FIRST AMENDMENT TO DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS OF ENCINITAS RANCH

RECORDING REQUESTED BY: )

)

WHEN RECORDED RETURN TO: )

)

Luce, Forward, Hamilton & Scripps LLP )

601 West Broadway, Suite 2600 )

San Diego, CA 92101 )

Attn: Nancy T. Scull, Esq. )

FIRST AMENDMENT TO

DECLARATION OF COVENANTS,

CONDITIONS AND RESTRICTIONS

ENCINITAS RANCH

This First Amendment to Declaration of Covenants, Conditions and Restrictions of Encinitas Ranch ("Amendment") is made and entered into as of , 1999, by ENCINITAS RANCH LLC, a California limited liability company ("Declarant"), with reference to the matters set forth below.

RECITALS

A. Declarant recorded that certain Declaration of Covenants, Conditions and Restrictions of Encinitas Ranch on February 26, 1999 as File Number 1999-0121953 in the Official Records of San Diego County, California, ("Declaration") against the real property described therein.

B. Under Section 16.1 of the Declaration, Declarant may amend this Declaration without the consent of any Owner but with the consent of the DRE prior to the close of escrow for the sale of the first Lot in the first Phase of the Covered Property.

C. Developer desires to amend the Declaration to revise certain provisions and the legal descriptions as set forth below. Barratt American Incorporated, a Delaware corporation, as a Merchant Builder and Shea Homes Limited Partnership, a California limited partnership, as a Merchant Builder have agreed to such amendment.

NOW, THEREFORE, the Declaration is hereby amended as set forth below.

AMENDMENT

1. Defined Terms. Except as the context otherwise requires, all terms contained herein shall have the same meaning as set forth in the Declaration.

2. Amendment to Article 2 - Definitions. Article 2 of the Declaration shall be amended to add the following definition at the end of this Article:

2.60 Open Space Lots: The term "Open Space Lots" refers to Lots 42 and 43 of Tract Map No. 98-110 and any other lots designated as Open Space Lots in a Supplementary Declaration.

3. Amendment to Section 2.26 - Custom Lots: Section 2.26 of the Declaration shall be deleted in its entirety and replaced with the following language:

2.26 Custom Lots: The term "Custom Lots" refers to the real property described on Exhibit "C" attached hereto and incorporated herein and any Custom Lots designated in a Supplementary Declaration.

4. Amendment to Section 9.1 - Repair and Maintenance by Community Association: Section 9.1 of the Declaration shall be amended to add the following as Section 9.1.12:

Open Space Lot: The Community Association shall perform all maintenance obligations required to maintain the Open Space Lots in accordance with the requirements of the City, except for those areas located within any Landscape Assessment Districts, or Landscape Development Zones established by the City.

5. Amendment to Section 9.2.4 - Interior Walls. The second paragraph in Section 9.2.4 of the Declaration shall be deleted in its entirety and replaced with the following:

No wall or fence shall be moved by an Owner from its original location without the consent of the Architectural Committee and the City. The Owner shall remove all graffiti from said walls and fences or paint over such graffiti within forty-eight (48) hours after such graffiti first appears. No changes or alterations shall be made to said walls and/or fences, without the consent of the Architectural Committee and the City.

6. Amendment to Article 18 - Golf Course Restrictions: Article 18 of the Declaration shall be deleted in its entirety and replaced with the following:

18.1 Golf Ball Easement. Every Lot and all other areas of the Encinitas Ranch Community are burdened with a perpetual, non-exclusive easement permitting golf balls to enter and land on Lots or portions of the Encinitas Ranch Community from the golf course adjacent to the Encinitas Ranch Community. Under no circumstances shall any of the following persons be held liable for any damage or injury resulting from nor be enjoined from operating the Golf Course as a result of golf balls on this easement: the Declarant and its principals, successors or assigns; the Community Association and its members (in their capacity as such); and the City of Encinitas, its officers, employees, agents, lessees, contractors, the Encinitas Ranch Golf Authority ("ERGA") (including management companies) and their respective successors and assigns (collectively referred to in this Article as "City").

18.2 No Representatives. All Owners of Lots are advised that no representations or warranties have been made or are made by the Declarant, City, or any other person with regard to the continuing existence, ownership or operation of the Encinitas Ranch Golf Course (the "Golf Course"). No purported representation or warranty in that regard, whether written or oral, shall be effective without an amendment to this Declaration executed or joined into by the Declarant and approved by City.

18.3 No Views and No Obligations. Neither the Declarant, the Association nor City guarantees or represents that any view over or across the Golf Course from adjacent Lots will be preserved without impairment. The ERGA has no obligation to prune or thin trees or other landscaping on the Golf Course, and may at any time add trees and other landscaping to the Golf Course. ERGA may also, at any time, in its sole discretion, change the location, configuration, size and elevation of the tees, bunkers, fairways and greens of the Golf Course, regardless of whether such changes diminish or obstruct the view from any Lot.

18.4 No Amendment. This Article may not be amended without the written approval of the Declarant and City.

18.5 Golf Course Liabilities. By accepting the deed to a Dwelling, each Owner, for himself or herself and his or her Invitees, personal representatives, assigns, heirs and next of kin (collectively, the "Owner's Related Parties") hereby (a) acknowledges the potential effect on his or her Dwelling of (a) stray golf balls and other events inherent to the activities of the Golf Course within the Encinitas Ranch Community (the "Golf Course Hazards") and the effect of the installation or growth of trees, shrubs and other landscaping on the Golf Course, (b) the potential for damage to such Owner's Dwelling including, without limitation, stucco, tile roofs and windows, attributable to the Golf Course Hazards, (c) any adverse effect on any landscaping installed by an Owner on the Owner's Lot arising from or attributable to the use of reclaimed water on the Golf Course by the Owner of the Golf Course, (d) nuisances created by or arising from the Golf Course, including, without limitation, the landscaping and maintenance of the Golf Course and the use of fertilizers and pesticides in connection therewith, noise generated by the use or maintenance of the Golf Course and early morning and late night play (including, without limitation, foul language or raucous noise) or maintenance activities and visibility of lights used in connection with any driving range or clubhouse, if any, installed by the Owner of the Golf Course and (e) assumes the risk of any property damage, personal injury and/or creation or maintenance of a trespass or nuisance created by or arising in connection with the Golf Course Hazards or any matters described above (collectively the "Assumed Risks") and (f) releases, waives, discharges, covenants not to sue, indemnifies and agrees to hold harmless Declarant, the City, the Community Association, the Community Board, the other members, the owner and operator of the Golf Course, and each of their respective officers, directors, shareholders, members, affiliates, agents, employees, successors and assigns, (collectively, the "Released Parties"), and each of them, from any and all liability to the Owner or Owner's Related Parties for any losses, costs (including, without limitation, attorneys' fees), claims, demands, suits, judgments or other obligations arising out of or connected with any of the Assumed Risks, whether caused by the negligence of the Released Parties or otherwise. This release and waiver shall be binding upon each Owner whether or not separately set forth in the documents of sale and/or deed to such Owner's Lot. Each Owner, by acceptance of a deed, acknowledges that the Golf Course is a publicly owned Golf Course and the Community Association has no obligation or right to regulate or control the Golf Course, in any way or manner. Each Owner, by acceptance of a deed, further acknowledges and agrees that Declarant, in making any reference to a Golf Course herein, makes no warranties or representations that a Golf Course will be a part of the Encinitas Ranch Community or that, if installed, a Golf Course will continue to be maintained and operated within any portion of the Encinitas Ranch Community

18.6 Golf Course Restrictions: Each Owner and Owner's Related Parties shall comply with the following restrictions: (a) no Owner or Owner's Related Parties are permitted to enter upon the Golf Course from any Golf Course Lot or from any other portion of Encinitas Ranch Community. The only entry upon the Golf Course for any Owner of any Lot in the Encinitas Ranch Community shall be in the same manner and at the same locations as all other members of the public who pay green fees and use the Golf Course. The Golf Course is private property and no Owner of a Golf Course Lot and no Owner of any other Lot in the Encinitas Ranch Community acquires any right to travel upon, landscape or otherwise use any portion of the Golf Course in conjunction with the ownership of the respective Lots, (b) pets are not permitted on the Golf Course at any time, (c) cart paths may not be used for jogging, walking, bicycling, skateboarding, or any activities other than these activities directly related to a game of golf, and (d) pedestrians, joggers and bicyclists are required to use designated hiking trails and bike paths.

7. Exhibits A and B: Exhibits A and B of the Declaration shall be deleted in their entirety and replaced with the amended Exhibits A and B, attached hereto and incorporated herein.

8. Affirmation. Except as amended or modified herein or to the extent inconsistent with this Amendment, the Declaration therein remains in full force and effect.

IN WITNESS WHEREOF, Declarant has executed this instrument as of the date first set forth above.

STATE OF CALIFORNIA )

) ss.

COUNTY OF _________ )

On _________ before me, ______________________________, personally appeared __________________________________________ personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name(s) are/is subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature_________________________ (SEAL)

STATE OF CALIFORNIA )

) ss.

COUNTY OF _________ )

WITNESS my hand and official seal.

Signature_________________________ (SEAL)

STATE OF CALIFORNIA )

) ss.

COUNTY OF _________ )

WITNESS my hand and official seal.

Signature_________________________ (SEAL)

STATE OF CALIFORNIA )

) ss.

COUNTY OF _________ )

WITNESS my hand and official seal.

Signature_________________________ (SEAL)

SUBORDINATION AGREEMENT

The undersigned, as Beneficiary of the beneficial interest in that certain Deed of Trust dated March 2, 1998 and recorded in the Office of the County Recorder of San Diego County on March 2, 1998 as File/Page No. 1998-0109372, which Deed of Trust by and between Encinitas Ranch LLC, a California limited liability company, as Trustor, First American Title Insurance Company, as Trustee and Presnar Investments, Ltd., a Company organized under the laws of the Commonwealth of the Bahamas, as Beneficiary encumbers all or a portion of the real property covered by the Declaration of Covenants, Conditions and Restrictions of Encinitas Ranch recorded in the Office of the County Recorder of San Diego County on February 26, 1999 as File/Page No. 1999-0121953 ("Declaration"), does hereby consent to the foregoing Amendment to the Declaration and intentionally and unconditionally subordinate the lien of said Deed of Trust to the Declaration, as amended by the Amendment recorded concurrently herewith and to which this Subordination Agreement is attached.

PRESNAR INVESTMENTS, LTD., a Company organized under the laws of the Commonwealth of the Bahamas

By:

Name:

Title:

By:

Name:

Title:

STATE OF CALIFORNIA )

) ss.

COUNTY OF SAN DIEGO )

On _________________________ before me, personally appeared ________________ _________________________________________________________________ personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name(s) are/is subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity, and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature_________________________ (SEAL)

STATE OF CALIFORNIA )

) ss.

COUNTY OF SAN DIEGO )

WITNESS my hand and official seal.

Signature_________________________ (SEAL)

SUBORDINATION AGREEMENT

The undersigned, as holder of the beneficial interest in that certain Deed of Trust dated February 26, 1999 and recorded in the Office of the County Recorder of San Diego County on February 26, 1999 as File/Page No. 1999-0121958, which Deed of Trust encumbers all or portion of the real property covered by the Declaration of Covenants, Conditions and Restrictions of Encinitas Ranch recorded in the Office of the County Recorder of San Diego County on February 26, 1999 as File/Page No. 1999-0121953 as amended by this First Amendment to Declaration of Covenants, Conditions and Restrictions of Encinitas Ranch (collectively the "Declaration"), does hereby intentionally and unconditionally subordinate the lien of said Deed of Trust to the Declaration recorded concurrently herewith and to which this Subordination Agreement is attached.

ENCINITAS QUAIL HOLLOW LLC, a Delaware limited liability company

By:

Name:

Title:

STATE OF CALIFORNIA )

) ss.

COUNTY OF SAN DIEGO )

WITNESS my hand and official seal.

Signature_________________________ (SEAL)

SUBORDINATION AGREEMENT

The undersigned, as holder of the beneficial interest in that certain Deed of Trust dated May 12, 1999 and recorded in the Office of the County Recorder of San Diego County on May 20, 1999 as File/Page No. 1999-0344728, which Deed of Trust encumbers all or portion of the real property covered by the Declaration of Covenants, Conditions and Restrictions of Encinitas Ranch recorded in the Office of the County Recorder of San Diego County on February 26, 1999 as File/Page No. 1999-0121953 as amended by this First Amendment to Declaration of Covenants, Conditions and Restrictions of Encinitas Ranch (collectively the "Declaration"), does hereby intentionally and unconditionally subordinate the lien of said Deed of Trust to the Declaration recorded concurrently herewith and to which this Subordination Agreement is attached.

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association

By:

Name:

Title:

STATE OF CALIFORNIA )

) ss.

COUNTY OF SAN DIEGO )

WITNESS my hand and official seal.

Signature_________________________ (SEAL)

EXHIBIT "A"

LEGAL DESCRIPTION

PARCEL A:

LOTS 1 THROUGH 18, AND 20 THROUGH 46, OF CITY OF ENCINITAS TRACT NO. 97-263, IN THE CITY OF ENCINITAS, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 13776, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MAY 5, 1999.

PARCEL B:

LOT 19, OF CITY OF ENCINITAS TRACT NO. 97-263, IN THE CITY OF ENCINITAS, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 13776, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MAY 5, 1999.

TOGETHER WITH THAT PORTION OF THE NORTH 880 FEET OF LOT 1 IN SECTION 3 TOWNSHIP 13 SOUTH, RANGE 4 WEST, SAN BERNARDINO BASE AND MERIDIAN IN SAID COUNTY, ACCORDING TO UNITED STATES GOVERNMENT SURVEY APPROVED APRIL 19, 1881 DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID NORTH 880 FEET OF LOT 1 ALSO BEING THE NORTHWEST CORNER OF SAID LOT 19 OF ENCINITAS TRACT 97-263; THENCE ALONG THE NORTHEASTERLY PROLONGATION OF THE WESTERLY BOUNDARY OF SAID LOT 19 NORTH 27°10' 00" EAST, 20.18 FEET; THENCE SOUTH 70°46' 40" EAST, 55.90 FEET TO THE NORTHEAST CORNER OF SAID LOT 19 BEING A POINT ON THE SOUTHERLY LINE OF SAID NORTH 880 FEET OF LOT 1; THENCE ALONG SAID SOUTHERLY LINE AND THE NORTHERLY LINE OF SAID LOT 19, NORTH 89°34' 45" WEST, 62 FEET TO THE POINT OF BEGINNING.

SAID LAND IS DESCRIBED AS PARCEL B ON CERTIFICATE OF COMPLIANCE RECORDED MAY 10, 1999 AS FILE NO. 1999-0315629 OF OFFICIAL RECORDS.

EXHIBIT "B"

LEGAL DESCRIPTION

PARCEL A:

LOTS 48, 49, 56, 67 AND 75 OF CITY OF ENCINITAS TRACT NO. 94-066, UNITS 4, 5 AND 6, IN THE CITY OF ENCINITAS, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA ACCORDING TO MAP THEREOF NO. 13356 FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY SEPTEMBER 4, 1996.

EXCEPTING THEREFROM THAT PORTION OF LOT 75 OF CITY OF ENCINITAS TRACT NO. 94-066, UNITS 4, 5 AND 6, IN THE CITY OF ENCINITAS, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA ACCORDING TO MAP THEREOF NO. 13356 FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY SEPTEMBER 4, 1996 DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHWEST CORNER OF SAID LOT 75; THENCE ALONG THE NORTHERLY BOUNDARY THEREOF SOUTH 79°20'56" EAST, 692.87 FEET TO AN ANGLE POINT IN SAID NORTHERLY BOUNDARY; THENCE LEAVING SAID BOUNDARY SOUTH 36°02'35" EAST, 413.42 FEET; THENCE SOUTH 04°20'00" EAST, 144.97 FEET; THENCE NORTH 84°19'00" EAST, 176.00 FEET; THENCE SOUTH 05°41'00" EAST, 20.00 FEET; THENCE SOUTH 84°19'00" WEST, 174.95 FEET; THENCE SOUTH 04°00'00" WEST, 14.57 FEET TO AN ANGLE POINT IN THE SOUTHERLY BOUNDARY OF SAID LOT 75, SAID ANGLE POINT BEING THE EASTERLY TERMINUS OF THAT COURSE IN SAID SOUTHERLY BOUNDARY SHOWN AS N 89°13'10" W 435.01" ON SAID MAP NO. 13356; THENCE ALONG THE BOUNDARY OF SAID LOT 75 THE FOLLOWING COURSES AND DISTANCES:

NORTH 89°13'10" W 435.01 FEET;

SOUTH 00°43'12" WEST, 330.00 FEET;

NORTH 89°13'10" WEST, 330.00 FEET;

NORTH 00°43'12" EAST, 330.00 FEET;

NORTH 06°53'08" WEST, 616.77 FEET TO THE POINT OF BEGINNING.

PARCEL B:

LOT 62 OF CITY OF ENCINITAS TRACT NO. 94-066, UNITS 4, 5 AND 6, IN THE CITY OF ENCINITAS, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA ACCORDING TO MAP THEREOF NO. 13356 FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY SEPTEMBER 4, 1996.