SHELLEY LAKE PUD

DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS, ASSESSMENTS, CHARGES, SERVITUDES, LIENS, RESERVATIONS AND EASEMENTS

This Declaration of Covenants, Conditions, Restrictions, Assessments, Charges, Servitudes, Liens, Reservations end Easements (hereinafter termed the "Declaration") is made this 9th day of December, 1996, by SHELLEY LAKE DEVELOPMENTS, a Washington General Partnership ("Declarant"), with reference to the following facts:

A. Declarant is the owner of a certain tract of land located in Spokane County, Washington, which property is more particularly described on Exhibit "A" attached hereto end incorporated herein by this reference (the "Property"). The Property set forth on Exhibit "A" includes all of the real property intended for the overall subdivision of Shelley Lake PUD. The development of Shelley Lake shall herein be referred to as (the "Project").

B. Declarant intends to develop the properly in residential subdivision Phases. Without obligation, Declarant intends to record various subdivision plats; to dedicate portions of the Project to the public for streets, roadways, drainage end flood control; and to record various supplemental declarations coveting certain Phases of the Project, which supplemental declarations may be used to set forth additional covenants, conditions, restrictions, assessments, charges, servitudes, liens, reservations and easements applicable to such Phases of the Project.

C. Declarant has improved or intends to improve the Property by constructing thereon certain residential improvements and related facilities, and to establish thereon a residential subdivision, to be managed, operated, and maintained by an incorporated Association of Owners, for the benefit of all pans of the Property. Each particular Phase shall be annexed into the Project as the final plat for that particular Phase is approved end recorded, at which time that particular Phase shall become subject to these Covenants with the owners of that particular Phase becoming Members of the Association and subject to the Articles end Bylaws of the Association. The initial Phase, known as SHELLEY LAKE FIRST ADDITION, the legal description of which is set forth on the attached Exhibit "B" shall be subject to these Covenants end the Articles end Bylaws of the Association without the necessity of annexation by virtue of its being the First Phase which is approved and recorded hi conjunction with the filing of these Covenants.

D. Declarant intends by this document to impose upon the Property mutually beneficial restrictions under a general plan of improvement for the benefit of all of the said lots end the owners thereof.

Declarant hereby declares that the Property shall be held, conveyed, mortgaged, encumbered, leased, rented, used, occupied, sold, and improved, subject to the following declarations, limitations, covenants, conditions, restrictions, assessments, charges, servitudes, liens, reservations and easements, all of which are for the purpose of enhancing and protecting the value end attractiveness of the Property, and the Project, and every part thereof, in accordance with the plan for the improvement, sale, and operation of the Property as a residential subdivision. All of the limitations, covenants, conditions, restrictions and easements shall constitute covenants and encumbrances which shall run with the land and shall be perpetually binding upon Declarant and its successors-in-interest and assigns, and all parties having or acquiring any right, title, or interest in or to any part of the Property or the Project.

E. Each specific Phase may have Common Areas, which shall be set forth on the face of the plat for that particular area. There may be additional Common Areas including the actual lake known as Shelley Lake and certain entry statements and landscaping attributable to and for the benefit of the entire Project winch may be conveyed to the Association or which shall become the responsibility of the Association, whether such Common Area is specifically conveyed to the Association or not.