Exhibit
10

 

 

INFRASTRUCTURE DEDICATION AGREEMENT

THIS AGREEMENT made and entered into this 16th day of October, 2007, by and
between FISH SPRINGS RANCH, LLC, a Nevada limited liability company, hereinafter
referred to as “FSR,” and WASHOE COUNTY, a political subdivision of the State of
Nevada, hereinafter referred to as “WASHOE.”
RECITALS
1.       WASHOE owns and operates a water distribution system located in the
North Valleys area of Washoe County, Nevada and FSR owns certain water rights
which may become available in support of development within WASHOE’s water
distribution service area or the water distribution service area of the Truckee
Meadows Water Authority (“TMWA”); and
2.       WASHOE and TMWA have entered into agreements whereby WASHOE and TMWA
cooperate in the provision of municipal water service; and
3.       FSR has approximately 28 existing monitoring and production wells on or
near the Fish Springs Ranch for purposes of monitoring the impacts of ground
water pumping in the Honey Lake Hydrographic basin; and
4.       FSR has expanded the geographic extent of the United States Geological
Survey hydrologic model of the Nevada portion of the Honey Lake Hydrographic
Basin, which has been reviewed and accepted by the United States Geological
Survey (“U.S.G.S.”) for use in the Environmental Impact Statement issued by the
Bureau of Land Management for the FSR pipeline right of way; and
5.       The expanded hydrologic model of the groundwater basin, as accepted by
U.S.G.S., indicates that the proposed export of 8,000 acre feet of groundwater
from the Fish Springs Ranch is sustainable; and

6.       Rulings 3786A and 3787A of the Nevada State Engineer, each issued on
January 17, 1991, have resulted in the granting by the State Engineer of certain
Change Applications which have changed the place and manner of use of the
Dedicated Water Rights (as defined in Paragraph 7, below) for municipal purposes
in southern Washoe County and allowed WASHOE to obtain certain permits (the
“Municipal Permits”) for municipal use of the Dedicated Water Rights; and
7.       Pursuant to a Water Banking Trust Agreement dated February 28, 2006
(the “Banking Agreement”), FSR has transferred certain water rights (the
“Dedicated Water Rights”) to WASHOE, which are held by WASHOE subject to the
Transfer and Assignment by FSR of water rights credits, as defined in the
Banking Agreement, to be credited against the water rights dedication
requirement with respect to the issuance of “will-serve” commitments requested
from time to time by FSR, or its assignees, for water service. A copy of the
Banking Agreement is attached as Exhibit “A”; and
8.       FSR has processed and received a Record of Decision and Right of Way in
accordance with the requirements of The National Environmental Policy Act of
1969, as Amended, and related federal requirements, permitting the
transportation of 8,000 acre feet of the Dedicated Water Rights through a
pipeline and related facilities across an established utility corridor to the
North Valleys area of Washoe County, Nevada; and
9.       FSR has diligently pursued the numerous required approvals and permits
relative to the Fish Springs Ranch North Valleys Importation Project and to date
has received and obtained the following permits and authorizations:
·  Special Use Permit No. SW05-009, approved January 24, 2006 by the Washoe
County Board of Commissioners
·  Water Banking Trust Agreement approved February 28, 2006 by the Washoe County
Board of Commissioners
·  Biological Opinion issued by the U.S. Fish and Wildlife Service on May 16,
2006
·  Record of Decision issued May 31, 2006 by the Bureau of Land Management for
ROW N-76800
·  The Nationwide Permit Number 12, 2004-008l8 confirmed July 5, 2006 by the
Environmental Protection Agency
·  The Right of Way N-76800 issued August 10, 2006 by the Bureau of Land
Management
·  Conditional Dust Control Permit C06043 issued by Washoe County Health on
August 30, 2006
·  Conditional Dust Control Permit D06003 issued by Washoe County Health
Department on October 9, 2006
·  The Notice to Proceed issued by the Bureau of Land Management on October 11,
2006; and
10.           FSR has transferred the Dedicated Water Rights by Water Rights
Deed to WASHOE, and the Nevada State Engineer has issued the Municipal Permits,
which shall be held by WASHOE in trust for the exclusive benefit of FSR and its
assignees, pursuant to the terms of the Banking Agreement, and credited against
the water rights dedication requirement in connection with requests for
“will-serve” commitments requested from time to time by FSR or its assignees;
and
11.        WASHOE and FSR have agreed that, as to the Dedicated Water Rights,
the provisions of TMWA’s Rule 7 (”Rule 7”) as they may be amended from time to
time shall govern the quantity of water rights required for dedication to
support development within WASHOE’s water service area; and

12.        WASHOE has accepted the Dedicated Water Rights in trust for the
exclusive benefit of FSR and its assignees, pursuant to the terms of the Banking
Agreement, for future water rights dedication requirements within the utility
service areas of WASHOE and/or TMWA, as those service areas may change from time
to time, and subject to appropriate agreements between WASHOE and TMWA, on the
condition that FSR, or its assignees, be responsible for all costs associated
with the transfer by FSR to WASHOE, and all costs associated with the
maintenance of the Dedicated Water Rights; and
13.        WASHOE’s acceptance of the Dedicated Water Rights has not, in and of
itself, created an obligation to provide water service to FSR or its assignees,
because such water service obligation will arise only after a “will-serve”
request is made to WASHOE and all conditions for such service have been
satisfied; and
14.           Pursuant to the Banking Agreement, the parties anticipated the
negotiation of an Infrastructure Dedication Agreement in order to ensure
adequate water transmission infrastructure to deliver the Dedicated Water Rights
to the point of delivery provided for in the Banking Agreement; and
15.           In furtherance of the Banking Agreement, FSR has planned,
designed, permitted and is constructing certain Infrastructure which comprises
the Project Infrastructure, as defined in Section I, below, and WASHOE desires
to accept the completed infrastructure necessary to deliver water to the
designated Point of Delivery as provided for in the Banking Agreement and
defined in Section I, below; and
16.            FSR agrees to dedicate and WASHOE agrees to accept the Project
Infrastructure pursuant to the terms hereof.  All references to other writings,
instruments, agreements or laws, whether attached hereto or otherwise, should be
reviewed in their entirety. Nothing herein contained is meant to modify, amend,
expand or vary such other agreements.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements and subject to the conditions hereinafter set forth it is hereby
agreed between FSR and WASHOE as follows:

I.
PROJECT CHARACTERISTICS
Subject to the terms hereof, the project infrastructure consists of pipeline,
pump stations, surge tanks, storage tanks, valves, collection pipelines,
production wells, well pumps, control systems, well houses, pump stations,
telemetry, fiber optic lines, roadway easements, pipeline easements, production
and monitoring well easements, monitoring wells, data loggers, weather stations,
electrical distribution line easements, whether above, under or across the
easements created for the Fish Springs Ranch water importation pipeline related
infrastructure improvements necessary to appropriate, transport and convey a
minimum of 8,000 acre feet of water from the Fish Springs Ranch in northern
Washoe County to WASHOE’s Matterhorn Terminal Tank (the “Point of Delivery”) in
the North Valleys area of Washoe County.  From the Point of Delivery the
pipeline connects through an additional four (4) miles of 30 inch ductile iron
pipe along Matterhorn Drive to Tupelo to Water Ash to Lemon Drive where it
connects to a 12 inch water distribution line.  This portion of the improvements
includes two (2) pressure reducing valves, telemetry and related improvements
(collectively, the “Project Infrastructure”).
II.
ADMINISTRATION OF THE PROJECT
2.1            County and Other Governmental Agency Permits. The Project
Infrastructure has been planned, designed, permitted, developed and constructed
by FSR in accordance with all applicable Washoe County approvals, ordinances and
regulations. As of the date hereof, to the knowledge of FSR, FSR has, at its own
expense, secured all approvals and permits required by WASHOE or any other
governmental authority affected by the construction, development or work related
to the Project. WASHOE agrees to cooperate and use its best efforts to provide
all assistance necessary to FSR in securing any additional approvals or permits.
2.2        Right of Access. For the purposes of assuring compliance with this
Agreement, representatives of WASHOE shall continue to have the reasonable right
of access to the Project Infrastructure without charges or fees and at normal
construction hours during the period of construction for the purposes of this
Agreement, including, but not limited to, the inspection of the work being
performed in constructing the Project Infrastructure. Such representatives of
WASHOE shall be those who are so identified in writing by the Director of Washoe
County’s Department of Water Resources. WASHOE shall indemnify FSR and hold it
harmless from any damage caused or liability arising out of this right to
access.
2.3            Further Covenants. WASHOE shall not require any payments,
contributions, economic concession, other conditions for approvals, or
authorizations or permits, contemplated within or by this Agreement other than
as provided herein.
2.4        Mutual Cooperation. WASHOE shall cooperate with FSR to obtain all
necessary approvals, permits or to meet other requirements that are or may be
necessary to implement the approvals required for construction of the Project
Infrastructure. Nothing contained within this paragraph, however, shall require
WASHOE or its employees to function on behalf of FSR nor shall this Agreement be
construed as an implicit pre-approval of any further actions required by WASHOE.

III.
PROJECT INFRASTRUCTURE CONSTRUCTION REQUIREMENTS
3.1            Standards. To the best knowledge of FSR, all construction of The
Project Infrastructure has been done in accordance with the Standard
Specifications for Public Works Construction as adopted by WASHOE and all other
applicable state and local codes, ordinances and statutes except as otherwise
provided in the project approval process.
3.2            Grading and Slope. FSR shall specify grading practices, extent of
grading allowed at one time, a dust suppression program, and erosion control and
revegetation measures that effectively mitigate blowing dust and soil erosion
problems associated with development of all portions of the Project
Infrastructure to the satisfaction of WASHOE. If required by state law or
regulation, FSR shall obtain an Air Quality permit and implement the approved
plan and provide the State of Nevada or WASHOE with financial security for the
required mitigation measures.
3.3            Transfer of Construction Warranties. FSR shall assign and
transfer to WASHOE any and all warranties, performance guarantees, product
warranties, construction guarantees that are in any way related to the Project
Infrastructure.
3.4        Cooperation. FSR agrees to cooperate and use its best efforts to
enforce construction warranties, performance guarantees, product warranties or
other related product or construction indemnities, guarantees or warranties that
are in any way related to the Project Infrastructure.
3.5            Dedication. Subject to the terms hereof, the Project
Infrastructure is being dedicated to WASHOE pursuant to this Agreement and as
detailed in Paragraph 6.1 below.  FSR makes no representations or warranty,
express or implied, other than those contained herein. FSR is not a guarantor of
all or any manufacturer or product provider warranties, representations,
performance guarantees, product warranties or construction guaranties.

IV.
RESERVED RIGHTS OF FSR
4.1        It is hereby expressly acknowledged and agreed between WASHOE and FSR
that FSR retains and holds the exclusive beneficial interest in certain
additional and valuable water rights in the Honey Lake Basin, in excess of 8,000
acre feet, as set forth in Exhibit “A” to the Banking Agreement (the “Additional
Water Rights”). At such time as there is sufficient evidence of resource
sustainability, as provided in Paragraphs 2.2 and 3.2 of the Banking Agreement,
and all required permitting is obtained, it is the intent of FSR to import the
Additional Water Rights owned by FSR, or other water rights which FSR may
subsequently acquire, into the Washoe County service area after completing the
necessary and required system upgrades and expansions. Subject to the provisions
of Paragraph 5.2, below, FSR does hereby exclusively reserve, retain and hold,
and WASHOE does hereby agree to reserve, retain and hold, all of the capacity
rights up to 13,000 acre feet in, including the ability to expand the existing
and future capacity of the Project Infrastructure up to 13,000 acre feet,
whether above, under or across the easements created for the Fish Springs Ranch
water importation pipeline, for the purpose of transporting the Dedicated Water
Rights, including the Additional Water Rights and any other water rights which
FSR may subsequently acquire up to 13,000 acre feet.  In utilizing its exclusive
rights, FSR shall be solely responsible for all costs and expenses in the
upgrading, permitting, construction and equipping of the Project Infrastructure
as required to transport all or a part of the Additional Water Rights or other
water rights subsequently acquired by FSR through the Project Infrastructure up
to 13,000 acre feet. Any such upgraded infrastructure shall be dedicated to
WASHOE as WASHOE may reasonably require.
4.2            The failure to specify or detail any portion of the Project
Infrastructure shall not impair or diminish in any way the right of FSR to fully
utilize its exclusive rights to the Project Infrastructure capacity as the same
may be increased for the transmission of The Additional Water Rights or any
other water rights which FSR may subsequently acquire up to 13,000 acre feet or
pursuant to Paragraph 5.2, below.
4.3            Nothing herein contained shall be construed as impacting or
impairing WASHOE’s rights pursuant to this Agreement, and Paragraph 3.4 of the
Banking Agreement to use the Project Infrastructure and the Dedicated Water
Rights for general temporary purposes. FSR’s conveyance of the Project
Infrastructure however, is expressly and conditionally subject to FSR’s
exclusive right to upgrade the Project Infrastructure and to utilize the Project
Infrastructure in order to convey additional water as set forth above up to
13,000 acre feet or pursuant to Paragraph 5.2, below.
4.4        WASHOE and FSR agree to take such actions as reasonably necessary to
ensure that any Additional Water Rights or future water entering the Project
Infrastructure meet the drinking water standards established by WASHOE.
4.5        The parties acknowledge and agree that FSR shall retain all of its
rights under Paragraph V of that certain Line Extension Agreement with Sierra
Pacific Power Company dated October 6, 2005 relating to the refund, if any, of
monies paid for the construction of the Fort Sage electrical substation.
V.
ADDITIONAL USE OF PROJECT INFRASTRUCTURE CAPACITY
5.1        Subject to FSR’s exclusive right set forth in Section IV above, until
such time as the full capacity of the Project Infrastructure is in use to
satisfy will-serve commitments issued through Water Rights Credits on the
Dedicated Water Rights, including the Additional Water Rights up to 13,000 acre
feet, WASHOE shall have the exclusive right to utilize any unused Project
Infrastructure capacity for any general temporary purposes.
5.2        FSR and WASHOE may agree at any time by amending this Agreement, or
by separate written agreement, to expand the Project Infrastructure capacity
above and beyond 13,000 acre feet. The costs related to such additional capacity
shall be allocated between and paid by each party in proportion to the
additional capacity received by each party. Any expansion pursuant to this
Paragraph 5.2 shall include a reimbursement on a pro rata basis as negotiated by
the parties.
 
 
VI.
DEDICATION/OPERATION AND MAINTENANCE
6.1        Upon completion of the construction of the Fish Springs Ranch North
Valleys Importation Project and the determination by the Washoe County
Department of Water Resources that construction of the Project Infrastructure is
substantially completed and the facility is acceptable for operations, FSR shall
transfer and dedicate to WASHOE by Bill of Sale, Assignment and this Agreement,
all of the Project Infrastructure, subject to FSR’s reserved right to existing
and future Project Infrastructure capacity, as provided for in Sections IV and
V, above.
6.2        Subsequent to the transfer of the Project Infrastructure, WASHOE
shall be responsible for the day-to-day operation, maintenance, and repair of
the Project Infrastructure and complying with the terms and conditions of any
and all related regulatory permits, subject to the terms of this Agreement. All
costs and expenses for the pumping of wells, and operation, maintenance, and
repair of the Project Infrastructure shall be solely the responsibility of
WASHOE.
6.3            At such time as FSR assigns certain Water Rights Credits to third
parties in accordance with the Banking Agreement, WASHOE shall establish a rate
schedule that provides for a pro rata charge for operation and maintenance of
the Project Infrastructure and the required reserves for repair and replacement
of the necessary portions of the Project Infrastructure. Based upon the
dedication of the Project Infrastructure by FSR, WASHOE agrees not to assess any
connection or user fees for the construction of the Project Infrastructure. FSR
acknowledges that WASHOE will charge connection or user fees for storage and
transmission facilities that WASHOE constructs, and that WASHOE will charge user
fees for the operation, maintenance, repair and depreciation of the Project
Infrastructure, including fees for actual start up costs incurred by WASHOE in
connecting the Project Infrastructure to WASHOE’s water system and bringing it
on line for service.
VII.
DEFAULTS AND REMEDIES
7.1           Default. Subject to extensions of time by mutual consent in
writing, failure or unreasonable delay in performing any term or provision of
this Agreement shall constitute a default In the event of alleged material
default or material breach of any terms or conditions of this Agreement, the
party alleging such default or breach shall give the other party not less than
thirty (30) days notice in writing, specifying the nature of the alleged default
and the manner in which said default may be satisfactorily cured. During any
such thirty (30) day period, the party charged shall not be considered in
default for purposes of institution of legal proceedings, or issuance of any
building permit.
After notice and expiration of the thirty (30) day period, the non-defaulting
party to this Agreement, at its option, may institute legal proceedings against
the defaulting party.
Evidence of default may also arise in the course of periodic review of this
Agreement. If either party determines that the other party is in default
following the completion of the normal periodic review, said party may give
written notice of default of this Agreement as set forth in this section,
specifying in said notice the alleged nature of the default, and potential
actions to cure said default where appropriate. If the alleged default is not
cured within thirty (30) days or within such longer period specified in the
notice, the other party may institute legal proceedings.
It is hereby acknowledged and agreed that any portion of the Project
Infrastructure which is the subject of a construction permit or other final
entitlement not be affected by or jeopardized in any respect by any subsequent
default affecting the Project Infrastructure. In the event that WASHOE does not
accept, review, approve or issue necessary permits or entitlements for use in a
timely fashion as defined by this Agreement, or as otherwise agreed to by the
parties, or WASHOE otherwise defaults under the terms of this Agreement, WASHOE
agrees that FSR shall not be obligated to proceed with or complete the Project
Infrastructure, or any portion or expansion thereof.
Except as otherwise expressly provided in this Agreement, any failure or delay
by FSR or WASHOE in asserting any of its rights or remedies as to any default
shall not operate as a waiver of any default or of any such rights or remedies
or deprive such party of its right to institute and maintain any actions or
proceedings which it may deem necessary to protect, assert or enforce any such
rights or remedies.
Failure of WASHOE to allow for the transfer of the Additional Water Rights,
except as provided in Paragraphs 2.2 and 3.2 of the Banking Agreement shall
result in the revocation of the Banking Agreement as to any Additional Water
Rights not acceptable to WASHOE for “will-serve” purposes, and FSR shall
thereafter have full ownership of such remaining Additional Water Rights and all
of the rights to utilize the Project Infrastructure as set forth herein.
7.2           Enforced Delay, Extension of Time of Performance. In addition to
specific provisions of this Agreement, performance by either party hereunder
shall not be deemed to be in default where delays or defaults are due to war,
insurrection, strikes, walk-outs, riots, floods, earthquakes, avalanches,
inclement weather, fires, casualties, acts of God, governmental restrictions
imposed or mandated by other governmental entities, not parties to this
Agreement, enactment of conflicting state or federal laws or regulations, new or
supplementary environmental regulation, litigation, or similar bases for excused
performance. If written notice of such delay is given to WASHOE within thirty
(30) days of the commencement of such delay, an extension of time for such cause
shall be granted in writing for the period of the enforced delay, as may be
mutually agreed upon.
As provided herein, either party may institute legal action to cure, correct or
remedy any default, to enforce any covenant or agreement herein, or to enjoin
any threatened or attempted violation.
VIII.
APPLICABLE LAWS AND ATTORNEY’S FEES
8.1           Washoe County Code. The Project Infrastructure shall be subject to
all ordinances and fees adopted by WASHOE, applied on a uniform basis to all
resource development projects in the North Valleys area of Washoe County in
effect as of the date of this Agreement, and as they may be amended from time to
time,
8.2            Nevada Law/Attorneys’ Fees. This Agreement shall be construed and
enforced in accordance with the laws of the State of Nevada.  Should any legal
action be brought by either party relating to this Agreement or to enforce any
provision herein, the prevailing party of such action shall be entitled to
reasonable attorneys’ fees, court costs and such other costs as may be fixed by
the court.
IX.
GENERAL PROVISIONS
9.1        Notices, Demands and Communications Between the Parties. Formal
notices, demands and communications between WASHOE and FSR shall be sufficiently
given if dispatched by registered or certified mail, postage prepaid, return
receipt requested, to the principal offices of WASHOE and FSR as set forth
below. Such written notices, demands and communications may be sent in the same
manner to such other addresses as either party may from time to time designate
by mail.
9.2        Conflicts of Interest.  No official or employee of WASHOE shall have
any personal interest, direct or indirect, in this Agreement, nor shall any such
member, official or employee participate in any decision relating to this
Agreement that affects his or her personal interests or the interests of any
corporation, partnership or association in which he or she is directly or
indirectly interested.
9.3            No Fees. FSR warrants that it has not paid or given, and will not
pay or give, any third person any money or other consideration for obtaining
this Agreement.
9.4        Nonliability of WASHOE Officials and Employees. Except as provided
for by applicable law, no official or employee of WASHOE shall be personally
liable to FSR in the event of any default or breach by the WASHOE or for any
amount that may become due to FSR or on any obligations under the terms of this
Agreement.
9.5            Amendments to This Agreement. FSR and WASHOE agree to mutually
consider reasonable requests for amendments to this Agreement that may be made
by the other party, provided such requests are consistent with this Agreement
and would not substantially alter the basic business terms included herein.

X.
SUCCESSORS AND ASSIGNS/CONSENT
The parties hereto agree that the terms and conditions of this Agreement shall
bind and inure to the benefit of the parties’ successors and assigns. Neither
party may assign or transfer all or any part of its interest in this Agreement
without the prior written consent of the other party, which consent may not be
unreasonably withheld.

XI.
ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between the parties with
respect to the subject matter hereof, and supersedes all other agreements,
written or oral, between the parties with respect to dedication of the Project
Infrastructure.

XII.
HOLD HARMLESS AND INDEMNIFICATION
FSR hereby agrees to, and shall hold WASHOE, its elective and appointive boards,
commissions, officers, agents and employees harmless from any liability for
damage or claims for property damage which may arise from FSR’s or FSR’s
contractors’, subcontractors’, agents’, or employees’ operations under this
Agreement, whether such operations by FSR or by any of FSR’s contractors,
subcontractors, or by any one or more person directly or indirectly employed by,
or acting as agent for FSR or any of FSR’s contractors or subcontractors. FSR
agrees to, and shall defend WASHOE, its elective and appointive boards,
commissions, officers, agents and employees, from any suits or actions at law or
in equity for damage caused or alleged to have been caused by reason o the
aforesaid operations.
WASHOE hereby agrees to, and shall hold FSR, its officers, directors, members,
agents and employees harmless from any liability for damage or claims for
property damage which may arise from WASHOE or WASHOE’s contractors’,
subcontractors’, agents’, or employees’ operations under this Agreement, whether
such operations by WASHOE or by any of WASHOE’s contractors, subcontractors, or
by any one or more person directly or indirectly employed by, or acting as agent
for WASHOE or any of WASHOE’s contractors or subcontractors. WASHOE agrees to,
and shall defend FSR, its officers, directors, members, agents and employees,
from any suits or actions at law or in equity for damage caused or alleged to
have been caused by reason of the aforesaid operations.
XIII.
PROJECT AS PRIVATE UNDERTAKING
It is specifically understood and agreed by and between the parties hereto that
the subject Project Infrastructure is a private development and no partnership,
joint venture or other association of any kind is formed by this Agreement. The
only relationship between WASHOE and FSR is that of a government entity
regulating the development of resources held by a private property owner within
the parameters of applicable law and the owner of such private property and
receiving the dedication of completed infrastructure as part of its service
territory with the concomitant commitment to serve residents in accordance with
its adopted rates and schedules.

 
XIV.
FURTHER ASSURANCES
In the event of any legal action instituted by any third party or other
government entity or official challenging this Agreement or the Banking
Agreement, or the May 30, 2007 Pyramid Lake Paiute Tribe Fish Springs Ranch
Settlement Agreement or any rights or duties of the parties thereto, including
the provision of municipal water service using the Project
Infrastructure.  WASHOE and FSR shall jointly cooperate and use their respective
best efforts in defending any such action. FSR acknowledges that upon entry of a
Court Order requiring WASHOE to cease and desist from issuing “will-serve”
commitments based on the Dedicated Water Rights, “will-serve” commitments will
not be issued until dissolution of any such injunctive order or until such legal
action is resolved.
FSRWASHOE
FISH SPRINGS RANCH, LLCWASHOE COUNTY
a Nevada limited liability companya political subdivision of the
State of Nevada

By:  __________________________                                                                                                                     By:  ________________
DOROTHY TIMIAN-PALMERROBERT M. LARKIN
PRESIDENTCHAIRMAN
WASHOE COUNTY
BOARD OF                                COMMISSIONERS

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        Exhibit “A”      
    

Washoe County
WATER BANKING TRUST AGREEMENT
THE PARTIES TO THIS AGREEMENT are WASHOE COUNTY, a political subdivision of the
State of Nevada, (hereinafter “Washoe”) and FISH SPRINGS RANCH, LLC, a Nevada
limited liability company, (hereinafter “FSR”).
RECITALS
WHEREAS, Washoe owns and operates a water distribution system located in the
North Valley area of Washoe County, Nevada and FSR owns pertain water rights
which may become available in support of development within Washoe’s water
distribution service area or the water distribution service area of the Truckee
Meadows Water Authority (“TMWA”); and
WHEREAS, Washoe and TMWA both have “wholesale agreements” whereby Washoe and
TMWA cooperate in the provision of their respective water distribution service
areas in order to expedite water service to their respective customers; and
WHEREAS, FSR is the owner of certain irrigation water rights, consisting of
Permits for the use of more than 13,000 acre feet of water all of which are more
particularly described on Exhibit “A” which is incorporated by this reference as
if fully set forth herein (collectively, “Dedicated Water Rights”); and
WHEREAS, Ruling #3786A and 3787A of the Nevada State Engineer, issued on January
17, 1991 approved Washoe’s Interbasin Transfer applications allowing Washoe to
obtain approval of permits (the “Municipal Permits”) to change the place and
manner of use of the Dedicated Water Rights for municipal purposes in southern
Washoe County: and

WHEREAS, FSR has processed and received an Environmental Impact Statement (EIS)
in accordance with the water requirements of the National Environmental
Protection Act and related federal requirements, permitting the transportation
of 8,000 acre feet of the Dedicated Water Rights through a pipeline and related
facilities across an established utility corridor to the North Valleys area of
Washoe County, Nevada: and
WHEREAS, FSR and its predecessors have historically operated the Fish Springs
Ranch as an active farming operation for over twenty years pumping as much as
5000 acre feet per year in connection with the alfalfa hay production on the
ranch; and
WHEREAS, Washoe County has previously filed and defended the applications with
the Nevada State Engineer’s Office to put the water from the Fish Springs Ranch
to beneficial use within the North Valleys area of southern Washoe County; and
WHEREAS, FSR has 26 existing monitoring and production wells on or near the Fish
Springs Ranch for purposes of monitoring the impacts of ground water pumping in
the basin; and
WHEREAS, FSR has expanded the geographic extent of the United States Geological
Survey hydrologic model of the Nevada portion of the Honey Lake Basin, which has
been reviewed and accepted by the United States Geological Survey for use in the
Environmental Impact Statement prepared by the Bureau of Land Management for the
FSR pipeline right of way; and
WHEREAS, the expanded hydrologic model of the groundwater basin indicates that
the proposed export of 8,000 acre feet of groundwater from the Fish Springs
Ranch is sustainable and that the predicted drawdown of the water table will be
approximately 1 foot or less at the California-Nevada state line and less than
30 feet in the well field area at the end of 100 years of production; and
WHEREAS, the expanded hydrologic model predicted results are consistent with the
observed changes in the water table elevation over the past 20 years of
agricultural use of the water from Fish Springs Ranch; and
WHEREAS, a portion of the terms and provisions of this Agreement will authorize
Washoe to utilize the Dedicated Water Rights for conjunctive uses on a temporary
basis. Such temporary use will assist in replenishing the ground water basins in
the North Valleys area and allow for the confirmation and verification of the
sustainability of ground water pumping from the Fish Springs Ranch; and
WHEREAS, the banking provisions provided for herein are intended to facilitate
the compliance with the procedural requirements of the Nevada State Engineer’s
office for permit issuance and for the efficiency in the provision of water
resources to the North Valleys area; and
WHEREAS, FSR and Washoe acknowledge that the Dedicated Water Rights end FSR’s
subsequent transfers and assignments of the beneficial interest therein as
provided hereunder are interests in real property and that the utilization of
this Agreement and the transfer of the ownership of the Dedicated Water Rights
to Washoe in trust for FSR as provided hereunder for convenience and for the
ease in the administration of the water rights as between FSR and its assignees,
Washoe, and the Nevada State Engineer’s Office; and
WHEREAS, Washoe intends to cause the Municipal Permits to be issued only after
the Dedicated Water Rights are transferred by deed to Washoe; and
WHEREAS, FSR intends to transfer the Dedicated Water Rights by Water Rights Deed
to Washoe, which shall serve as the basis for the Nevada State Engineer to issue
the Municipal Permits, which for purposes of convenience shall be held by Washoe
in trust for the exclusive benefit of FSR and its assignees, and credited
against the water rights dedication requirement in connection with requests for
“will-serve” commitments requested from time to time by FSR or its assignees;
and
WHEREAS, Washoe has adopted a Master Plan for the North Valleys area of Washoe
County in order to provide for the orderly growth and development of the area;
and
WHEREAS, Washoe agrees that, as to the Dedicated Water Rights, the provisions of
TMWA’s Rule 7 (“Rule 7”) shall govern the quantity of water rights required for
dedication to support development within Washoe’s water service area; and
WHEREAS, Washoe agrees to accept the Dedicated Water Rights in trust for the
exclusive benefit of FSR and its assignees, for future water rights dedication
requirements within the utility service areas of Washoe and/or TMWA, as those
service areas may change from time to time, and subject to

appropriate wholesale agreements between Washoe and TMWA, on the condition that
FSR, or its assignees, be responsible for all costs associated with the transfer
by FSR to Washoe, and all costs associated with the maintenance of the Dedicated
Water Rights; and
WHEREAS, after the Dedicated Water Rights are deeded to Washoe, as provided
hereunder, FSR may assign from time to time all or a portion of its beneficial
interest in the Dedicated Water Rights and resulting Water Rights Credits, as
defined below, to future water service requirements for dedication of water
rights in connection with requests for “will-serve” commitments; and
WHEREAS, the parties anticipate that future infrastructure dedication
agreement(s) will be entered into for the purpose of providing for the planning,
development, construction, and maintenance of infrastructure necessary to
deliver the Dedicated Water Rights to the point of delivery; and
WHEREAS, Washoe’s acceptance of the Dedicated Water Rights will not, in and of
itself, create an obligation to provide water service to FSR or its assignees,
because such water service obligation will arise only after a “will-serve”
request is made to Washoe and all conditions for such service have been
satisfied.
NOW, THEREFORE, in consideration of the following terms, conditions, and
covenants it is hereby agreed between FSR and Washoe as follows:
1.           DEDICATED WATER RIGHTS
1.1         Subject and pursuant to the following terms and conditions of this
Agreement, and any terms, conditions and restrictions imposed by the State
Engineer, FSR hereby agrees to convey the Dedicated Water Rights to Washoe, in
trust, by execution and delivery of a Water Rights Deed in a form acceptable to
Washoe. Washoe has reviewed and approved the type and quantity of the Dedicated
Water Rights and agrees to accept the dedication of the Dedicated Water Rights,
in trust, and to seek the Municipal Permits under all applicable State Engineer
Rulings, and to hold and reserve, exclusively for the account of FSR or its
assignees, a quantity of water rights credits (the “Water Rights Credit”) equal
to the amount of the Municipal Permits issued by the State Engineer, for credit
against the requirement for the dedication of water rights in connection with
requests for “will-serve” commitments by FSR or its assignees.
1.2         Water Rights Credits available as the result of the issuance of the
Municipal Permits will be placed to beneficial use within the service areas of
Washoe and/or TMWA, subject to appropriate wholesale agreements between Washoe
and TMWA. Washoe will file, if necessary, applications for extensions of time,
proofs and other appropriate documents for the purpose of maintaining the
validity of the Dedicated Water Rights and for obtaining the maximum use of the
Dedicated Water Rights. During the time the Water Rights Credits remain
uncommitted and unallocated to an approved project, all direct costs, and filing
fees paid by Washoe shall be reimbursed by FSR or its assignees.
1.3         Prior to the Water Rights Credits being available for use within the
service areas of Washoe and/or TMWA, FSR or its assignees, shall be responsible
for design and construction of the water transmission infrastructure necessary
to appropriate, pump and convey the water evidenced by the Dedicated Water
Rights to the point of delivery which is to be Washoe’s Matterhorn Terminal Tank
location, (the “Point of Delivery”) located in the North Valleys area of Washoe
County. In order to ensure adequate water transmission infrastructure to deliver
the water represented by the Water Rights Credits to the Point of Delivery, the
parties anticipate the completion and execution of a separate Infrastructure
Dedication Agreement between FSR and/or its assignees and Washoe.
2.           TRANSFER AND ASSIGNMENT
2.1         FSR may, at any time following issuance of the Municipal Permits,
transfer and assign its right to unallocated Water Rights Credits by the
execution and delivery to Washoe of an Assignment of Water Rights Credits
(“Assignment” or “Assignments”) as provided for herein.  The Assignments shall
be in the form attached hereto as Exhibit B which will be provided to Washoe by
FSR in favor of its assignees, evidencing the signature of the Manager of FSR
and the signature of each assignee of FSR. The Assignments shall be dated,
identify the assignee of FSR, specifically describe the quantity of Water Rights
Credits being assigned and indicate that Washoe may rely upon the face value
representations of validity of the Assignment without the duty to inquire beyond
the Assignment.  The Assignment shall expressly state that it is subject to the
terms, conditions and restrictions of the Municipal Permits.
2.2         The initial Assignments of the Water Rights Credits shall be limited
to 8,000 acre feet. The remaining Water Rights Credits resulting from the
Municipal Permits shall be held by Washoe pursuant to the terms and conditions
of this Agreement, and no further Assignments may be made by FSR until such time
as all necessary permits have been obtained by FSR and the parties have agreed
upon the amount of such future Assignments.
2.3         Washoe and FSR and/or its assignees shall annually agree upon the
accounting and reconciliation of the total Water Rights Credits transferred and
assigned by means of an accounting presented by FSR and/or its assignees in a
format or schedule acceptable to Washoe. The termination, default or other
action related to one assignee shall not affect the rights or obligations of any
other assignee.
3.           WILL SERVE/TEMPORARY USE
3.1         At such time as the Dedicated Water Rights have been conveyed in
trust to Washoe as provided for in Paragraph 1.3 above and the Municipal Permits
have been issued the State Engineer, FSR and/or its assignees, may request
“will-serve” commitments for up to 8,000 acre feet of Water Rights
Credits.  Additional “will-serve” commitments are subject to the limitations of
Paragraph 2.2 above. The Water Rights Credits will be held in an account as a
credit for FSR and/or its assignees as provided in this Agreement. The quantity
of Water Rights Credits to be applied to and credited against any such
“will-serve” commitment shall be based upon Rule 7 as adopted by TMWA and
implemented by Washoe and TMWA for their respective service areas.  Washoe
agrees that the Assignments will be accepted in satisfaction of the requirements
for dedication of water rights in connection with requests for “will-serve”
commitments.
3.2         The parties agree that the Washoe is the final authority in
determining the number of will-serves which may be granted by Washoe.
3.3         Washoe, subject to the terms and conditions of the Municipal
Permits, is also the final authority regarding the dedication rate associated
with “will-serve” commitments which may be issued from the Water Rights Credits.
3.4         Prior to the time when all of the Water Rights Credits are in actual
use for municipal service, Washoe, at it’s sole cost and expense, may utilize
some or all of the water rights associated with the Water Rights Credits that
have not been called upon as the basis “will-serve” commitments for it’s general
temporary purposes, including groundwater recharge or conjunctive use
management.  Washoe’s use of the Water Rights Credits is strictly limited to
temporary uses that will not diminish or have adverse quantitative effect on the
rights of FSR or its assignees to put the full amount of the Water Rights
Credits hereunder to beneficial use, to the limitations of Paragraph 2.2 above.
3.5         It is specifically agreed and understood that Washoe will wholesale
water to TMWA, subject to appropriate wholesale agreements between Washoe and
TMWA, and that such wholesale water after it is provided to TMWA shall be served
to TMWA customers in accordance with the rate schedule and charges established
for TMWA customers.
4.           TERMINATION
4.1         This Agreement may be amended or terminated only by written
agreement between parties, except as provided in Paragraph 4.2 below.
4.2         This Agreement will terminate at its own accord at such time as the
total amount of Water Rights Credits provided for herein have been assigned by
FSR and put into actual use for municipal service.
5.           MISCELLANEOUS
5.1         Assignment:  FSR’s rights and obligations contained within this
Agreement may be freely assigned.  All of the parties’ rights inure to, and the
obligations are binding upon, the parties’ successors in interest.  Washoe may
not assign this agreement without the express consent of FSR.

5.2         Survival:  This Agreement and the covenants, warranties and
representations contained herein shall survive the execution of this Agreement.
5.3         Entire Agreement:  This Agreement, together with any exhibits and
other matters attached hereto and/or incorporated herein by reference,
constitutes the entire agreement between the parties. All terms, conditions,
representations, warranties, understandings and interpretations contained in any
other written or oral communications between the parties are superseded. In
executing this Agreement, the parties acknowledge that they are relying solely
on the matters set forth herein and not on any other inducements, written or
oral, by the other party or any agent, employee or representative thereof.
5.4         Severability: if any term, covenant, condition, or provision of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, covenants, conditions, and provisions
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. The rights and obligations of the parties hereto shall be
governed by and construed in accordance with the laws of the State of Nevada.
5.5         Notice  No notice, request, demand, instruction or other document to
be given hereunder to any Party shall be effective for any purpose unless
personally delivered to the person at the appropriate address set forth below
(in which event such notice shall be deemed effective only upon such
delivery) delivered by air courier  next-day delivery (e.g., Federal Express),
or delivered by U.S. mail, sent by registered or certified mail, return receipt
requested as follows:
 
If to FSR, to:                      Fish Springs Ranch, LLC
Attention:  Dorothy A. Timian-Palmer
            704 West Nye Lane, Suite 201
            Carson City, NV 89703

If to Washoe, to:                  Director
Department of Water Resources
4930 Energy Way
Reno, NV 89502-4106

Notices delivered by air courier shall be deemed to have been given the next
business day after deposit with the courier and notices mailed shall be deemed
to have been given on the second day following deposit of same in any United
States Post Office mailbox in the state to which notice is addressed or on the
third day following deposit in any such post office box other than in the state
to which the notice is addressed, postage prepaid, addressed as set forth
above.  The addresses and addressees, for the purpose of this Paragraph, may be
changed by giving written notice of such change in the manner herein provided
for giving notice. Unless and until such written notice of change is received,
the last address and addressee stated by written notice, or provided herein if
no such written notice of change has been received, shall be deemed to continue
in effect for all purposes hereunder.
5.6         Counterpart:  This Agreement maybe executed in one or more
counterparts. Each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
Dated this   28th  day of February, 2006.

FSR:                                                                WASHOE:
FISH SPRINGS RANCH,
LLC                                                                                                WASHOE
COUNTY

By:  /s/Dorothy A.
Timian-Palmer                                                                                     By:  /s/Robert
M. Larkin
Dorothy A.
Timian-Palmer                                                                                                Chairman
of the Board of
Chief Operating
Officer                                                                                                           County
Commissioners

Attest:  /s/Amy Harvey
     Washoe County Clerk

STATE OF NEVADA                      )
)  ss.
COUNTY OF CARSON                   )

On this   28th  day of February, 2006, personally appeared before me, a Notary
Public, _______Dorothy A. Timian-Palmer  ___  , personally known to me to be the
person whose name is subscribed to the above instrument, who acknowledged to me
that he/she executed the above instrument on behalf of Fish Springs Ranch, LLC.

/s/ Teresa A. Rankin                                                      
NOTARY PUBLIC

STATE OF NEVADA                      )
) ss.
COUNTY OF WASHOE                 )

On this   28th  day of February, 2006, personally appeared before me, a Notary
Public, ________Robert M. Larkin     __   , personally known to me to be the
person whose name is subscribed to the above instrument, who acknowledged to me
that he/she executed the above instrument on behalf of Washoe County.

/s/Rita Lencioni_______________
NOTARY PUBLIC