DECLARATION OF EASEMENTS AND COVENANT TO SHARE COSTS FOR McKENNA FOREST RESERVE COMMUNITIES

DECLARATION OF EASEMENTS AND COVENANT TO SHARE COSTS FOR McKENNA FOREST RESERVE COMMUNITIES THIS DECLARATION OF EASEMENTS AND COVENANT TO SHARE COSTS FOR McKENNA FOREST RESERVE COMMUNITIES ( Covenant ) is dated for reference purposes this 11 th day of December, 2003, by JACKSON FOREST ASSOCIATION, a Washington nonprofit corporation, ( JFA ), SILVER LAKE HIGHLANDS PRIMARY ROAD ASSOCIATION, a Washington nonprofit corporation ( SLHA ), TULE LAKE & PRIMARY ROAD ASSOCIATION, a Washington nonprofit corporation ( TLA ), WILLOW LAKE ASSOCIATION, a Washington nonprofit corporation, FOREST GROVE ASSOCIATION, a Washington nonprofit corporation, and HIGHLAND MEADOWS ASSOCIATION, a Washington nonprofit corporation (collectively, Declarant ). BACKGROUND STATEMENT A. As successor to certain interests of Weyerhaeuser Real Estate Company, Weyerhaeuser Real Estate Development Company, a Washington corporation ( WREDCO ) is the developer of the Tule Lake (including The Ridge at Tule Lake), Silver Lake Highlands and Jackson Forest Communities located in Pierce County, Washington (the Initial McKenna Forest Reserve Communities ). The real property comprising the Initial McKenna Forest Reserve Communities is described in the attached EXHIBIT A. B. WREDCO is the owner of approximately 2,400 acres of real property described in the attached EXHIBIT B ( Subsequent Property ) which lies adjacent to the Initial McKenna Forest Reserve Communities. Declarant is developing three additional forest reserve communities within the Subsequent Property to be known as the Willow Lake, Forest Grove and Highland Meadows communities. The Initial McKenna Forest Reserve Communities and such additional communities within the Subsequent Property are referred to herein collectively as the McKenna Forest Reserve Communities. C. The Initial McKenna Forest Reserve Communities contain various roads, recreational amenities, community gathering areas, entry features, gates, signage, water features and similar improvements ( Existing Community Property ). The Existing Community Property has been developed by WREDCO for the common use and enjoyment of the owners of property within the respective communities in which the Existing Community Property exists. Declaration of Easements and Covenant to Share Costs page 1

The Existing Community Property has been developed using consistent designs, materials and construction techniques. D. WREDCO intends to develop community property within the Subsequent Property which is consistent with the design, materials and construction techniques of the Existing Community Property. Such additional community property together with the Existing Community Property is collectively referred to herein as the Shared Community Property. E. By establishing mutual rights for all owners within the McKenna Forest Reserve Communities to utilize all of the Shared Community Property and by providing for the equitable sharing of costs associated with such Shared Community Property, the Neighborhood Associations have determined that (i) substantial efficiencies can be achieved in the maintenance, repair and replacement of the Shared Community Property, (ii) recreational opportunities for all owners can be expanded, and (iii) accessibility to and from the homes and property of all owners can be improved. F. To provide for the maintenance and operation of the Shared Community Property and to administer the terms and conditions of this Covenant, Declarant intends to establish the McKenna Forest Reserve Community Council as a Washington nonprofit corporation. The Council s Board of Directors will include representatives of all of the Neighborhood Associations who will act on behalf of the Owners of Lots within the McKenna Forest Reserve Communities. G. Recognizing the significance of proper forest management to the Owners of property within the McKenna Forest Reserve Communities, Declarant also desires to authorize the Council to coordinate the efforts of participating owners in achieving forestry certification for their respective Lots. H. By this Covenant, Declarant desires to provide for the maintenance and operation of the Shared Community Property; to provide for the obligation of all owners of property within the McKenna Forest Reserve Communities to contribute to such costs; to set forth the method for allocating such costs among such property owners; to provide for all necessary and appropriate easements for the use, maintenance and operation of the Shared Community Property; and to authorize the Council to serve as the coordinator of Owners desiring to obtain forest certification for their respective Lots. STATEMENT OF COVENANTS AND EASEMENTS Pursuant to the authority granted to each undersigned Neighborhood Association by its respective Neighborhood Declaration, Declarant hereby declares that the real property described in EXHIBITS A and B, and any additional property which is made a part of this Declaration of Easements and Covenant to Share Costs page 2

Covenant in the future shall be owned, conveyed, and used subject to all of the provisions of this Covenant, which shall run with the title to such property. This Covenant shall be binding upon all Persons having any right, title, or interest in any portion of the real property now or hereafter submitted hereto, their heirs, successors, successors-in-title, and assigns. ARTICLE 1. DEFINITIONS The words used in this Covenant shall generally be given their normal, commonly understood definitions unless otherwise specified. Capitalized terms shall be defined as follows: 1.1. Articles of Incorporation or Articles : The Articles of Incorporation of the McKenna Forest Reserve Community Council, a Washington nonprofit corporation, as filed with the Washington Secretary of State, as such may be amended from time to time. 1.2. Board of Directors or Board : The body responsible for administration of the Council, selected as provided in the Bylaws and serving the same role as the board of directors under Washington corporate law. 1.3. Bylaws : The Bylaws of the McKenna Forest Reserve Community Council, establishing the powers, duties, and organization of the Council. 1.4. Community-Wide Standard : The standard of conduct, maintenance, design, or other activity applicable to the Shared Community Property. Such standard shall be as established initially by WREDCO including, without limitation, WREDCO s Forest Reserve Vision Statement and Community Design Elements dated 2001. The Community-Wide Standard may contain both objective and subjective elements and may evolve as development progresses and as the needs and demands of the McKenna Forest Reserve Communities change. 1.5. Council : The McKenna Forest Reserve Community Council, a Washington nonprofit corporation. 1.6. Council Expenses : The actual and estimated expenses incurred or anticipated to be incurred by the Council to administer, operate, maintain, repair, replace, improve and insure the Shared Community Property and to provide other authorized services for the general benefit of the McKenna Forest Reserve Communities. 1.7. Declarant : Collectively hereunder, Jackson Forest Association, a Washington nonprofit corporation, Silver Lake Highlands Primary Road Association, a Washington nonprofit corporation, Tule Lake & Primary Road Association, a Washington Declaration of Easements and Covenant to Share Costs page 3

nonprofit corporation, Willow Lake Association, a Washington nonprofit corporation, Forest Grove Association, a Washington nonprofit corporation, and Highland Meadows Association, a Washington nonprofit corporation, or their successors or assigns as designated in a recorded instrument executed by the immediately preceding Declarant entity. 1.8. Existing Community Property : Those areas and facilities within each of the Initial McKenna Forest Reserve Communities and defined in each of the applicable Neighborhood Declarations as community property to be maintained, administered, operated and otherwise overseen by the applicable Neighborhood Association including, without limitation, roads, recreational amenities, community gathering areas, entry features, gates, signage, water features and similar features. 1.9. General Assessments : Assessments levied on all Lots to fund Council Expenses, as determined in accordance with Section 5.1. 1.10. Lot : A portion of the McKenna Forest Reserve Communities, whether improved or unimproved, which may be individually owned and which is subject to assessment by any of the Neighborhood Associations. 1.11. McKenna Forest Reserve Communities : The Tule Lake, Silver Lake Highlands, Jackson Forest, Willow Lake, Forest Grove and Highland Meadows forest reserve communities located in Pierce County, Washington, as described in the attached EXHIBIT A. 1.12. Mortgage : A mortgage, deed of trust, deed to secure debt, or any other form of security instrument affecting title to any Lot. A Mortgagee shall refer to a beneficiary or holder of a Mortgage. 1.13. Neighborhood Association : Any mandatory membership association comprised of owners of real property within the McKenna Forest Reserve Communities which has the power to assess each of its members for common expenses in accordance with its respective Neighborhood Declaration. As of the recording of this Covenant, the Neighborhood Associations within McKenna Forest Reserve Communities are the Jackson Forest Association, the Silver Lake Highlands Primary Road Association, the Tule Lake & Primary Road Association, Willow Lake Association, Forest Grove Association and Highland Meadows Association. 1.14. Neighborhood Declaration : Any recorded declaration of covenants, conditions, or restrictions which primarily affect Owners of Lots within one of the McKenna Forest Reserve Communities and which are administered and enforced by a Neighborhood Association. Neighborhood Declarations include (i) the Declaration of Easements, Covenants, and Restrictions (Jackson Forest Association) as recorded under Pierce County Recording No. 200111141332, as amended; (ii) the Declaration of Easements, Covenants, and Declaration of Easements and Covenant to Share Costs page 4

Restrictions (Silver Lake Highlands Primary Road Association) as recorded under Pierce County Recording No. 200012040734, as amended; (iii) the Declaration of Easements, Covenants, and Restrictions (Tule Lake & Primary Road Association) as recorded under Pierce County Recording No. 200012290715, as amended; (iv) the Declaration of Easements, Covenants and Restrictions for Willow Lake as recorded under Pierce County Recording No. 200311131319; (v) the Declaration of Easements, Covenants and Restrictions for Forest Grove as recorded under Pierce County Recording No. 200311131321; and (vi) the Declaration of Easements, Covenants and Restrictions for Highland Meadows as recorded under Pierce County Recording No. 200311131320. 1.15. Owner : One or more Persons who hold the record title to a Lot within McKenna Forest Reserve Communities but excluding in all cases any Mortgagee or other party holding an interest merely as security for the performance of an obligation. If a Lot is sold under a recorded contract of sale, then upon recording of such contract, the purchaser (rather than the fee owner) will be considered the Owner if the contract specifically so provides. If a Lot is subject to a written lease with a term in excess of one year and the lease specifically so provides, then upon filing a copy of the lease with the Council, the lessee (rather than the fee owner) will be considered the Owner during the term of the lease for the purpose of exercising any rights of Owners under this Covenant. 1.16. Person : A human being, a corporation, a partnership, a trustee, or other legal entity. 1.17. Policies and Procedures : Those policies, procedures, rules and regulations adopted by the Board from time to time pursuant to the authority granted to the Council by this Covenant. 1.18. Shared Community Property : Those areas for which the Council has maintenance, insurance, operating, or other responsibility under this Covenant or other agreements entered into by the Council. The Shared Community Property shall include, but need not be limited to, all real and personal property which the Council owns, leases, or otherwise holds possessory, easement or use rights in for the common use and enjoyment of all Owners and occupants within the McKenna Forest Reserve Communities. 1.19. Special Assessments : Assessments levied against all Lots to cover unanticipated expenses or expenses in excess of those budgeted, as described in Section 5.3. 1.20. Specific Assessments : Assessments levied against a particular Lot or Lots or a particular Neighborhood Association for expenses incurred or to be incurred by the Council for the purposes described in Section 5.4. Declaration of Easements and Covenant to Share Costs page 5

1.21. Subsequent Property : That real property more particularly described on the attached EXHIBIT B being developed by WREDCO as the Willow Lake, Forest Grove and Highland Meadows forest reserve communities. ARTICLE 2. PURPOSES 2.1. Purposes. The purposes for which this Covenant is entered into and the Council is established are, without limitation: (a) To provide for the administration, operation, maintenance, repair, replacement and improvement of the Shared Community Property; (b) To obligate all Owners within the McKenna Forest Reserve Communities to contribute to the costs of maintenance and operation of the Shared Community Property through assessments levied by the Council; (c) To provide all necessary and appropriate easements for (i) the use of the Shared Community Property by the Owners and (ii) its administration, operation, maintenance, repair, replacement and improvement by the Council; and (d) To coordinate the efforts of participating Owners to achieve forestry certification for their Lots. ARTICLE 3. SHARED COMMUNITY PROPERTY 3.1. Initial Shared Community Property. The Shared Community Property as of the recording of this Covenant is more particularly described or depicted on the attached EXHIBIT C. 3.2. Obligation to Operate and Maintain. The Council shall administer, operate, maintain, repair, replace and, in the Council s discretion, improve in accordance with the Community-Wide Standard, the Shared Community Property and the Neighborhood Associations are hereby relieved of any obligation for such administration, operation, maintenance, repair, replacement and improvement. The Shared Community Property may include, without limitation, any or all of the following as determined in the discretion of the Council and as reflected in a recorded supplement to this Covenant or any other writing executed by the Council: Declaration of Easements and Covenant to Share Costs page 6

(a) Landscaping, signage, lighting, utilities, infrastructure, structures, and other improvements, including pathways and trails, situated within or along the right-of-way of the primary private roads and any public roads within the McKenna Forest Reserve Communities; (b) The existing entry features serving the McKenna Forest Reserve Communities and entry features at such other locations as determined in the discretion of the Council to be of general benefit to all of McKenna Forest Reserve Communities, including all signage, landscaping, and other improvements which are a part thereof; (c) Recreational amenities providing general benefit to all of the McKenna Forest Reserve Communities including any lake, pond, wetlands, pedestrian or equestrian trail, picnic area, natural area, or community gathering area.; (d) Property and/or facilities owned by any Neighborhood Association or by WREDCO and made available, on a temporary or permanent basis, for the use or benefit of all of McKenna Forest Reserve Communities and accepted in writing by the Council, but only so long as such property and/or facilities are made available for the use or benefit of all of McKenna Forest Reserve Communities; and (e) Such additional property and facilities as the Council may reasonably determine to be for the general benefit of McKenna Forest Reserve Communities and which the Council may acquire, or may become obligated to assume the responsibility to administer, operate, and maintain. The expenses associated with the administration, operation, maintenance, repair, replacement and, as applicable, improvement of the Shared Community Property shall be Council Expenses allocated as set forth in Article 5. 3.3. Conveyance of Shared Community Property by WREDCO. WREDCO may convey to the Council improved or unimproved real estate located within the Subsequent Property or the Initial McKenna Communities, personal property, and leasehold or other property interests. Such property or interests shall be accepted by the Council and thereafter shall be maintained as Shared Community Property. The expenses associated with the Shared Community Property shall be Council Expenses allocated as set forth in Article 5. 3.4. Conveyance of Shared Community Property by Neighborhood Associations or Other Persons. The Council may acquire improved or unimproved real estate located within the McKenna Forest Reserve Communities, personal property, easements, and leasehold or other property interests from any Neighborhood Association or other Persons. Such property or interests shall be maintained by the Council as Shared Community Property in accordance with the Community-Wide Standard. Declaration of Easements and Covenant to Share Costs page 7

3.5. Subtraction of Shared Community Property. In recognition of the fact that WREDCO will convey, or grant easements or other rights in, Shared Community Property within the Subsequent Property to the Council at no cost to the Council, WREDCO shall have the right to reduce any such donation and may require the Council to reconvey to WREDCO, or to transfer to any governmental or quasi-governmental entity or public utility, any such donation previously conveyed by WREDCO to the Council as Shared Community Property. 3.6. Dedication of Shared Community Property. Subject to the approval of and acceptance by such entity, the Council may dedicate portions of the Shared Community Property which it owns to Pierce County, Washington, or to any other local, state, or federal governmental or quasi-governmental entity, provided the Board has determined, in its reasonable discretion, that such entity has the funding source and commitment to maintain the dedicated property in accordance with the Community-Wide Standard. ARTICLE 4. USE OF SHARED COMMUNITY PROPERTY 4.1. Use by Owners. Subject to the provisions of this Declaration and the Policies and Procedures adopted hereunder, each Owner shall have a right and easement in and to the Shared Community Property for the uses for which they are established, which easement shall be appurtenant to and pass with the title to such Owner s Lot. Any Owner may extend the Owner s right of use and enjoyment of the Shared Community Property to the members of the Owner s family, lessees, and social invitees, as applicable, subject to reasonable regulation by the Council. An Owner who leases the Owner s property shall be deemed to have assigned all such rights to the lessee of such property for the period of the lease. 4.2. Use by Public. To the extent mandated by any governmental authority or when so determined by the Council acting through its Board of Directors, members of the public may have the right to use portions of the Shared Community Property at such time and subject to such Policies and Procedures as the Council may establish. 4.3. Restrictions on Use. The following restrictions shall apply to the Shared Community Property: 4.3.1. Private Use. The Shared Community Property may not be partitioned or otherwise restricted to private use by an Owner, and no private structure of any type (except utilities or similar facilities permitted by the Council) shall be constructed on the Shared Community Property. The Shared Community Property shall be reserved for the use and enjoyment of all Owners, and no private use may be made of the Shared Community Property, except for temporary uses as authorized by the Council. Declaration of Easements and Covenant to Share Costs page 8

4.3.2 Offensive or Unlawful Activities. No noxious or offensive activities shall be carried on within the Shared Community Property, nor shall anything be done or placed on the Shared Community Property which interferes with or jeopardizes the enjoyment of the Shared Community Property, or which is a source of annoyance to Owners or occupants. No unlawful use shall be made of the Shared Community Property nor any part thereof, and all laws and regulations of all Governmental Authorities shall be observed. 4.3.3 Policies and Procedures. In addition to the restrictions in this Declaration, the Council from time to time may adopt, modify or revoke such Policies and Procedures governing the conduct of persons and the operation and use of the Shared Community Property as it may deem necessary or appropriate in order to assure the peaceful and orderly use and enjoyment of the Shared Community Property. A copy of the Policies and Procedures, upon adoption, and a copy of each amendment, modification or revocation thereof, shall be furnished by the Council to each Owner, or to each Neighborhood Association for distribution to each Owner, and shall be binding upon all Owners and occupants of property within the McKenna Forest Reserve Communities. 4.3.4 Neighborhood Declarations. Use of any particular item of Shared Community Property shall be subject to any additional restrictions contained in any Neighborhood Declarations as of the recording of this Covenant which governs such item of Shared Community Property. 4.4. Easements Reserved. 4.4.1 In Favor of Council. There are hereby reserved and granted to the Council perpetual, nonexclusive blanket easements over, under and across the Shared Community Property and such portions of the McKenna Forest Reserve Communities as are necessary for ingress and egress to and from the Shared Community Property and to enable the Council to fulfill its responsibilities under this Covenant; provided, the exercise of such easements shall not unreasonably interfere with the use and enjoyment of the burdened property and, upon completion of any such work, the Council shall restore such property to the condition existing immediately prior to the exercise of such easement, to the extent reasonably possible. 4.4.2 In Favor of WREDCO. So long as WREDCO owns any real property within the McKenna Forest Reserve Communities or subject to annexation to the McKenna Forest Reserve Communities, there is granted to and reserved by WREDCO an easement over, under and across the Shared Community Property in order to carry out management, sales and rental activities necessary or convenient for the sale of Lots. This easement includes, but is not limited to, a right of ingress and egress over the Shared Community Property for construction, utilities, communication lines, drainage, signs and ingress and egress for the benefit of other portions of McKenna Forest Reserve Communities or any Declaration of Easements and Covenant to Share Costs page 9

property in the vicinity of the Property or additional property that is then owned by WREDCO. WREDCO agrees that such users shall be responsible for any damage caused to the Shared Community Property as a result of their actions in connection with development of such property. If the easement is exercised for permanent use by such property and such property or any portion thereof benefiting from such easement is not made subject to this Declaration, WREDCO, its successors or assigns shall enter into a reasonable agreement with the Council to share the cost of any maintenance of such facilities. 4.4.3 In Favor of Governmental Authorities and Utilities. The Shared Community Property shall be subject to any easements reserved or granted by WREDCO, a Neighborhood Association or the Council to any governmental authorities or companies providing utility and communication services and to police, fire and other public officials. ARTICLE 5. OBLIGATION TO SHARE COSTS 5.1. Budgeting and Allocating Council Expenses. At least 60 days before the beginning of each fiscal year, the Board shall prepare a budget of the estimated Council Expenses for the coming year, including any contributions to be made to a reserve fund pursuant to Section 5.2. The budget shall also reflect the sources and estimated amounts of funds to cover such expenses, which may include any surplus to be applied from prior years, any income expected from sources other than assessments levied against the Lots, and the amount to be generated through the levy of General Assessments and Special Assessments against the Lots, as authorized in accordance with this Article 5. The Council is hereby authorized to levy General Assessments against all Lots subject to assessment under Section 5.5 to fund the Council Expenses. The amount of the General Assessment allocated to each Lot shall be equal; provided, however, that until such time as any portion of the Subsequent Property has been made subject to a record of survey or other recorded instrument creating Lots, no General or Special Assessments shall be levied against such property. In determining the General Assessment rate per Lot, the Board may consider any assessment income expected to be generated from any additional Lots reasonably anticipated during the fiscal year. Within 30 days after the adoption of a final budget by the Board, the Board shall send to each Owner a copy of the final budget, notice of the amount of the General Assessment to be levied pursuant to such budget, and a summary of the allocations. (If an Owner is subject to the jurisdiction of a Neighborhood Association, the notice may be sent to the Neighborhood Association for distribution by the Neighborhood Association to the individual Owners.) The budget and assessment shall be effective upon its adoption by the Board. Declaration of Easements and Covenant to Share Costs page 10

The Board may revise the budget and adjust the General Assessment from time to time during the year, subject to the notice requirements set forth above. 5.2. Budgeting for Reserves. The Board may, in its discretion, include in the budget amounts to be held as reserves for the replacement and repair of capital items. Reserves calculations shall take into account the number and nature of replaceable assets, the expected life of each asset, and the expected repair or replacement cost. 5.3. Special Assessments. In addition to other authorized assessments, the Council may levy Special Assessments to cover unbudgeted expenses or expenses in excess of those budgeted. The amount of any such Special Assessment allocated to each Lot shall be equal. Special Assessments shall be payable in such manner and at such times as determined by the Board, and may be payable in installments extending beyond the fiscal year in which the Special Assessment is approved. 5.4. Specific Assessments. The Board shall have the power to levy specific assessments against a particular Lot or Lots or a particular Neighborhood Association, as appropriate, for benefits, items, or services not provided to all Owners. Additionally, the Board shall have the power to levy a specific assessment against any Person whose conduct results in extraordinary expense to the Council as a result of damage to or destruction of any item of Shared Community Property. Such determination shall be made in the sole discretion of the Board provided that the Board shall give the Person prior written notice and a reasonable opportunity for a hearing before levying a Specific Assessment to repair or replace any such damaged or destroyed Shared Community Property. 5.5. Initial Payment; Commencement of Assessment Obligation. In addition to General, Special and Specific Assessments, from and after the recording of this Covenant, an initial working capital payment of $150 shall be made to the Council by the first purchaser of each Lot subject to this Covenant including, without limitation, each Lot created by any further subdivision or platting of a Lot. The obligation to pay assessments under this Covenant shall commence as to each Lot, after the Board first determines a budget and levies assessments. The first annual General Assessment levied on each Lot shall be adjusted according to the number of months remaining in the fiscal year at the time assessments commence. Assessments shall be paid in such manner and on such dates as the Board may establish. Unless the Board otherwise provides, the General Assessment shall be due and payable in advance on the first day of each fiscal year. If any Owner is delinquent in paying any assessments or other charges levied on the Owner s Lot, the Board may require the outstanding balance on all assessments to be paid in full immediately. Declaration of Easements and Covenant to Share Costs page 11

5.6. Obligation for Assessments. Subject to collection pursuant to Section 5.9 below, each Owner, by accepting a deed or entering into a recorded contract of sale for any Lot, is deemed to covenant and agree to pay all assessments authorized in this Covenant. All assessments, together with interest (computed from its due date at a rate of 10% per annum or such higher rate as the Board may establish, subject to the limitations of Washington law), late charges as determined by Board resolution, costs, and reasonable attorneys fees, shall be the personal obligation of each Owner and a lien upon each Lot until paid in full. Upon a transfer of title to a Lot, the grantee shall be jointly and severally liable for any assessments and other charges due at the time of conveyance. Failure of the Board to fix assessment amounts or to deliver or mail each Owner an assessment notice shall not be deemed a waiver, modification, or a release of any Owner from the obligation to pay assessments. In such event, each Owner shall continue to pay General Assessments on the same basis as during the last year for which an assessment was made, if any, until a new assessment is levied, at which time the Council may retroactively assess any shortfalls in collections. No Owner may exempt himself from liability for assessments by non-use of Shared Community Property, abandonment of his Lot, or any other means. The obligation to pay assessments is a separate and independent covenant on the part of each Owner. No diminution or abatement of assessments or set-off shall be claimed or allowed for any alleged failure of the Council or Board to take some action or perform some function required of it, or for inconvenience or discomfort arising from the making of repairs or improvements, or from any other action it takes. Upon written request, the Council shall furnish to any Owner liable for any type of assessment a certificate in writing signed by an Association officer setting forth whether such assessment has been paid. Such certificate shall be conclusive evidence of payment. The Council may require the advance payment of a reasonable processing fee for the issuance of such certificate. 5.7. Lien for Assessments. The Council shall have a lien against each Lot to secure payment of delinquent assessments, as well as interest, late charges (subject to the limitations of Washington law), and costs of collection (including attorneys fees). Such lien shall be superior to all other liens, except (a) the lien of a Neighborhood Association responsible for collecting the delinquent assessment; (b) the liens of all taxes, bonds, assessments, and other levies which by law would be superior, and (c) the lien or charge of any recorded first Mortgage (meaning any recorded Mortgage with first priority over other Mortgages) made in good faith and for value. Such lien, when delinquent, may be enforced by suit, judgment, and judicial or nonjudicial foreclosure. Declaration of Easements and Covenant to Share Costs page 12

The Council may bid for the Lot at the foreclosure sale and acquire, hold, lease, mortgage, and convey the Lot. While a Lot is owned by the Council following foreclosure: (a) no assessment shall be levied on it and (b) each other Lot shall be charged, in addition to its usual assessment, its pro rata share of the assessment that would have been charged such Lot had it not been acquired by the Council. The Council may sue for unpaid assessments and other charges authorized hereunder without foreclosing or waiving the lien securing the same. Sale or transfer of any Lot shall not affect the assessment lien or relieve such Lot from the lien for any subsequent assessments. However, the sale or transfer of any Lot pursuant to foreclosure of the first Mortgage shall extinguish the lien as to any installments of such assessments due prior to the Mortgagee s foreclosure. The subsequent Owner to the foreclosed Lot shall not be personally liable for assessments on such Lot due prior to such acquisition of title. Such unpaid assessments shall be deemed to be Council Expenses collectible from Owners of all Lots subject to assessment under Section 5.5, including such acquirer, its successors and assigns. 5.8. Exempt Property. The following property shall be exempt from payment of General Assessments and Special Assessments: (a) All Shared Community Property which constitutes a legally conveyable Lot, tract or parcel; provided, however, that an easement constituting Shared Community Property that lies within a Lot shall not make such Lot exempt from assessment; (b) or public utility; and Any property dedicated to and accepted by any governmental authority (c) Property owned by any Neighborhood Association for the common use and enjoyment of its members. In addition, Declarant and/or the Council shall have the right, but not the obligation, to grant exemptions to certain Persons qualifying for tax exempt status under Section 501(c) of the Internal Revenue Code so long as such Persons own property subject to this Declaration for purposes listed in Section 501(c). 5.9. Reduced Assessments. Consistent with the provisions of certain Neighborhood Declarations, any Owner ( Exempt Owner ) who has established to the satisfaction of such Owner s Neighborhood Association that access to the Owner s Lot is provided by legal access, other than access over Shared Community Property roads, shall be specifically exempt from the payment of any assessment or portion thereof levied by the Council for maintenance or repairs of Shared Community Property roads. The Exempt Owner will Declaration of Easements and Covenant to Share Costs page 13

remain liable for any and all other assessments levied by the Council. In the event any Exempt Owner subsequently utilizes Shared Community Property roads for access to the Owner s Lot, such Owner shall be subject to assessments levied by the Council for maintenance and repair of such roads, which shall be applied retroactively to the date such Owner commenced utilization of the Shared Community Property roads. ARTICLE 6. JURISDICTION OF THE COUNCIL 6.1. Powers and Duties of the Council. The Board shall have all the powers necessary for the administration of the Council s affairs and for performing all responsibilities and exercising all rights of the Council as set forth in this Covenant, the Articles, the Bylaws, other covenants or agreements binding the Council, and as provided for non-profit corporations by Washington law. The Board shall operate, manage, and maintain the Shared Community Property subject to every Owner s right and nonexclusive easement of use, access, and enjoyment, the rights and powers of the Council as set forth in the Bylaws, and the terms, conditions, covenants, or restrictions set forth in the instrument conveying such property to the Council. The Council shall have the specific authority to establish a minimum Community-Wide Standard of maintenance and aesthetic appearance for the Shared Community Property. The Council also may promulgate reasonable Policies and Procedures governing the use of the Shared Community Property. The Council shall have the authority to enforce such standards and such Policies and Procedures including, without limitation, the right to levy fines which if unpaid shall constitute a Specific Assessment and a lien on the violator s property as set forth herein. The Council also shall have the right of self-help to abate any violation or nonconforming use or activity, which shall not be deemed a trespass, and the costs of which shall be a Specific Assessment. The Council shall have the right, but not the obligation, to enforce any provision of a Neighborhood Declaration if the Neighborhood Association fails or refuses to do so; provided however, that each Neighborhood Association shall be the primary entity responsible for enforcing its governing documents. Except for the foregoing, the Council shall not have jurisdiction over the internal affairs or operations of any Neighborhood Association. 6.2. Safety. The Council may, but shall not be obligated to, maintain or support certain activities within McKenna Forest Reserve Communities designed to make McKenna Forest Reserve Communities safer than it otherwise might be. Neither the Council nor WREDCO shall be considered insurers or guarantors of security or safety within McKenna Forest Reserve Communities nor shall either be Declaration of Easements and Covenant to Share Costs page 14

held liable for any loss or damage by reason of failure to provide adequate security or ineffectiveness of security or safety measures undertaken. No representation or warranty is made that any system or measure, including any mechanism or system for limiting access to McKenna Forest Reserve Communities, cannot be compromised or circumvented, nor that any such system or measure undertaken will in all cases prevent loss or provide the detection or protection for which it is designed or intended. Each Owner acknowledges and agrees that the Council, its Board of Directors, and WREDCO are not insurers and that each Person using the Shared Community Property and other portions of McKenna Forest Reserve Communities assumes all risks for personal injury and loss or damage to property resulting from acts of third parties. 6.3. Composition of the Board of Directors. The members of the Board of Directors shall be selected as provided in the Bylaws. Notwithstanding anything to the contrary in the Bylaws, the Board shall be comprised of one member appointed by each of the Neighborhood Associations and, until such time as the Development Period specified in each of the Neighborhood Declarations has expired, one member appointed by WREDCO or any successor or assign named by WREDCO in a recorded amendment to this Covenant. 6.4. McKenna Forest Reserve Communities Alternative Dispute Resolution. (a) Agreement to Avoid Litigation. WREDCO, the Council and its officers, directors, and committee members, each Neighborhood Association and each of their members, officers, directors and committee members, and any Person not otherwise subject hereto who agrees to submit to this Article (collectively, Bound Parties ) agree to encourage the amicable resolution of disputes within the McKenna Forest Reserve Communities to which the Council is a party, without engaging in litigation. Accordingly, each Bound Party covenants and agrees that those claims, grievances, or disputes described in Section 6.4(b) ( Claims ) shall be submitted to the procedures set forth in Section 6.4(c) prior to filing suit in any court. (b) Claims. Unless specifically exempted below, all claims, grievances, or disputes arising out of or relating to the interpretation, application, or enforcement of this Covenant, or the rights, obligations, and duties of any Bound Party under this Covenant shall be subject to the provisions of Section 6.4(c). Notwithstanding the above, unless all parties thereto otherwise agree, the following shall not be Claims and shall not be subject to the provisions of Section 6.4(c): (i) any suit by the Council against any Bound Party to enforce the obligation to pay any assessment to the Council under this Covenant or any other applicable covenants; Declaration of Easements and Covenant to Share Costs page 15

(ii) any suit by the Council to obtain equitable relief (e.g., temporary restraining order, injunction, or specific performance) and such other ancillary relief as the court may deem necessary in order to enforce or maintain the status quo and preserve the Council s ability to act under and enforce the provisions of this Covenant or any other applicable covenants; and (iii) any suit in which any indispensable party is not a Bound Party; (iv) any suit which otherwise would be barred by any applicable statute of limitations or which would be so barred prior to the expiration of the applicable notice periods specified in this Section 6.4. With the consent of all parties thereto, any of the above may be submitted to the alternative dispute resolution procedures set forth in Section 6.4(c). (c) Mandatory Procedures. (i) Notice. Any Bound Party having a Claim ( Claimant ) against any other Bound Party ( Respondent ) (the Claimant and the Respondent referred to herein individually as a Party, or collectively as the Parties ) shall notify each Respondent in writing (the Notice ), stating plainly and concisely: (A) the nature of the Claim, including the Persons involved and Respondent s role in the Claim; (B) out of which the Claim arises); (C) the legal basis of the Claim (i.e., the specific authority Claimant s proposed remedy; and (D) the fact that Claimant or an authorized representative of Claimant will meet with Respondent or an authorized representative of Respondent to discuss in good faith ways to resolve the Claim. (ii) Negotiation and Mediation. (A) The Parties shall make every reasonable effort to meet in person and confer for the purpose of resolving the Claim by good faith negotiation. If requested in writing, accompanied by a copy of the Notice, the Council may appoint a representative to assist the Parties in resolving the dispute by negotiation. Declaration of Easements and Covenant to Share Costs page 16

(B) If the Parties do not resolve the Claim within 30 days of the date of the Notice (or within such other period as may be agreed upon by the Parties) ( Termination of Negotiations ), Claimant shall have 30 additional days to submit the Claim to mediation under the auspices of an independent mediation service designated by the Council or, if the Parties otherwise agree, to an independent agency providing dispute resolution services in the Pierce County, Washington, area or, as provided above in Section 6.4(a), to the Council. (iii) Waiver of Claim. If Claimant does not submit the Claim to mediation within 30 days after Termination of Negotiations, or does not appear, either in person or through an authorized representative, for the mediation, Claimant shall be deemed to have waived the Claim, and Respondent shall be released and discharged from any and all liability to Claimant on account of such Claim; provided, nothing herein shall release or discharge Respondent from any liability to any Person other than the Claimant. (iv) Settlement. Any settlement of the Claim through mediation shall be documented in writing by the mediator. If the Parties do not settle the Claim within 30 days after submission of the matter to the mediation process, or within such longer time as determined necessary by the mediator, the mediator shall issue a notice of termination of the mediation proceedings ( Termination of Mediation ). The Termination of Mediation notice shall set forth that the Parties are at an impasse and the date that mediation was terminated. Upon Termination of Mediation, the Claimant shall thereafter be entitled to sue in any court of competent jurisdiction or to initiate proceedings before any appropriate administrative tribunal on the Claim. Each Party shall bear its own costs of the mediation, including attorneys fees, and each Party shall share equally all charges rendered by the mediator. If the Parties agree to a resolution of any Claim through negotiation or mediation in accordance with this Section 6.4(c) and any Party thereafter fails to abide by the terms of such agreement, then any other Party may file suit or initiate administrative proceedings to enforce such agreement without the need to comply again with the procedures set forth in this Section 6.4(c). In such event, the Party taking action to enforce the agreement shall be entitled to recover from the non-complying Party (or if more than one non-complying Party, from all such Parties pro rata) all costs incurred in enforcing such agreement including, without limitation, attorneys fees and court costs. 6.5. Use, Management, and Operating Agreements. The Council may enter into agreements with one or more Neighborhood Associations or other Persons within the McKenna Forest Reserve Communities to provide shared use, management, and administrative services, and to perform such other community related activities as may be agreed upon by the Council and such Neighborhood Association(s) or Persons. The expense of providing such services by the Council shall be allocated by agreement between the parties. Declaration of Easements and Covenant to Share Costs page 17

6.6. Administration of Particular Areas Within McKenna Forest Reserve Communities. In addition to its other powers and obligations, the Council may agree with a Neighborhood Association or may otherwise agree to provide maintenance, architectural review, assessment collection, rules enforcement, or other services to, and levy assessments against, Owners within particular McKenna Forest Reserve Communities. In such event, the Council shall provide such services in the manner agreed, and the expenses of such services shall be allocated and assessed as Specific Assessment against the benefited Lots or as otherwise agreed by the Council and the Neighborhood Association. 6.7. Assumption of Other s Maintenance Responsibility. The Council may, but shall not be obligated to, assume maintenance responsibility for property which is the responsibility of another entity or Person (e.g., a Neighborhood Association, or any local or state governmental authority) if, in the discretion of the Board, the maintenance of such property provides a benefit to the McKenna Forest Reserve Communities and/or such property is not otherwise being maintained in accordance with the Community-Wide Standard. The cost of maintenance assumed in accordance with this Section may be a Council Expense to be allocated among all Owners in accordance with Article 5 or may be a Specific Assessment levied only against the benefited parties as provided in Section 5.4. ARTICLE 7. FORESTRY CERTIFICATION 7.1. Overview. Proper forest management of Lots within the McKenna Forest Reserve Communities is anticipated to have significant benefits to all Owners. Such benefits include (i) compliance with relevant laws and regulations affecting forested areas, (ii) development of effective forest management plans, (iii) protection of water and soil quality, (iv) conservation of wildlife and biodiversity and (v) mitigation of visual impacts. Accordingly, the Council is authorized to serve as the coordinator of Owners desiring to obtain forestry certification for their respective Lots. Without limitation, the Council is authorized to participate in the programs of the American Tree Farm System ( ATFS ) or similar forestry certification programs. 7.2. Group Certification. Individual Owners shall be responsible for implementing the requirements of any forestry certification program. However, in recognition of the efficiencies which can be obtained through group certification, the Council is authorized to serve as a group organization for certification purposes. In that capacity, the Council shall have the power (i) to establish procedures for determining eligibility of Owners to participate in the group, (ii) to hire a group manager on behalf of participating Owners and (iii) to assess fees for participation in the group certification process. Declaration of Easements and Covenant to Share Costs page 18

7.3. Costs Associated with Certification. In recognition of the general benefits to the McKenna Forest Reserve Communities of having Owners participate in a forestry certification program, the Council is authorized to fund limited office, administrative and overhead expenses relating to the group certification process from its general budget. Fees and expenses for the engagement of a group manager, outside consultants or contractors and any other costs specifically benefiting individual Lot Owners participating in the certification program shall be specifically assessed to the participating Owners pursuant to Section 5.4 above. ARTICLE 8. GENERAL 8.1. Notice. Any notice provided for in this Covenant shall be served personally or shall be mailed by registered or certified mail, as follows: (a) if to the Council, to the-president or secretary of the Council at the principal office of the Council, or at such other address of which it has given notice in accordance with this Section; (b) if to a Neighborhood Association, to the address designated by such Neighborhood Association in writing with the Council, or at the principal office of such Neighborhood Association; or (c) if to an Owner, to such Owner at the address of such Owner s property within the jurisdiction of the Council or such other address as it has registered with the Council. All such notices shall, for all purposes, be deemed delivered (a) upon personal delivery to the party or address specified above or (b) on the third day after mailing when mailed by registered or certified mail, postage prepaid, and properly addressed. 8.2. Submission of Property by WREDCO. So long as WREDCO owns real property adjoining any of the McKenna Forest Reserve Communities, WREDCO shall have the unilateral right, privilege, and option, from time to time, at any time to subject such additional property to the provisions of this Covenant by recording a supplement to this Covenant with the legal description of the property to be submitted. Any such annexation shall be effective upon the recording of the supplement unless otherwise provided therein. Nothing herein shall preclude the annexation of property that, at the time that the supplement is recorded, is not owned by WREDCO, so long as such supplement has the consent of the owner of such property. The rights reserved unto WREDCO to subject additional land to this Covenant shall not be implied or construed to impose any obligation upon WREDCO to subject any additional land to this Covenant. Declaration of Easements and Covenant to Share Costs page 19