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RECORDING REQUESTED BYAND WHEN RECORDED RETURN TO:VikibciN , b L 0 4 e _ 1 2 . .A . . .4 - J u a t _ LLADone ynuri4:1 g _ y 5 .6 II PlatSfiv FgAne..IL b_Pc. i ic. 4Attn: Frt.4.13 L 1 ItONI esib

DOC NI 2003 8649810/31/2003 68:00A Fee:274.00Page 1 of 90Recorded in Official RecordsCounty of RiversideGary L. OrsoAssessor County Clerk 8 Recorder

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D E C L A R A T I O N O FCOVENANTS CONDITIONS AND RESTRICTIONS

A N D A G R EE M E NTFOR THE HILLS

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TABLE OF CONTENTSPage I

ARTICLE 1 EFINITIONS1 1 Intentionally left blank]1 2 Act1 3 rticles1 4 Association1 5 oard or Board of Directors1 6 Budget1 7 Bylaws1 8 ity1 9 ommon A reas1 10 Committee1 11 Common Expenses1 12 Common Facilities 31 13 County1 14 Declarant1 15 Declaration1 16 Design Guidelines1 17 DRE1 18 Golf Courses1 19 Hazardous Materials1 20 Homeowner1 21 Improvements1 22 Laws1 23 Lot1 24 Lessee1 25 Maintenance and Operation Account1 26 Member1 27 Mortgage1 28 Mortgagee1 29 Noncompliance Expense

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TABLE OF CONTENTScontinued)Page

1.30 Occupant 41.31 Operator 41.32 Owner 51 33 Parcel 51.34 Parking Area 51.35 Percentage Share 51.36 Person 51 37 Plans 51.38 Preliminary Plan 51 39 Primary Entrance Road 51.40 Project Documents 51.41 Property 51.42 Record or Recordation 51 43 Regular A ssessment 61.44 Reimbursement A ssessment 61 45 Reserve Account 61 46 Residence1.47 Rules and R egulations 61 48 Special Assessment 61.49 Supplement 61.50 Telecommunications System 61.51 Unit 61.52 Users 61.53 Voting R ights 6

ARTICLE 2 EFFECTIVE DATE 62.1 Status of Property 62.2 Property Co nfiguration 62.3 Effective Date 7

ARTICLE 3 THE OPERATOR 73.1 The Operator 7

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TABLE OF CONTENTScontinued) age -

3 2 irectors and Officers3.3 uties3 4 Powers3.5 ersonal Liability 113.6 nterest of Declarant 113.7 ights 1

ARTICLE 4 REVIEW OF IMPROVEMENT PLANS 24.1 urpose of Improvement Regulations 24 2 equired Review of Plans 134.3 odifications to Plans and Improvements 44 4 asis for Disapproval 44.5 ecision of the Operator 44.6 ime for Approval or Disapproval ... 154.7 ppeals 154.8 evelopment Requirements of City 154.9 ubmission of Plans to City or Government 54.10 Requirements of Development Agreement 64.11 Proceeding with Work 64.12 Completion of Work 64.13 Estoppel Certificate 164.14 No Liability for Approval Errors 64.15 Disclosure and Waiver of Conflict of Interest 7

ARTICLE 5 IMPROVEMENT STANDARDS AND LIMITATIONS 7ARTICLE 6 REGULATION OF OPERATIONS AND USES 7

6 1 ermitted Uses 76.2 rohibited Uses 76.3 uisances 186.4 ompliance with Laws, Regulations, Permits or Certificates of Occupancy 86.5 azardous Materials 196.6 ecessary Permits 19

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TABLE OF CONTENTS(continued) Page

6.7 Access 196.8 Rules and Regulations 206.9 Parking 206.10 Noises and Noxious Odors 206.11 Temporary Structures 206.12 Oil and Mineral Rights 216.13 Use of Golf Courses, Hotels and Other Property 21

ARTICLE 7 RESERVATIONS OF EASEMENTS AND RIGHTS 227.1 Easements Over Common Areas 227.2 Easement for Performance and Discharge of Rights and Duties 227.3 Access 227.4 Utilities 227.5 Entry by Owners 237.6 Easements Reserved and Granted 247.7 Reservation by Declarant and Operator 247.8 Owner s and Homeowners Easements of Enjoyment of the Common

Areas 247.9 Owner s and Homeowners Easements for Ingress and Egress 247.10 Oil, Mineral Rights, Water Rights, Cable Television and Drainage

Monitoring. 247.11 Signage Easement 25

ARTICLE 8 MAINTENANCE AND USE OF THE PROPERTY AND COMMONAREAS 25

8.1 Management and Maintenance by Operator 258.2 Maintenance Caused by Owners, Etc 258.3 Common Area Restrictions 268.4 Signs 268.5 Intentionally Omitted 268.6 Destruction, Restoration 268.7 Eminent Domain 26

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TABLE OF CONTENTS(continued) PageARTICLE 9 FUNDS AND ASSESSMENTS 79.1 greement to Pay Maintenance Assessm ents; Creation of Lien and

Obligation 79.2 o Waiver by Non-Use 79.3 Budgets 79.4 arcels Subject to Assessment; Allocation of Assessm ents 89.5 ubassociations or Supplemen tal CC Rs 89.6 egular Assessments 89.7 pecial Assessments 99.8 eimbursement Assessments 09.9 on-payment of Assessments 09.10 No Offsets 09.11 Transfer of Property 09.12 Failure to Fix Regular Assessments 19.13 Operator Funds 19.14 Books of Account 1

ARTICLE 10 MAINTENANCE, RESTORATION OF PARCELS 110.1 Duty to Maintain 110.2 Erosion Control; Lateral Support 110.3 Damage and Destruction; Duty to Rebuild 210.4 Insurance Obligation of Owners 210.5 Obligation to Pay Taxes, Liens 210.6 Performance By Operator 2

ARTICLE 11 ENFORCEMENT 311.1 Violation a Nuisance 311.2 General Remedies 311.3 Collection of Assessments; Liens 411.4 Interest 511.5 Attorneys Fees 511.6 Cumulative Remedies; No Waiver 5

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TABLE OF CONTENTScontinued)

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ARTICLE 12 TERM, TERMINATION, AMENDMENT 512.1 Term of Declaration 512.2 Amendments 6

ARTICLE 13 GENERAL PROVISIONS 613.1 Termination and Assignment of Declarant s Rights and Duties 613.2 Constructive Notice and Acceptance 613.3 Declarant s Reserved Rights 713.4 Exhibits 713.5 Governing Law 713.6 Headings 713.7 Mortgage Protection; Right to Cure 713.8 Mutuality, Reciprocity; Runs With Land 813.9 Notices 813.10 Notification of Sale 813.11 Recitals 813.12 Number; Gender 913.13 Severability 913.14 Waiver 913.15 Common Interest SubdivisionlDRE 9

ARTICLE 14 ANNEXATION AND DEANNEXATION 014.1 Annexation 014.2 Deannexation 014.3 Supplement14.4 Reallocation of Assessments. 0

ARTICLE 15 RESIDENTIAL PROPERTY 0

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T BLE OF CONTENTScontinued)

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EXHIBIT A 1EXHIBIT A 2EXHIBIT BEXHIBIT C-1EXHIBIT C 2EXHIBIT DEXHIBIT EEXHIBIT F

LEG L DESCRIPTION OF THE PROPERTYM P S HOWI NG T HE P ROJE CT ND T HE P RCE L SLEG L DESCRIPTION OF P RTICIP TING PROPERTYLEG L DESCRIPTION OF COMM ON RE SDESCRIPTION OF COMM ON F CILITIESGOLF COURSERELOC TION OF COM MON F CILITIESPROPOSED FIRST YE R BUDGET

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DECLARATION OFCOVENANTS, CONDITIONS AND RESTRICTIONS

AND AGREEMENTFOR THE HILLS

THIS DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONSAND AGREEMENT FOR THE HILLS ( Declaration ) is made as of C e r a l l i 2 IL/ 2003by LB HILLS GOLF, LLC, a California limited liability company ( Declarant ), with referenceto the following facts:

RECITALSA. Declarant is the fee owner of certain real property located in the City of Indio

( City ), County of Riverside, State of California, more particularly described on Exhibit A-1attached hereto, which Declarant intends to subdivide into parcels, currently as depicted onTentative Parcel Map no. 30260 prepared by Watson & Watson Engineering, Inc., a copy of

r its Gevtic e. era s .c .A .sch zfltni -cwhich is available in the office of Declarant located at 30,c Aiotrif ifintborc RivD r fFkalrizrci-11 eilf 9zS3Z

B. Declarant has developed a portion of the Property (as defined in Section 1.41)with two 18-hole golf courses, a clubhouse and related facilities. Declarant intends to developthe remaining portions of the Property with approximately 900 units of residential housingproducts which may include custom lots, single family detached housing and timeshare/resortwith related retail uses. Declarant intends to sell, lease or otherwise convey portions of theProperty to various individuals and entities for such purposes.

C. The Property is subject to (i) that certain Development Agreement( Development Agreemen t ), dated December 18, 1996, made by and between the City ofIndio, a California municipal corporation, Paul Ames, trustee, and Landmark Golf Company, anArizona corporation, and recorded in the Official Records of Riverside County, California onSeptember 18, 1998 as Instrument No. 399082; (ii) that certain The Hills Specific Plan (SP 96-8-7 ( Specific Plan ) approved by the City of Indio City Council and Planning Commission onNovember 13, 1996; (iii) that certain Project Master Plan (PMP 96-8-10) ( Project MasterPlan ) approved by the City of Indio City Council and Planning Commission on November 13,1996; and (iv) all other documents, covenants, conditions and restrictions recorded prior heretoor to which this Declaration is expressly subordinated, if any.

D. INDIO LAND VENTURE LLC ( Participating Neighbor ) is the fee owner ofcertain real property located southwest of the Property, in the City of Indio, County ofRiverside, State of California, more particularly described on Exhibit B attached hereto( P articipating Prop erty ). Participating Neighbor and Declarant intend to process a lot lineadjustment with respect to a portion of the Property and the Participating Property to relocatethe lot lines of the Property and the Participating Property such that the entire primary entranceroad, which commences at the western boundary of the Property (the Primary EntranceRoad ) is thereafter relocated as set forth below. Declarant and Participating Neighbor have

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addressed and provided for the cost, at their expense, of such lot line adjustment as well as theconstruction of the relocated Primary Entrance Road and removal and relandscaping of theoriginal Primary Entrance Road in a separate agreement. Operator and ParticipatingNeighbor, or their successors and assigns, shall also enter into an agreement providing for theParticipating Property s payment of its fair and equitable share, based on usage, of theOperator s cost of maintaining and servicing the Primary Entrance Road ( Primary EntranceRoad M aintenance Agreem ent ).

E. y this Declaration, Declarant intends to impose upon the Property (as definedbelow) mutually beneficial restrictions, which will constitute a general scheme for themanagement, use, occupancy and enjoyment of the Property, all for the purpose of enhancingand protecting the value, desirability and attractiveness of the Property and enhancing thequality of life within the Property, for the benefit of Declarant and all future owners of theProperty.

DECLARATIONNOW, THEREFORE, Declarant hereby covenants, agrees and declares that the

Property and each portion thereof is and shall be owned, conveyed, mortgaged, encumbered,leased, developed, improved, used and occupied subject to this Declaration and the limitations,covenants, conditions, reservations, rights, restrictions, easements, liens and charges set forthherein, all of which are equitable servitudes and shall run with the title to the land and shall bebinding on and inure to the benefit of all parties having or acquiring any right, title or interestin the Property or any portion thereof and their respective heirs, successors and assigns. Thepurpose of this Declaration is to enhance and protect, and provide a means of controlling andmaintaining, the value, desirability and attractiveness of the Property and every portionthereof, for the benefit of Declarant and every owner of the Property or a portion thereof, inaccordance with a general plan of subdivision, development and improvement and in a m annerthat is fair and equitable to each Owner. Declarant shall consider making reasonableamendm ents to this Declaration that may b e requested by the D RE (as defined in Section 1.17below) in connection with an O wner's compliance with the D RE requirements for a residentialor time-share subdivision of an Ow ner's Parcel.

ARTICLE 1DEFINITIONS1.1 Intentionally left blank]1.2 Act shall have the meaning set forth in Section 13.15.1.3 Articles shall mean the Articles of Incorporation of the Association which are orshall be filed in the Office of the California Secretary of State, as amended and supplemented (1)from time to time.1.4 Association shall have the meaning set forth in Section 3.1.1.

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1.5 Board or Board of Directors shall mean the Board of Directors of theAssociation, as the same may be constituted from time to time.

1.6 Budget shall have the meaning set forth in Section 9.3.1 7 Bylaws shall mean the Bylaws of the Association, as amended and

supplemented from time to time.1 8 City shall mean the City of Indio, California.1.9 Common Areas shall mean the Primary Entrance Road, Parking Areas, water

lines, other utility infrastructure and landscaping areas within the Property described onExhibit C-2 attached hereto, as the same may be adjusted from time to time in accordance withthe terms and provisions of this Declaration.

1.10 Committee shall mean the Architectural Committee.

1.11 Common Expenses shall mean the expenses of: (a) maintaining and operatingthe Common Areas and Common Facilities located thereon incurred by the Operator includingwithout limitation the cost of maintaining the Primary Entrance Road and any project marquee,monument or sign with respect to the Property that may be installed at the primary entrance roadof the Property; (b) the cost of utility services for the Common Areas; (c) exercising the powersand performing the duties of the Operator under this Declaration and the other ProjectDocuments; and (d) that portion of the maintenance and shared expenses that Operator hasagreed to pay pursuant to the Primary Entrance Road Maintenance Agreement, if entered into byOperator and Participating Neighbor. The undivided interests in the Common Expenses shall beallocated among the Parcels so that each Parcel's percentage interest in the Common Expenses isas set forth in Article 9.

1.12 Common Facilities shall mean and refer to the Improvements upon theCommon Areas as set forth in Exhibit C-2 attached hereto, as the same may be adjusted fromtime to time in accordance with the terms and provisions of this Declaration.

1.13 County shall mean the County of Riverside, California.1.14 Declarant shall mean LB Hills Golf, LLC, a California limited liability

company, and successors and assigns of LB Hills Golf, LLC, a California limited liabilitycompany, or a successor Declarant if: (a) such successor or assign is an Owner, and (b) LB HillsGolf, LLC, a California limited liability company, or the then current Declarant executes andrecords a document which expressly names such party as a successor Declarant and assigns therights and duties of Declarant hereunder.

1.15 Declaration shall mean this Declaration of Covenants, Conditions andRestrictions and Agreement for The Hills, as amended or supplemented from time to time.

1.16 Design Guidelines shall mean the guidelines for the development and use of theProperty as established by the Operator from time to time. Copies of the Design Guidelines willbe available from the Operator upon written request to the Operator.

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1.17 DRE shall mean the California Department of Real Estate.1.18 Golf Courses shall mean the two golf courses and related golf course facilities,

including, without limitation, a clubhouse, more particularly described in Exhibit D attachedhereto and incorporated therein by this reference, and shall further include either golf courseand/or any portion thereof.

1.19 Hazardous Materials shall have the meaning set forth in Section 6.5.1.20 Homeowner shall mean the fee simple owner of a Unit within the Property,

including a timeshare condominium interest, whether fractional or club membership interest.1.21 Improvements shall mean buildings, accessory structures, underground

installations, slope and grade alterations, roads, rail spurs, curbs, driveways, gutters, parkingareas, loading areas, sidewalks, utilities, fences, walls and barriers, stairs, decks, poles, signs,hedges, plantings, planted trees and shrubs, irrigation systems, storm drains, drainage facilities,clarifiers and other storm drain water filtration systems and all other improvements, structures orlandscaping of any kind, whether above or below the land surface.

1.22 Laws shall mean, collectively, all laws, statutes, ordinances, rules, regulations,requirements, permits, approvals, or certificates of occupancy promulgated by any federal, stateor local governmental entity with jurisdiction over the Property or any business, use or operationthereon.

1.23 Lot shall mean any portion of a Parcel that is demarcated as a separate legal loton a final map or a parcel shown on a parcel map filed for record in the County, which lot orparcel is described in this Declaration or any Supplement as part of the Property, as such lot orparcel may be adjusted from time to time by any recorded lot line adjustment. Lot shall notinclude any Common Areas.

1.24 Lessee shall mean the owner of a leasehold interest in a Parcel or Unit, or theowner of Improvements built on a Parcel.

1.25 Maintenance and Operation Account shall mean an account into which theOperator shall deposit funds for maintenance and operation assessments, as described inSection 9.13.

1.26 Member shall mean an Owner who is a Member of the Association.1.27 Mortgage shall mean any duly recorded mortgage or deed of trust encumbering

one or more Parcels or Units.1.28 Mortgagee shall mean a holder of a Mortgage, including a beneficiary under a

deed of trust.1.29 Noncompliance Expense shall have the meaning set forth in Section 9.8.1(a).

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2.2 roperty Configuration. Declarant intends to subdivide the Property so that theentire Property consists of the four Parcels and the Golf Course Parcel defined above whichsubdivision shall be substantially in the form set forth in the attached Exhibit A-2.

2.3 ffective Date. This Declaration shall be of no force and effect until the date (theEffective Date ) upon which the appropriate governmental authorities approve the subdivision

contemplated by this Declaration substantially in the form demarcated on the attached Exhibit A-2.

ARTICLE 3THE OPER TOR

3 1 he Operator. As long as Declarant is an Owner, and subject to the provisions ofSection 13.1, Declarant shall be the Operator .

3.1.1 Notwithstanding the foregoing, Declarant shall have the option, at anytime, to discontinue functioning as the Operator; provided, however, that prior to discontinuingits function as the Operator, Declarant shall form a California non-profit mutual benefitcorporation (the Association ), which Association shall, upon formation, become the Operator,and shall assume the rights, obligations and duties of the Operator hereunder. The Articles andBylaws of the Association shall be submitted to the City for review and approval prior toformation of the Association. Once formed, the Association's membership and voting rightsshall be determined by their Percentage Share. If at any time Declarant ceases to be the Operatorand at such time the Association has not yet been formed, then until such time that theAssociation is formed, the Operator shall be an unincorporated association consisting of allOwners, which Owners (a) shall have voting rights commensurate with the rights theirPercentage Share, and (b) shall forthwith organize the Association.

3.1.2 The Operator, as the agent and representative of the Owners, shall havethe right, but not the obligation, to enforce the provisions of this Declaration. Further, anyOwner, including Declarant so long as it is an Owner, shall have the right and authority, but notthe obligation, to enforce the provisions of this Declaration.

3.1.3 Subject to the restrictions and limitations contained herein the Operatormay enter into contracts or other transactions with other parties, including Declarant or itsaffiliated companies. Such contracts or other transactions shall not be void or voidable becauseone or more directors or officers of the Operator are employed by, have a financial interest in orare otherwise affiliated with such other parties, including Declarant or its affiliates, if (i) the factof such interest has been previously disclosed or made known to all of the Owners, and (ii) thetransaction or contract is fair and reasonable. Notwithstanding the foregoing, any managementcontract entered into by the Operator must be terminable, without penalty, for cause at anytimeand without cause upon reasonable notice.

3.1.4 If the Association has been formed, then upon adoption of a resolution bythe Board of Directors stating that the then current use of a specified part of the Common Areasis no longer in the best interests of the Owners, and the approval of such resolution in accordancewith the Bylaws, the Board of Directors shall have the power and right to change the use thereof

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(and in connection therewith to take whatever actions are required to accommodate the new use),provided such new use; (i) also shall be for the common benefit of the Owners; and (ii) shall beconsistent with any recorded deed and zoning regulations.

3 2 irectors and Officers. The affairs of the Association, once formed, shall beconducted by and through the Board of Directors and such officers and committees as the Boardmay elect and appoint, all in accordance with the Article and the Bylaws.

3.3 uties. The Operator shall be charged with the duties set forth in thisDeclaration, including, but not limited to, the following:

3.3.1 Assessments. he Operator shall fix, levy, collect and enforceAssessments as further described in Article 9.

3.3.2 Common Areas. The Operator shall maintain, repair, replace, restore,operate, control and manage the Common Areas and all Common Facilities and equipmentlocated thereon, as further described in Article 8, except as otherwise set forth herein.

3.3.3 Discharge of Liens. The Operator shall discharge by payment, ifnecessary, any lien against the Common Areas or any portion thereof owned by the Operator,and, if placed thereon as a result of the action of an Owner or Owners or their respectiveOccupants or Lessees, assess the cost thereof as a Reimbursement Assessment to the Owner orOwners responsible therefor; provided, however, that such Owner or Owners shall be givennotice of the lien and the proposed discharge at least fifteen (15) days prior to discharge by theOperator, and the opportunity to be heard by the Operator, either orally or in writing, at least five(5) days prior to the proposed discharge.

3.3.4 Insurance. The Operator shall maintain such policy or policies ofinsurance as it deems necessary, to the extent available at a reasonable cost, including, but notlimited to: (a) all risk property insurance in an amount sufficient to cover the Common Areasand Common Facilities for which the Operator is responsible for restoring under thisDeclaration; (b) commercial general liability insurance in the amount of at least Three MillionDollars ( 3,000,000) per occurrence, insuring Declarant, the Operator, the Association, theOwners, the Board and the Committee, as applicable, against all liability arising out of theownership, use and maintenance of the Common Areas; (c) worker's compensation insurance, asrequired by law; (d) directors' and officers' errors and omissions policies, in form and amountdetermined by the Operator; and (e) insurance against any other risk which the Operatorconsiders appropriate.

(a) Notwithstanding the scope of insurance specifically set forthabove, the Association shall maintain, at all times, insurance against such losses and perils, insuch amounts, upon such terms and subject to such conditions, as may be prescribed by anygovernmental agency from time to time.

(b) The Association, any member of the Board of Directors, anyofficer and Declarant shall not be liable to any Person, including any Owner or Mortgagee, if anyrisks or hazards are not covered by the insurance obtained by the Operator or if the amount ofsuch insurance is not adequate.

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c) Premiums for all insurance obtained by the Operator pursuant tothis Article shall be Common Expenses and shall be paid for by the Operator; provided,however, that the cost of insurance coverage is a Common Expense only to the extent thecoverage is incurred in the course of its duties as Operator.

d) It is the responsibility and obligation of each Owner to provide fireand extended coverage insurance on its Parcel and any Improvements located thereon. Nothingherein shall preclude any Owner or Occupant from also carrying any public liability insurance asit deems desirable to cover its individual liability for damage to person or property occurring onits Parcel or elsewhere on the Property. Such policies shall not adversely affect or diminish anyability under any insurance obtained by or on behalf of the Association.

3.3.5 Payment of Expenses. Subject to the terms of reimbursement set forth inArticle 9 hereof, the Operator shall pay, as part of the Common Expenses, all expenses andobligations incurred by the Operator in the conduct of its business relating to the Common Areasand Common Facilities, including, without limitation, all licenses, taxes or governmental chargeslevied or imposed against the Common Areas and Common Facilities.

3.3.6 Metering Utilities. To the extent reasonably possible, the Operator shallseparately meter the utilities used for the Common Areas and Common Facilities.

3.4 owers. The Operator shall have the following powers, rights and duties, inaddition to those provided elsewhere in this Declaration and by applicable Law, and ifapplicable, by the Articles and Bylaws.

3.4.1 Acquisition and Development of Property. The Operator shall have thepower to acquire by gift, purchase or otherwise), own, hold, improve, operate, maintain, convey,sell, lease, transfer, dedicate for public use or otherwise dispose of the Property and any real orpersonal property in connection with the affairs of the Operator, including, without limitation,the designation of traffic circulation and parking areas.

3.4.2 Assessments, Liens. The Operator shall have the power to levy andcollect assessments pursuant to Article 9 and to perfect and enforce liens in accordance with theprovisions of Article 11.

3.4.3 Contracts. The Operator shall have the power to contract for goods and/orservices for the Property and the Common Areas or for the performance of any power or duty ofthe Operator, subject to limitations set forth elsewhere in this Declaration, and if applicable, theArticles and Bylaws.

3.4.4 Delegation. The Operator shall have the power to delegate its authorityand powers to associations, committees, agents, officers or employees of the Operator.

3.4.5 Enforcement. The Operator shall have the power to enforce thisDeclaration pursuant to Article 11.

3.4.6 Manager. The Operator shall have the power to employ a manager orother Person and to contract with independent contractors or managing agents to perform all or

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any portion of the duties and responsibilities of the Operator, provided that any contract with amanager or managing agent shall not exceed a one (1) year term and may provide for the right ofthe Operator to terminate the contract immediately for cause and otherwise on thirty (30) dayswritten notice. The Operator may contract with Declarant or an affiliate of Declarant so long asthe contract terms reflect reasonable and competitive market rates and other terms.

3.4.7 Security Services. The Operator shall have the power to provide, or tocontract for the provision of, security patrols or other security measures, or both, with regard tothe Common Area and Common Facilities as the Operator deems necessary.

3.4.8 Telecommunications Services. The Operator shall have the power toprovide, or to contract for the provision of, basic telecommunications services ( basic services )to the Residences by implementing a Telecommunications System. The Association shall acceptan assignment of any contracts that the Operator may establish related to the basic services, or toany telecommunications services, and to the Telecommunications System. A monthly fee maybe charged to the Owners, or to the Association if the Association has been formed, for the basicservices, plus any applicable franchise fees or taxes, which shall be allocated to the Members aspart of the Regular Assessment. The Operator, or its assignees, may provide additionaltelecommunications services ( upgrade to service ) directly to the Residences. If any Residenceaccepts any upgrades to service, the Residence will be billed directly for such services. TheOperator, or its assignees, may also provide telecommunications services directly to Users, orentities other than Residences, within the Property, separately from the basic services provided tothe Owners or to the Association and separately from any upgrades to service provided directlyto the Residences. The terms and provisions of any contract entered into pursuant to this Section3.4.8 shall be subject to any restrictions that may be imposed by the DRE. This Section 3.4.8shall not apply to Parcel 2.

3.4.9 Variances. The Operator shall have the power to grant reasonablevariances from the provisions of this Declaration from time to time as the Operator may deem tobe in the best interests of the Property for the purpose of overcoming practical difficulties or topreventing unnecessary hardship in the application of the provisions contained herein; provided,however, that: (a) a variance shall not materially injure any of the Parcels or the Improvementson any of the Property; and (b) the Owner seeking the variance shall otherwise be subject to andconform with all applicable governmental laws, ordinances, regulations and requirements. Novariance granted pursuant to the authority granted herein shall constitute a waiver of anyprovision of this Declaration as applied to any Person or Parcel nor have any value as aprecedent or entitle others to the same or any similar or other variance.

3.4.10 Agreement Regarding Primary Entrance Road of the ParticipatingProperty. In the event the Primary Entrance Road is relocated, the Operator shall (i) provide, atits sole expense for a reasonable plan for removal of the original Primary Entrance Road and re-landscaping of the original location; and (ii) shall enter into the Primary Entrance Roadagreements, as described in Recital D hereof. In no event shall relocation of the PrimaryEntrance Road cause a significant increase in the maintenance costs imposed upon any Owner.

3.4.11 Location of Common Facilities. The Operator and the Association (onceformed) shall have the power, but not the duty, to relocate some or all of the Common Facilities

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from the locations depicted on Exhibit C to the locations depicted on Exhibit E attached heretoand made a part hereof, provided, that it also provides, at its sole expense for a reasonable planfor removal of the original Common Facilities and re-landscaping of the original CommonAreas. Any other relocation of any of the Common Facilities shall require the approval ofOwners holding sixty-seven (67 ) of the Voting Rights. Notwithstanding anything herein to thecontrary, any relocation of the Common Facilities shall be performed at a time and in a mannerthat minimizes, to the greatest extent reasonably possible, any resulting disruption andinconvenience

3,4.12 Location of Utilities. The Operator and the Association (once formed)shall have the power, but not the duty, to relocate some or all of the utilities within the CommonAreas to the locations depicted on Exhibit E attached hereto and made a part hereof Any otherrelocation of any of the utilities within the Common Areas shall require the approval of sixty-seven (67 ) of the Voting Rights of the Owners. Notwithstanding anything herein to thecontrary, any relocation of the Common Facilities shall be performed at a time and in a mannerthat minimizes, to the greatest extent reasonably possible, any resulting disruption andinconvenience

3 5 ersonal Liability. Neither the Operator, nor any officer, employee or agent ofthe Operator, nor Declarant nor any officer, employee or agent of Declarant, shall be personallyliable to any Owner, or to any other party, for any damage, loss or prejudice suffered or claimedon account of any act, omission, error or negligence of any such Person unless such person failedto act in good faith or has engaged in willful or intentional misconduct.

3.6 nterest of Declarant. Declarant may develop the Property in separate phases.Declarant has developed a plan for the development of the Property which has been formulatedfor the common good within the Property. Declarant intends, but is not obligated, to develop theentire Property. The completion of that work and the sale, resale, rental and other disposal of theParcels in the Property are essential to the establishment and welfare of the Property. EachOwner acknowledges that Declarant has a substantial interest in assuring compliance with, andenforcement of, the covenants, conditions, restrictions and reservations contained in thisDeclaration and any Supplements.

3.7 ights. During the period of Declarant control set forth in Section 13.1, Declarantand the Owner of Parcel 2 have the rights listed below with respect that portion of the Propertyowned by each such party. Notwithstanding anything to the contrary that may be contained inthis Declaration, nothing in this Declaration or any Rules and Regulations limits and neither anyother Owner nor the Association will interfere with the exercise of these rights by the partyentitled thereto

3.7.1 Subdivision and Lot Line Adjustments. To subdivide and resubdivide anyportion of any Parcel it owns. To process lot line adjustments amongst and between (i) thoseParcels it owns, (ii) the Participating Property (to the extent the Participating Neighbor or issuccessor in interest, consents), and (iii) the Common Areas (to the extent the Common Areasbeing adjusted are owned by the party processing the lot line adjustment PROVIDED that suchadjustment does not materially impact other Owners' use of the Common Facilities.

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(c) to ensure construction of Improvements of proper design and materials in conformance withthe Design Guidelines which enhance the economic or aesthetic value of the Property; (d) toprovide for architectural compatibility and continuity for all buildings and landscaping; (e) tosecure and maintain proper setbacks from streets and adequate open spaces between structures;and (f) in general, to provide and maintain a high quality of Improvements for the Property forthe benefit of Declarant and all Owners. All Improvements made to the Property also shallcomply with the Development Agreement. In addition, each Owner shall be responsible forcompliance of its subdivision, and the improvements to be constructed on its Parcel, with allapplicable laws including, without limitation, all DRE requirements, Subdivision Lands Actrequirements, and all applicable requirements of Title 10 of the California Administrative Code.

4.2 equired Review of Plans. No Improvements (other than interior improvements)shall be erected, placed, altered, expanded, maintained or permitted to remain on any portion ofthe Property until Plans have been submitted to and approved in writing by the Operator. Allrequired Plans shall be submitted to the Operator in writing, signed by the Owner or prospectiveOwner of the affected Parcel. If an application is submitted by a Lessee or prospective Owner,the Owner of the affected Parcel shall execute the Plans indicating its approval thereof. Alldrawings, designs, and materials must be accurate and complete. A plan review fee in the initialamount of Five Hundred Dollars ($500.00) payable to the Operator will be charged by theOperator. Plans shall be submitted to Operator's office at: Ld -etc /t) ,.e/f/Cc artn;&.,-31A/Atriv 6/i/D Saiklizirlaazh>v dif z8.3?-or such other address as designated by Operator in a writing delivered to each Owner pursuant toSection 13.9 hereto. The plan review fee may be modified by the Operator to reflect changedcircumstances, such as increased costs due to inflation. If the Association has become theOperator pursuant to Section 3.1 hereof, then the Operator's duties and rights under this Article 4shall be performed by, and inure to, the Committee. Plans shall be submitted as follows:

4.2.1 General Requirements. Two (2) copies of each submittal are required.One copy will be returned to the applicant with comments. Parcel numbers must be included onall plans and other documents submitted for review.

4.2.2 Preliminary Plan. All applicants shall submit a preliminary plan or plans( Preliminary Plan ), which shall set forth and/or depict the following information:

(a) the location of any reciprocal access affecting adjacent Parcels;(b) setbacks;(c) the existing Parcel topography;(d) finished grades;(e) drainage and utility connections to existing lines;(f) building elevations, indicating materials;(g) building and roof lines;

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the height of all exterior design elements;exterior colors and finishes;the location and method of screening exterior storage areas;trash enclosures;walkway and security lighting, including catalogue cuts of fixtures;a conceptual landscape plan depicting planting areas;

n) the location, dimension and general form of proposed temporaryand permanent signage, in compliance with all applicable regulations imposed by the County orany other applicable governmental entity and the Design Guidelines; and

o) a description of sound attenuation measures, if applicable.The Preliminary Plan shall be submitted and approved by the Operator before a Final Plan issubmitted.

4.2.3 Final Plan. Following approval of a Preliminary Plan by the Operator, allapplicants shall submit a final plan ( Final Plan ), which shall include the followinginformation:

a) revisions required by the Preliminary Plan review;b) construction details;c) specifications if requested;d) exterior color samples;e) complete landscape plans showing the location and types of trees,

shrubs, ground cover and irrigation systems; and1) nergy and water conservation measures to be taken.

4 3 odifications to Plans and Improvements. Changes in the Preliminary or FinalPlan approved by the Operator must be re-submitted to and approved by the Operator pursuant tothis Article 3.

4 4 asis for Disapproval. The Operator may disapprove the Preliminary or FinalPlan or any changes thereto in its sole discretion. In reviewing or approving any submittal, theOperator shall not be responsible for determining compliance with any governmental land use orbuilding construction ordinances or requirements, or the Development Agreement.

4 5 ecision of the Operator. The Operator may approve, conditionally approve, ordisapprove the Preliminary or Final Plan, or any changes thereto, on the basis set forth in

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Section 4.4. One (1) set of the Preliminary and Final Plans and any other document submitted tothe Operator shall be returned to the applicant with the approval, conditional approval ordisapproval endorsed thereon, and the other set shall be retained by the Operator for itspermanent files.

4 6 ime for Approval or Disapproval. f the Operator, or its designatedrepresentative, fails to approve, conditionally approve or disapprove the complete Preliminary orFinal Plan or other documents submitted to the Operator, in writing, within thirty (30) days afterthe Operator s receipt of a complete application for such approval and the plan review fee, it shallbe conclusively presumed that the Operator has disapproved the same unless the applicant hasdelivered to the Operator, within fifteen (15) days after the expiration of the thirty (30) dayperiod, a notice in writing setting forth the date of initial submittal of the complete application tothe Operator and the fact that no approval or disapproval has been given as of the date of suchnotice. If the Operator fails to either approve or disapprove the application on or before thefifteenth (15th) day after the Operator s receipt of such notice, the provisions of this Declarationrequiring approval of such Plans or other documents by the Operator shall be deemed to havebeen waived by the Operator with respect to such plans; provided, however, that such waivershall not be deemed to be a waiver of any other covenant, condition or restriction providedherein

4.7 ppeals. If the Association has become the Operator, and the Committee ismaking the decisions of the Operator hereunder, then the decision of the Committee may beappealed to the Board, and the decision of the Board shall be final and binding on all parties.The Board may amend its decision only with the consent of the Owner of the Parcel on which theImprovement is to be located. In making a decision on such an appeal, the Board shall apply thesame criteria to be applied by the Committee pursuant to this Article 4.

4 8 evelopment Requirements of City. The Property is subject to and each Ownershall comply with the development criteria, restrictions and other requirements set forth by allapplicable governmental entities. The City, or other applicable governmental entity, has the rightto review and approve development plans for each Parcel pursuant to policies and standardspromulgated, approved or adopted by said City or other applicable governmental entity,including without limitation, zoning ordinances. The review by the City or other applicablegovernmental entity may include, but shall not be limited to, sign location, landscaping, accessdrives and building architecture. If any requirement imposed by the City or other applicablegovernmental entity is different from a requirement contained herein, the more restrictiverequirement shall prevail. Each Owner and Occupant is responsible for identifying andconforming with all City or other applicable governmental entity requirements and Laws.

4.9 ubmission of Plans to City or Government. Without the prior written consent ofthe Operator, no plans, specifications or other documents to be submitted to the Operatorpursuant to this Article 4 shall be submitted to the City or any other governmental agency priorto obtaining the approval of the Operator. If plans, specifications or documents approved by theOperator are subsequently modified by the City or other governmental action, the modificationsmust be submitted to and approved by the Operator in writing, pursuant to the proceduresspecified in this Article 4. Upon City or other governmental approval of any such plans,

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specifications or other documentation or any structural or other defects in any work, whether ornot pursuant to approved plans or specifications; d) the development of any Parcel; or e) theexecution and filing of an estoppel certificate pursuant to Section 4.13, whether or not the factstherein are correct, provided that the Operator has acted in good faith in issuing such estoppelcertificate on the basis of such information as may be possessed by it. Each Owner or otherPerson who submits Plans or other documents to the Operator shall indemnify, protect, holdharmless and defend Declarant, the Operator and the agents of each such party harmless fromand against all liabilities, losses, claims, damages, costs, loss or prejudice suffered or claimed byany Person on account of any of the matters described above in this Section 4.14. The soleremedy of any Owner or other Person shall be to request a court order requiring Declarant and/orthe Operator, as applicable, to act in accordance with this Declaration.

4.15 Disclosure and Waiver of Conflict of Interest. The Committee members may beappointed by, affiliated with or employed by Declarant. If Declarant submits any Plans to theCommittee for approval, the Committee members may have a conflict of interest in renderingtheir decisions. Neither Declarant nor any Committee member shall have any liability to anyOwner or other Person as a result of decisions which may benefit Declarant rendered in goodfaith by the Committee or any Committee member, and each Owner hereby waives any claim ofliability against Declarant, the Committee or any Committee member, based upon such conflictof interest. Nothing in this Section 4.15 is intended to limit the application or meaning ofSection 3 5 above

ARTICLE 5IMPROVEMENT STANDARDS AND LIMITATIONS

Each Owner including Declarant, shall be bound by and shall develop, maintain andoperate its Parcel in accordance with this Declaration, the Development Agreement, theSpecific Plan, the Project Master Plan, as applicable, and all applicable Laws, including theDesign Guidelines, which Design Guidelines are incorporated herein by this reference andshall form a part of this Declaration as if fully set forth herein.

ARTICLEREGULATION OF OPERATIONS AND USES

6 1 ermitted Uses. Unless otherwise specifically prohibited herein, permitted usesshall include those uses permitted by applicable City or other governmental entity zoning andland use regulations and the Design Guidelines, including, without limitation, timeshare use,provided such use is performed or carried out entirely within a building that is so designed andconstructed that the operations and uses comply with: a) all Laws, b) the provisions of thisDeclaration, and c) the Development Agreement, the Specific Plan and the Project Master Plan.If applicable Law is less restrictive than the provisions of this Declaration, the more restrictiveprovision shall apply.

6 2 rohibited Uses. Without limiting the provisions of Section 6.1 or any otherprovision of this Article 6, no Parcel shall be used for any of the following activities or purposes:

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(a) Any use which, in the Operator s sole and absolute discretion, isconsidered to be objectionable as an intrusion into the environment by sound, odor, visual effector physical impact or that will disturb or tend to disturb the other Owners, or Occupants in theProperty or that will adversely affect the value of the Property;

(b) Camping;(c) Mobile home sales or mobile home, trailer or recreational vehicle

parks or sale facilities; and(d) Commercial, retail, industrial or manufacturing uses, excluding

(i) retail and sales uses which are ancillary to hotel, timeshare or golf clubhouse uses, (ii) servicestations, and (iii) restaurants.

6 3 uisances. No noxious or offensive trade or activity shall be permitted upon anypart of the Property, nor shall anything be done thereon which shall in any way interfere with thequiet enjoyment of each of the Owners, Occupants and Homeowners, or which shall in any wayincrease the rate of insurance carried by the Operator, any Owner or any Homeowner. No plantsor seeds infected with insects or plant diseases, shall be brought upon, grown or maintained uponany part of the Property. No motorcycles, dirt bikes or other mechanized vehicles may beoperated upon any portion of the Common Area not improved as a street or a Parking Areawithout, written approval of the Board, which approval may be withheld for any reasonwhatsoever. Alarm devices used exclusively to protect the security of a Residence or anautomobile and its contents shall be permitted, provided that such devices do not produceannoying sounds or conditions as a result of frequently occurring false alarms. No rifle, shotgun,pistol, revolver or firearm of any kind shall be shot, fired or discharged anywhere within theProperty. No explosive of any kind shall be detonated anywhere in the Property, except to theextent permitted by the applicable governmental agency and then only upon the issuance of anyrequired permit(s) by the applicable governmental agency having jurisdiction. No rubbish ordebris of any kind shall be placed or permitted to accumulate upon any portion of the Propertyfor any unreasonable time, and no odors shall be permitted to arise therefrom, so as to render theProperty or any portion thereof unsanitary, unsightly, offensive or detrimental to any otherportion of the Property in the vicinity thereof or to any Owner or Occupant. No loud, noxious oroffensive activity shall be carried on or permitted on any part of the Property, nor shall anythingbe done thereon which may be, or may become, an annoyance or nuisance to Persons or propertyin the vicinity of such Lot or Parcel, or which shall interfere with the quiet enjoyment of anOwner or Occupant.

6.4 ompliance with Laws, Regulations, Permits or Certificates of Occupancy. NoOwner, Lessee, Occupant or Homeowner shall permit any activity, use or operation on anyportion of the Property in violation of any Law. Each Owner, Lessee, Occupant and Homeownershall, upon written notice from the Operator, discontinue any use which is declared by anygovernmental entity having such jurisdiction to be a violation of any Law. Each Owner, Lessee,Occupant and Homeowner shall, immediately upon receipt from any governmental entity of analleged violation of any Law, provide a copy of such allegation to the Operator, notwithstandingsuch party s belief that meritorious defenses to such allegations exist. No representation is made

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6.7 ccess. The Operator, and its agents, shall have the right, but not the obligationto enter upon a Parcel as provided in Section 11.2.2 for the purpose of inspecting the same todetermine compliance with Article 6. In addition, the Operator may require disclosure of anyapplicable information relating to the applicable Laws or permits and any other evidencenecessary to assure the Operator of an Owner's compliance with said Laws.

6.8 ules and Regulations. The Operator shall have the right to prepare reasonableRules and Regulations relating to the use, management and maintenance of the Common Areasand the facilities and Improvements located thereon, and to the conduct of Owners, Lessees,Homeowners, Occupants and guests with respect to the Property and other Owners, including,without limitation, reasonable restrictions on (a) night lighting from any Parcel that wouldinterfere with the quiet enjoyment of any Unit, (b) noise, (c) times for construction ofImprovements and location of construction staging areas and usage of vehicles and constructionequipment on any Parcel, (d) parking of motor vehicles, and (e) waste disposal. The Operatorshall have the right to amend, supplement or repeal any of the Rules and Regulations, from timeto time, subject to obtaining written approval of the Owners holding sixty-seven percent (67 )of the Voting Rights PROVIDED that after the date on which both of the following conditionshave been met: (i) the Association has been formed and the role of the Operator has beenassumed by the Association, and (ii) no single entity or group of affiliated entities, includingwithout limitation Declarant, holds or has the ability to significantly influence or control morethan fifty percent (50 ) of the Voting Rights, the Rules and Regulations may be amended by thewritten consent of the Owners then holding not less than sixty percent (60 ) of the VotingRights. The Rules and Regulations, as so amended and supplemented, shall be binding on allOwners, Lessees, Homeowners, Occupants and guests. In the event of any inconsistencybetween the Rules and Regulations and this Declaration, this Declaration shall govern to theextent of the inconsistency.

6.9 arking. Any and all parking shall be in compliance with all applicable Laws.Parking areas shall be limited to use for parking purposes. Storage of materials in designatedparking areas on each Parcel is hereby prohibited.

6.10 Noises and Noxious Odors. No exterior speakers, horns, whistles, bells or othersound devices (other than security devices used exclusively for security purposes), noisy orsmoky vehicles, unlicensed off-road motor vehicles or items which may unreasonably interferewith the television or radio reception of any Residence, shall be located, used or placed on anyportion of the Property, or exposed to the view of other Owners. No loud noises or noxiousodors shall be permitted to emanate from the Property. The Association shall have the right todetermine in accordance with the provisions for hearing and notice set forth in the ProjectDocuments if any noise, odor, interference or activity producing such noise, odor or interferenceconstitutes a nuisance. Noise associated with the construction of a Residence shall betemporarily permitted until completion of the construction of the Residence, subject to any Rulesand Regulations.

6.11 Temporary Structures. A construction trailer, temporary storage shed andtemporary on-site sanitary facilities shall be permitted upon a Lot during the period of timeduring which a Residence and related amenities are being constructed upon such Lot. Upon thecompletion of construction activity any such temporary facilities shall be promptly removed

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from the Lot. No structure of a temporary character, whether it is a trailer, basement, tent, shack,garage, barn or other out-building shall thereafter be placed upon or used on any Residence atany time, either temporarily or permanently.

6.12 Oil and Mineral Rights. No oil drilling, oil development operations, oil refining,quarrying, or mining operations of any kind shall be permitted upon or in the Property nor,subsequent to the recording of this Declaration, shall oil wells, tanks, tunnels, or mineralexcavations or shafts be installed upon the surface of the Property or within five hundred 500)feet below the surface of such properties. No derrick or other structure designed for use inboring for water, oil or natural gas shall be erected, maintained or permitted upon the Property.

6.13 Use of Golf Courses, Hotels and Other Property. The Property includes realproperty which is currently used or proposed to be developed and operated as golf coursefacilities, hotels, and timeshares. These particular uses are located on the property described onExhibit D to this Declaration. Although it is contemplated that the particular sites described onExhibit D will be developed and will be continued to be used and operated in a mannerconsistent with the uses depicted thereon, there is no assurance and Declarant expresslydisclaims any obligation to any Owner to so continue, operate and maintain the sites inaccordance with such uses.

In connection with the operation of the Golf Course Area and the timeshare site, andthe use of other property adjacent to the Property, the Owner and Homeowner are advised thatthe use and enjoyment of its Parcel or Residence may be impacted by all or some of thefollowing, the risks and special benefits and burdens of which each Owner and Homeowner bytheir acquisition of an interest in any Unit, Lot or Parcel, acknowledges, accepts and assumesto fullest extent permitted by Law:

a) ingress and egress by patrons over the Golf Course Area bypedestrian means and by golf carts in connection with the use and enjoyment of the Golf CourseArea and by the owner of the Golf Course Area by pedestrian and vehicular means in connectionwith the maintenance or improvement thereof;

b) occasional noise associated with the use and enjoyment of the GolfCourse Area by patrons and by spectators and by the maintenance by the owner thereof;

c) the establishment, operation, use and maintenance of detentionbasins within the Property or the Golf Course Area for the purpose, in part, of assuringcompliance with stormwater regulatory requirements;

d) the construction and operation of hotel facilities, including, withoutlimitation, noise associated therewith from the patrons and the employees thereof and theproviding of services thereto;

e) the construction and operation of timeshares facilities, including,without limitation, noise associated therewith from the patrons and the employees thereof and theproviding of services thereto; and

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(f) he over-flight of golf balls, which are not susceptible of beingeasily controlled and accordingly may land or strike beyond the golf course boundaries.

ARTICLE 7RESERVATIONS OF EASEMENTS AND RIGHTS

7.1 asements Over Common Areas. The Common Areas are subject to thefollowing easements:(a) There is hereby reserved to Declarant, the Operator, and their

agents and representatives, an easement in, over, under and across all Common Areas for thepurpose of egress and ingress, and installation, maintenance and repair of landscaping, and asnecessary to exercise the rights and to perform the Operator s duties set forth in this Declaration.Owners shall not remove, modify or alter said landscaping without Operator s prior writtenapproval pursuant to the terms of Article 4 hereof.

(b) Declarant hereby reserves for itself, the Operator, and their agentsa non-exclusive easement for ingress and egress over each Parcel for the purpose of maintainingthe landscaping installed in the Common Areas on each Parcel.

(c) Declarant hereby reserves for itself, the Operator, the Owners andtheir agents a non-exclusive easement over the Common Areas for the purpose of constructing,erecting, operating and maintaining thereon, therein or thereunder the Common Facilities.The Common Areas, including all areas subject to the easements reserved in this Section 7.1,shall be maintained as further described in Article 8.

7.2 asement for Performance and Discharge of Rights and Duties. Declarant herebyreserves for itself, the Operator and their agents a non-exclusive easement for ingress and egressover the Property and each Parcel for the purpose of permitting the Operator, Declarant and theiragents to discharge their rights and obligations as described in this Declaration, including but notlimited to, construction of Improvements on the Property provided however, that to the extent itis for purposes other than the fulfillment of its duties as Operator, Declarant shall access a Parcel2 only upon reasonable notice upon times reasonably convenient to the Owner thereof.

7.3 ccess. Each Parcel is hereby declared to have a non-exclusive easement overthe roads ( Roads ) of each other Parcel for the use and purpose of ingress and egress by anyOwners, Homeowners, and Users and any motor vehicles of such Owners, Homeowners, andUsers to and from any Parcel and Owners, Homeowners, and Users access to and from thepublic streets adjacent to the Property. Declarant is hereby declared to have a non-exclusiveeasement over the Roads of each Parcel for the use and purpose of repairing and maintaining saidareas in the exercise of Declarant s right to enforce this Declaration pursuant to the terms ofArticle 11 hereof. No Owner shall obstruct or block the use, entrance or exit of any Roads.Declarant shall have the right to enter any Parcel and remove any item that is obstructing orblocking the Roads, and assess the Owner responsible for said obstruction a ReimbursementAssessment pursuant to Section 9.8 hereof

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7 4 tilities. Declarant hereby reserves for itself, the Operator, the Owners and theiragents a non-exclusive easement over the Property for the purpose of the installation andmaintenance of electric, telephone, cable television, telecommunication lines and services, water,gas, and sanitary sewer lines and drainage facilities as shown on any pertinent recorded finaltract or parcel map covering the Property. By virtue of this easement, it shall be expresslypermissible for the providing utility company (or the Operator, in the event the Operatorprovides said services) to erect and maintain the necessary equipment and facilities on theCommon Areas, but no sewers, electrical lines, water lines or other utility or service lines may beinstalled or located on the Common Areas except as initially designed and constructed therein byDeclarant and as demarcated on Exhibit C-1 and C-2, or thereafter as approved by the Ownersholding sixty-seven percent (67%) of the Voting Rights PROVIDED that after the date on whichboth of the following conditions have been met: (i) the Association has been formed and the roleof the Operator has been assumed by the Association, and (ii) no single entity or group ofaffiliated entities, including without limitation Declarant, holds or has the ability to significantlyinfluence or control more than fifty percent (50%) of the Voting Rights, such change shall beeffected by the written consent of the Owners then holding not less than sixty percent (60%) ofthe Voting Rights. This easement shall in no way affect any other recorded easements on theCommon Areas. All utilities used by the Common Areas and Common Facilities shall beseparately metered from the other portions of the Property.

7 5 ntry by Owners. In connection with any entry by an Owner, includingDeclarant, onto any Common Areas for purposes of performing any work in connection with theconstruction, use, operation or development of its Parcel, such Owner shall, at its expense:

(a) Maintain, at all times during such period of entry, commercialgeneral liability insurance with a combined single limit per occurrence of at least One MillionDollars ( 1,000,000) or such higher minimum as may reasonably be required by the Operatorfrom time to time, naming the Operator (and the fee owner of such Common Areas if other thanthe Operator), as additional insureds, and providing that such coverage shall not be terminated ormodified without at least thirty (30) days' prior written notice to the Operator;

(b) Deliver to the Operator a certificate evidencing that such insuranceis in full force and erect prior to entry onto such Common Areas;

(c) Perform all work in a safe manner, insure that no hazardouscondition remains on such Common Areas, and repair any damage thereto;

(d) Keep such Common Areas free and clear of all mechanics' ormaterialmen's liens arising out of such Owner's activities;

(e) Comply with all applicable Laws in connection with such work;(f) Indemnify, protect, hold harmless and defend the Operator and thefee owner of such Common Areas from and against all liabilities, losses, liens, claims, damages,

costs and expenses (including attorneys' fees and court costs) for labor or services performed ormaterials furnished in connection with such Owner's entry, or for personal injury, death or

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property damage, arising out of such Owner s entry or breach of the provisions of thisSection 7.5; and

(g) rovide the Operator with prior written notice of its intended entryand cooperate with the Operator and/or any utility company to minimize any interference withthe Operator s and/or any utility company s ability to perform its duties or services.

7 6 asements Reserved and Granted. Any easements referred to in this Declarationshall be deemed reserved or granted, or both reserved and granted, as applicable, in a deed to anyParcel notwithstanding that such deed fails to reference this Declaration or such reservation orgrant. All easements reserved in this Article 7 to Declarant, Operator, and any Owners, if any,shall be appurtenant to and shall pass with title to each Parcel and are subject to the Rules andRegulations and the other restrictions set forth in Article 8.

7 7 eservation by Declarant and Operator. Declarant and Operator hereby reservethe right to subsequently grant and create additional easements over one or more of the Parcels,including any Common Areas contained therein, for the benefit of one or more other Parcels,provided, and upon condition that, the grant of such additional easement does not materiallyinterfere or impede an Owner s use of its Parcel(s) and provided that a written notice of seventy-five (75) one hundred twenty (120) days shall be given to the Owner impacted by such proposedeasement

7 8 wner s and Homeowners Easements of Enjoyment of the Common Areas.Every Owner shall have a right and easement of enjoyment in and to the Common Areas whichright and easement shall be appurtenant to and shall pass with the title to such Owner s Parcel.This right and easement is subject to all rights and easements set forth in this Declaration.

7 9 wner s and Homeowners Easements for Ingress and Egress. There are herebycreated easements for ingress and egress for pedestrian traffic over, through and acrosssidewalks, stairs, paths, walks and lanes that from time to time may exist upon the CommonAreas. There is also created an easement for ingress and egress for pedestrian and vehiculartraffic over, through and across such driveways and parking areas as from time to time may bepaved and intended for such purposes except that such easements shall not extend beyond theCommon Areas. Such easements shall run in favor of and be for the benefit of the Owners andOccupants.

7.10 Oil, Mineral Rights, Water Rights, Cable Television and Drainage Monitoring.Declarant hereby reserves, together with the right to grant and transfer all or a portion of same:

(a) ll oil, oil rights, minerals, mineral rights, natural gas rights, andother hydrocarbons by whatsoever name known, geothermal steam, and all products derivedfrom any of the foregoing, that may be within or under the Property together with the perpetualright of drilling, mining, exploring and operating therefor and storing in and removing the samefrom said land or any other land, including the right to whipstock or directionally drill and minefrom lands other than the Property, oil or gas wells, tunnels and shafts into, through or across thesubsurface of the Property and to bottom such whipstocked or directionally drilled wells, tunnelsand shafts under and beneath or beyond the exterior limits thereof, and to redrill, retunnel, equip,

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maintain, repair, deepen and operate any such wells or mines without, however, the right to drill,mine, store, explore and operate through the surface or the upper five hundred (500) feet of thesubsurface of the Property; provided however, this Section 7.10(a) shall not apply to f Parcel 2.

(b) Any and all water, water rights or interests therein appurtenant orrelating to the Property or owned or used by Declarant in connection with or with respect to theProperty (no matter how acquired by Declarant), whether such water rights shall be riparian,overlying, appropriative, littoral, percolating, prescriptive, adjudicated, statutory or contractual,together with the right and power to explore, drill, redrill, remove and store the same from or inthe Property or to divert or otherwise utilize such water, rights or interests on any other propertywhether or not such other property is owned or leased by Declarant; but without, however, anyright to enter upon the surface of the Property in the exercise of such rights.

(c) The right to place on, under or across the Property, transmissionlines and other facilities for a community antenna television system (and/or theTelecommunications System) and thereafter to own and convey such lines and facilities, and theright to enter upon the Property to service, maintain, repair, reconstruct and replace said lines andfacilities; provided, however, that the exercise of such rights shall not unreasonably interferewith an O wnerOs reasonable use and enjoyment of the Property.

(d) Easements over the Property for the monitoring, testing andsampling of drainage discharged from any portion of the Property either into any public orprivate drainage systems, by sheet flow or by other means or which is otherwise discharged ordrains into adjacent real property.

(e) Any easements shown on any recorded final tract or parcel mapcovering the Property, including, but not limited to, easements for ingress and egress over anybicycle, pedestrian, equestrian or other trail shown. The reservation of this easement shall notimply any right of public use of the Property or Improvements.

7.11 Signage Easement. Declarant hereby reserves on behalf of each of the Owners, anonexclusive easement over the Common Areas for the construction, maintenance and use ofsignage directing their respective Users to the Owner s Parcel. All signs located within theforegoing easement shall be subject to (i) the review and approval of the Operator, (ii) applicablegovernmental requirements and (iii) Operator s right to place and maintain signs pursuant toSection 8.4.

ARTICLEMAINTENANCE AND USE OF THE PROPERTY AND COMMON AREAS

8.1 anagement and Maintenance by Operator. The administration of thisDeclaration as it applies to the Property and the Common Areas and the management of theCommon Areas and Common Facilities shall be vested in the Operator, subject to delegation ofspecific maintenance obligations pursuant to this Article 8. In order to implement the power ofadministration established by this Declaration and management of the Common Areas andCommon Facilities, the Operator shall have the powers set forth in Section 3.4 of thisDeclaration and elsewhere in the Project Documents.

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8 2 aintenance Caused by Owners, Etc. The Operator shall not be responsible formaintenance and repair of any Common Areas arising out of or caused by the willful or negligentact or omission of any Owner, Lessees, Homeowners, Occupants or guests, and such repairs orreplacements shall be the responsibility of such Owner or Homeowner. If the Owner orHomeowner fails to perform such repairs and replacements within thirty (30) days after receiptof a written notice (or such shorter time as may be appropriate under the circumstances ifnecessary to protect the health, safety or welfare of the Owners, Lessees, Homeowners, andOccupants), the Operator shall have the right (but not the obligation) to make such repairs orreplacements, and the cost thereof shall be charged to such Owner and its Parcel(s) or suchHomeowner and its Lot or Lots, as applicable, as a Reimbursement Assessment as defined inSection 9.8.

8.3 ommon Area Restrictions. Use of the Common Areas and Common Facilitiesshall be subject to: (a) the reserved rights described in Article 7; (b) the Rules and Regulations;and (c) the other provisions of this Declaration. Other than the work performed or approved bythe Operator in connection with the development of the Property, the Common Areas shall not beplanted, altered, or improved, and nothing shall be removed therefrom without the writtenconsent of the Operator and the Owners holding sixty-seven percent (67 ) of the Voting Rights.

8.4 igns. Subject to applicable governmental requirements, the Operator may placeand maintain on the Common Areas such signs as it may deem necessary in order to identify theProperty, regulate traffic access and parking, facilitate use of the Common Areas, and protect thehealth, safety and welfare of all Owners, Lessees, Occupants, Homeowners, agents, employeesand guests. No signage of any type shall be installed without prior written approval by Operator.Submittals to Operator shall include accurate color rendered plans and elevations indicatingmaterials of construction, colors, fabrication details, copy and logos, lighting details (ifapplicable), size(s) and location(s) proposed. Submittals shall comply with the terms noted inSection 4.2 of this Declaration.

8.5 ntentionally Omitted8 6 estruction, Restoration. As soon as practicable after the damage or destruction

of any Common Facilities for which the Operator is responsible to repair, reconstruct or restorehereunder, the Operator shall: (a) obtain bids from at least two (2) reputable contractors,licensed in California, which bids shall set forth in detail the work required to repair, reconstructand restore such damaged or destroyed areas to substantially the same condition as existed priorto such damage and the itemized cost of such work; and (b) determine the amount of allinsurance proceeds available to the Operator for the purpose of effecting such repair,reconstruction and restoration. If the insurance proceeds available to the Operator are sufficientto effect the total repair, reconstruction and restoration of the damaged or destroyed areas, thenthe Operator shall cause such to be repaired, reconstructed and restored to substantially the samecondition as existed prior to such damage. If the proceeds of insurance available to the Operatorare insufficient to cover the cost of repair, reconstruction and restoration, the Operator shall levya Special Assessment for all additional funds needed to comply with the obligation of theOperator to maintain the Common Areas in accordance with this Article 8.

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8.7 minent Domain. In the event of a taking of any Common Areas, the Operatorshall act in its sole discretion with respect to any awards being made in connection with thetaking and shall be entitled to make a voluntary sale to the condemnor in lieu of engaging in acondemnation action. Any awards received on account of a taking of Common Areas shall bepaid to the Operator and shall be retained in the general funds of the Operator subject to the priorrights of any Mortgagee holding an encumbrance upon any Common Areas for which suchaward has been paid. For purposes hereof, taking shall mean condemnation by eminentdomain, or by sale under threat thereof, of all or a part of the Common Areas.

Each Owner shall be responsible for its Percentage Share of the costs incurred by theOperator pursuant to this Article 8, through assessments levied in accordance with Article 9.

ARTICLEFUNDS AND ASSESSMENTS

9.1 greement to Pay Maintenance Assessments; Creation of Lien and Obligation.Declarant, for each Parcel, hereby covenants and agrees, and each Owner of any Parcel by suchOwner's acceptance of a conveyance therefor, whether or not it shall be expressed in suchconveyance, is deemed to covenant and agree, for each such Parcel, to pay to the Operator:(a) annual Regular Assessments, as described in Section 9.6; (b) Special Assessments, asdescribed in Section 9.7; (c) Reimbursement Assessments, as described in Section 9.8; and (d)such other assessments which the Operator is authorized to levy pursuant to this Declaration.Assessments levied by the Operator shall be used to pay the Common Expenses, in order toenhance, maintain and protect the desirability, attractiveness, and safety of the Property, and toreimburse the Operator for the costs incurred in bringing an Owner into compliance with theProject Documents, and for any other purpose which in the reasonable judgment of the Operatorshall be for the common good of the Property. Assessments, together with interest, costs andreasonable attorneys' fees, shall be a charge and a continuing lien on the Parcel against whicheach such assessment is made and the Improvements located thereon, which lien shall beeffective upon Recordation of a notice pursuant to Section 1 1 .3.3. Each such assessment,together with interest, costs and reasonable attorneys' fees, shall also be the personal obligationof the Owner of such Parcel at the time such assessment and other sums are levied. If more thanone Person is the Owner of a Parcel, the personal obligation to pay such assessment shall be jointand several. The personal obligation for delinquent assessments shall not pass to an Owner'ssuccessors in title, unless expressly assumed by them, but any lien created hereunder shallremain a charge upon the affected Parcel.

9 2 o Waiver by Non-Use. No Owner may exempt itself from payment ofassessments by waiver of the use or enjoyment of all or any portion of the Common Areas or bywaiver of the use or enjoyment, or by abandonment, of its Parcel.

9 3 udgets. At least thirty (30) days prior to the date for commencement of RegularAssessments pursuant to Section 9.6.2, and at least thirty (30) days prior to each calendar yearthereafter, the Operator shall prepare or cause to be prepared and distribute to all Owners a proforma operating budget ( Budget ) for such first or successive calendar year setting forth theestimated revenue and expenses on an accrual basis. The Budget shall include a reasonableallowance for contingencies, replacements and reserves. If the Association has become the

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Operator pursuant to Section 3.1 hereof, then the Association shall deliver, together with theBudget, notice of the Members' right to obtain copies of minutes of Board meetings, to the extentrequired under California Civil Code Section 1363. The Operator has prepared an estimatedBudget for the first operating period and it is attached as Exhibit F. The administrative expenseof the Operator shall not exceed ten percent (10 ) of the total Budget. On a subdivision of anyone of the Parcels for residential use, the Owner will be required to obtain a Reserve Study forDRE approval. To the extent such Reserve Study results in different amounts required forreserves, then the Operator agrees it will adjust its Budget to conform to the DRE approvedBudget.

9.4 arcels Subject to Assessment.Allocation of Assessments. All Parcels within theProperty and the Improvements located thereon are subject to Regular Assessments, SpecialAssessments and Reimbursement Assessments as well as any other assessments that the Operatoris authorized to levy pursuant to this Declaration. Regular Assessments, and Special Assessmentsas well as any other assessments that the Operator is authorized to levy pursuant to thisDeclaration shall be allocated among each Parcel based on the following percentages: Parcel 1:1 1 % , Parcel 2: 35 , Parcel 3: 17 , Parcel 4: 17 , and Golf Course Parcel: 20 (each suchpercentage being the Owner's Percentage Share ).

9.5 ubassociations or Supplemental CC&Rs. To the extent Owner deems itadvisable, it shall be responsible for allocating among the different Homeowners within itsParcel voting rights and other rights and responsibilities. The assessments allocated to eachOwner shall be deemed levied against each Unit in the Parcel in an amount equal to a fraction ofthe entire assessment allocated to that Parcel, the denominator of which shall be a numbercalculated by adding the total number of Units in that Parcel, and the numerator of which is one(1 .

9.6 egular Assessments.9.6.1 Purpose. Regular Assessments shall be used to defray the Common

Expenses and the expenses of providing security services, if applicable, pursuant to Section 3.4.7thereof, and the expenses of providing the telecommunications basic services, if applicable,pursuant to Section 3.4.8.

9.6.2 Date of Commencement of Regular Assessments. Regular Assessmentsshall commence, as to all Parcels initially subject to this Declaration, on the first (1st) day of themonth following the conveyance of the first Parcel by Declarant to an Owner other thanDeclarant; provided, however, that Declarant may, at its option, delay the start of RegularAssessments so long as Declarant performs all maintenance and other obligations of the Operatorat its sole cost and expense. The first Regular Assessments shall be adjusted according to thenumber of months remaining in the calendar year and shall be prorated for any partial month.

9.6.3 Establishment. Prior to the first Regular Assessments hereunder andthereafter at least thirty (30) days before the beginning of each calendar year thereafter, theOperator shall establish the Regular Assessment for the first or successive calendar year based onthe Budget prepared in accordance with Section 9.3, and any other information available to it.

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The Operator shall give written notice of the Regular Assessments to each Owner promptly afterestablishment thereof9.6.4 Revised Regular Assessment. Subject to (i) obtaining the written approval

of Owners holding sixty-seven percent (67%) of the Voting Rights; or (ii) upon the occurrence ofthe following two events: (a) the Association has been formed and the role of the Operator hasbeen assumed by the Association, and (b) no single entity or group of affiliated entities,including without limitation Declarant, holds or has the ability to significantly influence orcontrol more than fifty percent (50%) of the Voting Rights, subject to obtaining the writtenapproval of Owners holding not less than sixty percent (60%) of the Voting Rights, if theOperator reasonably determines that the Regular Assessment established for any year is, or willbecome, insufficient to meet all Common Expenses, it may determine the approximate amount ofsuch deficiency and revise the amount of the Regular Assessments for each Owner for thebalance of such year to reduce or avoid the deficiency. After the end of each calendar year, theOperator shall cause an accounting to be made of all Common Expenses for such year and theamount of Regular Assessments paid for such year. If the Regular Assessments collected exceedthe Common Expenses, the Operator may refund the excess to the Owners, or apply such excesstoward Regular Assessments next becoming due from the Owners, in either event in the sameproportion as the Regular Assessments were paid.

9.6.5 Payment of Assessments. Regular Assessments shall be due and payableby the Owners to the Operator in regular installments as established by the Operator.

9.7 pecial Assessments9.7.1 Purpose. Special Assessments may be levied by the Operator:

(a) If the Operator determines that the Regular Assessments are or willbe insufficient to defray actual Common Expenses of the Association for a given year due tounanticipated delinquencies or cost increases or unexpected repairs, replacements orreconstruction of any Common Facilities;

(b) If funds are otherwise required for any authorized activity of theOperator; or(c) For the purpose of defraying, in whole or in part, the cost ofconstruction of any capital improvements deemed reasonably necessary by the Operator for the

benefit of the Property.(d) All Special Assessments must receive written approval of the

Owners holding sixty-seven percent (67%) of the Voting Rights. After the date on which both ofthe following conditions have been met: (i) the Association has been formed and the role of theOperator has been assumed by the Association, and (ii) no single entity or group of affiliatedentities, including without limitation Declarant, holds or has the ability to significantly influenceor control more than fifty percent (50%) of the Voting Rights, all Special Assessments mustreceive written approval of the Owners holding not less than sixty percent (60%) of the VotingRights

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9.7.2 Establishment. The Operator shall determine the approximate amountnecessary to defray the expenses set forth in Section 9.7.1 and such amount shall become aSpecial Assessment; provided, however, that the Operator may, in its discretion, pro-rate suchSpecial Assessment over the remaining months of the calendar year or levy the full assessmentimmediately against each Parcel and the Improvements located thereon.

9.7.3 Payment of Assessments. Subject to the provisions of Section 9.7.2,Special Assessments shall be due and payable within thirty (30) days after an Owner receiveswritten notice from the Operator specifying the amount of the Special Assessment, unless theOperator specifies in such notice a later date for payment.

9 8 eimbursement Assessments.9.8.1 Purpose. The Operator may levy a Reimbursement Assessment

against any Owner and such Owner's Parcel or Parcels and the Improvements located thereon:(a) To recover costs ( Noncompliance Expenses ) incurred by the

Operator as a result of such Owner's or its Lessees' or Occupants' willful or negligent acts orfailure to comply with this Declaration, the Rules and Regulations, the Design Guidelines or anyother Project Documents, or to impose a fine pursuant to this Declaration; or

(b) To recover costs incurred by the Operator in removing any lienagainst the Common Areas caused by such Owner or its Lessees or Occupants, as described inSection 3 3 3

9.8.2 Payment of Assessments. Reimbursement Assessments shall be due andpayable within thirty (30) days after an Owner receives notice from the Operator specifying theamount of the Reimbursement Assessment.

9 9 on-payment of Assessments. Any assessment not paid within fifteen (15) daysafter the due date shall be delinquent and such nonpayment shall constitute a default by theOwner hereunder. If any assessment is not paid within fifteen (15) days after the due date, theOperator shall have the right to collect a late charge equal to ten percent (10%) of the delinquentaccount or Fifty Dollars ( 50.00), whichever is greater. In addition, the delinquent amount shallbear interest from thirty (30) days after the due date at the rate specified in Section 11.4. In theevent of a default in the payment of any assessment, the remedies provided in Article 11 shall beavailable in addition to any other available legal or equitable remedies. Each Parcel Owner shallbe responsible for payment of the assessments allocated to the Unit Owners as described inSection 9 5 above

9.10 No Offsets. All assessme