the Landowners of Palmer Divide to exercise the water decree obligation and as the AC. Also if necessary expand the powers of the HOA in the future. – This COA does not eliminate overarching guidelines in the covenants. – This COA does not eliminate an individual landowners right to enforce the covenants – This COA keeps a check and balance system within the community and allows the landowners a local process to work through in regard to their land

23. COA 2 POA/AC PRO – Keeps overarching guidelines in covenants – Fulfills water decree obligation – Limited Capacity HOA – no fees/dues, limited enforcement – Waiver capability – AC approval protects landowner – Community representation CON – Enforcement – Refiling of covenants – Landowner angst/conflict

24. COA 3 POA no AC Vote in initial Board of Directors for a short term no longer than time it takes to accomplish rewrites/amendments to the covenants but to serve no longer than on or about Dec 1 st which would be the timeframe for an annual HOA meeting at this time a new board can be elected or create a limited capacity board exercising our water decree obligations. Proposed Changes to Amend Covenants – Remove all references to the developer and the Architecture Committee. Each land owner is required to follow the building requirements set forth in the covenants and deviations from the covenants open themselves up for litigation. Self policing. – Remove other such paragraphs as voted upon – Add verbiage to covenants and by laws to establish a limited capacity Property Owners Association (POA) to fulfill the responsibilities set forth in the water decree – Replace the HOA paragraph (s) with verbiage to allow the expansion of powers of HOA and bylaws to current filings with 51% land owner approval – Allow special/specific case representation by the limited capacity Board of Directors for situations such as representation on County Water Boards or the Black Forest Land Board. – Although an HOA is not necessarily wanted right now. This COA allows the Landowners of Palmer Divide to exercise the water decree obligation and if necessary expand the powers of the HOA in the future. – This COA eliminates the AC – This COA places the burden on individual landowners right to enforce the covenants – This COA allows the landowners a level of freedom in regard to their land within the guidelines of the covenants, no waiver process

25. COA 3 POA no AC PRO – Fulfills water decree obligation – Limited Capacity POA – no fees/dues – Community representation – No Enforcement CON – Eliminates AC guidelines in covenants – No waiver capability – No Enforcement (would take full activation of the HOA) – Refiling of covenants – Landowner angst/conflict

26. Tough Questions How are we going to address – Enforcement – Correction – Dues/donations – Water withdrawal at Sundance Ranch

27. End State Protect Palmer Divide rights and interests Retain an aesthetically pleasing neighborhood with high home values Preform self governance (remove the developer)

28. Meetings Schedule additional meetings – As this is the initial meeting with allot of information: table all decisions for 10 days – Reconvene on March 15 as stated by Grant Langdon in the notice of meeting This allows members time to evaluate their current positions This also allows time for additional COA submissions – Be prepared to prepare, present, discuss and vote on a course of action on 15 March with members present or via proxy

29. Landowner Discussion QUESTIONS? Landowner Discussion

30. Colorado Division of Resources