Water Agreement 257-258

17 January 2007

To: PlaVada Community Association Members

From: 2006-2007 Board of Directors

Fellow Members

As has been reported in the Timber Trumpet, Board meetings, and general membership meetings for about the past four years, the Association has undertaken considerable discussion and actions in developing new water resources. There have been considerable discussions with the State of California, our consulting engineers, and amongst community members who volunteered to participate in a committee that proposed several recommendations for development of new water resources. The result of these actions has yielded two test wells, which at this point in time have yielded a potentially considerable water resource for the community.

The test bores are located on properties that are outside the Associations assets. So this requires the Board to enter into an agreement with the property owners for easement rights to develop the well sites. The owners of the properties we are discussing in this communication are Nick Nieffenegger and Sunnie Skiles (Nieffenegger/Skiles), members of PlaVada and active in community interests. To summarize where we are with this process, in October 2006 the Board entered into an agreement over the water rights to the test well drilled on lot 257/258. I apologize in advance, but this agreement is presented here in detail, as written by the Association attorney. This is done to promote full disclosure of the agreement to the membership.

WHEREAS, NIEFFENEGGER/SKILES owns Lots 257 and 258 in Pla-Vada, and two additional lots situated at 51337 Donner Pass Road and at 51180 Donner Pass Road (at the intersection with Taffy Lane), respectively, which are outside, but next to, the boundaries of Pla-Vada; See attached legal descriptions:

WHEREAS, NIEFFENEGGER/SKILES has drilled a test bore for a well on the lot at 51337 Donner Pass Road ("Well No. 1"), which has tentatively been rated to produce approximately 30 gallons of water per minute;

WHEREAS, NIEFFENEGGER/SKILES has allowed Pla-Vada to drill a well on Lot 258 in PLA- VADA ("Well No.2"), which has tentatively been found to produce upwards of eighty (80) gallons of water per minute;

WHEREAS, NIEFFENEGGER/SKILES would like to exchange rights to all the water from Well No.1 and Well No.2 for sewer and water service to be provided to his property at 51180 Donner Pass Road, and for additional water service to the properties as specified below;

NOW THEREFORE, in consideration of the mutual promises, covenants and conditions contained in this Agreement, the parties hereto agree as follows:

1. GRANT OF WATER AND ACCESSORY RIGHTS

1.1 NIEFFENEGGER/SKILES grants to Pla-Vada exclusive rights to all water produced by Well No. 1 and Well No.2; provided, that should PLA­-VADA not have developed or exercised said rights as to Well No. 1 within ten (10) years from the date hereof, said rights shall revert exclusively to NIEFFENEGGER/SKILES.

1.2 PLA-V ADA agrees that it shall bear all costs required to bring Well No.1 and Well No.2 into compliance with all State and local laws and regulations.

1.3 NIEFFENEGGER/SKILES will grant to Pla-Vada, for no additional consideration, any easements necessary to access and service Well No. 1 and Well No.2, to run power to them, and to pipe the water from them to storage tanks. Said easements shall be located away from the middle of Lots 257 and 258, and shall be in accordance with the recommendations of PLA-V ADA's professional engineers, and shall be prepared and recorded at PLA-V ADA's expense.

2. PROVISION OF WATER SERVICE

2.1 Pla-Vada agrees to provide water service hook-ups to Lots 257 and 258 at no cost to NIEFFENEGGER/SKILES.

2.2 In addition, Pla-Vada agrees to provide water service by means of a two-inch (2") line to the property at 51180 Donner Pass Road, at the intersection of Donner Pass Road with Taffy Lane, and to provide a hook-up to said water line for the property at that address at no cost to NIEFFENEGGER/SKILES. NIEFFENEGGER/SKILES shall be responsible for providing all plumbing infrastructure past the point of hook-up; PLA-V ADA shall install a water meter for such service at its expense.

2.3 NIEFFENEGGER/SKILES agrees to pay the regular annual charges for water and sewer service assessed to Lots 257 and 258, and to see to it that he or the builder/developer of the property at 51180 Donner Pass Road signs a standard service agreement to pay said charges to Pla-Vada for the service to that address.

2.4 In addition, Pla-Vada agrees to provide water service by means of a two-inch (2") line to the seven (7) existing lots on Taffy Lane, at a cost of $3,500 per hook-up. The owners of said lots shall provide their own plumbing infrastructure from the point of each hook-up; Pla-Vada shall install at its expense water meters on each hook-up.

2.5 The owners of the lots on Taffy Lane shall sign standard water service agreements with Pla-Vada by which they each agree to pay to PLA- VADA Thirty-five Percent (35%) of the annual assessment charge imposed on members of Pla-Vada for the provision of water and sewer services; the reduced rate is to take into account that no sewer services are being provided to the lots on Taffy Lane.

2.6 The well water on 51337 Donner Pass Rd Well No.1, water from Subject well will be provided to owner of 51337 Donner Pass Rd at no charge.

3. PROVISION OF SEWER SERVICE

3.1 Pla-Vada agrees to hook up sewer service to Lots 257 and 258 at no cost to NIEFFENEGGER/SKILES.

3.2 In addition, Pla-Vada agrees to provide sewer service by means of a four-inch (4") line to the property at 51180 Donner Pass Road, at the intersection of Donner Pass Road and Taffy Lane, for hook-up at no cost to NIEFFENEGGER/SKILES.

3.3 Residence at 51180 Donner Pass Rd to pay 75% of annual assessment fee for sewer and water.

4. MISCELLANEOUS

4.1 All installation of water and sewer service shall be with labor and materials furnished by Pla-Vada.

4.2 Upon execution of this agreement, Pla-Vada shall provide NIEFFENEGGER/SKILES with letters of intent to provide water and sewer service to Lots 257 and 258 and to the property at 51180 Donner Pass Road

4.3 Weather permitting, installation of the water and sewer lines to the intersection of Donner Pass Road and Taffy Lane shall be completed in calendar 2006. Water hook-ups to the seven lots on Taffy Lane shall be completed by the summer of 2007.

4.4 Pending the preparation and recording of the formal easements pursuant to paragraph 1.3 above, NIEFFENEGGER/SKILES shall grant all necessary and reasonable rights of access to PLA - V ADA and its agents to allow it to complete the Well. PLA - VADA will indemnify and hold harmless NIEFFENEGGER/SKILES from any and all liens, damage, costs and other liability by reason of, or arising out of, its work on the Well.

4.5 This is the entire agreement between the parties. All prior discussions, verbal agreements and understandings are either embodied in or are superseded by this Agreement. This Agreement shall not be changed or modified except by a writing duly signed by both parties after a resolution approving any such amendment, and authorizing its execution, has been passed by Pla-Vada's Board of Directors.

4.6 Time is of the essence of this Agreement.

4.7 The parties shall first attempt to resolve any disputes arising under this Agreement by mediation. Failing such resolution, the parties agree to appoint a single arbitrator, who shall be a retired judge or attorney with experience in the subject matter, who shall hear and resolve the disputes in accordance with Title 9 of Part 3 of the California Code of Civil Procedure; if the parties cannot agree on a single arbitrator, either one may apply to the Superior Court of Nevada County for appointment of an arbitrator. In any such arbitration proceeding, the arbitrator shall have full discretion to award to a party all or any portion of that party's reasonable costs of arbitration, including (but not limited to) expert witness and attorneys' fees.

This agreement was formally signed between the property owners, Nick Nieffenegger and Sunnie Skiles, and Association President, Chik Brenneman on December 9, 2006

As presented, PlaVada stands to gain from this agreement. We receive water rights to two wells for the approximate sum of $20K + development costs. Those development costs are offset by the $24K in hookup fees from the Taffy Lane residents. For those concerned about water supply, bringing well no. 2 on line, with the potential for well 1 and a third well, yet still in development, our customers should not see any decrease in services, unless we have some catastrophic water loss. We have also purchased a 240,000 gallon water tank, that we are seeking a site for placement. All these actions will bring us into compliance with current water works standards. Currently, we do not have sufficient water resources to meet our demand. The consequences of not identifying and developing new water resources include the possibility of a building moratorium and strict water conservation rules for the Association. Given many previous options, this was presented as the best for our Association. The Board unanimously supports this agreement as it is in the best interest of PlaVada to secure water rights at the lowest possible cost to the Association.

Currently, our Bylaws, Articles of Incorporation, and a court order specify that we can only provide water and sewer services to the existing 352 planned lots for the Association, without membership approval. The Bylaws do state, that any Board action that is voted on and approved, if it is not in accordance with our existing governing documents, must be approved by the membership at the next general membership meeting or earlier, by special election.

In this mailing, please familiarize yourself with the new election policy as required by the Davis-Sterling Act, which became effective July 1st, 2006. The Board at the December 9th meeting formally adopted this policy. The most significant changes in the policy is that all elections are conducted by mail, with the requirement that all ballots are returned to the Association by a specified date where they are counted by an election inspector, who is not a Board member or employee of the Association. In summery, all members vote their own ballot. Please note that this is a summary, and we strongly encourage you to review the enclosed policy.

In February, we will be asking you, the members, for support of this agreement by means of a special ballot. Please vote in favor of this amendment for the best interest of PlaVada and its future. We appreciate your support.

Sincerely, on behalf of the 2006-2007 PlaVada Board of Directors.

Chik Brenneman

President, PlaVada Community Association