Desert Hot Springs City Council
August 9, 2023

City of Desert Hot Springs

ACTION MINUTES
City Council Special Meeting
6:00 PM - Wednesday, August 9, 2023
Council Chambers
CLOSED SESSION - 5:30 P.M.

CALL TO ORDER
Mayor Matas called the Closed Session to order at 5:30 P.M.

ROLL CALL

Present:

Council Members: Gary Gardner, Jan Pye
Mayor Pro Tem: Roger Nuñez
Mayor: Scott Matas

Absent:

Council Member: Russell Betts

PUBLIC COMMENTS
None.

CLOSED SESSION:

1. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Initiation of litigation pursuant to paragraph (4) of subdivision (d) of Section 54956.9: One Potential Case
REGULAR SESSION - 6:00 P.M.

CALL TO ORDER
Mayor Matas called the Regular Session to order at 6:03 P.M.

ROLL CALL

Present:

Council Members: Gary Gardner, Jan Pye
Mayor Pro Tem: Roger Nuñez
Mayor: Scott Matas

City Council
August 9, 2023

Absent:

Council Member: Russell Betts

PLEDGE OF ALLEGIANCE
Councilmember Gardner led the Pledge of Allegiance.

CITY ATTORNEY REPORT ON CLOSED SESSION
Jennifer Mizrahi, City Attorney, advised that there was no reportable action.

PUBLIC COMMENTS
None.

PUBLIC HEARINGS:

2. Skyborne Amendment to Development Agreement and Lien Contract Recommendation:
1) Staff Report
2) Entertain questions of Staff from the City Council;
3) Open the Public Hearing;
4) Take testimony from Applicant;
5) Take public testimony for those in favor;
6) Take public testimony from those opposed;
7) Take public testimony from those in a neutral position; 8) Opportunity for Applicant rebuttal;
9) Close the Public Hearing;
10) City Council discussion and questions to Staff; and 11) A. Read by title only AN ORDINANCE OF THE CITY COUNCIL OF THE

CITY OF DESERT HOT SPRINGS, CALIFORNIA, APPROVING THE

FIRST AMENDMENT TO THE DEVELOPMENT AGREEMENT BY AND

BETWEEN THE CITY OF DESERT HOT SPRINGS AND SKYBORNE
VENTURES, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY; and B. Approval of the First Amendment to Lien Contract
Staff Report - SR-23-187 - Pdf
Mayor Matas recused himself due to a potential conflict of interest. Mayor Pro Tem Nuñez assumed the Chair.

Sean Smith, Economic Development Director, presented the staff report and responded to questions.

Mayor Pro Tem Nuñez opened the Public Hearing.

City Council
August 9, 2023
Jeff Bowman spoke in favor.

Dot Reed spoke in favor.

William Sacriste, Lennar, spoke in favor.

Gerald Russel spoke in favor.

Sandra Garland spoke in favor.

Jennifer Johnson, Lennar Project Manager, spoke in favor.

Lloyd Purdy spoke in favor.

Jim Kozak, applicant, addressed the City Council.

Written testimonies in favor were received from: John Gerardi, Russ Martin, Courtney Moe, and Ivan Sewell; copies of which were received, distributed, and made a part of the record.

Mayor Pro Tem Nuñez closed the Public Hearing.

A discussion ensued.

ACTION: Approve Staff recommendation.

Moved by Council Member Gardner
Seconded by Council Member Pye
Carried 3-0 by the following votes:

AYES: Gardner, Pye, and Nuñez
ABSENT: Betts
RECUSE: Matas

ADJOURN
Mayor Pro Tem Nuñez adjourned the meeting at 6:41 P.M.

Jerryl Soriano, CMC, City Clerk

SR-23-187
City of Desert Hot Springs
City Council

AGENDA ITEM REPORT
To: City Council
Date: August 9, 2023
Department: Economic Development
Prepared by: Sean Smith, Economic Development Director
Subject: Skyborne Amendment to Development Agreement and Lien Contract RECOMMENDATION:
1) Staff Report
2) Entertain questions of Staff from the City Council;
3) Open the Public Hearing;
4) Take testimony from Applicant;
5) Take public testimony for those in favor;
6) Take public testimony from those opposed;
7) Take public testimony from those in a neutral position; 8) Opportunity for Applicant rebuttal;
9) Close the Public Hearing;
10) City Council discussion and questions to Staff; and 11) A. Read by title only AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DESERT HOT

SPRINGS, CALIFORNIA, APPROVING THE FIRST AMENDMENT TO THE DEVELOPMENT

AGREEMENT BY AND BETWEEN THE CITY OF DESERT HOT SPRINGS AND SKYBORNE VENTURES, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY; and B. Approval of the First Amendment to Lien Contract
BACKGROUND:

DEVELOPMENT AGREEMENT AND LIEN CONTRACT BACKGROUND
In 2004, following annexation into the City of Desert Hot Springs (“City”), the City approved the Stoneridge Specific Plan for 2,140 residential units including the following entitlements: Stoneridge Specific Plan, General Plan Amendment No. 02-04, Change of Zone No. 02-04, Development Agreement No. 01-04 and Tract Maps 32029 & 32030. An Environmental Impact Report was also prepared and was certified by the City Council on January 2nd, 1993.

On May 5, 2005, the City and First West-DHS Associates, LLC entered into Development Agreement No. 01-04 for the construction of the Stoneridge Project, this is shown in Exhibit “A”. In July 2005, Western Pacific Housing, Inc., dba for DR Horton purchased the property from First West-DHS Associates, LLC and assumed the Development Agreement with the City and renamed the project as the Skyborne project.

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In 2008, Skyborne Ventures LLC subsequently purchased the property, acquired title to the property comprising the Stoneridge Project. Skyborne Ventures LLC (“Owner”) is the successor in interest to First West and Western Pacific Housing, Inc., under the Development Agreement and Project Approvals and the developer of the Skyborne Project (“Project”).

The Skyborne Project has a Vested Tentative Tract No 32030 which is made up of 10 individual tracts referred to as Villages 1 through 10. Tract No. 32030 consists of public streets along the exterior perimeter, a storm drain system, and various main interior streets. Each Village within Tract No. 32030 consists of multiple lots for single family homes, local streets, a storm drain system, and various amenities.

The Developer secured and provided performance and payment bonds for public improvements on final tract map 32030, that were approved by Council and recorded, as required by the conditions of approval for the project.

On September 16, 2008, the City Council approved the substitution of the security instrument associated with the required public improvements for Tract Map No. 32030 from performance and payment bonds to a lien. The lien was detailed in a Lien Contract in which the lien was assigned to Villages 1 through 10 within Tract Map No. 32030. The Lien Contract is attached as Exhibit “D”.

The Owner is currently working with national home builder, Lennar, for the continued construction of the project based on approval of the First Amendment to the Development Agreement.

CONSTRUCTION BACKGROUND
In 2006, the first phase of construction of the Skyborne Project began. However, in 2008 the local housing market experienced a sudden and rapid economic downturn. During the ensuing recession, construction stalled, and home sales stopped.

On February 13, 2020, the Planning Commission approved the construction of 29 new single-family homes within Village 1 of the Project. The development included building on 27 pre-existing slabs and 2 vacant lots which completed Village 1 and all associated public improvements.

On March 9th, 2021, the Planning Commission approved the construction of 79 new single-family homes within Village 2 of the Project. These new single-family homes are currently under construction.

On April 12, 2022, the Planning Commission approved the construction of the remaining 108 new single-family homes within Village 2 of the Project. Village 2 and all associated public improvements will be complete at the end of construction of the 108 single-family homes. These new single-family homes are currently being constructed in phases.

DISCUSSION:

To date, 332 homes have been completed with 31 more currently under construction. Additionally, the Owner has continued to complete public improvements of grading, streets, and storm drains, for various phases of the Project.

Per Section 3 of the Lien Contract, the Owner is now requesting to amend the Lien Contract to reduce the lien amount to reflect the public improvements that have been completed to date, and to re-assign the lien to specific lots. The Owner is also requesting to amend the original Development Agreement to change some key components.

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Staff met with the Owner on several occasions and discussed the details of both the First Amendment to Lien Contract and the First Amendment to Development Agreement. The Owner has stated that these revisions, if approved, would allow for continued construction on Village 3 with Lennar Homes, the second largest home builder in the United States. The construction of new market rate homes is a significant component of the City’s economic development efforts. Growth in this segment is an important factor to the commercial development community when considering new projects.

First Amendment to Lien Contract
In order to process the First Amendment to the Lien Contract, Staff reviewed all documents and inspected the site and determined percentages of work completed to date. Utilizing each line item from the original performance and payment bonds, a new proposed total lien amount was calculated. The First Amendment to Lien Contract is shown in Exhibit “E”. The below is the summary table of the proposed new lien amount per line item, which is also attached as Exhibit “G”.

Agreements Lien Amount New Required
security New Lien Amount
1 Monument
Agreement for Tract
No. 32030 (Villages 3
and 10) dated March
22, 2006, by and
between DR Horton
and City of Desert Hot
Springs
$ 20,000.00 100% $ 20,000.00
2 Grading Agreement
for Tract No. 32030
(Village 8) dated 2006
by and between DR
Horton and City of
Desert Hot Springs
$ 57,000.00 0% $ -
3 Grading Agreement
for Tract No. 32030
(Village 9) dated 2006
by and between DR
Horton and City of
Desert Hot Springs
$ 12,000.00 0% $ -
4 Street - Storm Drain
Agreement for Tract
No. 32030 (Villages 1,
2, 3, 4, 5, 6, 7, 8, 9, 10 -
Public Roads - Exterior
Streets) dated March
22, 2006, by and
between DR Horton
and City of Desert Hot
Springs
$ 1,823,000.00 60% $ 1,093,800.00
5 Street - Storm Drain
Agreement for Tract
No. 32030 (Villages 1,
2, 3, 4, 5, 6, 7, 8, 9, 10 -
Spine Roads-Interior
Streets) dated March
22, 2006, by and
between DR Horton
and City of Desert Hot
Springs
$ 1,540,000.00 80% $ 1,232,000.00

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Agreements Lien Amount New Required
security New Lien Amount
6 Water and Sewer
Improvements
Agreement for Tract
No. 32030 (Villages 3
and 10) dated March
22, 2006, by and
between DR Horton
and City of Desert Hot
Springs
$ 2,860,946.00 100% $ 2,860,946.00
7 Street - Storm Drain
Agreement for Tract
No. 32030 (Villages 3
and 10) dated March
22, 2006, by and
between DR Horton
and City of Desert Hot
Springs
$ 2,609,530.00 100% $ 2,609,530.00
8 Grading Agreement
for Tract No. 32030
(Village 5) dated July
12, 2006, by and
between DR Horton
and City of Desert Hot
Springs
$ 67,000.00 0% $ -
9 Grading Agreement
for Tract No. 32030
(Village 4) dated July
12, 2006, by and
between DR Horton
and City of Desert Hot
Springs
$ 26,000.00 0% $ -
10 Bond No. 6374143 $ 20,000.00 10% $ 2,000.00
11 Bond No. 6416350 $ 491,000.00 10% $ 49,100.00
Total Public
Improvements $ 9,526,476.00 $ 7,867,376.00
Completed Public Improvements $ 1,659,100.00
New Total Public Improvements $ 7,867,376.00
Proposed 10% Inflation of cost from 2006 Estimate $ 786,737.60 Proposed First Amendment to Lien Contract Amount $ 8,654,114 The original engineer’s estimate was calculated in 2006. To account for inflation of construction costs, a 10% inflation cost was added to the total. The original lien amount was $9,526,476, the proposed new lien amount was estimated at $8,654,114. Developer is committing to making a payment of $100,000 towards the Lien Contract Payment Fee with approval of the First Amendment to the Development Agreement and Lien Contract.

Per Section 3 of the Lien Contract, the Owner is also requesting to re-assign the lien from Villages 1 through 10 to only Village 5. An appraisal report prepared by The Property Sciences Group Inc, dated June 7, 2023, confirmed the value of Village 5 to be $22,170,000. The proposed new lien amount is $8,654,114, per section 3 of the Lien Contract the “Lien-to-Value” ratio is not greater than 50%, and therefore the re-assignment to Village 5 is acceptable. Additionally, the Owner is requesting that the City Manager be provided authority to reassign exiting collateral as appropriate while maintaining the 2:1 ratio of value to lien amount.

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Section 5 of the Lien Contract required a 1% Security Fee be paid to the City annually by the Developer.

In 2010 when the Lien Contract was approved, the Developer offered this fee to assist the City financially. The City has recently approved two other Lien Contracts without a Security Fee. Removing this requirement would be consistent with current City practices.

First Amendment to Development Agreement
The Owner also desires to modify and amend certain provisions of the Development Agreement. The proposed First Amendment to Development Agreement is presented in exhibit “E”. The following is a summary of the proposed changes:

1. 2.3 Term
Current language:

The term of this Agreement shall commence on the Effective Date and, provided Owner has obtained a building permit and begun construction on the first 100 residential units within three (3) years from the Effective Date and is not in default hereunder, shall continue for a period of ten (10) years thereafter unless this term is modified or extended pursuant to the provisions of this Agreement. So long as Owner is found by the City Council, during the Periodic Review conducted during the tenth (10th) year of the Term of this Agreement, to be in substantial compliance with this Agreement, including the Performance Schedule as set out in Exhibit “E” and all other phasing requirements set out in the Existing Development Approvals, this Agreement shall be automatically renewed by the City Council for an additional ten (10) years upon the same terms and conditions as contained herein.

Proposed language:

The term of this Agreement is extended such that it shall expire on May 5, 2035. The City Council shall find that Owner is in substantial compliance with this Agreement, so long as Owner is not in material default of any term herein. This finding by the City Council shall take place during the Periodic Review. Further, if the City Council finds that the Owner is in substantial compliance during the Periodic Review conducted in the year this Agreement is set to expire, this Agreement shall be automatically renewed for an additional ten (10) years upon the same terms and conditions as contained herein.

2. 2.4.4 Partial Release of Purchaser, Transfer or Assignee of Industrial or Commercial Lot Current language:

A purchaser, transferee or assignee of a lot, which has been finally subdivided as provided for in the Development Plan and for which a commercial or industrial plot plan for development of the lot has been finally approved pursuant to the Development Plan, may submit a request, in writing, to ?City to release said lot from the obligations under this Agreement relating to all other portions of the property. Within thirty (30) days of such request, City shall review, and if the above conditions are satisfied shall approve the request for release and notify the purchaser, transferee, or assignee in writing thereof. No such release approved pursuant to this Subsection

2.4.4 shall cause, or otherwise affect, a release of Owner from its duties and obligations under this Agreement.

Proposed language:

This section is being recommended for removal as it is not applicable.

3. 2.7(b) Notices:

Amend to update with current names and address for Notices.

4. 3.3 Timing of Development:

SR-23-187
Current language:

The parties acknowledge that Owner cannot at this time predict when or the rate at which phases of the Property will be developed. Such decisions depend upon numerous factors that are not within the control of Owner, such as market orientation and demand, interest rates, absorption, completion, and similar factors. Since the California /supreme Court held in pardee Construction Co. v. City of Camarillo (1984) 37 Cal.3d 465, that the failure of the parties therein to provide for the timing of development resulted in a later adopted initiative restricting the timing of development to prevail over such parties’ agreement, it is the parties’ intent to cure that deficiency by acknowledging and providing that Owner shall have the right to develop the Property in such order and at such rate and at such times as Owner deems appropriate within the exercise of its subjective business judgment, subject only to the timing and phasing requirements as shown in Exhibit “E” and as otherwise set forth in the Development Plan or the Phasing Plan set forth in Section 3.4.

Proposed language:

The parties acknowledge that Owner cannot at this time predict when or the rate at which phases of the Property will be developed. Such decisions depend upon numerous factors that are not within the control of Owner, such as market orientation and demand, interest rates, absorption, completion, and similar factors. Since the California /supreme Court held in pardee Construction Co. v. City of Camarillo (1984) 37 Cal.3d 465, that the failure of the parties therein to provide for the timing of development resulted in a later adopted initiative restricting the timing of development to prevail over such parties’ agreement, it is the parties’ intent to cure that deficiency by acknowledging and providing that Owner shall have the right to develop the Property in such order and at such rate and at such times as Owner deems appropriate within the exercise of its subjective business judgment, subject only to the timing and phasing requirements, as shown in Exhibit "E", which timing and phasing requirements may be modified from time to time by the City Manager, in City Manager’s reasonable discretion, after request from Owner, and as otherwise set forth in the Development Plan or the Phasing Plan set forth in Section 3.4.

5. 3.4 Phasing Plan
Current language:

Development of the Property shall be subject to all timing and phasing requirements as shown in Exhibit “E” and as otherwise established by the Development Plan, including the Specific Plan.

Once it has obtained a building permit and begun construction of a phase of the Project, Owner shall diligently proceed to completion of such phase.

Proposed language:

Development of the Property shall be subject to all timing and phasing requirements as shown in Exhibit "E", which timing and phasing requirements may be modified from time to time by the City Manager, in City Manager’s reasonable discretion, after request from Owner, and as otherwise established by the Development Plan, including the Specific Plan. Once it has obtained a building permit and begun construction of a phase of the Project, Owner shall diligently proceed to completion of such phase.

6. 3.6.1 (d) Limitations, Reservations and Exceptions
Current language:

Regulations imposing Development Exactions; provided, however, no such subsequently adopted Development Exaction shall be applicable to development of the Property unless such Development Exaction is applied uniformly to development, either throughout the City or within a defined area of benefit that includes the Property. No such subsequently adopted Development Exaction shall apply if its application to the Property would physically prevent development of the Property for the uses and to the density or intensity of development set forth in the

SR-23-187
Development Plan. In the event any such subsequently adopted Development Exaction fulfills the same purposes, in whole or in part, as the fees set forth in Section 4 of this Agreement, City shall allow a credit against such subsequently adopted Development Exaction for the fees paid under Section 4 of this Agreement to the extent such fees fulfill the same purposes.

Proposed language:

This section is being recommended for removal.

7. 3.6.2 Subsequent Development Approvals
Current Language:

This Agreement shall not prevent City, in acting on Subsequent Development Approvals, from applying Subsequent Land Use Regulations that are unrelated to the permitted uses of the Property, the density and intensity of use, and the maximum height and size of proposed buildings, nor shall this Agreement prevent City from denying or conditionally approving any Subsequent Development Approval on the basis of the Existing Land Use Regulations or any Subsequent Land Use Regulation not in conflict with the use and density standards set out in the Development Plan.

Proposed language:

This Agreement shall not prevent City, in acting on Subsequent Development Approvals, from applying Subsequent Land Use regulations that are unrelated to the Development Plan, nor shall this Agreement prevent City from denying or conditionally approving any Subsequent Development Approval on the basis of Existing Land Use Regulations or any Subsequent Land Use Regulation not in conflict with the standards set out in the Development Plan.

8. 4.1.1 Pierson Boulevard Improvements
Current language:

Owner to make contribution to the City in the sum of $600.000, without any credit against impact fees or right of reimbursement whatsoever, toward the total cost of currently proposed improvements required on Pierson Boulevard east of the Project in order to meet the increased traffic demand identified in the EIR as being generated by the Project. Said contribution shall be in lieu of any other mitigation suggested or proposed in the EIR specific to the Project’s impact on Pierson’s Boulevard east of the Project. The contribution is to be made in three installments of $200,000 each as follows: Owner to pay the first installment on or before the second anniversary of the recording of this Agreement or upon the issuance of the Certificate of Occupancy for the 100th unit, whichever occurs first; the second installment of the fourth anniversary or upon the issuance of the Certificate of Occupancy for the 300th unit, whichever occurs first; the third installment on the sixth anniversary or upon the issuance of the Certificate of Occupancy for the 500th unit, whichever occurs first.

Proposed language:

Owner to make contribution to the City in the sum of $600,000, without any credit against impact fees or right of reimbursement whatsoever, toward the total cost of currently proposed improvements required on Pierson Boulevard east of the Project in order to meet the increased traffic demand identified in the EIR as being generated by the Project. Said contribution shall be in lieu of any other mitigation suggested or proposed in the EIR specific to the Project’s impact on Pierson Boulevard east of the Project. As of the date hereof, Owner has contributed $400,000 of the $600,000 to the City. Owner shall cause the final payment of $200,000 to be directed to the City from proceeds received by Owner from the remaining bond sales to fund improvements in Improvement Area 1 of CFD2006-1 (defined below).

9. 4.1.2 Fire Station
This section is being recommended for removal as the obligation to construct a fire station has been fulfilled.

SR-23-187
10) 4.1.3 Park Improvements
Current language:

As agreed by Owner, and in full satisfaction of the City's Quimby requirements, Owner shall provide the following park facilities at Owner's sole cost and expense, and without any further right of reimbursement whatsoever, as follows:
(a) Karen Street Park. Owner shall contribute the 5-acre site identified in the conditions of approval incorporated in the Development Plan and improve said site in the manner also described in the conditions of approval incorporated in the Development Plan or as otherwise approved by the City Manager at a total cost not to exceed $1,200,000, not including land value.

Owner shall complete construction on Karen Street Park before date that Certificate of Occupancy for the first residential is issued.
(b) Parks Within Development. Owner shall develop the park and open areas described in the Development Plan in a manner acceptable to the City. Any and all parks identified within a Village shall be completed on or before the issuance of the first Certificate of Occupancy for a residential unit in that Village. Provided all park areas are developed concurrent with the build-out of each Village, Owner shall be entitled to credit against Quimby fees equal to the improved park acreage deemed by the City to be park area. Before the first transfer of ownership to any property within the Project, Owner shall create a perpetual easement, or other form of title restriction acceptable to the City Attorney, to ensure that the park areas shall be owned, used and maintained by the Homeowner's Association as park areas in perpetuity.

Proposed language:
(a) Karen Street Park. Owner shall: (i) dedicate to City the approximately five (5) acre site identified in the conditions of approval incorporated in the Development Plan (the “Karen Park Parcel”) for use as a public park within fifteen (15) business days of the recording of this First Amendment in the Official Records; and (ii) contribute $1,200,000 (“Karen Park Payment”) to the City for construction of the improvements at the Karen Park Parcel concurrent with the sale of any lots in either Village 3 or Village 10. Owner will notify City Manager in writing upon the opening of escrow to sell the lots in either Village 3 or Village 10 to facilitate City’s delivery of an escrow demand to Owner and escrow holder for payment of the Karen Park Payment from Owner’s proceeds from the sale. Following dedication of the Karen Park Parcel and delivery of the Karen Park Payment, Developer shall have satisfied its obligations related to the Karen Park Parcel.
(b) Parks Within Development. Owner shall develop the park(s) and open areas described in the Development Plan consistent with City standards and as approved by the City Manager.

Any and all parks identified within any Village shall be completed on or before issuance of fifty percent (50%) of the certificates of occupancy for a residential unit in that Village. Provided all park areas are developed concurrent with the build-out of each Village, Owner shall be entitled to credit against Quimby fees equal to the improved park acreage deemed by the City to be park area. Owner shall ensure that the park areas shall be owned, used and maintained by the Homeowner’s Association as park areas in perpetuity.
11) 4.1.4 Financing of Public Improvements
Current language:

A Community Facilities District (CFD) or other funding mechanism, as determined by the City Council, may, within the sole discretion of the City, be formed to finance the cost of construction and/or operation and maintenance of infrastructure and public facilities which serve the Project and surrounding areas. Owner shall cooperate in the formation. If formed, all costs related to the formation and studies related thereto shall be paid by Owner, with subsequent reimbursement

SR-23-187
to Owner by District (or other entity) after it is formed. The CFD (or other entity) may finance that portion that is permitted by law.

Proposed language:
(a) Infrastructure Financing. The Owner believes that the project cannot proceed without a CFD or Alternative Financing Mechanism (“Financing District”) to reimburse the developer for public facilities costs for infrastructure to be owned by the City or other public agencies and associated developer impact fees. At Developer's request, City may at its sole discretion establish an assessment district(s), community facilities district(s) or other public financing mechanism to finance any necessary public improvements for the Project substantially consistent with the financing plan (“Financing Plan”).
(b) Improvements and Financing/Community Facilities District. Pursuant to Chapter 2.5 (commencing with section 53311) Part 1, Division 2, Title 5 of the Government Code of the State of California, commonly known as the "Mello-Roos Community Facilities Act of 1982," the Developer may, at its sole election, petition the City Council of the City or a joint powers agency in which the City is a member to establish a Community Facilities District ("CFD" or “District”), in accordance with the City's policies in existence on the Effective Date. Alternatively, or in addition thereto, the Developer may request that the City initiate and complete proceedings under the Municipal Improvement Act of 1911, the Municipal Improvement Act of 1913, the Improvement Bond Act of 1915, or any and all other available public financing mechanism, to provide public conduit financing for the construction of public infrastructure improvements on the Property ("Alternative Financing Mechanisms"). If so, requested by the Developer, the City may at its sole discretion cooperate with the Developer (or, for matters beyond its control, and may use its best efforts) in taking all steps necessary to cause the CFD or Alternative Financing Mechanisms to issue bonds for such purposes. If the Property is included within a CFD or Alternative Funding Mechanism with other surrounding properties, the special taxes or special assessments burdening the various properties so included shall be apportioned on a fair share basis related to the benefit derived by each of such properties in accordance with City policies at the time such property is included.
(c) Existing CFD. Community Facilities District No. 2006-1 (Skyborne) (“CFD2006-1”) was formed by the City in 2006. Developer has applied for, and City Council has will work in good faith in implementing the following changes to CFD2006-1: (i) issuance of a second (2nd) series of bonds to fund further improvements and fees in Improvement Area 1 of CFD2006-1; and (ii) dissolution of Improvement Area 2 of CFD2006-1 for Villages 3 and 10. (d) New CFD. City agrees that following Developer’s application, petition or other request in writing for the dissolution and/or establishment of a CFD for any or all of Villages 3, 4, 5, 6, 7, 8, 9 or 10 (each, a “Subsequent CFD”), together with deposit of sufficient funds to pay the City’s costs to undertake the proceedings to establish any Subsequent CFD, City shall expeditiously conduct such proceedings to establish the Subsequent CFD in accordance with the Mello-Roos Act and City’s policies in existence as of the Effective Date and Developer shall cooperate in the conduct of such proceedings. Each Subsequent CFD shall, at a minimum, be subject to the following requirements:
(i) Tax Rate. City agrees that the maximum effective tax rate for each Subsequent CFD shall not exceed two percent (2%) based upon the product and pricing provided by the Developer.

In addition, the effective tax rate calculation for each CFD or Alternative Financing Mechanisms shall not include trash collection and sewer service assessment charges that are levied on the annual property tax bill.

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(ii) Joint Facilities. City agrees that any Subsequent CFD may finance, in addition to City fees, infrastructure, and public facilities, those fees, infrastructure, and public facilities of other governmental agencies required in connection with the Development Plan, the Development of the Property and any Subsequent Development Approvals, including, without limitation, Palm Springs Unified School District, Mission Springs Water District, and the County of Riverside.
(iii) Improvement Areas. City agrees that Developer, working with the City’s Special Tax Consultant and Formation Counsel, will advise the City on the structure of proposed improvement areas’ which would be designated and included with each Subsequent CFD. 12) 4.2.1 Amount and Component Fees
Current language:

The Owner shall pay all existing or future adopted service, permit, impact and other applicable fees required by the City of Desert Hot Springs as same shall exist at the time that a building permit is applied for. There is no entitlement to fees existing at time of this Agreement.

Proposed language:

The Owner shall pay the service, permit, impact and other applicable fees required by the City for the Existing Development Approvals and any Subsequent Development Approvals as provided in Exhibit “F”.
13) 4.2.4 Art in Public Places– proposed new section
Proposed language:

Owner has donated approved public art in conjunction with the Project’s entry monumentation, which public art has been accepted by the City Council, entitling Owner to fee credits in the amount of the actual cost of the public art. Documentation of actual costs are required, and its adequacy shall be determined by the City Manager prior to allocating the fee credit. The amount of fee credits provided to the Owner shall be limited to the actual costs of the public art and in the event the actual costs total an amount less than the Art In Public Places Program contribution amount required by Municipal Code section 17.60.050, Owner shall also pay into the City’s Art in Public Places Fund an amount equal to the difference between the Art in Public Places contribution amount required by Municipal Code section 17.60.050 and the actual costs of the public art.
14) 6.1 Periodic Review
Current language:

The Planning Manager shall review this Agreement annually, on or before the anniversary of the Effective Date, in order to ascertain the good faith compliance by Owner with the terms of the Agreement Owner shall submit an Annual Monitoring Report, in a form acceptable to the Planning Manager, within 30 days after written notice from the Planning Manager. The Annual Monitoring Report shall be accompanied by an annual review and administration fee sufficient to defray the estimated costs of review and administration of the Agreement during the succeeding year. The amount of the annual review and administration fee shall be set annually by resolution of the City Council.

Proposed language:

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Replace “Planning Manager” with “City Council”
15) 6.2 Special Review
Current language:

The City Council may order a special review of compliance with this Agreement at any time. The Planning Manager shall conduct such special reviews.

Proposed language:

Replace “Planning Manager” with “City Manager”.
16) 6.3. Procedure
Current language:
(b) Upon completion of a periodic review or a special review, the Planning Manager shall submit a report to the City Council setting forth the evidence concerning good faith compliance by Owner with the terms of this Agreement and his or her recommended finding on that issue.

Proposed language:
(b) Upon completion of a periodic review or a special review, the City Manager shall submit a report to the City Council.
17) 11.18 Full Force and Effect – proposed new section
Except as expressly provided in this First Amendment, all of the terms and provisions of the Development Agreement are and will remain in full force and effect and are hereby ratified and confirmed by the parties hereto. Without limiting the generality of the foregoing, the amendments contained herein will not be construed as an amendment to or waiver of any other provision of the Development Agreement or as a waiver of or consent to any further or future action on the part of either party that would require the waiver or consent of the other party. On and after the date hereof, each reference in the Development Agreement to “this Agreement,” “the Agreement,” “hereunder,” “hereof,” “herein” or words of like import, and each reference to the Agreement in any other agreements, documents or instruments executed and delivered pursuant to, or in connection with, the Agreement, will mean and be a reference to the Development Agreement as amended by this First Amendment.

FISCAL IMPACT:

Approval of the proposed revisions and subsequent continued development of the Skyborne project will have the following financial impacts to the city:
• The third and final installment payment of $200,000.00 required for the improvement of Pierson Boulevard and associated mitigation measures will be made upon receipt of funds from the Lennar CFD Bond funding proceeds on the 29 lots that skyborne Ventures LLC owned in Village 1

SR-23-187
• Approximately $2,315,283 in new annual taxes (property, police & fire, and property tax in lieu of vehicle license fee) will be collected at buildout
• Approximately $23,800,000 in total one-time Development Impact Fees will be collected by buildout
• The estimated annual payment of $95,264.76, which is the 1% security fee for the Lien Contract, will be removed
ATTACHMENTS:

Exhibit A - Development Agreement 01-04 Stoneridge aka Skybourne Exhibit B- First Amendment Development Agreement (Final) Exhibit C - First Amendment Development Agreement (Redlined) Exhibit D - Recorded Lien Contract and Subordination Agreement Exhibit E- First Amendment Lien Contract (Final)
Exhibit F - First Amendment Lien Contract (Redlined)
Exhibit G - Total Estimates for First Amendment Lien Contract Exhibit H - Ordinance - First Amendment Development Agreement Skyborne

Doc u 2995-0355117
05/ 05/ 2005 08 :00!‘-l Fee :NC

Recorded in Official Records
County of Riverside
Larry IJ. Uard Recorded at request of ) assessor.County Clerk 2. Recorder cmsnm )
> HllIllllll lllllllllll lllll
) . When recorded return to )
City Clerk )
City of Desert Hot Springs )
65950 Pierson Blvd. )
Desert Hot Springs, CA 92240 )
Exempt from FilingFees
per Gov’t Code 6103 I
/
DEVELOPMENT AGREEMENT NO. 01-04 C

A DEVELOPMENT AGREEMENT BETWEEN

CITY OF DESERT HOT SPRINGS
and
FIRST WEST—DHS ASSOCIATES,LLC
Stoneridge SpecificPlan

This Development Agreement (“Agreement”)is entered into effective on the date it is recorded with the Riverside County Recorder(“Elfective Date”) by and among the City of Desert Hot Springs, a California municipal corporation (“City”), and First West-DHS Associates,LLC, a Californialimitedliabilitycompany(“Owner”):

RECITALS
WI-IEREAS,City is authorized to enter into binding development agreements with persons having legal or equitableinterestsin real property for the developmentof such property, pursuant to Section65864,e_t_s_e_q. of the Government Code; and WHEREAS, Owner has requested City to enter into a development agreement and proceedingshave beentakenin accordancewith the rules and regulations of City; and WHEREAS, by electing to enter into this Agreement, City shall bind future City Councils of City by the obligations speci?ed herein and limit the ?xture exercise of certain governmentaland proprietarypowers ofCity; and
WHEREAS,the best interestsof the citizensofthe City and the public health,safetyand welfarewill be servedby entering intothis Agreement; and WHEREAS, prior to or concurrent with the approval of this Agreement, all of the proceduresof the CaliforniaEnvironmentalQuality Act will have been met with respect to the Project and the Agreement through the adoptionof a statement of overriding considerations,the adoptionof environmental?ndings and a mitigationmonitoring and reporting program, and the certi?cationof an environmentalimpactreport (“EIR”); and WHEREAS, this Agreement and the Project are consistent with the City's Comprehensive General Plan and the Stoneridge Speci?c Plan (“Speci?c Plan”) applicable thereto;and
WHEREAS, all actionstaken and approvals given by City have been duly taken or approved in accordance with all applicable legal requirements for notice, public hearings, ?ndings, votes, and otherproceduralmatters; and
WHEREAS, development of the Property in accordance with this Agreement will providesubstantialbene?tsto City andwill ?irtherimportantpoliciesandgoals of City, and WHEREAS, this Agreement will eliminateuncertainty in planning and provide for the orderlydevelopmentof the Property, ensure progressiveinstallationof necessary improvements, providefor public servicesappropriateto the developmentof the Project, and generally serve the purposes for which developmentagreements under Sections 65864, gt gm. of the Government Code are intended;and
WHEREAS, Owner hasincurred and will in the ?iture incursubstantialcosts in orderto assure developmentofthe Property in accordancewiththis Agreement; and Development Agreement

WHEREAS, Owner hasincurredand will in the ?ntureincursubstantialcosts in excess of the generally applicable requirementsin order to assure vesting of legal rights to develop the Propertyin accordancewith this Agreement.

C VENANTS
NOW, THEREFORE, in considerationof the above recitals and of the mutual covenants hereinaftercontainedand for other good and valuable consideration,the receiptand su?iciency ofwhichis hereby acknowledged,the parties agree as follows:

1. DEF NS AND EXHIBITS.

1.1 De?nitions. The following terms when used in this Agreement shall be de?ned as follows:

1.1.1 “Agreement”means thisDevelopmentAgreement.
. 1.1.2 “City” means the City of Desert Hot Springs,a politicalsubdivisionof the Stateof California.

1.1.3 “Development”means the improvementof the Property for the purposes of completing the structures, improvementsand facilities comprising the Project including, but not limited to: grading, the constructionof infrastructureand public facilities related to the Project whether located within or outside the Property, the construction of buildings and structures; and the installationof landscaping.“Development”does not includethe maintenance, repair, reconstructionor redevelopmentof any building, structure, improvementor facilityafter the constructionand completionthereof.

1.1.4 “Development Approvals” means all permits and other entitlementsfor use subject to approval or issuance by City in connection with development of the Property including,but not limitedto:
(a) general plan, speci?c plans and general plan and speci?c plan amendments;
(b) tentative and ?nal subdivisionand parcelmaps, includingvesting maps; (c) conditional use permits,developmentpermits, public use permits and plot plans;
((1) zoning;
(e) grading and building permits.

1.1.5 “Development Exaction” means any requirement of City in connection with or pursuant to any Land Use Regulation or Development Approval for the dedicationof land, the consuuction of improvementsor public facilities,or the payment of fees in order to Development Agreement

lessen, offset, mitigate or compensate for the impacts of development on the environmentor otherpublic interests.

1.1.6 “Development Plan” means the Existing DevelopmentApprovals and the ExistingLandUse Regulations applicableto developmentof the Property.

1.1.7 “Effective Date” means the date this Agreement is recorded with the CountyRecorder.

1.1.8 “Existing DevelopmentApprovals” means all Development Approvals approvedor issuedprior to the Effective Date, includingany and all conditionsof approval and the mitigationmonitoring plan adopted at the time of the approvals. Existing Development Approvalsincludesthe Approvalsincorporatedherein as Exhibit “C” and all other Approvals that are a matter of public record on the Effective Date.

1.1.9 “Existing Land Use Regulations” means all Land Use Regulations in effect on the Effective Date. Existing Land Use Regulations include the Regulations incorporatedherein as Exhibit“D” and all otherRegulationsthat are a matter of public record on the Effective Date.

1.1.10“Land Use Regulations” means all ordinances,resolutions,codes, rules, regulationsand official policies of City governing the developmentand use of land, including, without limitation, the permitted use of land, the density or intensity of use, subdivision requirements,the maximumheight and size of proposedbuildings, the provisionsfor reservation or dedicationof land for public purposes, and the design, improvement and construction standards and speci?cations applicable to the development of the property. “Land Use Regulations” does not includeany City ordinance,resolution, code, rule, regulation or official policy, governing:
(a) the conductof businesses,professions,and occupations; (b) taxes and assessments;
(c) the controland abatementof nuisances;
(d) the granting of encroachmentpermits and the conveyance of rights and intereststhat provideforthe use of or the entry upon publicproperty, (e) the exerciseof the power of eminentdomain;
(i) any other matters unrelatedto uses of land, density, design,improvement, and constructionstandardsand speci?cations.

1.1.11 “Owner” means the persons and entitieslisted as Owner on page 1 of this Agreement and, subject to the provisionsof Section2.4, their successors in interestto all or any part ofthe Property.

Development Agreement

1.1.12 “Mortgagee” means a mortgagee of a mortgage, a bene?ciary under a deedof trust or any other security-devicelender,andtheirsuccessors and assigns.

1.1.13 “Project” means the development of the Property contemplated by the DevelopmentPlan as such Plan may be ?nther de?ned, enhanced or modi?ed pursuant to the provisionsof this Agreement.

1.1.14 “Property”meansthe real property described on Exhibit “A” and shown on Exhibit “B” to thisAgreement.

1.1.15 “Reservations of Authority”means the rightsand authority exceptedfrom the assurances and rights providedto Owner under this Agreement and reserved to City under Section3.6 of this Agreement.

1.1.16 “SubsequentDevelopmentApprovals”means all DevelopmentApprovals requiredsubsequentto the Effective Date in connectionwith developmentof the Property.

1.1.17“Subsequent Land Use Regulations” means any Land Use Regulations adoptedand effectiveafterthe EffectiveDate ofthis Agreement.

1.2 Exhibits. The following documentsare attachedto, and by this reference made a part of,thisAgreement:

Exhibit“A” — LegalDescriptionofthe Property.

Exhibit“B” — Map showingProperty and itslocation.

Exhibit“C” —— ExistingDevelopmentApprovals.

Exhibit“D” —— ExistingLandUse Regulations.

Exhibit“E” — PerformanceSchedule.

2. GENERAL PROVISIONS.

2.1 Binding Effect of Agreement. The Property is hereby made subject to this Agreement.Development of the Property is hereby authorizedand shall be carriedout only in accordancewith the terms of thisAgreement.

2.2 Ownershipof Propeggg.Ownerrepresents and covenants thatit is the owner of the fee simple title to the Property. As a condition precedentto the City’s obligations hereunder, Owner shall provide to City a copy of the Operating Agreement for First West—DHS Associates, LLC, and all other documents required to establish the authority of the representativessigningbelow to bind the entityto the obligationsof this Agreement.

2.3 Term. The term of this Agreement shall commence on the E?'ective Date and, provided Owner has obtained a building permit and begun constructionon the ?rst 100 residential units within three (3) years from the E?'ective Date and is not in default Development Agreement

hereunder,shall continue for a periodoften (10) years thereafter unlessthisterm is modi?ed or extendedpursuant to the provisions of this Agreement. So long as Owner is found by the City Council,during the PeriodicReview conductedduring the tenth (10"’)year of the Term of this Agreement, to be in substantial compliance with this Agreement, including the PerformanceScheduleas set out in Exhibit“E” and all other phasing requirementsset out in the ExistingDevelopmentApprovals,thisAgreementshall be automaticallyrenewed by the City Council for an additional ten (10) years upon the same terms and conditionsas containedherein.

2.4 Ass'gnr_nent.

2.4.1 Right to Assign. Owner shall have the right to sell,transfer or assign the Property in whole or in part (providedthat no such partial transfershall violate the Subdivision Map Act, GovernmentCode Section 66410, e_tg.) to any person, partnership,joint venture, ?rm or corporation at any time during the term of this Agreement; provided, however,that any such sale, transfer or assignment shall includethe assignment and assumption of the rights, duties and obligationsarising under or from this Agreement and be made in strict compliance withthe following conditionsprecedent:
(a) No sale, transfer or assignment of any right or interest under this Agreement shall be made unless made together with the sale, transfer or assignment of all or a part ofthe Property.
(b) Concurrentwith any such sale, transfer or assignment, or within ?fteen (15) business days therea?er, Owner shall notify City, in writing, of such sale, transfer or assignmentand shall provide City with an executed agreement, in a form reasonablyacceptable to City, by the purchaser, transferee or assignee and providing therein that the purchaser, transfereeor assignee expressly and unconditionallyassumes all the duties and obligations of OwnerunderthisAgreement.
(c) The purchaser,transferee or assignee has established,to the satisfaction of City, that security equivalent to any security previously provided by Owner to secure performanceof its obligationshereundercontinuesto secure such performanceby the purchaser, transfereeor assignee.

Any sale, transfer or assignment not made in strict compliance with the foregoing conditionsshall constitutea non-curable,materialbreach of this Agreement.Notwithstandingthe failureof any purchaser,transferee or assigneeto execute the agreement required by Paragraph (b) ofthis Subsection2.4.1, the burdensofthis Agreementshall be bindingupon such purchaser, transferee or assignee,but the bene?ts of this Agreement shall not inure to such purchaser, transferee or assignee until and unless such agreement is executed and the City thereafter provides written waiver of the breach arising out of the sale, transfer or assignment prior to compliancewith the provisions of this Section2.4.

2.4.2 Release of Transfening Owner. Notwithstandingany sale, transfer or assignment, a transferring Owner shall continue to be obligated under this Agreement unless Development Agreement

suchtransferringOwneris given a releasein writing by City, which release shall be providedby City upon the fullsatisfactionby suchtransferringOwner of the followingconditions:
(a) Owner no longer has a legal or equitable interest in all or any part of the Property.
(b) Owneris not then in defaultunderthis Agreement.
(c) Owner hasprovidedCitywith the notice and executed agreement required underParagraph(b) of Subsection2.4.1 above.
(d) The purchaser, transferee or assignee provides City with security equivalentto any security previouslyprovidedby Ownerto secure performance of its obligations hereunder.

2.4.3 Subsguent Assi?ent. Any subsequentsale,transfer or assignment after an initialsale, transfer or assignmentshall be made only in accordance with and subject to the terms and conditionsof this Section2.4.

2.4.4 Partial Release of Purchaser, Transferee or Assigr_ieeof Industrial or Commerci? Lot, A purchaser,transfereeor assigneeof a lot,which has been ?nally subdivided as provided for in the DevelopmentPlan and for whicha commercialor industrial plot plan for developmentof the lot has been ?nally approvedpursuant to the DevelopmentPlan, may submit a request, in writing, to City to release said lot from the obligations under this Agreement relatingto all other portions of the property. Within thirty (30) days of such request, City shall review, and if the above conditionsare satis?ed shall approve the request for release and notify the purchaser,transferee or assignee in writing thereof.No such release approvedpursuant to this Subsection 2.4.4 shall cause, or otherwise affect, a release of Owner from its duties and obligationsunderthis Agreement.

2.4.5 IndividualQts Soldto Public and Completion of Construction. The provisionsof Subsection 2.4.] shall not apply to the sale or lease (for a period longer than one year) of any lot that has been ?nally subdividedand is individually(and not in “bulk”) sold or leasedto a member of the public or otherultimateuser. Notwithstandingany other provisionsof this Agreement, this Agreement shall terminate with respect to any lot and such lot shall be releasedand no longer be subject to this Agreement withoutthe executionor recordationof any ?rrther documentupon satisfactionof both ofthe following conditions:
(a) The lot has been ?nally subdividedand individually (and not in “bulk”) sold or leased (for a period longerthan one year) to a member of the public or other ultimate user", and,
(b) A Certi?cate of occupancy has been issued for a building on the lot.

2.5 Amendment or Cancellationof Agreement. This Agreement may be amendedor cancelledin whole or in part only by writtenconsent of all partiesin the manner provided forin Government Code Section 65868. This provisionshall not limit any remedy of City or Owner as providedby this Agreement.

Development Agreement

2.6 Termination.This Agreementshallbe deemedterminatedand of no ?trther effect upon the occurrenceof any of the followingevents:
(a) Expirationor terminationofthe stated term of this Agreement as set forth in Section2.3.
(b) Subject to the notice and hearing rights set out herein, a terminationof the Agreementpursuant to a materialbreachof the temts of this Agreement. (c) Entry of a ?nal judgmentsettingaside, voiding or annulling the adoption ofthe ordinanceapprovingthis Agreement.
((1) The adoption of a referendum measure overriding or repealing the ordinanceapproving this Agreement.
(e) Completionof the Project in accordancewith the terms of this Agreement includingissuanceof allrequiredoccupancypermitsand acceptance by City or applicablepublic agency of all required dedications.

Terminationof this Agreementshall not constitute termination of any other land use entitlementsapproved for the Property. Upon the termination of this Agreement, no party shallhave any furtherright or obligationhereunderexcept with respect to any obligationto have been performedpriorto suchterminationor with respect to any default in the performanceof the provisionsof this Agreementthat has occurred prior to such terminationor with respect to any obligationsthat are speci?cally set forth as surviving this Agreement. The vested rights of Owner underthis Agreement as to any parceI(s)for which it has not obtained a building permit shall expireupon the terrnination or expirationof this Agreement.

2.7 Notices.
(a) As used in this Agreement, “notice” includes, but is not limited to, the communicationof notice, request, demand, approval, statement, report, acceptance, consent, waiver,appointmentor othercommunicationrequiredor permittedhereunder. (b) All noticesshall be in writing and shall be considered given either: (i) when delivered in person to the recipient named below; or (ii) on the date of delivery shown on the retum receipt,after depositin the United States mailin a sealed envelope as eitherregisteredor certi?ed mail with return receipt requested, and postage and postal charges prepaid, and addressedto the recipientnamed below; or (iii) on the date of delivery shown in the records of the telegraph company after transmissionby telegraph to the recipientnamed below. All notices shallbe addressedas follows:

Ifto City:

City Manager
City of Desert Hot Springs
65950 PiersonBlvd.

Desert Hot Springs,CA 92240
Development Agreement

Ifto Owner:

FirstWest-DHS Associates,LLC
1105 QuailSt.

NewportBeach,CA 92660
Attention:Vic Mahony
Witha Copy to:

Jeffrey S. Ballinger
Best,Best & Krieger
3750 UniversityAvenue
Riverside,CA 92501
(c) Either party may, by noticegiven at any time,require subsequentnoticesto be given to another person or entity, whether a party or an of?cer or representative of a party, or to a di?erent address, or both. Notices given before actual receipt of notice of change shall not be invalidatedby the change.

3. DEVELOPMENT OF THE PROPERTY.

3.1 . Subject to the terms of this Agreement including the Reservationsof Authority,Owner shallhave a vested right to developthe Property in accordance with, and to the extent of, the land use and density standardsset out in the DevelopmentPlan.

Except as othenaviseprovided in this Agreement,the permitteduses of the Property, the density and intensity of use, the maximum height and size of proposed buildings, and provisionsfor reservationand dedicationof land for publicpurposesshall be those set forthin the Development Plan.

3.2 Effect of Ag’cement on Land Use Regglations. Except as otherwise provided underthe terms of this Agreement includingthe Reservationsof Authority, the rules,regulations and o?icial policies governing permitteduses of the Property, the density and intensity of use of the Property and the maximumheight and size of proposedbuildings applicableto development ofthe Property shall be the Existing LandUse Regulations.

3.3 Timing of Development.The partiesacknowledgethat Owner cannot at this time predict when or the rate at which phases of the Property will be developed. Such decisions depend upon numerous factors that are not within the control of Owner, such as market orientationand demand,interestrates, absorption,completionand othersimilarfactors. Sincethe CaliforniaSupreme Court held in Pardee ConstructionCo. v. City gf Camarillo (1984) 37 Cal.3d 465, that the failure of the par1:iesthereinto provide for the timing of development resulted in a later adopted initiative restricting the timing of development to prevail over such parties’ agreement, it is the parties’ intent to cure that de?ciency by acknowledging and providingthat Owner shall have the right to developthe Property in such order and at such rate and at such times as Owner deems appropriatewithin the exercise of its subjective business judgment, subject only to the timing and phasingrequirementsas shown in Exhibit “E” and as otherwiseset forth in the DevelopmentPlan or the PhasingPlan set forth in Section 3.4.

Development Agreement

3.4 . Development of the Property shall be subject to all timing and phasing requirementsas shown in Exhibit“E” and as otherwiseestablishedby the Development Plan,includingthe Speci?c Plan. Once it has obtaineda building permit and begun construction of a phaseof theProject, Owner shalldiligentlyproceedto completionof such phase.

3.5 Changes and Amendments.The parties acknowledgethat re?nement and ?irther development of the Project will require Subsequent Development Approvals and may demonstratethat changes are appropriate and mutuallydesirable in the Existing Development Approvals.In the event Owner ?nds that a change in the ExistingDevelopment Approvalsis necessary or appropriate, Owner shall apply for a Subsequent Development Approval to effectuate such changeand City shall process and act on such applicationin accordancewith the Existing LandUse Regulations, except as otherwiseprovided by this Agreement including the Reservationsof Authority. Ifapproved, any such change in the ExistingDevelopmentApprovals shallbe incorporatedherein as an addendumto Exhibit“C”, and may be further changed from time to time as provided in this Section. Unless otherwise required by law, as determinedin City’s reasonable discretion,a change to the ExistingDevelopment Approvals shall be deemed “minor”and not require an amendmentto this Agreement providedsuch change does not:
(a) Alterthepermitteduses of the Property as a whole;or, (b) Increasethe densityor intensityof use ofthe Property as a whole;or, (c) Increase the maximumheight and size of permittedbuildings; or, (d) Delete a requirement for the reservationor dedicationof land for public purposes withinthe Property as a whole;or,
(e) Constitute a project requiring a subsequent or supplemental environmental impactreport pursuant to Section21166 of the PublicResources Code.

3.6 Reservationsof Authority.

3.6.1 Limitations, Reservations and Exceptions. Notwithstanding any other provisionof this Agreement, the following SubsequentLand Use Regulations shall apply to the developmentofthe Property.
(a) Processing fees and charges of every kind and nature imposedby City to cover the estimated actual costs to City of processing applications for Development Approvalsor formonitoringcompliancewith any DevelopmentApprovalsgranted or issued. (b) Procedural regulations relating to hearing bodies, petitions, applications, notices, ?ndings, records, hearings, reports, recommendations,appeals and any other matter of procedure.
(c) Regulations governing construction standards and speci?cations including, without limitation, the City’s Building Code, Plumbing Code, Mechanical Code, ElectricalCode,Fire Code and GradingCode.

Development Agreement

(d) RegulationsimposingDevelopmentExactions;provided,however, no such subsequentlyadopted DevelopmentExaction shall be applicableto developmentof the Property unless such Development Exaction is applied uniformly to development, either throughout the City or within a de?ned area of bene?t that includesthe Property. No such subsequentlyadoptedDevelopmentExaction shall apply if its applicationto the Property would physicallyprevent development of the Property for the uses and to the density or intensity of developmentset forth in the DevelopmentPlan. In the event any such subsequently adopted DevelopmentExaction ?il?lls the same purposes, in whole or in part, as the fees set forth in Section 4 of this Agreement, City shall allow a credit against such subsequently adopted DevelopmentExactionfor the fees paid under Section 4 of this Agreement to the extent such feesful?ll the same purposes.
(e) Regulationsthat may be in con?ict with the DevelopmentPlan but that are reasonably necessary to protect the publichealth and safety. To the extent possible, any such regulations shall be applied and construed so as to provide Owner with the rights and assurances providedunder this Agreement.
(f)
' Regulationsthat are not in con?ict with the Development Plan.

Any regulation, whether adopted by initiative or otherwise, limiting the rate or timing of developmentof the Property shall be deemedto con?ict with the Development Plan and shall thereforenot be applicableto the developmentof the Property. (g) Regulations that are in con?ict with the Development Plan providedOwner has given written consent to the applicationof such regulationsto development of the Property.
(h) Regulations applyingnew or increasedfees that are determinedby agencieswhichare not withinthe exclusivecontrolofthe City.

3.6.2 SubsmuentDevelopmentApprovals. This Agreement shall not prevent City, in acting on Subsequent DevelopmentApprovals, ?'om applying Subsequent Land Use Regulationsthat are unrelatedto the permitteduses of the Property, the density and intensityof use, and the maximumheight and size of proposedbuildings, nor shall this Agreement prevent City from denying or conditionally approving any Subsequent Development Approval on the basis of the Existing Land Use Regulations or any Subsequent Land Use Regulation not in con?ict with the use and densitystandardsset out in the DevelopmentPlan.

3.6.3 Notwithstanding any other provision herein, City expressly retains its authorityand remediesto enforce applicablenon-landuse statutes and codes, includingwithout limitation,tax, criminal,and health/safetystatutes andcodes.

3.7 Tentative Tract Map Extension.Pursuant to the provisions of Section 66452.6, subdivision(a) of the Subdivision Map Act, the Master Tract Map and any subsequentvesting or tentative maps approved in connectionwith Development of the Property or Project, shall be extendedfor the Term of this Agreement.

3.8 The duration of each of the building permitsto be issued for the Project is not modi?edby this Agreement and willbe as set forth in the applicablebuilding and safety codes.

Development Agreement

4. PUBLIC BENEFITS.

4.1 _I_n_t_e_r;t. The parties acknowledgeand agree that developmentof the Property will result in substantialpublic needs that, absent Owner’s consent hereunder,will not be fully met by the Development Plan and further acknowledge and agree that this Agreement confers substantialprivate bene?tson Owner that shouldbe balanced by commensurate public bene?ts.

Accordingly,the parties intendto provide considerationto the public to balance the private bene?ts conferred on Owner by providing more fully for the satisfaction of the public needs resultingfrom the Project. Owner expressly acknowledges its acceptance of the mitigation monitoring plan and the conditionsof approvalthat are incorporatedin the DevelopmentPlan, includingwithout limitationthe obligations imposedwith respect to the constnictionof a Fire Station,publicpark and all otherDevelopmentExactionsidenti?edin the DevelopmentPlan.

4.1.1 PiersonBlvd. Improvements. Owner to make contributionto the City in the sum of $600,000, without any credit against impact fees or right of reimbursement whatsoever, toward the total cost of currently proposed improvementsrequired on Pierson Boulevard east of the Project in order to meet the increasedtral?c demand identi?edin the EIR as being generated by the Project. Said contributionshall be in lieu of any other mitigation suggested or proposed in the EIR speci?c to the Project’simpact on PiersonBoulevard east of the Project. The contributionis to be madein three installmentsof $200,000 each as follows:

Owner to pay the ?rst installment on or before the second anniversary of the recording of this Agreement or upon the issuance of the Certi?cate of Occupancy for the 100"‘unit, whichever occurs ?rst; the second installment on the fourth anniversary or upon the issuance of the Certi?cate of Occupancy for the 300"‘unit, whicheveroccurs ?rst; the third installment on the sixth anniversary or upon the issuance of the Certi?cate of Occupancy for the 500"‘unit, whicheveroccurs ?rst.

4.1.2 Fire Station. Owner shall construct, or cause to be constructed, a Fire Station, at Owner’s sole cost and expense, and without any credit against impact fees or right of reimbursementwhatsoever,as follows:
(a) Permanent Fire Station. Owner shall contribute the 2-acre site identi?ed in the conditionsof approval incorporatedin the DevelopmentPlan, or an alternatesite at the discretion of the City, and improve said site with a Permanent Fire Station pursuant to the speci?cationsto be providedby the City (the “Permanent Fire Station”). Construction of said Permanent Fire Station shallbegin no later than 24 monthsfrom the date that the necessary rightof-wayrights have been acquired. Constructionshallbe completedwithin 12 monthsof issuance of the building permit for the Permanent Fire Station. Construction of the Permanent Fire Station shall not include furniture or equipment, but shall otherwise include all elements necessary to place the Permanent Fire Station in operation. (b) Temporary Fire Station. In no event shall a Certi?cate of Occupancy for the ?rst residentialunit be issued until and unless either (a) the Permanent Fire Station shall have been completed or (b) constructionof a Temporary Fire Station shall have been completedat a site and to standardsacceptableto the RiversideCounty Fire Department.

Development Agreement

4.1.3 Park Improvements. As agreed by Owner, and in full satisfaction of the City’s Quimby requirements, Owner shall provide the following park facilities at 0wner’s sole cost and expense, and without any further right of reimbursementwhatsoever, as follows:
(a) Karen Street Park. Owner shall contribute the S—acresite identi?ed in the conditionsof approval incorporatedin the DevelopmentPlan, and improve said site in the manner also described in the conditions of approval incorporated in the Development Plan or as otherwise approved by the City Manager at a total cost not to exceed $1 ,200,000, not including land value. Owner shall complete construction on Karen Street Park before date that Certi?cate of Occupancy for the first residentialunit is issued.
(b) Parks Within Development. Owner shall develop the park and open areas described in the Development Plan in a manner acceptable to the City. Any and all parks identi?ed within a Village shall be completedon or before the issuance of the ?rst Certi?cate of Occupancy for a residential unit in that Village. Provided all park areas are developed concurrent with the build-out of each Village, Owner shall be entitled to credit against Quimby fees equal to the improved park acreage deemed by the City to be park area. Before the ?rst transfer of ownership to any property within the Project, Owner shall create a perpetual easement, or other form of title restriction acceptableto the City Attorney, to ensure that die park areas shall be owned, used and maintained by the Homeowner’s Association as park areas in perpetuity.

4.1.4 Financing of Public Improvements. A Community Facilities District (CFD) or other ?inding mechanism, as determined by the City Council, may, within the sole discretion of th City, be formed to ?nance the cost of construction and/or operation and maintenanceof i frastrucrure and public facilities which serve the Project and surrounding areas.

Owner shall coo erate in the formation. If fonned, all costs related to the formation and studies related thereto s all be paid by Owner, with subsequentreimbursementto Owner by District (or other entity) aft r it is formed. The CFD (or other entity) may finance that portion that is 4 2.1 Amount and Components of Fee. The Owner shall pay all existing or ?iture adopted 5 rvice, permit, impact and other applicable fees required by the City of Desert Hot Springs as ame shall exist at the time that a building permit is applied for. There is no entitlementto fe s existing at time of this Agreement.
4 2.2 Time of Pa?nent. The fees required pursuant to Subsection 4.2.1 shall be paid to City pn' to the issuance of building permitsfor each residential unit. No fees shall be payable for buil ing pennits issued prior to the Effective Date of this Agreement, but the fees required pursu to Subsection 4.2.1 shall be paid prior to the re-issuance or extension of any building permit r a residential unit for which such fees have not previously been paid. 4 .3 Credits. Performance by Owner of all obligations set out in Subsection

4.1.3 shall be d emed ?ill satisfaction by Owner of the City’s Quimby requirements for the dedicationof parkland as de?ned in the Existing Land Use Regulations. In the event that Owner

fails to improvethe park areas as requiredabove, however, creditsshall then be appliedonly in the proportionthat the acreage of completedpark area found acceptableby the City bears to the standardsset out in the City’s Quimby Ordinance. Except as to Quimby requirements,Owner shall not be entitled to any other credit(s) against fees for the performance of any other obligationsset out hereinor in the conditionsof approvalofthe Project.

5. REIMBQg§EMENT AGREEMENT.

Owner and City shall enter into a reimbursementagreement whereby Owner shall be reimbursedexpenses relatedto infrastructureimprovementsrequiredas a conditionof approval, which improvementsare on right-of-waysnot adjacentto the Property. Reimbursementshallbe provided to Owner (a) where Owner made required in?asnucture improvements on right-ofways that are adjacentto parcels not owned, or subsequently acquired, by Owner, (b) as fair sharecontributionsare collectedby the City fromowners who subsequentlydevelop the parcels that are adjacentto the right-of-waysupon whichowner has made infrastructure improvements.

6. RE!E? FOR COMPLIANCE.

6.1 PeriodicRevim.ThePlanningManager shallreviewthis Agreement annually,on or before the anniversary of the Eifective Date, in order to ascertain the good faith compliance by Ownerwith the terms of the Agreement. Ownershallsubmit an AnnualMonitoringReport, in a formacceptableto the PlanningManager, within30 days after written notice?'omthe Planning Manager. The Annual Monitoring Report shall be accompanied by an annual review and administrationfee su?icient to defray the estimated costs of review and administrationof the Agreementduring the succeedingyear. The amount of the annualreview and administrationfee shallbe set armuallyby resolutionofthe City Council.

6.2 Special Review. The City Councilmay order a specialreview of compliancewith this Agreement at any time.The PlanningManager shall conductsuch specialreviews.

6.3 Procedure.
(a) During either a periodic review or a special review, Owner shall be requiredto demonstrategood faith compliancewith the terms of the Agreement. The burden of proofon thisissue shallbe on Owner.
(b) Upon completionof a periodic review or a special review, the Planning Manager shallsubmit a report to the City Council setting forth the evidence concerning good faith complianceby Owner with the terms of this Agreement and his or her recommended ?nding on thatissue.
(c) Ifthe City Council?nds on the basis of substantialevidencethat Owner has compliedin good faith with the terms and conditionsof this Agreement, the review shall be concluded.
(d) If the City Council makes a preliminary ?nding that Owner has not compliedin good faith with the terms and conditionsof this Agreement, the Council may modify or terminate this Agreement as provided in Section 6.4 and Section 6.5. Notice of default as Development Agreement
Page I4 of 27

provided under Section 8.3 of this Agreement shall be given to Owner prior to or concurrent with,proceedingsunder Section6.4 and Section6.5.

6.4 . If, upon a ?nding under Section

6.3, City determinesto proceed with modi?cation or terminationof this Agreement, City shall give written notice to Owner of its intentionso to do. The notice shall be given at least ten calendardays prior to the scheduledhearingand shallcontain:
(a) The time and place of the hearing;
(b) A statement as to whether or not City proposes to terminate or to modify the Agreement; and,
(c) Such otherinformationas is reasonably necessary to informOwner ofthe nature ofthe proceeding.

6.5 Hearing on Modi?cationor Termination.At the time and place set forthe hearing on modi?cationor termination,Ownershallbe given an opportunityto be heard. Owner shallbe requiredto demonstrategood faith compliancewith the tems and conditionsof this Agreement.

The burden of proof on this issue shall be on Owner. If the City Council ?nds, based upon substantialevidence,that Owner has not compliedin good faith with the terms or conditionsof the Agreement, the City Council may terminatethis Agreement. Alternativelythe City may, but is not obligated to, modify this Agreement and impose such conditions as are reasonably necessary to protect the interests of the City. The decision of the City Council shall be ?nal, subject onlytojudicial review pursuant to Section1094.5ofthe Code of CivilProcedure.

6.6 Certi?cate of Agreement Compliance. If, at the conclusion of a Periodic or SpecialReview, Owner is found to be in compliancewith this Agreement, City shall, upon request by Owner, issue a Certi?cate of Agreement Compliance(“Certi?cate”) to Owner stating that afterthe most recent Periodicor SpecialReviewand based upon the informationknown or made knownto the PlanningManager and City Councilthat (1) this Agreement remainsin e?‘ect and (2) Owner is not in default. The Certi?cate shall be in recordable form, shall contain informationnecessary to communicateconstruc?verecord notice of the ?nding of compliance, shallstate whether the Certi?cateis issued after a Periodicor SpecialReview and shallstate the anticipated date of commencement of the next Periodic Review. Owner may record the Certi?catewith the CountyRecorder.

Whether or not the Certi?cate is relied upon by assignees or othertransferees or Owner, City shall not be bound by a Certi?cate if a default existedat the time of the Periodic or Special Review, but was concealed ?om or otherwise not known to the Planning Manager or City Council.

6.7 Failure of Periodic Review. The City’s failure to review at least annually complianceby Owner with the terms and conditionsof this Agreement shall not constituteor be asserted by any party hereto as a breach of this Agrmment, nor shall it constitutea basis for challenge by any third party.

Development Agreement

7. INDEMNIFICATION.

At its sole cost and expense, Owner shall indemnify, defend with counsel reasonably acceptableto the City, and hold harmlessthe City and its of?cials, o?icers, employees, agents andvolunteers,?'om and against any and all liability, loss, cost, expense, damage, claim,action, proceedingand attorneys feesresulting?om or arisingout ofthe action or inactionof Owner, its agents, o?icers and employees, and from any claim, actionor proceeding against the City, its agents, of?cers, employees, volunteers,seeking to attack, set aside, void or annul any actions taken by the City in connection with the Project or Property, including but not limitedto, approvalofthisAgreement and compliancewith the CaliforniaEnvironmentalQuality Act. The rights and obligations of this Section7 shall survive the terminationand/or expirationof this Agreement.

8. DEFAULT AND REMEDIES.

8.1 Remediesin General. It is acknowledgedby the parties that City would not have enteredinto this Agreement if it were to be liable in damages under this Agreement, or with respect to this Agreement or the applicationthereof.

In general, each of the parties hereto may pursue any remedy at law or equity available for the breach of any provisionof this Agreement, except that City shall not be liable in damages to Owner, or to any successor in interestof Owner, or to any other person, and Owner covenants not to sue for damages or claimany damages:
(a) For any breachof this Agreementor for any cause of actionthat arises out of this Agreement; or
(b) For the taking, impairmentor restriction of any right or interest conveyed or provided under or pursuant to this Agreement or the conditions of approval or other Existing DevelopmentApprovalsincorporatedherein;or
(c) Arising out of or connectedwith any dispute,controversy or issue regarding the applicationor interpretationor effect of the provisionsof this Agreement, or the conditionsof approvalor otherExistingDevelopmentApprovalsincorporatedherein.

8.2 Speci?c Performance. The parties acknowledge that money damages and remediesat law generally are inadequateand speci?c performanceand other non-monetary relief are particularly appropriate remedies for the enforcement of this Agreement and should be availableto all partiesfor the following reasons:
(a) Money damagesare unavailableagainstCity as providedin Section8.1 above. (b) Due to the size, nature and scope of the project, it may not be practical or possible to restore the Property to its natural conditiononce implementationofthis Agreement has begun.

After such implementation,Owner may be foreclosed ?'om other choices it may have had to utilize the Property or portionsthereof. Owner has invested signi?cant time and resources and performed extensive planning and processing of the Project in agreeing to the terms of this Agreement and will be investing even more signi?cant time and resources in implementingthe Development Agreement

Project in relianceupon the terms of this Agreement, and it is not possible to determinethe sum of money that would adequatelycompensate Ownerfor such efforts.

8.3 Termination or Modi?cation of Agreementfor Default of Owner. Subjectto the provisionscontainedin Subsection6.5 herein,Citymay terminateor modify this Agreement for any failureof Ownerto perform any materialduty or obligation of Owner underthis Agreement, or to complyin good faithwith the terms ofthis Agreement(hereinafterreferred to as “default”); provided, however,City may terminateor modify this Agreement pursuant to this Sectiononly a?er providing written noticeto Owner of default setting forth the nature of the default and the actions, if any, required by Owner to cure such default and, where the default can be cured, Owner has failed to take such actions and cure such default within 60 days after the effective date of such notice or, in the event that such default cannot be cured within such 60 day period but can be curedwithin a longer time,has failed to commence the actionsnecessary to cure such defaultwithin such 60 day period and to diligently proceed to complete such actions and cure such default.

8.4 Termination of Agreement for Default of Cig. Owner may terminate this Agreement only in the event of a defaultby City in the performanceof a materialterm of this Agreement and only after providingwritten noticeto City of default setting forth the nature of the defaultand the actions,if any, requiredby City to cure such defaultand, wherethe default can be cured,City has failed to take such actions and cure such default within 60 days after the effectivedate of such notice or, in the event that such defaultcannot be curedwithin such 60 day period but can be cured within a longer time, has failed to commence the actions necessary to cure such defaultwithin such 60 day period and to diligentlyproceed to complete such actions and cure such default.

9. SERVED

10. MORTGAGEE PROTECTION.

The parties hereto agree that this Agreement shall not prevent or limit Owner, in any manner, at Owner’ssolediscretion,?'om encumberingthe Property or any portionthereof or any improvementthereon by any mortgage, deed of trust or othersecurity device securing ?nancing with respect to the Property. City acknowledgesthat the lenders providing such ?nancing may require certain Agreement interpretationsand modi?cations and agrees upon request, ?'om time to time, to meet with Owner and representativesof such lendersto negotiatein good faith any such request for interpretationor modi?cation.Citywill not unreasonablywithholdits consent to any such requested interpretationor modi?cationprovidedsuchinterpretationor modi?cationis consistentwith the intent and purposes of this Agreement. Any Mortgagee of the Property shall be entitledto the followingrights andprivileges:
(a) Neither entering into this Agreement nor a breach of this Agreement shall defeat, render invalid, diminish or impair the lien of any mortgage on the Property made in good faith and for value, unlessotherwiserequiredby law.
(b) The Mortgagee of any mortgage or deed of trust encumbering the Property, or any part thereof; which Mortgagee, has submitteda request in writing to the City in the manner Development Agreement

speci?ed herein for giving notices,shall be entitledto receive written noti?cation from City of any defaultby Owner in the performanceof Owner’s obligationsunderthis Agreement. (c) If City timely receives a request ?om a mortgagee requesting a copy of any noticeof default given to Owner under the terms of this Agreement, City shall provide a copy of that notice to the Mortgagee within ten (10) days of sending the notice of default to Owner. The Mortgagee shall have the right,but not the obligation,to cure the default during the remaining cure periodallowedsuch party underthis Agreement.
(d) Any Mortgagee who comes into possessionof the Property, or any part thereof, pursuant to foreclosure of the mortgage or deed of trust, or deed in lieu of such foreclosure,shall succeedto the rights and obligationsof the Owner under this Agreement as to the Property or portion thereof so acquired; provided,however, in no event shall Mortgagee be liable for any defaults or monetary obligationsof the Owner arising prior to acquisitionof title to the Property by suchMortgagee, except that any such Mortgagee shall not be entitledto a building permitor occupancy certi?cate until all delinquentand current fees and other monetary obligations due under this Agreement have been paid to the City. Any sale, transfer or assignment by any Mortgageein possession shall be subjectto the provisionsof Section2.4 of this Agreement

11. MISCELLANEOUSPROVISIONS.

11.1 Recordation of Ageement. This Agreement and any amendment or cancellation thereof shall be recordedwiththe CountyRecorderby the City Clerk within the period required by Section65868.5of the GovernmentCode.

11.2 Entire Aggegment. This Agreement sets forth and contains the entire understanding and agreement of the parties, and there are no oral or written representations, understandings or ancillary covenants, undertakings or agreements that are not containedor expresslyreferred to herein.

11.3 Severability. Ifany term, provision,covenant or conditionof this Agreement shall be determined invalid, void or unenforceable,the remainderof this Agreement shall not be affectedtherebyto the extent such remainingprovisionsare not renderedimpracticalto perform taking into considerationthe purposes ofthis Agreement.

11.4 Interpretation and Governing Law. This Agreement and any dispute arising hereunder shall be governed and interpreted in accordance with the laws of the State of California.This Agreement shall be construed as a whole according to its fair language and common meaning to achieve the objectives and purposes of the parties hereto, and the rule of constructionto the effect that ambiguities are to be resolved against the draftingparty shall not be employedin interpretingthisAgreement,allpartieshavingbeen representedby counselin the negotiation and preparationhereof.

11.5, Section Headings. All section headings and subheadings are inserted for convenienceonly and shall not affect any constructionor interpretationofthis Agreement.

11.6 Singglar and Plural.As used herein,the singularof any word includesthe plural.

Development Agreement
Page I8 of 27

11.7 Joint and Several Obligations.If at any time during the term of this Agreement the Property is owned, in whole or in part, by more than one Owner, all obligations of such Owners underthis Agreementshallbe joint and several,and the default of any such Owner shall be the default of all such Owners. Notwithstandingthe foregoing, no Owner of a single lot that has been ?nally subdivided and sold to such Owner as a member of the general public or otherwiseas an ultimateuser shall have any obligationunderthis Agreement except as provided under Section4 hereof.

11.8 Time of Essence. Time is of the essence in the performanceof .the provisionsof this Agreement as to whichtime is an element. Owner expressly acknowledgesthat the timing of developmentas requiredby the PerformanceScheduleset out in Exhibit“E” is a materialterm ofthisAgreement, a breach of whichcannot be cured.

11.9 Waiver. Failure by a party to insist upon the strict performanceof any of the provisions of this Agreement by the other party, or the failure by a party to exercise its rights upon the default of the other party, shall not constitutea waiverofsuch party’sright to insist and demandstrictcomplianceby the otherparty with the terms ofthisAgreementthereafter.

11.10 No Third Pgy Bene?ciaries. This Agreement is made and entered into for the sole protectionand bene?t of the parties and their successors and assigns.No other person shall have any rightof actionbased upon any provisionofthis Agreement.

11.11 Force Maieure.

11.11.1 Providing the resulting delay cannot be avoidedby the commercially reasonableefforts of, and was not causedby, the affected party, neither party shall be deemedto be in default where failure or delay in performance of any of its obligations under this Agreement is caused by ?oods, earthquakes,other Acts of God, ?res, wars, riots or similar hostilities,strikes and other labor dit?culties beyond the party’s control,(including the party’s employment force), changes in government regulations adopted after the E?‘ectiveDate that prohibitOwner ?'om complyingwith a materialprovisionof this Agreement, court actions(such as restrainingorders or injunctions),or other causes beyond the party’s control. ll.1l.2 The parties hereto expressly acknowledge and agree that signi?cantly adverse changes in general economicconditionsthat, as demonstratedby Owner to the satisfactionof the City Council,prevent Owner fromobtaininga commercially reasonable pro?t shallconstitutea force majeure event.

11.11.3 If any such event of force majeure shall occur, the term of this Agreement and the time for performanceby eitherparty of any of its obligationshereundermay be extended by the written agreement of the partiesfor the period of time that such events prevented such performance, provided that the term of this Agreement shall not be extended under any circumstancesfor more than ?ve (5) years.

11.12 Mutual Covenants.The covenants containedherein are mutual covenants and also constituteconditionsto the concurrent or subsequent performanceby the party bene?tedthereby of the covenants to be performed hereunderby such bene?ted party.

Development Ageemem

11.13 Successors in Interest. The burdens of this Agreement shall be binding upon, and the bene?ts of this Agreement shall inure to, all successors in interestto the parties to this Agreement. All provisions of this Agreement shall be enforceable as equitable servitudesand constitutecovenants running with the land. Each covenant to do or refrain ?'om doing some act hereunderwith regard to developmentof the Property: (a) is for the bene?t of and is a burden upon every portion of the Property, (b) runs with the Property and each portionthereof; and, (c) is binding upon each party and each successor in interestduring ownershipof the Property or any portionthereof.

11.14 Qountemarts. This Agreement may be executed by the parties in counterparts, which counterparts shallbe construedtogether and have the same effect as if all of the parties had executedthe same instrument.

11.15 Jurisdictionand Venue. Any action at law or in equity arising under this Agreement or brought by a party hereto for the purpose of enforcing, construing or determining the validity of any provisionof this Agreementshall be ?led and tried in the Superior Court of the County of Riverside, State of California,and the parties hereto waive all provisions of law providingforthe ?ling, removalor change of venue to any other court.

11.16 Further Actions and Instruments. Each of the parties shall cooperate with and provide reasonable assistance to the other to the extent contemplated hereunder in the performanceof all obligationsunder this Agreement and the satisfactionof the conditionsof this Agreement. Upon the request of either party at any time,the other party shall promptly execute, with acknowledgment or a?idavit if reasonably required, and ?le or record such required instrumentsand writings andtakeany actionsas may be reasonablynecessary underthe terms of this Agreement to carry out the intent and to ?il?ll the provisionsof this Agreement or to evidenceor consummate the transactionscontemplatedby this Agreement.

11.17 Authority to Execute. The person or persons executing this Agreement on behalf of Owner warrants and represents that he or she/they have the authority to execute this Agreementon behalf of his or her/their corporation,partnershipor business entity and warrants and represents that he or she/theyhas/havethe authorityto bind Owner to the performanceof its obligationshereunder.

IN WITNESS WHEREOF,the parties hereto have executed this Agreement on the day and year set forth below.
[INTENTIONALLYLEFT BLANK]
Development Agreement

CITY
City of DesertHot Springs
a Californiamunicipalcorporation
eyuker, Mayor
ATTEST:

By:
‘ Rossie Stobbs,CityClerk

APPROVEDAS TO FORMAND
CONTENT:

APPRO > I AS TO FORM:
f‘a\ 0 By: a..«_au - PatriciaA. Larson,City Attorney
OWNER
FirstWest-DHS Associates,LLC, a California
Development Agreement

EXHEBIT“A”

LEGAL DESCRIPTION OF PROPERTY
Development Agreement

LEGALDEEIPTION
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E)G-HBIT “B"

MAP OF PROPERTY
MISSION LAKES|BOULEVARD
INTERSTATE1D

EXHIBIT “C”

EXISTING DEVELOPMENT APPROVALS
Final Environmental Impact Report (SCH# 2004061026), including Environmental Assessment No. 01-04 and associated CEQA Findings, Statements of Overriding Consideration, the Comments and Response Document, and Mitigation, Monitoring Program for the StoneRidge Specific Plan
General Plan Amendment No. 02-04
Zoning Map Amendment No. 02-04
Speci?c Plan No. 01-04, “The StoneRidge Spec?ic Plan”
Vesting Tentative Map No. 32030
Tentative Map No. 32029
Development Agreement N0. 01-04
Development Agreement

EXHIBIT “D”

EXISTING LAND USE REGULATIONS
City of Desert Hot Springs Comprehensive General Plan, including all amendments up to and including General Plan Amendment No. 02-04
City of Desert Hot Springs Zoning Ordinance, Design Guidelines and Subdivision Ordinance, including all amendments up to and including Zoning Map Amendment No. 02-04
Speci?c Plan N0. 01-04, “The StoneRidge SpecificPlan”
Development Agreement

EXHIBIT“E”

PERFORMANCE SCHEDULE
Date Performance Due Measured by
Anniversary Date
ofRecordation of
Development Agreement Description of Cumulative Performance 3d Anniversary Ownerto haveobtainedbuildingpermitsand begun constructionon at least 100 homes;certi?cateof
occupancyto be issued on each suchhomewithin
one year of issuanceof building permittherefor
5"’Anniversary Ownerto haveobtainedbuilding permitsandbegun constructionon at least 300 homes; certi?cate of
occupancyto be issuedon each suchhomewithin
one year ofissuanceof buildingpermittherefor
7”‘Anniversary Ownerto haveobtainedbuilding permitsandbegun constructionon at least 500 homes;certi?cateof
occupancyto be issuedon each suchhomewithin
one year of issuanceof building permittherefor
9"’Anniversary Ownerto haveobtainedbuilding permitsandbegun constructionon at least 700 homes; certi?cateof
occupancyto be issuedon each suchhomewithin
one year of issuanceof buildingpermittherefor
11"‘Anniversary Ownerto have obtainedbuilding permitsandbegun constructionon at least 900 homes;certi?cate of
occupancyto be issuedon each suchhomewithin
one year of issuanceof building permittherefor
13"Anniversary Ownerto have obtainedbuilding permitsand begun constructionon at least 1100 homes;certi?cateof
occupancy to be issued on each such home within
one year of issuanceof building permittherefor
15"‘Anniversary Owner to have obtained building permits and begun constructionon at least 1300 homes;certi?cateof
occupancyto be issued on each suchhomewithin
one year of issuanceof building permittherefor
Development Agreement

17"’Anniversary
19"‘Anniversary
20"‘Aimiversary
Ownerto have obtainedbuilding permitsand begun
constructionon at least 1500 homes;certi?cate of
occupancy to be issuedon each such homewithin
one year of issuanceof buildingpermittherefor
Ownerto have obtainedbuildingpermitsandbegun
constructionon at least 1700 homes;certi?cate of
occupancyto be issuedon each such homewithin
one year ofissuanceof buildingpermittherefor
Ownerto have obtainedbuildingpermitsandbegun
constructionon at least 2120 homes;certi?cateof
occupancy to be issued on each such home within
one year of issuanceof building permittherefor
Development Agreement

CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
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RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:

City of Desert Hot Springs
Attn: City Clerk
11999 Palm Drive
Desert Hot Springs, CA 92240
(SPACE ABOVE FOR RECORDER’S USE)
[EXEMPT FROM RECORDING FEES PURSUANT TO GOVERNMENT CODE SECTION 6103 AND 27383] FIRST AMENDMENT TO DEVELOPMENT AGREEMENT NO. 01-04
THIS FIRST AMENDMENT TO DEVELOPMENT AGREEMENT NO. 01-04 (the “First Amendment”) is made and entered into as of this ___ day of August, 2023, by and between the City of Desert Hot Springs, a California municipal corporation (the “City”), and Skyborne Ventures, a California limited liability company (the “Developer”) with respect to the following facts:

RECITALS
A. City and First West-DHS Associates, LLC, a California limited liability company, as predecessor in interest to Western Pacific Housing, Inc., a Delaware corporation (“WPH”), entered into that certain development agreement, recorded as Document No. 2005-0355117 in the Official Records of Riverside County, State of California on or about May 5, 2005 (the “Development Agreement”);
B. On or about September 15, 2008, City, pursuant to Section 3.5 of the Development Agreement, approved a Subsequent Development Approval as to Section 4.1.3 related to the Karen Street Park (the “Subsequent Park Approval”);
C. City approved and pursuant to that approval, WPH assigned the Development Agreement to Skyborne Ventures, LLC, recorded September 19, 2008 as Document No. 2008-0514881 in the Official Records of Riverside County, State of California (the “Official Records”); D. Pursuant to the Development Approvals, WPH obtained a building permit and constructed no less than 100 residential units at the Property within three (3) years of May 5, 2005, extending the Term of the Development Agreement, such that the Term of the Agreement was to expire May 5, 2015;
E. Pursuant to Sections 6.1 and 6.6 of the Development Agreement, the City conducted a Periodic Review of the Development Agreement on March 3, 2015 and certified that the Development Agreement remained then in effect and Developer was not in default of the Development Agreement by recording a Certificate of Compliance as Document No. 2015-0291464 in the Official Records on or about July 7, 2015 and extended the Development Agreement for an additional ten (10) years, through May 5, 2025; and
F. In accordance with Section 2.5 of the Development Agreement and Government Code section 65868, City and Developer now desire to amend the Development Agreement subject to, and on the terms and conditions set forth in this First Amendment.

All capitalized terms not otherwise defined herein shall have the meaning(s) set forth in the Development Agreement. In consideration of the mutual covenants and agreements contained herein

and other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, City and Developer agree as follows:

1. Amendments.
(a) Section 1.2 of the Development Agreement is hereby deleted in its entirety and the following Section 1.2 is hereby substituted in its place:
“Exhibits. The following exhibits are hereby replaced and revised exhibits are attached to, and by this reference are made a part of the Agreement:

Exhibit "A" - Legal Description of the Property.

Exhibit “B" - Map showing Property and its location.

Exhibit "C" - Existing Development Approvals.

Exhibit "D” - Existing Land Use Regulations.

Exhibit "E" - Performance Schedule.

Exhibit “F” – Fee Schedule.”
(b) Section 2.3 of the Development Agreement is hereby deleted in its entirety and the following Section 2.3 is hereby substituted in its place:
“Term. The term of this Agreement is extended such that it shall expire on May 5, 2035. The City Council shall find that the Owner is in substantial compliance with this Agreement so long as the Owner is not in material default of any term herein. This finding by the City Council shall take place during the Periodic Review. Further, if the City Council finds that the Owner is in substantial compliance during the Periodic Review conducted in the year this Agreement is set to expire, this Agreement shall be automatically renewed for an additional ten (10) years upon the same terms and conditions as contained herein.” (b) Section 2.4.4 of the Development Agreement is hereby deleted in its entirety. (c) Pursuant to Section 2.7(c) of the Development Agreement, the notice addresses for the parties are modified as follows:

If to City:

City Manager
City of Desert Hot Springs
11999 Palm Drive
Desert Hot Springs, CA 92240
If to Owner.

Skyborne Ventures, LLC
505 Lomas Santa Fe Drive, Suite 230
Solana Beach, CA 92075
Attn: Gregory P. Lansing

With a Copy to:

Lansing Industries, Inc.
505 Lomas Santa Fe Drive, Suite 230
Solana Beach, CA 92075
Attn: Paul W. Pitingaro, Esq
(d) Section 3.3 of the Development Agreement is hereby deleted in its entirety and the following Section 3.3 is hereby substituted in its place:
“Timing of Development. The parties acknowledge that Owner cannot at this time predict when or the rate at which phases of the Property will be developed. Such decisions depend upon numerous factors that are not within the control of Owner, such as market orientation and demand, interest rates, absorption, completion and other similar factors. Since the California Supreme Court held in Pardee Construction Co. v. City of Camarillo (1984) 37 Cal.3d 465, that the failure of the parties therein to provide for the timing of development resulted in a later adopted initiative restricting the timing of development to prevail over such parties' agreement, it is the parties' intent to cure that deficiency by acknowledging and providing that Owner shall have the right to develop the Property in such order and at such rate and at such times as Owner deems appropriate within the exercise of its subjective business judgment, subject only to the timing and phasing requirements as shown in Exhibit "E", which timing and phasing requirements may be modified from time to time by the City Manager, in City Manager’s reasonable discretion, after request from Owner, and as otherwise set forth in the Development Plan or the Phasing Plan set forth in Section 3.4.” (e) Section 3.3 of the Development Agreement is hereby deleted in its entirety and the following Section 3.3 is hereby substituted in its place:
“Phasing Plan. Development of the Property shall be subject to all timing and phasing requirements as shown in Exhibit "E"", which timing and phasing requirements may be modified from time to time by the City Manager, in City Manager’s reasonable discretion, after request from Owner, and as otherwise established by the Development Plan, including the Specific Plan. Once it has obtained a building permit and begun construction of a phase of the Project, Owner shall diligently proceed to completion of such phase.”
(f) Section 3.6.1 (d) of the Development Agreement is hereby deleted in its entirety. (g) Section 3.6.2 of the Development Agreement is hereby deleted in its entirety and the following Section 3.6.2 is hereby substituted in its place:
“Subsequent Development Approvals. This Agreement shall not prevent City, in acting on Subsequent Development Approvals, from applying Subsequent Land Use regulations that are unrelated to the Development Plan, nor shall this Agreement prevent City from denying or conditionally approving any Subsequent Development Approval on the basis of Existing Land Use Regulations or any Subsequent Land Use

Regulation not in conflict with the standards set out in the Development Plan.”
(h) Section 4.1.1 of the Development Agreement is hereby deleted in its entirety and the following Section 4.1.1 is hereby substituted in its place:
“Pierson Blvd. Improvements. Owner to make contribution to the City in the sum of $600,000, without any credit against impact fees or right of reimbursement whatsoever, toward the total cost of currently proposed improvements required on Pierson Boulevard east of the Project in order to meet the increased traffic demand identified in the EIR as being generated by the Project. Said contribution shall be in lieu of any other mitigation suggested or proposed in the EIR specific to the Project’s impact on Pierson Boulevard east of the Project. As of the date hereof, Owner has contributed $400,000 of the $600,000 to the City.

Owner shall cause the final payment of $200,000 to be directed to the City from proceeds received by Owner from the remaining bond sales to fund improvements in Improvement Area 1 of CFD2006-1 (defined below).”
(i) Section 4.1.2 of the Development Agreement is hereby deleted in its entirety and the following Section 4.1.2 is hereby substituted in its place:
“Fire Station. Owner’s obligations to construct the Permanent Fire Station have been satisfied.”
(j) Sections 4.1.3 (a) and (b) of the A Development greement, as modified by the Subsequent Park Approval, is hereby deleted in its entirety and the following Sections 4.1.3 (a) and (b) is hereby substituted in its place:
“(a) Karen Street Park. Owner shall: (i) dedicate to City the approximately five (5) acre site identified in the conditions of approval incorporated in the Development Plan (the “Karen Park Parcel”) for use as a public park within fifteen (15) business days of the recording of this First Amendment in the Official Records; and (ii) contribute $1,200,000 (“Karen Park Payment”) to the City for construction of the improvements at the Karen Park Parcel concurrent with the sale of the earlier of any lots in either Village 3 or Village 10. Owner will notify City Manager in writing upon the opening of escrow to sell the lots in either Village 3 or Village 10 to facilitate City’s delivery of an escrow demand to Owner and escrow holder for payment of the Karen Park Payment from Owner’s proceeds from the sale. Following dedication of the Karen Park Parcel and delivery of the Karen Park Payment, Developer shall have satisfied its obligations related to the Karen Park Parcel.
(b) Parks Within Development. Owner shall develop the park(s) and open areas described in the Development Plan consistent with City standards and as approved by the City Manager. Any and all parks identified within any Village shall be completed on or before issuance of fifty percent (50%) of the certificates of occupancy for a residential

unit in that Village. Provided all park areas are developed concurrent with the build-out of each Village, Owner shall be entitled to credit against Quimby fees equal to the improved park acreage deemed by the City to be park area. Owner shall ensure that the park areas shall be owned, used and maintained by the Homeowner’s Association as park areas in perpetuity.”
(k) Section 4.1.4 of the Development Agreement is hereby deleted in its entirety and the following Section 4.1.4 is hereby substituted in its place:
“Financing of Public Improvements.
(a) Infrastructure Financing. The Owner believes that the project cannot proceed without a CFD or Alternative Financing Mechanism (“Financing District”) to reimburse the developer for public facilities costs for infrastructure to be owned by the City or other public agencies and associated developer impact fees. At Developer's request, City may at its sole discretion establish an assessment district(s), community facilities district(s) or other public financing mechanism to finance any necessary public improvements for the Project substantially consistent with the financing plan (“Financing Plan”).
(b) Improvements and Financing/Community Facilities District. Pursuant to Chapter 2.5 (commencing with section 53311) Part 1, Division 2, Title 5 of the Government Code of the State of California, commonly known as the "Mello-Roos Community Facilities Act of 1982," the Developer may, at its sole election, petition the City Council of the City or a joint powers agency in which the City is a member to establish a Community Facilities District ("CFD" or “District”), in accordance with the City's policies in existence on the Effective Date. Alternatively, or in addition thereto, the Developer may request that the City initiate and complete proceedings under the Municipal Improvement Act of 1911, the Municipal Improvement Act of 1913, the Improvement Bond Act of 1915, or any and all other available public financing mechanism, to provide public conduit financing for the construction of public infrastructure improvements on the Property ("Alternative Financing Mechanisms"). If so requested by the Developer, the City may at its sole discretion cooperate with the Developer (or, for matters beyond its control, and may use its best efforts) in taking all steps necessary to cause the CFD or Alternative Financing Mechanisms to issue bonds for such purposes. If the Property is included within a CFD or Alternative Funding Mechanism with other surrounding properties, the special taxes or special assessments burdening the various properties so included shall be apportioned on a fair share basis related to the benefit derived by each of such properties in accordance with City policies at the time such property is included.
(c) Existing CFD. Community Facilities District No. 2006-1 (Skyborne) (“CFD2006-1”) was formed by the City in 2006. Developer has applied for, and City Council has will work in good faith in implementing the following changes to CFD2006-1: (i) issuance of a second (2nd) series of

bonds to fund further improvements and fees in Improvement Area 1 of CFD2006-1; and (ii) dissolution of Improvement Area 2 of CFD2006-1 for Villages 3 and 10
(d) New CFD. City agrees that following Developer’s application, petition or other request in writing for the dissolution and/or establishment of a CFD for any or all of Villages 3, 4, 5, 6, 7, 8, 9 or 10 (each, a “Subsequent CFD”), together with deposit of sufficient funds to pay the City’s costs to undertake the proceedings to establish any Subsequent CFD, City shall expeditiously conduct such proceedings to establish the Subsequent CFD in accordance with the Mello-Roos Act and City’s policies in existence as of the Effective Date and Developer shall cooperate in the conduct of such proceedings. Each Subsequent CFD shall, at a minimum, be subject to the following requirements i. Tax Rate. City agrees that the maximum effective tax rate for each Subsequent CFD shall not exceed two percent (2%) based upon the product and pricing provided by the Developer. In addition, the effective tax rate calculation for each CFD or Alternative Financing Mechanisms shall not include trash collection and sewer service assessment charges that are levied on the annual property tax bill.
ii. Joint Facilities. City agrees that any Subsequent CFD may finance, in addition to City fees, infrastructure, and public facilities, those fees, infrastructure, and public facilities of other governmental agencies required in connection with the Development Plan, the Development of the Property and any Subsequent Development Approvals, including, without limitation, Palm Springs Unified School District, Mission Springs Water District, and the County of Riverside.
iii. Improvement Areas. City agrees that Developer, working with the City’s Special Tax Consultant and Formation Counsel, will advise the City on the structure of proposed improvement areas’ which would be designated and included with each Subsequent CFD.”
(l) Section 4.2.1 of the Development Agreement is hereby deleted in its entirety and the following Section 4.2.1 is hereby substituted in its place:
“Amount and Components of Fee. The Owner shall pay the service, permit, impact and other applicable fees required by the City for the Existing Development Approvals and any Subsequent Development Approvals as provided in Exhibit “F”.”
(m) Section 4.2.4 is hereby added to the Development Agreement:
“Art In Public Places. Owner has donated approved public art in conjunction with the Project’s entry monumentation, which public art has been accepted by the City Council, entitling Owner to fee credits in the amount of the actual cost of the public art. Documentation of actual costs are required, and its adequacy shall be determined by the City Manager prior to allocating the fee credit. The amount of fee credits provided to the Owner shall be limited to the actual costs of the public

art and in the event the actual costs total an amount less than the Art In Public Places Program contribution amount required by Municipal Code section 17.60.050, Owner shall also pay into the City’s Art in Public Places Fund an amount equal to the difference between the Art in Public Places contribution amount required by Municipal Code section

17.60.050 and the actual costs of the public art.”
(n) Section 6.1 of the Development Agreement is hereby deleted in its entirety and the following Section 6.1 is hereby substituted in its place:
“Periodic Review. The City Council shall review this Agreement annually, on or before the anniversary of the Effective Date, in order to ascertain the good faith compliance by Owner with the terms of the Agreement. Owner shall submit an Annual Monitoring Report, in a form acceptable to the City Council, within 30 days after written notice from the City Council. The Annual Monitoring Report shall be accompanied by an annual review and administration fee sufficient to defray the estimated costs of review and administration of the Agreement during the succeeding year. The amount of the annual review and administration fee shall be set annually by resolution of the City Council.”
(o) Section 6.2 of the Development Agreement is hereby deleted in its entirety and the following Section 6.2 is hereby substituted in its place:
“Special Review. The City Council may order a special review of compliance with this Agreement at any time. The City Manager shall conduct such special reviews.”
(p) Section 6.3 (b) of the Development Agreement is hereby deleted in its entirety and the following Section 6.3 (b) is hereby substituted in its place:
“Upon completion of a periodic review or a special review, the City Manager shall submit a report to the City Council.”
(q) Section 6.6 of the Development Agreement is hereby deleted in its entirety and the following Section 6.6 is hereby substituted in its place:
“Certificate of Agreement Compliance. If, at the conclusion of a Periodic or Special Review, Owner is found to be in compliance with this Agreement, City Manager shall, upon request by Owner, issue a Certificate of Agreement Compliance (“Certificate”) to Owner stating that after the most recent Periodic of Special Review and based upon the information known or made known to the City Council that (1) this Agreement remains in effect and (2) Owner is not in default. The Certificate shall be in recordable form, shall contain information necessary to communicate constructive record notice of the finding of compliance, shall state whether the Certificate is issued after a Periodic of Special Review and shall state the anticipated date of commencement of the next Periodic Review. Owner may record the Certificate with the County Recorder.

Whether or not the Certificate is relied upon by assignees or other transferees or Owner, City shall not be bound by a Certificate if a default existed at the time of the Periodic of Special Review, but was concealed from or otherwise not known to the City Manager or City Council.” (r) Exhibit “A” – Legal Description of Property, Exhibit “B” – Map Of Property and Exhibit “E” – Performance Schedule are deleted and the attached Exhibit “A” – Legal Description of Property, Exhibit “B” – Map Of Property and Exhibit “E” – Performance Schedule are substituted in their place.
(s) Exhibit “F” – Fee Schedule”, is hereby added to the Development Agreement.

2. Full Force and Effect. Except as expressly provided in this First Amendment, all of the terms and provisions of the Development Agreement are and will remain in full force and effect and are hereby ratified and confirmed by the parties hereto. Without limiting the generality of the foregoing, the amendments contained herein will not be construed as an amendment to or waiver of any other provision of the Development Agreement or as a waiver of or consent to any further or future action on the part of either party that would require the waiver or consent of the other party. On and after the date hereof, each reference in the Development Agreement to “this Agreement,” “the Agreement,” “hereunder,” “hereof,” “herein” or words of like import, and each reference to the Agreement in any other agreements, documents or instruments executed and delivered pursuant to, or in connection with, the Agreement, will mean and be a reference to the Development Agreement as amended by this First Amendment.

3. Miscellaneous.
(a) This First Amendment is governed by, and construed in accordance with, the laws of the State of California, without regard to the conflict of laws provisions of such state. (b) This First Amendment shall inure to the benefit of and be binding upon each of the parties and each of their respective permitted successors and permitted assigns. (c) The headings in this First Amendment are for reference only and do not affect the interpretation of this First Amendment.
(d) This First Amendment may be executed in counterparts, each of which is deemed an original, but all of which constitutes one and the same agreement. (e) Each party shall pay its own costs and expenses in connection with this First Amendment (including the fees and expenses of its advisors, accounts and legal counsel). (f) This First Amendment constitutes the sole and entire agreement of the parties hereto with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.
[SIGNATURES ON FOLLOWING PAGE]

Executed this ___ day of August, 2023
CITY OF DESERT HOT SPRINGS: DEVELOPER:
_________________________________
Doria Wilms, Interim City Manager
SKYBORNE VENTURES, LLC, a California
limited liability company
BY: LANSING STRATEGIC
MANAGEMENT, LLC a California
limited liability company
BY: JK-RIVERWOODS, LLC, A

CALIFORNIA LIMITED

LIABILITY COMPANY

ITS GENERAL PARTNER
BY: _________________________
JAMES M. KOZAK
ITS: SOLE MEMBER
ATTEST:
_________________________________
Jerryl Soriano, City Clerk
APPROVED AS TO FORM:
_________________________________
Jennifer Mizrahi, City Attorney

EXHIBIT “A”

LEGAL DESCRIPTION OF PROPERTY
[SEE ATTACHED]

Real property in the City of Desert Hot Springs, County of Riverside, State of California, described as follows:

PARCEL 1: INTENTIONALLY DELETED
PARCEL 2: INTENTIONALLY DELETED
PARCEL 3: (APN'S: 667-300-001 THROUGH 054, 058; 667-310-001 THROUGH 084 AND 088; 667- 320-001 THROUGH 026, 029 THROUGH 078, 080 THROUGH 083 AND 667-330-001 THROUGH 013, 015 THROUGH 072 AND 076)
LOTS 1 THROUGH 286 AND LETTERED LOTS "O" THROUGH "Z" AND "AA" OF TRACT NO. 32030-3 AS SHOWN ON BY MAP ON FILE IN BOOK 419 PAGES 29 THROUGH 39 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

PARCEL 4: (APN'S: 667-340-001 THROUGH 048 AND 051; 667-350-001 THROUGH 074 AND 078 THROUGH 080; AND 667-360-001 THROUGH 060 AND 064)
LOTS 1 THROUGH 182, INCLUSIVE, AND LETTERED LOTS "H" THROUGH "S", INCLUSIVE, OF TRACT NO. 32030-10, AS SHOWN BY MAP ON FILE IN BOOK 419 PAGES 40 THROUGH 47 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

PARCEL 5: (APN'S: 667-080-006, 667-100-029, 031 AND 038) TENTATIVE (TRACT) MAP 32030-4, BEING A SUBDIVISION OF THE FOLLOWING DESCRIBED PROPERTY:

PARCEL NO. 1:

THE SOUTH ½ OF THE NORTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS

TO ALL OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTS

OR GEOTHERMAL SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER

RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT

CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"), TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 2:

THE SOUTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN BERNARDINO

BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

EXCEPTING THEREFROM THE EAST ½ OF THE SOUTHWEST ¼.

ALSO EXCEPTING THEREFROM THE EAST ½ OF THE NORTHEAST ¼ OF THE NORTHWEST ¼ OF THE SOUTHWEST ¼ OF SAID SECTION.

ALSO EXCEPTING THEREFROM THE SOUTHERLY 40 FEET CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED FILED FOR RECORD JULY 26, 1949 AS INSTRUMENT NO. 3081 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-1 AS SHOWN ON FILE IN BOOK 404 PAGES 67 THROUGH 75 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANY

SUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE, OPERATE,

PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 3:

THE EAST ½ OF THE SOUTHWEST ¼, AND THE EAST ½ OF THE NORTHEAST ¼ OF THE NORTHWEST ¼ OF THE SOUTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST,

SAN BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

EXCEPTING THEREFROM THE SOUTHERLY 40 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE, BY DEED RECORDED JULY 26, 1949 AS INSTRUMENT NO. 3081 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-1 AS SHOWN ON FILE IN BOOK 404 PAGES 67 THROUGH 75 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-3 AS SHOWN ON FILE IN BOOK 419 PAGES 29 THROUGH 39 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL 6: (APN'S: 667-100-029, 031 AND 038; 667-120-051, 052, 025 THROUGH 027) TENTATIVE (TRACT) MAP 32030-5, BEING A SUBDIVISION OF THE FOLLOWING DESCRIBED PROPERTY:

PARCEL NO. 1
THE SOUTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN BERNARDINO

BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

EXCEPTING THEREFROM THE EAST ½ OF THE SOUTHWEST ¼.

ALSO EXCEPTING THEREFROM THE EAST ½ OF THE NORTHEAST ¼ OF THE NORTHWEST ¼ OF THE SOUTHWEST ¼ OF SAID SECTION.

ALSO EXCEPTING THEREFROM THE SOUTHERLY 40 FEET CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED FILED FOR RECORD JULY 26, 1949 AS INSTRUMENT NO. 3081 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-1 AS SHOWN ON FILE IN BOOK 404, PAGES 67 THROUGH 75, OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 2:

THE EAST ½ OF THE SOUTHWEST ¼, AND THE EAST ½ OF THE NORTHEAST ¼ OF THE NORTHWEST ¼ OF THE SOUTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST,

SAN BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

EXCEPTING THEREFROM THE SOUTHERLY 40 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE, BY DEED RECORDED JULY 26, 1949 AS INSTRUMENT NO. 3081 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-1 AS SHOWN ON FILE IN BOOK 404, PAGES 67 THROUGH 75, OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-3 AS SHOWN ON FILE IN BOOK 419, PAGES 29 THROUGH 39, OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL 3:

THAT PORTION OF THE EAST ½ OF SECTION 29, TOWNSHIP 2 SOUTH, RANGE 4 WEST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

COMMENCING AT THE SOUTHEAST CORNER OF SAID SECTION 29; THENCE NORTHERLY ALONG THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 906 FEET TO THE TRUE POINT OF BEGINNING; THENCE WESTERLY AND PARALLEL THE SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET THENCE NORTHERLY AND PARALLEL WITH THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 577 FEET; THENCE EASTERLY AND PARALLEL WITH THE SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET TO THE EASTERLY BOUNDARY OF SAID SECTION 29; THENCE SOUTHERLY ALONG THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 577 FEET TO THE TRUE POINT OF BEGINNING.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE,

PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 4:

THE NORTH 165 FEET OF THE REAL PROPERTY DESCRIBED AS FOLLOWS:

THAT PORTION OF THE EAST ½ OF SECTION 29, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

COMMENCING AT THE SOUTHEAST CORNER OF SAID SECTION 29; THENCE NORTHERLY ALONG THE EASTERLY BOUNDARY OF SAID SECTION, A DISTANCE OF 329.0 FEET TO THE TRUE POINT OF BEGINNING; THENCE WESTERLY AND PARALLEL WITH THE SOUTH BOUNDARY OF SAID SECTION, A DISTANCE OF 528.0 FEET; THENCE NORTHERLY AND PARALLEL WITH THE EASTERLY BOUNDARY OF SAID SECTION, A DISTANCE OF 577.0 FEET; THENCE EASTERLY AND PARALLEL WITH THE SOUTH BOUNDARY OF SAID SECTION A DISTANCE OF 528.0 FEET; THENCE SOUTHERLY ALONG THE EASTERLY BOUNDARY OF SAID SECTION, A DISTANCE OF 577.0 FEET TO THE TRUE POINT OF BEGINNING.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 5:

THAT PORTION OF THE EAST ½ OF SECTION 29, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL

GOVERNMENT PLAT THEREOF
COMMENCING AT THE SOUTHEAST CORNER OF SAID SECTION 29; THENCE NORTHERLY ALONG THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 329 FEET TO THE TRUE POINT OF BEGINNING; THENCE WESTERLY AND PARALLEL WITH SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET; THENCE NORTHERLY AND PARALLEL WITH THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 577 FEET; THENCE EASTERLY AND PARALLEL WITH THE SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET; THENCE

SOUTHERLY AND ALONG THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 577 FEET TO THE TRUE POINT OF BEGINNING.

EXCEPTING THEREFROM THE NORTH 165 FEET THEREOF.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 6:

THAT PORTION OF THE EAST ½ OF SECTION 29, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

COMMENCING AT THE SOUTHEAST CORNER OF SAID SECTION 29; THENCE WESTERLY ALONG THE SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING WESTERLY ALONG THE SAID SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET; THENCE NORTHERLY AND PARALLEL WITH THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 2640 FEET; THENCE EASTERLY AND PARALLEL WITH THE SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET; THENCE SOUTHERLY AND PARALLEL WITH THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 2640 FEET TO THE TRUE POINT OF BEGINNING.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND

B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL 7: (APN'S: 667-080-006; 667-100-029, 031 AND 038; 667-120-051, 052 AND 024) TENTATIVE (TRACT) MAP 32030-6, BEING A SUBDIVISION OF THE FOLLOWING DESCRIBED PROPERTY:

PARCEL NO. 1:

THE SOUTH ½ OF THE NORTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 2:

THE SOUTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN BERNARDINO

BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

EXCEPTING THEREFROM THE EAST ½ OF THE SOUTHWEST ¼.

ALSO EXCEPTING THEREFROM THE EAST ½ OF THE NORTHEAST ¼ OF THE NORTHWEST ¼ OF

THE SOUTHWEST ¼ OF SAID SECTION.

ALSO EXCEPTING THEREFROM THE SOUTHERLY 40 FEET CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED FILED FOR RECORD JULY 26, 1949 AS INSTRUMENT NO. 3081 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-1 AS SHOWN ON FILE IN BOOK 404 PAGES 67 THROUGH 75 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 3:

THE EAST ½ OF THE SOUTHWEST ¼, AND THE EAST ½ OF THE NORTHEAST ¼ OF THE NORTHWEST ¼ OF THE SOUTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST,

SAN BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

EXCEPTING THEREFROM THE SOUTHERLY 40 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE, BY DEED RECORDED JULY 26, 1949 AS INSTRUMENT NO. 3081 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-1 AS SHOWN ON FILE IN BOOK 404 PAGES 67 THROUGH 75 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-3 AS SHOWN ON FILE IN BOOK 419 PAGES 29 THROUGH 39 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTS

OR GEOTHERMAL SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER

RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT

CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"), TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 4:

THAT PORTION OF THE EAST ½ OF SECTION 29, TOWNSHIP 2 SOUTH, RANGE 3 EAST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

COMMENCING AT THE SOUTHEAST CORNER OF SAID SECTION 29; THENCE NORTHERLY ALONG THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 1483 FEET TO THE TRUE POINT OF BEGINNING; THENCE WESTERLY AND PARALLEL WITH THE SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET; THENCE NORTHERLY AND PARALLEL WITH THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 577 FEET; THENCE EASTERLY LAND PARALLEL WITH THE SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET TO THE EASTERLY BOUNDARY OF SAID SECTION 29; THENCE SOUTHERLY ALONG THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 577 FEET TO THE TRUE POINT OF BEGINNING.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)

PARCEL NO. 5:

THAT PORTION OF THE EAST ½ OF SECTION 29, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

COMMENCING AT THE SOUTHEAST CORNER OF SAID SECTION 29; THENCE WESTERLY ALONG THE SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING WESTERLY ALONG THE SAID SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET; THENCE NORTHERLY AND PARALLEL WITH THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 2640 FEET; THENCE EASTERLY AND PARALLEL WITH THE SOUTHERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 528 FEET; THENCE SOUTHERLY AND PARALLEL WITH THE EASTERLY BOUNDARY OF SAID SECTION 29, A DISTANCE OF 2640 FEET TO THE TRUE POINT OF BEGINNING.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL 8: (APN'S: 667-080-002 THROUGH 004 AND 006)
TENTATIVE (TRACT) MAP 32030-7, BEING A SUBDIVISION OF THE FOLLOWING DESCRIBED PROPERTY:

PARCEL NO. 1
THAT PORTION OF THE NORTHWEST ¼ OF THE NORTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

BEGINNING AT THE SOUTHEAST CORNER OF THE NORTHWEST ¼ OF THE NORTHWEST ¼, OF SAID SECTION; THENCE WESTERLY, ON THE SOUTH LINE OF SAID NORTHWEST ¼ OF THE NORTHWEST ¼ 980.5 FEET, TO THE EAST LINE OF THAT CERTAIN 60 FOOT ROAD KNOWN AS 29 PALMS HIGHWAY; THENCE NORTH 23° 01' 13" EAST ON THE NORTH LINE OF SAID SECTION 390.71 FEET TO THE NORTHEAST CORNER OF THE NORTHWEST ¼ OF THE NORTHWEST ¼ OF SAID SECTION; THENCE SOUTH 0° 09' 30" EAST, ON THE EAST LINE OF THE SAID NORTHWEST ¼

OF THE NORTHWEST ¼ OF SAID SECTION, 1380.18 FEET, TO THE POINT OF BEGINNING.

EXCEPTING THEREFROM ONE HALF OF ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES UNDERLYING SAID LAND AND ½ OF ALL OTHER MINERALS, AS RESERVED IN DEED FROM JOSEPH R. TROTTER, HUSBAND AND WIFE FILED FOR RECORD MARCH 30, 1955 AS BOOK 1715 PAGE 572 OF OFFICIAL RECORDS OF SAID COUNTY.

SAID PROPERTY IS ALSO SHOWN AS PARCEL 2, 3 AND 4 ON RECORD OF SURVEY ON FILE IN BOOK 27 PAGE 65 OF RECORDS OF SURVEY, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 2
THE SOUTH ½ OF THE NORTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STOREAND

REMOVE ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT

LIMITATION THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM

LANDS OTHER THAN THE PROPERTY, WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS

THE SUBSURFACE OF THE PROPERTY, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY

DRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR BEYOND THE EXTERIOR LIMITS OF THE

PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY

SUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE, OPERATE,

PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL 9: (APN'S: 667-080-006 AND 007)
TENTATIVE (TRACT) MAP 32030-8, BEING A SUBDIVISION OF THE FOLLOWING DESCRIBED PROPERTY:

PARCEL NO. 1
THE NORTHEAST ¼ OF THE NORTHWEST ¼ AND THE NORTH ½ OF THE NORTHEAST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-10 AS SHOWN ON FILE IN BOOK 419 PAGES 40 THROUGH 47 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 2:

THE SOUTH ½ OF THE NORTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL 10: (APN'S: 667-080-002 THROUGH 004, 006 AND 007) TENTATIVE (TRACT) MAP 32030-9, BEING A SUBDIVISION OF THE FOLLOWING DESCRIBED PROPERTY:

PARCEL NO. 1
THAT PORTION OF THE NORTHWEST ¼ OF THE NORTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

BEGINNING AT THE SOUTHEAST CORNER OF THE NORTHWEST ¼ OF THE NORTHWEST ¼, OF SAID SECTION; THENCE WESTERLY, ON THE SOUTH LINE OF SAID NORTHWEST ¼ OF THE NORTHWEST ¼ 980.5 FEET, TO THE EAST LINE OF THAT CERTAIN 60 FOOT ROAD KNOWN AS 29 PALMS HIGHWAY; THENCE NORTH 23° 01' 13" EAST ON THE NORTH LINE OF SAID SECTION 390.71 FEET TO THE NORTHEAST CORNER OF THE NORTHWEST ¼ OF THE NORTHWEST ¼ OF SAID SECTION; THENCE SOUTH 0° 09' 30" EAST, ON THE EAST LINE OF THE SAID NORTHWEST ¼ OF THE NORTHWEST ¼ OF SAID SECTION, 1380.18 FEET, TO THE POINT OF BEGINNING.

EXCEPTING THEREFROM ONE HALF OF ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES UNDERLYING SAID LAND AND ½ OF ALL OTHER MINERALS, AS RESERVED IN DEED FROM JOSEPH R. TROTTER, HUSBAND AND WIFE FILED FOR RECORD MARCH 30, 1955 AS BOOK 1715 PAGE 572 OF OFFICIAL RECORDS OF SAID COUNTY.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND

B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
SAID PROPERTY IS ALSO SHOWN AS PARCEL 2, 3 AND 4 ON RECORD OF SURVEY ON FILE IN BOOK 27 PAGE 65 OF RECORDS OF SURVEY, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

PARCEL NO. 2
THE NORTHEAST ¼ OF THE NORTHWEST ¼ AND THE NORTH ½ OF THE NORTHEAST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

EXCEPTING THEREFROM ANY PORTION LYING WITHIN TRACT 32030-10 AS SHOWN ON FILE IN BOOK 419 PAGES 40 THROUGH 47 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.)
PARCEL NO. 3
THE SOUTH ½ OF THE NORTHWEST ¼ OF SECTION 28, TOWNSHIP 2 SOUTH, RANGE 4 EAST, SAN

BERNARDINO BASE AND MERIDIAN, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL GOVERNMENT PLAT THEREOF.

ALSO EXCEPTING THEREFROM ALL THAT INTEREST CONVEYED TO DRH ENERGY, INC., A COLORADO CORPORATION BY DOCUMENT RECORDED OCTOBER 13, 2006, AS INSTRUMENT NO.

2006-0756951 OF OFFICIAL RECORDS OF SAID COUNTY. SAID INTEREST IS FURTHER DESCRIBED AS FOLLOWS:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" ATTACHED HERETO AND INCORPORATED HEREIN (THE "PROPERTY"),TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSSTHE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLYDRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANYSUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY.

PARCEL 11: (APN'S: 667-300-055-0, 667-300-056-1, 667-300-057-2, 667-310-085-8, 677-310-086-9, 677-310-087-0, 677-320-027-7, 677-320-028-8, 677-320-079-4, 667-330-014-6, 667-330-073-9, 667- 330-074-0 AND 667-330-075-1)
LETTERED LOTS A, B, C, F, G, H, I, J, K, L, M AND N OF TRACT NO. 32030-3 AS SHOWN ON BY MAP ON FILE IN BOOK 419 PAGES 29 THROUGH 39 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

EXCEPTING THEREFROM:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" IN DEED RECORDED OCTOBER 13, 2006 AS INSTRUMENT NO. 2006- 0756951 OF OFFICIAL (THE "PROPERTY"), TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND
B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY. AS CONVEYED IN DEED RECORDED OCTOBER 13, 2006 AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS.

PARCEL 12: (APN'S: 667-340-049-9, 667-340-350-9, 667-350-075-3, 667-350-076-4, 667-360-061-1, 667-360-062-2 AND 667-360-063-3)

LETTERED LOTS A THROUGH F OF TRACT NO. 32030-10, AS SHOWN BY MAP ON FILE IN BOOK 419 PAGES 40 THROUGH 47 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

EXCEPTING THEREFROM:

A. ANY AND ALL (I) OIL RIGHTS, (II) MINERAL RIGHTS, (III) NATURAL GAS RIGHTS, (IV) RIGHTS TO ALL OTHER

HYDROCARBONS BY WHATSOEVER NAME KNOWN, (V) GEOTHERMAL HEAT RIGHTSOR GEOTHERMAL

SUBSTANCES THAT MAY BE PRODUCED FROM THE PROPERTY, (VI) WATER RIGHTS AND CLAIMS OR RIGHTS TO WATER AND (VII) ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING (COLLECTIVELY, "SUBSURFACE RESOURCES") LOCATED IN OR UNDER THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA DESCRIBED IN EXHIBIT "A" IN DEED RECORDED OCTOBER 13, 2006 AS INSTRUMENT NO. 2006- 0756951 OF OFFICIAL RECORDS (THE "PROPERTY"), TO THE EXTENT SUCH SUBSURFACE RESOURCES HAVE NOT BEEN PREVIOUSLY RESERVED; AND B. THE PERPETUAL RIGHT TO DRILL, MINE, EXPLORE AND OPERATE FOR AND PRODUCE, STORE AND REMOVE

ANY OF THE SUBSURFACE RESOURCES ON OR FROM THE PROPERTY, INCLUDING WITHOUT LIMITATION THE

RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE, FROM LANDS OTHER THAN THE PROPERTY,

WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE PROPERTY, AND TO

BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS WITHIN OR

BEYOND THE EXTERIOR LIMITS OF THE PROPERTY, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR,

DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, BUT WITHOUT THE RIGHT TO DRILL, MINE, EXPLORE,

OPERATE, PRODUCE, STORE OR REMOVE ANY OF THE SUBSURFACE RESOURCES THROUGH OR IN THE SURFACE OF THE PROPERTY OR THE UPPER FIVE HUNDRED (500) FEET OF THE SUBSURFACE OF THE PROPERTY. AS CONVEYED IN DEED RECORDED OCTOBER 13, 2006 AS INSTRUMENT NO. 2006-0756951 OF OFFICIAL RECORDS.

PARCEL 13: (APN: 162-230-015 AND 162-230-021)
PARCEL "B" AS SHOWN ON LOT LINE ADJUSTMENT NO. LLA #19007, AS EVIDENCED BY DOCUMENT RECORDED MARCH 12, 2020 AS INSTRUMENT NO. 2020-0115685 OF OFFICIAL RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

THAT PORTION OF LOT 3 OF TRACT NO. 36822, IN THE CITY OF JURUPA VALLEY, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 465 OF MAPS, PAGES 69 THROUGH 73, INCLUSIVE, OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, LYING WITHIN SECTION 27, TOWNSHIP 2 SOUTH, RANGE 6 WEST, S.B.M., MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHEAST CORNER OF SAID LOT 3, SAID POINT BEING ON THE SOUTHERLY RIGHT OF WAY OF RANCHO JURUPA DRIVE, HAVING A HALF WIDTH OF 30.00 FEET, AS SHOWN ON

SAID MAP, SAID POINT ALSO BEING ON A NON TANGENT CURVE CONCAVE TO THE NORTH AND HAVING A RADIUS OF 280.00 FEET, A RADIAL LINE FROM SAID POINT BEARS NORTH 08º 54’ 47” EAST;
THENCE SOUTH 00º 36’ 07” WEST, ALONG THE EAST LINE OF SAID LOT 3, A DISTANCE OF 516.44 FEET;
THENCE SOUTH 28º 46’ 32” WEST, A DISTANCE OF 49.89 FEET TO A POINT ON THE SOUTHERLY LINE OF SAID LOT 3, SAID POINT ALSO BEING ON THE NORTHERLY RIGHT OF WAY OF EQUESTRIAN WAY, HAVING A HALF WIDTH OF 30.00 FEET, AS SHOWN ON SAID MAP; THENCE NORTH 61º 13’ 28” WEST, ALONG SAID SOUTHERLY LINE OF SAID LOT 3, A DISTANCE OF

28.60 FEET;
THENCE SOUTH 31º 30’ 21” WEST, A DISTANCE OF 275.43 FEET;

THENCE SOUTH 76º 56’ 11” WEST, A DISTANCE OF 35.62 FEET; THENCE NORTH 57º 37’ 59” WEST, A DISTANCE OF 340.72 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE TO THE NORTHEAST AND HAVING A RADIUS OF 345.00 FEET; THENCE NORTHWESTERLY ALONG SAID CURVE, AN ARC DISTANCE OF 88.86 FEET, THROUGH ACENTRAL ANGLE OF 14º 45’ 26”;
THENCE NORTH 72º 23’ 25” WEST, A DISTANCE OF 496.61 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE TO THE SOUTH AND HAVING A RADIUS OF 845.00 FEET; THENCE WESTERLY ALONG SAID CURVE, AN ARC DISTANCE OF 484.34 FEET, THROUGH A CENTRAL ANGLE OF 32º 50’ 27”;
THENCE SOUTH 74º 46’ 08” WEST, A DISTANCE OF 153.49 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE TO THE SOUTHEAST AND HAVING A RADIUS OF 670.00 FEET; THENCE SOUTHWESTERLY ALONG SAID CURVE, AN ARC DISTANCE OF 1.51 FEET, THROUGH A CENTRAL ANGLE OF 00º 07’ 44”;
THENCE NORTH 64º 15’ 42” WEST, A DISTANCE OF 19.83 FEET TO A POINT ON THE WEST LINE OFSAID LOT 3, SAID POINT BEING ON THE EAST RIGHT OF WAY OF BEACH STREET, HAVING A HALF WIDTH OF 28.00 FEET, AS SHOWN ON SAID MAP; THENCE NORTH 15º 13’ 52” WEST, A DISTANCE OF 80.36 FEET TO THE BEGINNING OF A TANGENTCURVE CONCAVE TO THE EAST AND HAVING A RADIUS OF 302.00 FEET; THENCE NORTHERLY ALONG SAID CURVE, AN ARC DISTANCE OF 294.47 FEET, THROUGH A CENTRAL ANGLE OF 55º 52’ 01” TO THE BEGINNING OF A REVERSE CURVE CONCAVE TO THE NORTHWEST AND HAVING A RADIUS OF 258.00 FEET, A RADIAL LINE FROM SAID POINT BEARSNORTH 49º 21’ 51” WEST;
THENCE NORTHERLY ALONG SAID CURVE, AN ARC DISTANCE OF 170.77 FEET, THROUGH ACENTRAL ANGLE OF 37º 55’ 25”;
THENCE NORTH 51º 01’ 34” EAST, A DISTANCE OF 19.54 FEET TO A POINT ON THE NORTH LINEOF SAID LOT 3, SAID POINT BEING ON THE SOUTH RIGHT OF WAY OF RANCHO JURUPA DRIVE, HAVING A HALF WIDTH OF 30.00 FEET, AS SHOWN ON SAID MAP; THENCE SOUTH 89º 05’ 29” EAST, ALONG SAID NORTH LINE, A DISTANCE OF 1041.48 FEET

TOTHE BEGINNING OF A TANGENT CURVE CONCAVE TO THE SOUTH AND HAVING A RADIUS OF
220.00 FEET;
THENCE EASTERLY ALONG SAID CURVE, AN ARC DISTANCE OF 84.14 FEET, THROUGH A CENTRALANGLE OF 21º 54’ 51”;
THENCE SOUTH 67º 10’ 38 EAST, A DISTANCE OF 57.56 FEET TO THE BEGINNING OF A TANGENTCURVE CONCAVE TO THE NORTH AND HAVING A RADIUS OF 280.00 FEET; THENCE SOUTHEASTERLY ALONG SAID CURVE, AN ARC DISTANCE OF 67.98 FEET, THROUGH A CENTRAL ANGLE OF 13º 54’ 35” TO THE POINT OF BEGINNING.

PARCEL 14: (APN: 162-220-019; 162-220-020; 162-220-021; 162-230-010; 162-230-011; 162- 230-
012; 162-230-013; 162-230-014 AND 162-230-016)
LOT 4, 5, 6, 7, 8 AND 9 OF TRACT NO. 36822, IN THE CITY OF JURUPA VALLEY, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 465 OF MAPS, PAGES 69THROUGH 73, INCLUSIVE, OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXHIBIT “B”

MAP OF PROPERTY

EXHIBIT “C”

EXISTING DEVELOPMENT APPROVALS
Final Environmental Impact Report (SCH# 2004061026), including Environmental Assessment No. 01-04 and associated CEQA Findings, Statements of Overriding Consideration, the Comments and Response Document, and Mitigation, Monitoring Program for the StoneRidge Specific Plan
General Plan Amendment No. 02-04
Zoning Map Amendment No. 02-04
Specific Plan No. 01=04, “The StoneRidge Specific Plan” Vesting Tentative Map No. 32030
Tentative Map No. 32029
Development Agreement No. 01-04

EXHIBIT “D”

EXISTING LAND USE REGULATIONS
City of Desert Hot Springs Comprehensive General Plan, including all amendments up to and including General Plan Amendment No. 02-04
City of Desert Hot Springs Zoning Ordinance, Design Guidelines and Subdivision Ordinance, including all amendments up to and including Zoning Map Amendment No. 02-04
Specific Plan No. 01-04, “The StoneRidge Specific Plan”

EXHIBIT “E”

PERFORMANCE SCHEDULE
Date Performance Due Measured by
Anniversary Date of Recordation of First
Amendment to Development Agreement Description of Cumulative Performance 5th Anniversary Owner to have obtained certificates of
occupancy for at least 200 homes
10th Anniversary Owner to have obtained certificates of occupancy for at least 400 homes
15th Anniversary Owner to have obtained certificates of occupancy for at least 600 homes
20th Anniversary Owner to have obtained certificates of occupancy for at least 800 homes
25th Anniversary Owner to have obtained certificates of occupancy for at least 1,000 homes
30th Anniversary Owner to have obtained certificates of occupancy for at least 1,200 homes
35th Anniversary Owner to have obtained certificates of occupancy for at least 1,400 homes
40th Anniversary Owner to have obtained certificates of occupancy for at least 1,600 homes
45th Anniversary Owner to have obtained certificates of occupancy for at least 1,746 homes

EXHIBIT “F”

SCHEDULE OF FEES APPLICABLE TO EXISTING DEVELOPMENT APPROVALS

AND SUBSEQUENT DEVELOPMENT APPROVALS

This Development Agreement ("Agreement") is entered into effective on the date it is recorded with the RiversideCounty Recorder ("Effective Date") by and among the City of Desert Hot Springs, a Californiamunicipal corporation ("City"), and First West—DHSAssociates,LLC, a California limited liability company ("Owner"):

RECITALS
WHEREAS, City is authorizedto enter into binding development agreements with persons having legal or equitable interests in real property for the development of such property, pursuant to Section 65864, et sea. of the Government Code; and
WHEREAS, Owner has requested City to enter into a development agreement and proceedings have been taken in accordance with the rules and regulations of City; and WHEREAS, by electing to enter into this Agreement, City shall bind future City Councils of City by the obligations speci?ed herein and limit the future exercise of certain govermnental and proprietary powers of City; and
V V WHEREAS, the best interestsof the citizens of the City and the public health,safety and ‘ " ":_':=w.elfare will be served by entering into this Agreement; and WHEREAS, prior to or concurrent with the approval of this Agreement, all of the procedures of the California Environmental QualityAct will have been met with respect to the ‘Project and the Agreement through theadoption of a statement of overriding considerations,the p
, adoption of environmental?ndings and a mitigation monitoring and reporting program, and the " j certification of an environmental impactreport ("EIR"); and e WHEREAS, thisAgreement and the Project are consistent with the City's Comprehensive GeneralPlan and the Stoneridge Speci?c Plan ("Speci?c Plan") applicablethereto; and WHEREAS, all actions taken and approvals given by City have been duly taken or approvedin accordancewith all applicablelegalrequirementsfor notice, public hearings, ?ndings, votes, and other proceduralmatters; and
WHEREAS, development of the Property in accordance with this Agreement will provide 7 substantialbene?ts to City and will further importantpolicies and goals of City; and WHEREAS, this Agreementwill eliminate uncertainty in planning and provide for the orderly developmentof theProperty, ensure progressive installationof necessary improvements, provide for public services appropriate to the development of the Project, and generallyserve the purposes for which development agreements under Sections 65864, et seq. of the Government Code are intended;and
WHEREAS, Owner has incurred and will in the Mure incur substantial costs in order to assure development of the Property in accordancewith this Agreement; and WHEREAS, Owner hasincurred and will in the future incur substantial costs in excess of the generally applicable requirements in order to assure vesting of legal rights to develop the Property in accordance with this Agreement.

COVENANTS
NOW, THEREFORE, in consideration ofthe above recitals and of the mutual covenants hereinafter contained and for other good andvaluable consideration,the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.DEFINITIONS AND EXHIBITS.

1.1 De?nitions. The following terms when used in this Agreement shall be defined as follows:

1.1.1 "Agreement" means this Development Agreement.

1.1.2 "City" means the City of Desert Hot Springs, a political subdivisionof the State of California

1.1.3 “Development" means the improvement of the Property for the purposes of completing the structures, improvements and facilities comprising the Project including, but not limitedto: grading; the constructionof infrastructure and public facilities related to the " Project whether locatedwithinor outsidethe Property, the construction of buildings and structures; and _ _ R
- the installationicofclandscaping.- "Development" does not include the maintenance, repair, R reconstruction or redevelopment of any building, structure, improvement or facility after the construction and completionthereof.

1.1.4 "DevelopmentApprovals” means all permits and other entitlements foruseI subject to approval or issuanceby City in connection with development of the Property including,T, but not limited to: s
*
, (a) ,
. general plan, specific plans andgeneral plan and speci?c plan amendments; (b) tentative and final subdivisionand parcel maps, including vesting maps; (c) conditionaluse permits, development permits, public use permits and plot“ plans;
(d) zoning;
(e) grading andbuilding permits.

1.1.5 "DevelopmentExaction" means any requirement of City in connectionwith I or pursuant to any Land Use Regulation or DevelopmentApproval for the dedication of land,the construction of improvements or public facilities,or the payment of fees in order to lessen,offset, mitigate or compensate for the impacts of development on the environment or other public , interests.

1.1.6 "Development Plan" means the Existing DevelopmentApprovals and the Existing Land Use Regulations applicable to development of the Property.

1.1.7 "Effective Date" means the date this Agreement is recordedwith the County Recorder.

1.1.8 "Existing Development Approvals" means all Development Approvals approved or issued prior to the Effective Date, including any and all conditions of approval and the mitigation monitoring plan adopted at the time of the approvals. Existing Development Approvalsincludesthe Approvalsincorporatedherein as Exhibit "C" and all otherApprovals that are a matter of public record on the Effective Date.

1.1.9 "Existing Land Use Regulations means all Land Use Regulationsin effect on the Effective Date. Existing Land Use Regulations include the Regulations incorporated herein as Exhibit 'D" and all other Regulations that are a matter of public record on the Effective Date.

1.1.10 "Land Use Regulations" means all ordinances,resolutions, codes, rules, regulations and of?cial policies of City governing the developmentand use of land, including, without limitation, the permitted use of land, the density or intensity of use, subdivision requirements, the maximum height and size of proposed buildings, the provisions for reservation or dedicationofland for public purposes, and the design, improvementand construction standards A andspeci?cations applicableto the developmentof the property. "LandUse Regulations” does not include any City ordinance,resolution,code,rule,regulation or official policy, governing:
——
1 .(a) the conduct of businesses,professions, and occupations; (b) taxes and assessments;
(c) the control and abatementof nuisances;
(d) the granting of encroachmentpermits and the conveyance of rights and interests thatprovide for the use of or the entry upon public property, (e) the exercise of the power of eminent domain;
(f) any other matters unrelatedto uses of land, density, design, improvement, and construction standardsand speci?cations.

1.1.11 "Owner" means the persons and entities listed as Owner on page 1 of this Agreement and, subject to the provisions of Section 2.4, their successors in interest to all or any part of the Property.

1.1.12 "Mortgagee" means a mortgagee of a mortgage, a bene?ciary under a deed of trust or anyother security-devicelender,and their successors and assigns. ,.
, .1.1.13,‘,‘P,roject"means the development of the Property contemplated by the Development Plan as such Plan may be further de?ned, enhanced or modi?ed pursuant to the provisions of thisAgreement.

1.1.14 "Property" means the real property describedon Exhibit "A" and shown on Exhibit "B" to this Agreement.

1.1.15 "Reservations of Authority" means the rights and authority excepted from the assurances and rights provided to Owner under this Agreement and reserved to City under Section 3.6 of this Agreement.

1.1.16 "Subsequent Development Approvals" means all Development Approvals required subsequent to the Effective Date in connection with development of the Property.

1.1.17 "Subsequent Land Use Regulations" means any Land Use Regulations adopted and effective after the Effective Date of this Agreement.

1.2 Exhibits. The following exhibits are hereby replaced and revised exhibits are attached to, and by this reference 3 made a part of this@ Agreement:

Exhibit "A" - Legal Description of the Property.

Exhibit “B" - Map showing Property and its location.

Exhibit "C" - Existing Development Approvals.

Exhibit "D” — Existing Land Use Regulations.

Exhibit "E" - Performance Schedule.

Exhibit “F” — Fee Schedule.

2. GENERAL PROVISIONS.

2.1 Binding Effect of Agreement. The Property is hereby made subject to this Agreement. Development of the Property is hereby authorized and shall be carried out only in accordance with the terms of this Agreement.

2.2 Ownership of Property. Owner represents and covenants that it is the owner of the fee simple title to the Property. As a condition precedent to the City's obligations hereunder,Owner shall provide to City a copy of the Operating Agreement for First West-DHS Associates,LLC, rnd all other documents required to establish the authority of the representatives signing below to bind the entity to the obligations of this Agreement.

2.3 Term. The term of this Agreement is extended such that it shall expire on May 5, 2035. The City Council shall find that the Owner has is in substantial compliance with this
Agreement so long as the ‘
‘
' ' ’ ' '
'
anel—is—Owner is not in material default of ten—(—H9)—years ‘
'
' @yte1m
l1e1'ei11. This finding by the City Council shall take place during the Periodic Review. Further.if the City Council; ?nds that the Owner is in substantial compliance during the Periodic Review conducted eluringinthe te&tl+(—l0*“’-year this Agreement; out in Exhibit "E" and all
to expire, this Agreement shall be automatically renewed for an additional ten (10) years upon the same terms and conditions as contained herein.

2.4 Assignment.

2.4.1 Right to Assign. Owner shall have the right to sell, transfer or assign the Property in whole or in part (provided that no such partial transfer shall violate the Subdivision Map Act, Government Code Section 66410, et seq.) to any person, partnership,joint venture, ?rm or corporation at any time during the term of this Agreement; provided, however, that any such sale, transfer or assignment shallinclude the assignment and assumption of the rights, duties and obligations arising under or from this Agreement and be made in strict compliance with the following conditions precedent:
(a) No sale, transfer or assigmnent of any right or interest under this Agreement shall be made unless made together with the sale, transfer or assignment of all or a part of the Property.
,(b) Concurrent with any such sale, transfer or assignment, or within fifteen (15) business days thereafter, Owner shall notify, City, in writing, of such sale, transfer or assigmnent and shallprovide City with an executed agreement in a form reasonably acceptableto City, by the purchaser, transferee or assignee and providing therein that the purchaser, transferee or assignee c expressly and unconditionally assumes all the duties and obligations of Owner under this Agreement.
(c) The purchaser,transferee or assignee has established,to the satisfactionof that security equivalentto any security previously providedby Owner to secure performance of its obligations hereunder continues to secure such performance by the purchaser, transferee or 2 assignee.

Any sale, transfer or assigmnent not made in strict compliance with the foregoing conditions shall constitute a non—curable,material breach of this Agreement. Notwithstanding the A : failureof any purchaser,transferee or assignee to execute the agreement requiredby Paragraph(b) ~ " 7 2 2 of this Subsection 2.4.1, the burdens of this Agreement shall be binding upon such purchaser, ' . transfer or assignee, but the bene?ts ofthis Agreement shall not inure to such purchaser,transferee - or assignee until and unless such agreement is executed and the City thereafter provides written * waiver of the breach arising out of the sale, transfer or assignment prior to compliancewith the provisions of this Section 2.4.

2.4.2 Release of Transferring Owner. Notwithstanding any sale, transfer or assignment, a transferring Owner shall continue to be obligated underthis Agreement unless such * transferring owner is given arelease inwriting by City, which release shall be provided by City ‘ upon thefull satisfaction by suchtransferring Owner of the following conditions:
(a) Owner no longer has a legal w equitableinterest in all or anypart of the property. (b) Owner is not then in default under this Agreement.
(c) Owner has providedCity with the notice and executed agreement requiredunder Paragraph (b) of Subsection2.4.1 above.
(d) The purchaser, transferee or assignee provides City with security equivalentto any security previously provided by Owner to secure performance of its obligations hereunder.

2.4.3 Subseguent Assignment. Any subsequentsale, transfer or assignment after, an initial sale, transfer or assignment shall be made only in accordance with and subject to the terms and conditions of this Section 2.4.
---..-.. .' . ' AA
Agreement:

2.4.4 Deleted.

2.4.5 Individual Lots Sold to Public and Completion of Construction. The provisions of Subsection 2.4.1 shall not apply to the sale or lease (for a period longer than one year) of any lot that has been legally subdivided and is individually (and not in "bulk") sold or leased to a member of the public or other ultimate user. Notwithstanding any other provisions of this Agreement, this Agreement shall terminate with respect to any lot and such lot shall be released and no longer be subject to this Agreement without the execution or recordation of any Met document upon satisfaction of both of the following conditions:
(a) The lot has been ?nally subdivided and individually (and not in "bulk‘) sold or leased (for a period longer than one year) to a member of the public or other ultimate user, and, (b) A Certi?cate of occupancy has been issued for a building on the lot.

2.5 Amendment or Cancellation of Agreement. This Agreement may be amended or cancelled in whole or in part only by written consent of all parties in the manner provided for in Government Code Section 65868. This provision shall not limit any remedy of City or Owner as provided by this Agreement.

2.6 Termination. This Agreement shall be deemed terminated and of no further effect upon the occurrence of any of the following events:
(a) Expiration or termination of the stated term of this Agreement as set forth in Section 2.3.
(b) Subject to the notice and hearing rights set out herein, a termination of the Agreement pursuant to a material breach of the terms of this Agreement. (c) Entry of a ?nal judgment setting aside, voiding or annulling the adoption of the ordinance approving this Agreement.

(d). The adoption of a referendum measure overriding or repealing the ordinance approving this Agreement.
(e) Completion of the Project in accordance with the terms of this Agreement including issuance of all required occupancy permits and acceptance by City or applicable public agency of all required dedications.

Termination of this Agreement shall not constitute termination of any other land use entitlements approved for the Property. Upon the termination of this Agreement no party ,1 shall have any further right or obligation hereunder except with respect to any obligation to have been performed prior to such termination or with respect to any default in the performance of the provisions of this Agreement that has occurred prior to such termination or with respect to any obligations that are speci?cally set forth as surviving this Agreement. The vested rights of Owner under this Agreement as to any parcel(s) for which it has not obtained a building permit shall expire upon the termination or expiration of this Agreement.

2.7 Notices.
(a) As used in this Agreement "notice" includes, but is not lirrrited to, the communication of notice, request, demand, approval, statement, report, acceptance, consent, waiver, appointment or other communication required or permitted hereunder. (b) All notices shall be in writing and shall be considered given either. (i) when delivered in person to the recipient named below; or (ii) on the date of delivery shown on the return receipt, after deposit in the United States mail in a sealed envelope as either registered or certi?ed mail with return receipt requested, and postage and postal charges prepaid, and addressed to the recipient named below; or (iii) on the date of delivery shown in the records of the telegraph company after transmission by telegraph to the recipient named below. All notices shall be addressed as follows:

If to City:

City Manager
City of Desert Hot Springs
11999 Palm Drive
Desert Hot Springs, CA 92240
IftoOwner.

F._ W EH.” . ‘IX:
1—19§—Q=crail—st—.

Newper—tSkyborrreVentures, LLC
505 Lomas Santa Fe Drive, Suite 230
Solana Beach, CA 9266992075
. In. H}

Attn: Gregory P. Lansing
With a Copy to:

E E
.
_ . I
La1rsirrg Industries, Inc.
505 Lomas Santa Fe Drive, Suite 230
Solana Beach, CA 9259l92075
Attn: Paul W. Pitingaro, Esq
(c) Either party may, by notice given at any time,require subsequent notices to be given to another person or entity, whether a party or an officer or representative of a party, or to a different address, or both. Notices given before actual receipt of notice of change shall not be invalidated by the change.

3. DEVELOPMENT OF THE PROPERTY.

3.1 Rights to Develop. Subject to the terms of this Agreement including the Reservations of Authority, Owner shall have a vested ?ght to develop the Property in accordance with, and to the extent of the land use and density standards set out in the Development Plan.

Except as otherwise provided in this Agreement, the permitted uses of the Property, the density and intensity of use, the maximum height and size of proposed buildings, and provisions for reservation and dedication of land for public purposes shall be those set forth in the Development Plan.

3.2 Effect of Agreement on Land Use Regulations. Except as otherwise provided under the terms of this Agreement including the Reservations of Authority, the rules, regulations and official policies governing permitted uses of the Property, the density and intensity of use of the Property and the maximum height and size of proposed buildings applicable to developmentof the Property shall be the Existing Land Use Regulations.

3.3 Timing of Development. The parties acknowledge that Owner cannot at this time predict when or the rate at which phases of the Property will be developed. Such decisions depend upon numerous factors that are not within the control of Owner, such as market orientation and demand, interest rates, absorption, completion and other similar factors. Since the California Supreme Court held in Pardee Construction Co. v. City of Camarillo (1984) 37 Gal—3dCal.3d465, that the failure of the parties therein to provide for the timing of development resulted in a later adopted initiative restricting the timing of development to prevail over such parties‘ agreement, it is the parties’intent to cure that de?ciency by acknowledging and providing that Owner shall have the right to develop the Property in such order and at such rate and at such times as Owner deems appropriate within the exercise of its subjective businessjudgment, subject only to the timing and phasing requirements as shown in Exhibit "E3", which timing and phasing requirements may be modi?ed from time to time by the City Manager, in City Manager’s reasonable discretion, after

reguest from Owner, and as otherwise set foith in the Development Plan or the Phasing Plan set forth in Section 3.4.

3.4 Phasing Plan. Development of the Property shall be subject to all timing and phasing requirements as shown in Exhibit "E3"", which timing and phasing requirements may be modi?ed from time to time by the City Manager, in City Manager’s reasonable discretion, after request from Owner, and as otherwise established by the Development Plan, including the Speci?c Plan. Once it l1as obtained a building permit and begun constiuction of a phase of the Project, Owner shall diligently proceed to completion of such phase.

3.5 Changes and Amendments. The parties acknowledge that re?nement and further development of the Project will require Subsequent Development Approvals and may demonstrate that changes are appropriate and mutually desirable in the Existing DevelopmentApprovals. In the event Owner ?nds that a change in the Existing Development Approvals is necessary or appropriate, Owner shall apply for a Subsequent Development Approval to effectuate such change and City shall process and act on such application in accordance with the Existing Land Use Regulations, except as otherwise provided by this Agreement including the Reservations of Authority. If approved, any such change in the Existing Development Approvals shall be incorporatedherein as an addendum to Exhibit "C", and may be further changed from time to time as provided in this Section. Unless otherwise required by law, as determined in City's reasonable discretion, a change to the Existing Development Approvals shall be deemed "minor" and not require an amendment to this Agreement provided such change does not:
(a) Alter the permitted uses of the Property as a whole; or, (b) Increase the density or intensity of use of the Property as a whole; or, (C)Increase the maximum height and size of permitted buildings; or, ((1) Delete a requirement for the reservation or dedication of land for public purposes within the Property as a whole; or,
(e) Constitute a project requiring a subsequent or supplemental environmental impact repoit pursuant to Section 21166 of the Public Resources Code.

3.6 Reservations of Authority.

3.6.1 Limitations, Reservations and Exceptions. Notwithstanding any other provision of this Agreement, the Mowing Subsequent Land Use Regulations shall apply to the development of the Property.
(a) Processing fees and charges of every kind and nature imposed by City to cover the estimated actual costs to City of processing applications for DevelopmentApprovals or for monitoring compliance with any Development Approvals granted or issued. (b) Procedural regulations relating to hearing bodies, petitions, applications, notices, ?ndings, records, hearings, reports, recommendations, appeals and any other matter of procedure.

(c) Regulations governing construction standards and specifications including, without limitation, the City's Building Code, Plumbing Code, Mechanical Code, Electrical Code, Fire Code and Grading Code.
gd1Deleted.
(e) Regulations that may be in con?ict with the Development Plan but that are reasonably necessary to protect the public health and safety. To the extent possible, any such regulations shall be applied and construed so as to provide Owner with the rights and assurances provided under this Agreement.
(t) Regulations that are not in con?ict with the Development Plan. Any regulation, whether adopted by initiative or otherwise, limiting the rate or timing of development of the Property shall be deemed to con?ict with the Development Plan and shall therefore not be applicable to the development of the Property.
(g) Regulations that are in con?ict with the Development Plan provided Owner has given written consent to the application of such regulations to development of the Property.
(h) Regulations applying new or increased fees that are determined by agencies which are not within the exclusive control of the City.

3.6.2 Subsequent Development Approvals. This Agreement shall not prevent City, in acting on Subsequent Development Approvals, from applying Subsequent Land Use 1‘egu1atio1is that are unrelated to the peimitteel uses—efthe }’, tlieeleiisitlyuané Develop1ne11t Plan, nor
shall this Agreement prevent City from denying or conditionally approving any Subsequent Development Approval on the basis of the-Existing Land Use Regulations or any SubsequentLand Use Regulation not in con?ict with the standards set out in the DevelopmentPlan.

3.6.3 Notwithstanding any other provision herein, City expressly remains its authority and remedies to enforce applicable non-land use statutes and codes, including without limitation, tax, criminal,and health & safety statutes and codes.

3.7 Tentative Tract Map Extension. Pursuant to the provisions of Section 66452.6, subdivision (a) of the Subdivision Map Act, the Master Tract Map and any subsequent vesting or tentative maps approved in connection with Development of the Property or Project, shall be extended for the Term of this Agreement.

3.8 The duration of each of the building peimits to be issued for the Project is not modi?ed by this Agreement and will be as set forth in the applicable building and safety codes.

4. PUBLIC BENEFITS.

4.1 Intent. The parties acknowledge and agree that development of the Property will result in substantial public needs that, absent Owner's consent hereunder, will not be fully met by the Development Plan and further acknowledge and agree that this Agreement confers substantial private bene?ts on Owner that should be balanced by coirnnensurate public bene?ts. Accordingly, the parties intend to provide consideration to the public to balance the private bene?ts conferred on Owner by providing more fully for the satisfaction of the public needs resulting from the Project. Owner expressly acknowledges its acceptance of the mitigation monitoring plan and the conditions of approval that are incorporated in the Development Plan, including Withoutlimitation the obligations imposed with respect to the construction of a Fire Station, public park and all other DevelopmentExactions identi?ed in the Development Plan.

4.1.1 Pierson Blvd. Improvements. Owner to make contribution to the Gi?y in the sum of $600:,00O,without any credit against impact fees or right of reimbursement whatsoever, toward the total cost of currently proposed improvements required on Pierson Boulevard east of the Project in order to meet the increased traf?c demand identi?ed in the EIR as being generated by the Project. Said contribution shall be in lieu of any other mitigation suggested or proposed in the _ _ . . . _. .

Certi?cate of Oecupancy for speci?c to the Project’s
impact on Pierson Boulevard east of the Project. As of the date hereof, Owner has contributed $400,000 of the $600,000 to the City. Owner shall cause the ?nal payment of $200,000 to be directed to the City from proceeds received by Owner from the remaining bond sales to fund improvements in Improvement Area 1 of CFD2006-l (de?ned below).

Owne1"s obligations to constmct

(b) Deleted.

4.1.3 Park Improvements. As agreed by Owner, and in ll-lf_u? satisfaction of the City's Quimby requirements, Owner shall provide the following park facilities at Owner's sole cost and expense, and without my—Meranyfurther right of reimbursement whatsoever, as follows:
(a) Karen Street Park, Owner sl1all : (i) dedicate to City the approximately ?ve (5—)_acre site identi?ed in the conditions of approval incorporated in the DevelopmentPlan,' -
' " -
' -' -- ----
net—teraeeeed—(the “Karen Park Parcel”) for use as a public park within ?fteen (15) business days of the recording of this First Amendment in the Of?cial Records; and (ii) contribute $1,200,000; (“Karen Park Payment”) to the City for construction of the improvements at the Karen Park Parcel concurrent with the sale of the earlier of any lots in either Village 3 or Village 10. Owner will notify City Manager in writing upon the opening of escrow to sell the lots in either Village 3 or Village 10 to facilitate City’s delivery of an escrow demand to Owner and escrow holder for payment of the Karen Park Payment ?‘om Owner’s proceeds ?'om the sale.

Following dedication of the Karen Park Parcel and delivery of the Karen Park Payment, Developer shall .- - -- - --':---- - -- --e = .:--
' ' ' have satis?ed its obligations related to the Karen Park Parcel. (b) Parks Within Development. Owner shall develop the park(§) and open areas described in the Development Plan co11siste11t with City standards and as approved by the City Manager. Any and all parks identi?ed within a?y Village shall be completed on or before thaissuance of ??y percent (50%) of the certi?cates of occupancy for a residential unit in that Village. Provided all park areas are developed concurrent with the build-out of each Village, Owner shall be entitled to credit against Quimby fees equal to the improved park acreage deemed by the City to be park area. Before ‘ *
‘
' ‘ ‘
' , Owner shall ‘ ensure that the park
areas shall be owned, used and maintained by the Ho1neow11e1"s Association as park areas in perpetuity.

4.1.4 Financing of Public Improvements. A
(a) Infrastructure Financing. The Owner believes that the project cannot proceed without a CFD or Alternative Financing Mechanism (“Financing District”) to reimburse the developer for public facilities costs for infrastructure to be owned by the City or other public agencies and associated developer impact fees. At Developer's request, City may at its sole discretion establish an assessment district(s), community facilities district(s) or other public financing mechanism to finance any necessary public improvements for the Project substantially consistent with the f1nancing_plan(“Financing Plan”).
(b) Improvements and Financing/Community Facilities District+GFD) Pursuant to Chapter 2.5 (commencing with section 53311) Part 1, Division 2, Title 5 of the Government Code of the State of California, commonly known as tl1e "Mello—RoosCommunity FacilitiesAct of 1982," the Developer may, at its sole election, petition the City Council, , '
'
of the City or a joint powers agency
in which the City is a member to establish a Community Facilities District ("CFD" or “District”), in accordance with the City's policies in existence on the Effective Date.

Altematively, or in addition thereto, the Develoypermay request that the City initiate and Complete proceedings under the Municipal Improvement Act of 1911, the Municipal Improvement Act of 1913, the Improvement Bond Act of 1915, or any and all other available public financing mechanism, to provide public conduit financing for the construction '
'
'
‘ ‘
'
' '
' ' of public infrastructureimprovements on the Property ("Alternative Financing Mechanisms"). If so requested by the Developer; the City may at its sole discretion cooperate with the Developer (or, for matters beyond its control, and may use its best efforts) in taking all steps necessary to cause the CFD or Alternative Financing Mechanisms to issue bonds for such purposes. If the Property is included within a CFD or Alternative Funding Mechanism with other surrounding
propenies, the special taxes or special assessments
burdening the variousproperties so included shall be apportioned on a fair share basis related to the be1ie?t derived by
Gwner—,eachof such properties in accordance with
City policies at the time such property is included.
(c) Existing CFD. Community Facilities District (No. 2006-1 (Skyborne) (“CFD2006-l”) was formed by the City in 2006. Developer has applied for, and City Council has will work in good faith in implementing the followingcliaiiges to CFD2006-l: (i) issuance of a second (2“d)series of bonds to fund further improvements and fees in Improvement Area 1 of CFD2006-l; and (ii) dissolution of Improvement Area 2 of CFD2006-l for Villages 3 and 10.
(d) New CFD. City agrees that following Developer’s ggplication, etition or other '
‘ Pj_ . request in writinS for the dissolution

2_1n_(l/o1‘ establisln1ie1it ofa CFD for any or all ofVillages 3, 4, 5, 6, 7, 8, 9 or 10 (each, a “Subsequent CFD”), together with deposit of sufficient funds to pay the City’s costs to undertake the proceedings to establish any Subsequent CFD, City shall expeditiously conduct such proceedings to establish the Subsequent CFD in accordance with the Mello—RoosAct and City’s policies in existence as of the Effective Date and Developer shall cooperate in the conduct of such proceedings. Each Subsequent CFD shall, at a minimum, be subject to the following requirements:

4.2 (i) Tax Rate. City agrees that the maximum effective tax rate for each Subsequent CFD shall not exceed two percent 12%) based upon the product and pricingprovided by the Developer. In addition, the effective tax rate calculation for each CFD or Alternative Financing Mechanisms shall not include trash collection and sewer service assessment charges that are levied on the annual property tax bill.
(ii) Joint Facilities. City agrees that any Subsequent CFD may ?nance , in addition to City fees, infrastructure,
and public facilities, those fees, infrastructure, and public facilities of other governmental agencies required in connection with the Development Plan, the Development of the Property and any Subsequent Development Approvals, including, without limitation, Palm Springs Unified School District, Mission Springs Water District, and the County of Riverside.
(iii) Improvement Areas. City agrees that Developer, working with the City’s Special Tax Consultant and Formation Counsel, will advise the City on the structure of proposed improvement areas’ which would be designated and included with each Subsequent CFD.”
Development Impact Fees.

4.2.1 Amount and Components of Fee. The Owner shall pay adepted? service, permit, impact and other applicable fees required by the City ef—Desert—I=Iot Springsfor the Existing Development Approvals and any Subsequent Development Approvals as ' pemait is applied for. There i
p1'ovided in Exhibit “F”.

4.2.2 Time of Payment. The fees required pursuant to Subsection 42.1 shall be paid to City prior to the issuance of building permits for each residential unit. No fees shall be payable for building permits issued prior to the Effective Date of this Agreement but the fees required pursuant to Subsection 4.2.1 shall be paid prior to the re-issuance or extension of any building permit for a residential unit for which such fees have not previously been paid.

4.2.3 Credits. Performance by Owner of all obligations set out in Subsection4.1.3 shall be deemed ?ll satisfaction by Owner of the City's Quimby requirements for the dedication of parkland as de?ned in the Existing Land Use Regulations. In the event that Owner fails to improve the park areas as required above, however, credits shall then be applied only in the proportion that

the acreage of completed park area found acceptable by the City bears to the standards set out in the City's Quimby Ordinance. Except as to Quimby requirements, Owner shall not be entitled to any other credit(s) against fees for the performance of any other obligations set out herein or in the conditions of approval of the Project.

4.2.4 Art In Public Places. Owner has donated approved public art in conjunction with the Pr‘oiect’sentry morrumentation, which public art has been accepted by the City Council, entitling Owner to fee credits in the amount of the actual cost of the public art. Documentation of actual costs are required, and its adequacy shall be determined by the City Manager prior to allocating the fee credit. The amount of fee credits provided to the Owner shall be limited to the actual costs of the public art and in the event the actual costs total an amount less than the Art In Public Places Program contribution amount required by Municipal Code section l7.60.050, Owner shall also pay into the City’s Art in Public Places Fund an amount equal to the difference between the Art in Public Places contribution amount required by Municipal Code section l7.60.050 and the actual costs of the public art.

5. REIMBURSEMENT AGREEMENT.

Owner and City shall enter into a reimbursement agreement whereby Owner shall be reimbursed expenses related to infrastructure improvements required as a condition of approval, which improvements are on right-of-ways not adjacent to the Property. Reimbursement shall be provided to Owner (a) where Owner made required infrastructure improvements on right-of-ways that are adjacent to parcels not owned, or subsequently acquired, by Owner, (b) as fair share contributions are collected by the City from owners who subsequently develop the parcels that are adjacent to the right-of-ways upon which Owner has made in?astructure improvements.

6. REVIEW FOR COMPLLANCE.

6.1 Periodic Review. The City Council shall review this Agreement annually, on or before the anniversary of the Effective Date, in order to ascertain the good faith complianceby Owner with the terms of the Agreement, Owner shall submit an Annual Monitoring Report, in a form acceptable to the City Council, within 30 days after written notice from the Cig Council. The Annual Monitoring Report shall be accompanied by an annual review and administration fee suf?cient to defray the estimated costs of review and administration of the Agreement during the succeeding year. The amount of the annual review and administration fee shall be set annually by resolution of the City Council.

6.2 Special Review. The City Council may order a special review of compliance with this Agreement at any time. The lllannin4gC_ityManager shall conduct such specialreviews.

6.3 Procedure.
(a) During either a periodic review or a special review, Owner shall be required to demonstrate good faith compliance with the ter=r-rstenns of the Agreement. The burden of proof on this issue shall be on Owner.

(b) Upon completion of a periodic review or a specialreview, the Plamain-gl Manager shall submit a report to the City Cou11cil . ' - . I _ .- - _, ' - A .' A -
I II I'v' v
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(c) If the City Council ?nds on the basis of substantial evidence that Owner has complied in good faith with the terms and conditions of this Agreement, the review shall be concluded.
(d) If the City Council makes a preliminary ?nding that Owner has not complied in good faith with the terms and conditions of this Agreement, the Council may modify or terminate this Agreement as provided in Section 6.4 and Section 6.5. Notice of default as provided under Section 8.3 of this Agreement shall be given to Owner prior to or concurrent with, proceedings under Section 6.4 and Section 6.5.

6.4 Proceedings Upon Modi?cation or Termination. If, upon a finding under Section

6.3, City detennines to proceed with modi?cation or termination of this Agreement, City shall give written notice to Owner of its intention so to do. The notice shall be given at least ten calendar days prior to the scheduled hearing and shall contain:
(a) The time and place of the hearing;
(b) A statement as to whether or not City proposes to terminate or to modify the Agreement; and,
(c) Such other information as is reasonably necessary to inform Owner of the nature of the proceeding.

6.5 Hearing on Modi?cation or Termination. At the time and place set for the hearing on modi?cation or termination, Owner shall be given an opportunity to be heard. Owner shall be required to demonstrate good faith compliance with the terms and conditions of this Agreement.

The burden of proof on this issue shall be on Owner. If the City Council ?nds, based upon substantial evidence, that Owner has not complied in good faith with the tenns or conditions of the Agreement, the City Council may terminate this Agreement. Alternatively, the City may, but is not obligated to, modify this Agreement and impose such conditions as are reasonably necessary to protect the interests of the City. The decision of the City Council shall be ?nal, subject only to judicial review pursuant to Section 1094.5 of the Code of Civil Procedure.

6.6 Certi?cate of Agreement Compliance. If, at the conclusion of a Periodic or Special Review, Owner is found to be in compliance with this Agreement, City Manager shall, upon request by Owner, issue a Certi?cate of Agreement Compliance (#'§fCerti?cate%:) to Owner stating that after the most recent Periodic ero_fSpecial Review and based upon the information known or made known to tl1e City Council that (1) this Agreement remains in effect and (2) Owner is not in default. The Certi?cate shall be in recordable form,shall contain information necessary to communicate constructive record notice of the ?nding of compliance, shall state whether the Certi?cate is issued after a Periodic e+‘o_fSpecial Review and shall state the

anticipated date of commencement of the next Periodic Review. Owner may record the Ceiti?cate with the County Recorder.

Whether or not the Certificate is relied upon by assignees or other transferees or Owner, City shall not be bound by a Certificate if a default existed at the time of the Periodic oro_fSpecial Review, but was concealed from or otherwise not known to the City Manager or City Council.

6.7 Failure of Periodic Review. The City's failure to review at least annually compliance by Owner with the terms and conditions of this Agreement shall not constitute or be asserted by any party hereto as a breach of this Agreement, nor shall it constitute a basis for challenge by any third party.

7. INDEMNIFICATION.

At its sole cost and expense, Owner shall indemnify, defend with counsel reasonably acceptable to the City, and hold harmless the City and its officials, officers, employees, agents and volunteers, fbm and against any and all liability, loss, cost, expense, damage, claim, action, proceeding and attorneys’ fees resulting from or arising out of the action or inaction of Owner,its agents, officers and employees, and from any claim, action or proceeding against the City, its agent, officers, employees, volunteers,seeking to attack, set aside, void or annul any actions taken by the City in connection with. the Project or Property, including but not limited to, approval of this Agreement and compliance with the California Environmental Quality Act. The rights and obligations of this Section 7 shall survive the termination and/or expiration of this Agreement.

8. DEFAULT AND REMEDIES.

8.1 Remedies in General. It is acknowledged by the parties that City would not have entered into this Agreement if it were to be liable in damages under this Agreement, or with respect to this Agreement or the application thereof. In general, each of the parties hereto may pursue any remedy at law or equity available for the breach of any provision of this Agreement, except that City shall not be liable in damages to Owner, or to any successor in interest of Owner, or to any other person, and Owner covenants not to sue for damages or claim any damages:
(a) For any breach of this Agreement or for any cause of action that arises out of this Agreement; or
(b) For the taking, impairment or restriction of any right or interest conveyed or provided under or pursuant to this Agreement or the conditions of approval or other Existing Development Approvals incorporated herein; or
(c) Arising out of or connected with any dispute, controversy or issue regarding the application or interpretation or effect of the provisions of this Agreement or the conditions of approval or other Existing Development Approvals incorporated herein.

8.2 Specific Performance. The parties acknowledge that money damages and remedies at law generally are inadequate and specific performance and other non-monetary relief are

particularly appropriate remediesfor the enforcement of this Agreement and should be available to all partiesfor the following reasons:
(a) Money damages are unavailableagainst City as provided in Section 8.1 above. (b) Due to the size, nature and scope of the project, it may not be practical or possible to restore the Property to its natural condition once implementationof this Agreement has begun.

After such implementation,Owner may be foreclosedfrom other choices it may have had to utilize the Property or portions thereof Owner has invested significant time and resources and performed extensive planning and processing of the Project in agreeing to the terms of this Agreement and will be investing even more significant time and resources in implementing the Project in reliance upon the terms of this Agreement, and it is not possible to determine the sum of money that would adequately compensate Owner for such effect.

8.3 Termination or Modification of Agreement for Default of Owner. Subject to the provisions containedin Subsection 6.5 herein, City may terminate or modifythis Agreement for any failure of Ownerto perform any material duty or obligation of Owner under this Agreement, or to comply in good faith with the terms of this Agreement (hereinafterreferred to as "default"); provided,~however,City mayterminate or modify this Agreement pursuant to this Sectiononlyi ’ 7 after providing written notice to Owner of default setting forth the nature of the default and thféetuuli ' actions,if any, requiredby Owner to cure such default and,where the default can be cured,Owner has failed to take such actions and‘cure such default within 60 days after the effective date of such notice or, in the event that such defaultcannot be curedwithin such 60 day period but can be cured O within a longer time, has failed:to commencethe actions necessary to cure such default within S A
such 60 dayperiod and to diligently proceed to complete such actions and cure such default.

M,8.4y Termination, of Agreement for Default of City. Owner may terminate this A c :A.greement only in the event of a default by City in the performance of a material term of this.

Agreement and only after providing written notice to City of defaultsetting forth the nature of the default and the actions,if any, requiredby City to cure such default and,where the default can be cured,City has failed to take suchactions and cure such default within 60 days after the effective date of such notice or, in the event that such default cannot be curedwithin such 60 dayperiod but can be cured within a longer time, has failed to commence the actions necessary to cure such default within such 60 day period and to diligently proceedto complete such actions and cure such default.

9. [RESERVED]

10. MORTGAGEE PROTECTION.

The parties hereto agree that this Agreement shall not prevent or limit Owner, in any manner, at Owner's sole discretion,from encumbering the Property or any portion thereof or any improvement thereon by any mortgage, deed of trust or other security device securing financing with respect to the Property. City acknowledges that the lenders providing such financing may require certainAgreement interpretationsand modifications and agrees upon request, from time to time, to meet with Owner and representatives of such lenders to negotiate in good faith any such

request for interpretation or modi?cation. City will not unreasonably withholdits consent to any such requested interpretation or modification provided such interpretation or modi?cation is consistent with the intent andpurposes of this Agreement. Any Mortgagee of the Property shall be entitled to the following rights and privileges:
(a) Neither entering into this Agreement nor a breachof this Agreement shall defeat,render invalid, diminish or impair the lien of any mortgage on the Property made in good faith and for Value,unless otherwise required by law.
(b) The Mortgagee of any mortgage or deed of trust encumbering the Property, or any part thereof which Mortgagee, has submitteda request in writing to the City in the manner specified herein for giving notices,shall be entitled to receive written notification from City of any default , by Owner in the performance of Owner's obligations under this Agreement. (c) If City timely receives a request f1-oma mortgagee requesting a copy of any notice of default given to Owner under the terms of this Agreement, City shall provide a copy of that notice A to the Mortgagee within ten (10) days of sending the notice of default to Owner. The Mortgagee shall have the right,‘but not the obligation, to cure the default during the remaining cure period allowed such party under this Agreement.
(d)Any Mortgagee who comes into possession of the Property, or any part thereof,pursuant to foreclosure of the mortgage or deed of trust, or deed in lieu of such foreclosure,shall succeed tothe rights andiobligations of the Owner under this Agreement as to the Property or portion:
thereofso acquired; provided,however, in no event shall Mortgagee be liable for any defaults or monetary obligations of the Owner arising prior to acquisition of title to the Property by such’, C
-Mortgagee,’ except thatany suchMortgagee shall not be entitled to a building permit or occupancy * certificate untilall delinquent and current fees and other monetary obligations dueunder this Agreement have been paid to the City. Any sale, transfer or assignment by any Mortgagee in possession shall be subject to the provisions of Section 2.4 of this Agreement.

11. MISCELLANEOUS PROVISIONS.
be 11.1 Recordation of Agreement. This Agreement and any amendmentor cancellation thereof shall be recordedwith the County Recorder by the City Clerk within the period required by Section 65868.5 of the Government Code.

11.2 * Entire Agreement.‘ This Agreement sets forth and containsthe entire understanding “ and agreement of the parties, and there are no oral or written representations, understanding or ancillary covenants, undertakings or agreements that are not contained or expressly referred to herein.

11.3 Severability. If any term, provision, covenant or condition of this Agreement shall be determinedinvalid,void or unenforceable,the remainder of thisAgreement shall not be affected therebyto the extent such remaining provisions are not renderedimpracticalto perform taking into consideration the purposes of this Agreement.

11.4 Interpretation and Governing Law. This Agreement and any dispute arising hereundershall be governed and interpretedin accordancewith the laws of the State of California.

This Agreement shall be construed as a whole according to its fair language and common meaning to achieve the objectives and purposes of the parties hereto, and the rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in interpreting this Agreement, all parties having been representedby counsel in the negotiation and preparation hereof.

11.5 Section Headings. All section headings and subheadings are inserted for. convenience only and shall not affect any construction or interpretationof this Agreement.

11.6 Singular andPlural.As used herein,the singular of any word includesthe plural.

11.7 Joint and Several Obligations. If at any time during the term of this Agreement the Property is owned, in whole or in part, by more than one Owner, all obligations of such Owner under this Agreement shall be joint and several, and the default of any such Owner shall be the default of all such Owners. Notwithstanding the foregoing, no Owner of a single lot that has been ?nally subdividedand sold to such Owner as a member of the general public or otherwise as an 7 c —~:Asrultimateeuserashall have any:obligation under this Agreement except as provided under Section ~ — hereof.

11.8 Time of Essence. Time is of the essence in the performance of the provisions of this Agreement as to which time is an element Owner expressly acknowledges that the timing of — development as required by the Performance Schedule set out in Exhibit “E” is a material term of this Agreement, a breach of which cannot be cured.

11.9 .Waiver. Failure by a party to insist upon the strict performance of any of the” ’’provisionsof thisAgreement by the other party, or the failure by a party to exercise itsrights upon "
’ I
the default of the other party, shall not constitute a waiver of such party’s right to insist and demand.”, strict complianceby the other party with the terms of this Agreement thereafter.

11.10 No Third-Party Bene?ciaries. This Agreement is made and entered into for the sole protection and bene?t of the parties and their successors and assigns. No other person shall have any right of action based upon any provision of this Agreement.

11.11 Force Majeure.
. "11.11.l . Providing the resulting delay cannot be avoided by the commercially reasonableefforts of and was not caused by, the affectedparty, neitherparty shall be deemed to be in default where failure or delay in performance of any of its obligations underthisAgreement is causedby ?oods, earthquakes,otherActs of God, ?res, wars, riots or similar hostilities, strikes and other labor dif?culties beyond the party's control, (including the party's employment force), changes in government regulations adopted after the Effective Date that prohibit Owner from complying. with a material ‘ provision of this Agreement, court actions (such as restraining orders or injunctions), or other causes beyond the party's control.

1l.1l.2 The parties hereto expressly acknowledge and agree that signi?cantly adverse changes in general economic conditions that, as demonstratedby Owner to the satisfaction of the City Council, prevent Owner from obtaining a commerciallyreasonable pro?t shall constitute a force majeure event.

11.11.3 If any such event of force majeure shall occur, the term of this Agreement and the time for performance by either party of any of its obligations hereunder may be extendedby the written agreement of the parties for the period of time that such events prevented suchperformance, provided that the term of this Agreement shall not be extended under any circumstancesfor more than ?ve (5) years.

11.12 Mutual Covenants. The covenants contained herein are mutual covenants and also a constitute conditionsto the concurrent or subsequent performance by the party bene?ted thereby of the covenants to be performed hereunderby such bene?ted party. . 11.13 Successors in Interest. The burdens of this Agreement shall be binding upon, and e the bene?ts of this Agreement shall inure to, all successors in interest to the parties to this Agreement. All provisions of this Agreement shall be enforceable as equitable servitudes and . gconstitute covenants ,1‘unning=with:theland. Each covenant to do or refrain hm doing some act L hereunder with regardto developmentof the Property: (a) is for the benefit of andis a burdenupon every portion of the Property, (b) runs with the Property and each portion thereof, and, (c) is binding upon each party and each successor in interest during ownership of the Property or any portion thereof. 1
1 11.14 Counterparts...This.Agreementmay be executed by the parties incounterparts, which counterparts shall beconstruedtogether and have the same effect as if all of the parties had executed the same instrument.
a 11.15 Jurisdiction andVenue. Any actionat law or in equity arising under this Agreement or ‘broughtby aparty hereto.for the purposeof enforcing, construing or determining the validity of any provision of this Agreement shall be ?led and tried in the Superior Court of the County of Riverside, State of California, and the parties hereto waive all provisions of law providing for the ?ling, removal or change of venue to any other court.
1 11.16 Further Actions and Instruments. Each of the parties ‘shell cooperate with and providereasonableassistance to the other to the extent contemplatedhereunderin the performance of all obligations underthis Agreement and the satisfaction of the conditionsof this Agreement.

Upon the request of e either party at any time, the other party shall promptly execute, with acknowledgment or affidavit if reasonably required, and ?le or record such required instruments and writings and take any actions as may be reasonably necessary under the terms of this Agreement to carry out the intent and to ful?ll the provisions of this Agreement or to evidence or consummate the transactions contemplatedby this Agreement.

11.17 Authority to Execute. The person or persons executing this Agreement on behalf of Owner warrants and represents that he or she/they have the authority to execute this Agreement on behalf of his or her/their corporation,partnership or business entity and warrants and represents

that he or she/they has/have the authority to bind Owner to the performance of its obligations hereunder.

11.18 Full Force and Effect. Except as expressly provided in this First Amendment, all of the terms and provisions of the Development Ag1‘ee1ne11tare and will remain in fL1llforce and effect and are hereby ratified and con?nned by the parties hereto. Without limiting the generality of the foregoing, the amendments contained herein will not be construed as an amendment to or waiver of any other provision of the Development Agreement or as a waiver of or consent to any further or future action on the part of either party that would require the waiver or consent of the other party. On and after the date hereof, each reference in the Development Agreement to “this Agreement,” “the Agreement,” “hereunder,” “hereof,” “herein” or words of like import, and each reference to the Agreement in any other agreements, documents or instruments executed and delivered pursuant to, or in connection with, the Agreement, will mean and be a reference to the Development Agreement as amended by this First Amendment.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year set forth below.

DOC u 2010-0236266
05/21/2810
Customer Co Label
The paper to which 2215label ails affixed has not been compare FIRST AMERICAN FUND CONTROL, INC. with the recorded document ANDWHEN RECORDED MAIL TO: LarryllHard
County 0 Riverside
Qssessar, County Clerk & Recorder
FIRST AMERICAN FUND CONTROL, INC.
200 COMMERCE
IRVINE, CA 92602

LIEN CONTRACT
R
THIS LIEN CONTRACT (“Lien Contract") is entered into this if day of March, 2010, by and between the City of Desert Hot Springs ("City") and Skybome Ventures LLC, a Delaware limited liability company ("Developer").

RECITALS
A. Developer is the current owner of that certain real property situated in the City of Desert Hot Springs, County of Riverside, State of California, as more particularly described on _ -
Exhibit "A" attached hereto and incorporated herein ("Property").

B. In accordance with the Subdivision Map Act (California Government Code Section 66410, et seq.), Developer’s predecessor in interest posted bonds with the City in connection with the City's approval of the ?nal map(s) for the Property.

C. Pursuant to California Government Code Section 66499(a)(4), the City is authorized to accept the alternate security proposed by Developer. Developer and City desire to substitutethis Lien Contract for the bonds posted with the City.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Developer’s Performance. Developer has agreed (or has assumed the obligations) to construct the improvements previously approved by the City in connection with the development of the Property (the "Improvements”) pursuant to those certain subdivision improvement agreements more particularly set forth in Schedule 1 attached hereto and incorporated herein (collectively referred to herein as the “Agreements”). Pursuant to the Agreements, Developer or its predecessor in interest delivered to the City the performance and labor and material bonds more particularly set forth in Schedule 2 attached hereto and incorporated herein (“Bonds”).

2. Alternative Form of Security/Effect of Lien Contract In lieu of the Bonds as security for the performance of the obligations set forth in Section 1 above, Developer hereby grants to City, effective as of the date of recordation of this Lien Contract, a lien upon the Property in the initial amount of $9,526,476.00 plus any future advances in excess of this sum resulting from increased constructioncosts of the Improvements (the “Lien”), The amount of the 347/020269-0040
lU369l6,07 a03/23/10

Lien is allocated to each of the Agreements in the amounts shown on Schedule 1. The amount of the Lien shall automatically be reduced as the Improvements are completed by an amount equal to the amount of security required for such Improvement under the applicableAgreement as shown in Schedule 1. City hereby agrees that notwithstanding anything to the contrary set forth in the Agreements, Developer shall not be deemed in breach of the Agreements by virtue of withdrawing the Bonds. Within thirty (30) days after the recordation of this Lien Contract, the City shall exonerate and release the Bonds and return the Bonds to the person or entity which posted such Bonds. In the event Developer, its successors, heirs, assigns or transferees fail to (i) install and construct the Improvements in the time and manner required under the applicable Agreement following the expiration of any and all applicable notice and cure periods;or (ii) pay the Security Fee as required under Section 5 below (in either case, an "Event of Default"), City may exercise its rights or remedies under this Lien Contract if Developer fails to cure any such Event of Default within thirty (30) days of City’s written notice to Developer specifying in reasonable detail the nature of such default. If such default is of such a character as to require more than thirty (30) days to cure, said thirty (30) day period stall be extended to include such additional time as is reasonably necessary to cure such default. Upon the occurrence of an Event of Default and Developer's subsequent failure to cure such default within the time period set forth in this Section 2, Developer agrees that the City may install and construct, or cause the installation and construction of, the Improvements which are the subject of such Event of Default. City or its contractor may enter upon the Property as reasonably necessary to construct such Improvements. Developer or its successors, heirs, assigns or transferees shall reimburse City for the cost of such Improvements upon their completion. In the event such costs are not paid to City within ninety (90) days from completion, City may foreclose this lien as providedby law for the foreclosure of mortgages.

3. Release‘ Subordination. This Lien Contract may be released in whole or in part and may be subordinatedto other liens or encumbrances if the City determines that the obligation to construct the Improvements is sufficiently secured by a lien on other property or that the release or subordination of the lien will not jeopardize the completion of the Improvements, and any such subordinationmust first be approved in writing by the City in its reasonable discretion. Without limiting the foregoing, Developer may obtain and City shall grant the partial release (the “Partial Release") of any portion of the Property comprising of one or more subdivided lots within the Property or phases or tracts within the Property (the “Released Lots/Phases”) from this Lien Contract, if at the time of the request for the Partial Release: (a) Developer provides new performance and labor and materials bonds reasonably acceptable to the City or pursuant to the terms and conditions of the applicable Agreement with respect to such Released Lots/Phases; or (b) Developer has substantially completedthe required Improvements on the Released Lots/Phases; or (c) Developer demonstrates (by delivery of an appraisal or other method reasonable acceptable to the City) that the Lien-to-ValueRatio (de?ned below) with respect to the Remaining Property (defined below) is not greater than fifty percent (50%). The “Lien—to-ValueRatio” shall mean the ratio of (i) the amount of security for the construction of the Improvements required under the then remaining Agreements with respect to the Property, to (ii) the fair market value of the Remaining Property. “Remaining Property” shall mean that portion of the Property remaining subject to this Lien Contract upon or after the release of Released Lots/Phases from this Lien Contract. Developer agrees that prior to the issuance of any permits to commence construction of improvements on or with respect to any ReleasedLots/Phases within the Property, the Developer shall deliver to City in accordancewith 347/0202690040 2
103691607 203/23/l0 ' '

the City’s “General Guidelines on Use of Financial Assurances And Security Provided By Municipal Code, California Government Code and the Subdivision Map Act,” a performance bond, cash or an acceptable letter of credit equal to the cost of the improvements to be constructed thereon, and such Released Lots/Phases will be released from the Lien Contract as provided above and the amount of the Lien shall be reduced commensurately. During the term of this Lien Contract, Developer agrees to provide the maintenance necessary to keep the existing PM-10 permit and the SWPPP and its applicablepermits in compliance on the Property.

4. Termination. This Lien Contract shall terminate upon the earlier to occur of the following: (i) release of the Property from this Lien Contract by the City, (ii) Developer's substantial completion of the Improvements, or (iii) substitution of other security as authorized by the SubdivisionMap Act.

5. Security Fee. In consideration of the mutual agreements in this Lien Contract, Developer shall pay to City a fee equal to one percent (1%) per calendar year of the amount of security for the construction of the Improvements as required under the Agreements which are secured by this Lien Contract from time to time (“Security Fee”). Developer shall pay the Security Fee to City in quarterly payments within 30 days following the end of each calendar quarter. Payments for any partial calendar quarter shall be prorated. The Security Fee and the corresponding quarterly payments shall be adjusted following the completion of any of the Improvements (or the reduction of the estimatedcost to complete any of the Improvements),or the occurrence of each Partial Release pursuant to Section 3 above. If any installment of the Security Fee is not paid within 10 days after Developer’s receipt of written notice from City that the installment is delinquent, the City may impose a late charge in the amount of 10% of the amount unpaid. This fee is used to also cover any costs the City may incur with regard to implementingthis Lien Contract.

6. Transfer of the Property. This Lien Contract and the covenants contained herein i
shall be binding upon and moreto the benefit of the successors, heirs, assigns and transferees of Developer, shall run with the Property, and create an equitable servitude upon the Property.

Notwithstanding the foregoing, Developer shall have the right to convey any portion of the Property covered by this Lien Contract, and the purchaser shall be bound by the terms and provisions of this Lien Contract; provided, however, in the event Developer transfers any part of the Property to an individual homeowner, such individual homeowner purchaser shall not be bound by this Lien Contract and title to the lot purchasedby such homeowner shall not be subject to this Lien Contract. Upon the conveyance of any portion of the Property by Developer, Developer shall be released from any obligations hereunder with respect to that portion of the Property conveyed.

7. Recordation. Upon execution of this Lien Contract by both City and Developer, City shall record this Lien Contract with the Clerk of Riverside County.

8. General Previsions.

8.1 Entire Agreement This Lien Contract together with all exhibits and other agreements expressly referred to herein constitutes the entire agreement between the parties with 347/020269-0040 .,
103691607 a03/23/10

respect to the subject matter contained herein. All prior or contemporaneous agreements, understandings, representations,warranties and statements, oral or written, are superseded.

8.2 Governing Law. This Lien Contract shall be governed, interpreted, construed and enforced in accordancewith the laws of the State of California.

8.3 Headings. The captions and headings used in this Lien Contract are for convenience only and are not a part of this Lien Contract and are not intendedto de?ne, limit or affect the constructionor interpretationof any term or provision hereof.

8.4 Modi?cation‘ Waiver. No modi?cation, waiver, amendment, discharge or change of this Lien Contract shall be valid unless it is in writing and signed by the party against which the enforcement of such modi?cation, waiver, amendment, discharge or change is or may be sought.
_ 8.5 Severability. If any term, provision, covenant or condition of this Lien Contract is held to be invalid, void or otherwise unenforceable, to any extent, by any court of competent jurisdiction, the remainder of this Lien Contract shall not be affected thereby, and each term, provision, covenant or condition of this Lien Contract shall be valid and enforceable to the fullest extent permitted by law.

8.6 Counterparts. This Lien Contract may be executed in counterparts, each of which, when taken together, will constitute a fully executed original.

8.7 Exhibits and Schedules. All exhibits and schedules attached hereto are incorporatedherein by reference.

IN WITNESS WHEREOF, this Lien Contract has been made and executed as of the date first above written.

CITY OF DESERT HOT SPRINGS SKYBORNE VENTURES LLC, a Delaware limited liability company
By: Strategic Land Partners LP, as Member
By: JK-Riverwoods, LLC as General Partner
ByWI;L
———r-—-»-—a ; By ?/(KI I
'{
Name: >6,» ‘Z ' ‘N
’ S Name mes M. Kozakl
Title: »: U ' 3 Title Member
347/0202694040
103691607 a03/23/10 '4'

STATE OF CALIFORNIA )
)
COUNTY OF ’RNere§¢le, )
On\/log‘l3 .10\O . before ‘me, K\/3s‘\"|&RQMOS , Notary Public, personally appeared [Thm//1R.D.,/4|/l|_€.|S who proved to me on the basis of satisfactory evidence to be the personés9 whose name?i-)@/aresubscribed to the within instrument and acknowledged to me that @she/they executed the same in@$/her/their authorized capacityéies) and that by(E§/her/their signaturef? on the instrument the person(9), or the entity upon behalf of which the personés-) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct

KRISTIERAMOS
coMM.#1765869U) NOTARYPUBLIC-CALIFORNIA
RIVERSIDE comm " WITNESS my hand and official seal.
i MiComa.Exp. 5m. 7, 2011"‘
Signature
[SEAL]

STATE OF CALIFORNIA )
)
COUNTY OF M mega )
On giyilo ,befOre me, SWWH\<\‘°0N , Notary Public, personally appeared WW5 WMK who proved to me on the basis of
satisfactory evidence to be the person(s§ whose namefs-) islare-subscribed to the within instrument and acknowledged to me that heylshe/-t-heyexecuted the same in hisfl-rer/their authorized capacity(-ies-)and that by m sigr1at11re’(,a’) On the instrument the persongg),or the entity upon behalf of which the persong?acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws Of the State of California that the foregoing paragraph is true and correct
WITNESS my hand and official seal.

SARAHKWUN
Commission4 1824773
NotaryPublic- camomla
LosAngela; County
*4 °°mm. ExpiresNov25, 2012
/C
gnature
[SEAL]
347/020269-0040
103691607 a03/Z3/10 ‘S’

EXHIBIT “A”

PROPERTY
PARCEL3: (APN'S:667-300-001 THROUGH054, 058; 667-310-001THROUGH084 AND088; 667-320-001THROUGH026, 029 THROUGH078, 080 THROUGH083 AND667-330-001 THROUGH013, 015 THROUGH072 AND076)
LOTS1 THROUGH236 ANDLETTEREDLOTS"O"THROUGH"Z"AND"AA"OF TRACTNO. 32030- 3 ASSHOWNON BYMAPON FILEIN BOOK419 PAGES29 THROUGH39 OF MAPS,RECORDSOF RIVERSIDECOUNTY,CALIFORNIA.

PARCEL4: (APN‘S:667-340-001THROUGH048 AND051; 667-350-001 THROUGH074 AND078 THROUGH080; AND667-360-001THROUGH060 AND064)
LOTS1 THROUGH182 ANDLEFTEREDLOTS"H"THROUGH"S" OFTRACTNO. 32030-I0, AS SHOWNBYMAPON FILEIN BOOK419 PAGES40 THROUGH47 OF MAPS,RECORDSOF RIVERSIDECOUNTY,CALIFORNIA.

PARCEL5: (APN'S: 667-080-006,667-100-029,031 AND038)
TENTATIVE(TRACF)MAP32030-4, BEINGASUBDIVISIONOFTHEFOLLOWINGDESCRIBED PROPERTY:

PARCELNO. 1:

THESOUTH I/2 OF THE NORTHWEST‘/4 OF SECTION28, TOWNSHIP2 SOUTH, RANGE4 EAST,

SANBERNARDINOBASEANDMERIDIAN,STATEOF CALIFORNIA,ACCORDINGTO THE OFFICIALGOVERNMENTPLATTHEREOF.

A. ANYANDALL(I) OIL RIGHTS,(II) MINERALRIGHTS,(III) NATURALGASRIGHTS,(IV)

RIGHTSTO ALLOTHERHYDROCARBONS BYWHATSOEVERNAMEKNOWN,(V) GEOTHERMAL _ EXHIBITA
347/020269-0040 TO LIEN CONTRACT 103691607 a03/Z3/I0

HEATRIGHTSOR GEOTHERMALSUBSTANCESTHAT MAYBEPRODUCEDFROMTHE PROPERTY, (VI) WATERRIGHTSANDCLAIMSOR RIGHTSTO WATERAND(VII) ALLPRODUCTSDERIVED FROMANYOFTHE FOREGOING(COLLECTIVELY, "SUBSURFACERESOURCES")LOCATEDIN OR

UNDERTHATCERTAINREALPROPERTYSITUATEDIN THECOUNTYOF RIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A"ATTACHEDHERETOANDINCORPORATEDHEREIN (THE "PROPERTY"),TO THE EXTENTSUCHSUBSURFACERESOURCESHAVENOTBEEN PREVIOUSLYRESERVED;AND
B. THE PERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFOR ANDPRODUCE,

STOREANDREMOVEANYOF THESUBSURFACERESOURCESON OR FROMTHEPROPERTY,

INCLUDINGWITHOUTLIMITATIONTHE RIGHTTO WHIPSTOCKOR DIRECTIONALLYDRILLAND

MINE,FROMLANDSOTHERTHANTHE PROPERTY,WELLS,TUNNELSANDSHAETSINTO,

THROUGHOR ACROSSTHESUBSURFACEOFTHEPROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLYDRILLEDWELLS,TUNNELSANDSHAFTSWITHINOR

BEYONDTHE EXTERIORLIMFTSOFTHE PROPERTY,ANDTO REDRILL,RETUNNEL,EQUIP,

MAINTAIN,REPAIR,DEEPENANDOPERATEANYSUCHWELLSORMINES,BUTWITHOUTTHE

RIGHTTO DRILL,MINE,EXPLORE,OPERATE,PRODUCE,STOREOR REMOVEANYOFTHE

SUBSURFACERESOURCESTHROUGHORIN THE SURFACEOFTHE PROPERTYORTHE UPPER FIVEHUNDRED(S00) FEETOFTHESUBSURFACEOFTHE PROPERTY.)
PARCELNO. 2:

THESOUTHWEST‘/4OF SECTION28, TOWNSHIP2 SOUTH,RANGE4 EAST,SANBERNARDINO

BASEANDMERIDIAN,STATEOFCALIFORNIA,ACCORDINGTO THE OFFICIALGOVERNMENT PLATTHEREOF.

EXCEPTINGTHEREFROMTHE EAST‘/2OFTHESOUTHWEST‘/4.

ALSOEXCEPTINGTHEREFROMTHE EAST‘/2OFTHE NORTHEAST‘/2OF THE NORTHWEST‘A:

OFTHE SOUTHWEST‘/3OF SAIDSECTION.

ALSOEXCEPTINGTHEREFROMTHESOUTHERLY40 FEETCONVEYEDTO THECOUNTYOF RIVERSIDEBYDEEDFILEDFORRECORDJULY26, 1949 AS INSTRUMENTNO. 3081 OF OFFICIALRECORDSOF RIVERSIDECOUNTY,CALIFORNIA.

EXCEPTINGTHEREFROMANYPORTIONLYINGWITHINTRACT32030-1 ASSHOWNON FILEIN BOOK404 PAGES67 THROUGH75 OF MAPS,RECORDSOFRIVERSIDECOUNTY,CALIFORNIA.

ALSOEXCEPTINGTHEREFROMALLTHATINTERESTCONVEYEDTO DRHENERGY,INC.,A COLORADOCORPORATIONBYDOCUMENTRECORDEDOCTOBER13, 2006, AS INSTRUMENT NO.2006-0756951OFOFFICIALRECORDSOF SAIDCOUNTY.SAIDINTERESTIS FURTHER DESCRIBEDAS FOLLOWS:

A. ANYANDALL(I) OIL RIGHTS,(II) MINERALRIGHTS,(III) NATURALGASRIGHTS,(IV)

RIGHTSTO ALLOTHERHYDROCARBONS BYWHATSOEVERNAMEKNOWN,(V) GEOTHERMAL

HEATRIGHTSOR GEOTHERMALSUBSTANCESTHATMAYBEPRODUCEDFROMTHEPROPERTY, (VI) WATERRIGHTSANDCLAIMSOR RIGHTSTO WATERAND(VII) ALLPRODUCTSDERIVED FROMANYOF THE FOREGOING(COLLECTIVELY,"SUBSURFACERESOURCES")LOCATEDIN OR

UNDERTHATCERTAINREALPROPERTYSITUATEDIN THECOUNTYOF RIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A"ATTACHEDHERETOANDINCORPORATEDHEREIN (THE "PROPERTY"), TO THEEXTENTSUCHSUBSURFACERESOURCESHAVENOT BEEN PREVIOUSLYRESERVED;AND
347/020269-0040
1036916072033/23/10 '2‘

B.THE PERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFORANDPRODUCE,

STOREANDREMOVEANYOFTHESUBSURFACERESOURCESONORFROMTHE PROPERTY,

INCLUDINGWITHOUTLIMITATTONTHERIGHTTO WHIPSTOCKOR DIRECTIONALLYDRILLAND

MINE,FROMLANDSOTHERTHANTHEPROPERTY,WELIS,TUNNELSANDSHAFTSINTO,

THROUGHORACROSSTHESUBSURFACEOF THE PROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLYDRILLEDWELLS,TUNNELSANDSHAFTSWITHINOR

BEYONDTHE EXTERIORLIMITSOF THEPROPERTY,ANDTO REDRILL,RETIJNNEL,EQUIP,

MAINTAIN,REPAIR,DEEPENANDOPERATEANYSUCHWELLSOR MINES,BUTWITHOUTTHE

RIGHTTO DRILL,MINE,EXPLORE,OPERATE,PRODUCE,STOREOR REMOVEANYOF THE

SUBSURFACERESOURCESTHROUGHORINTHESURFACEOFTHE PROPERTYORTHEUPPER FIVEHUNDRED(S00) FEETOFTHESUBSURFACEOF THEPROPERTY.)
PARCELNO. 3:

THEEAST‘/2OFTHE SOUTHWEST‘A, ANDTHE EAST‘/2OF THENORTHEAST‘/4OF THE NORTHWEST‘/4OF THESOUTHWEST‘AOF SECTION28, TOWNSHIP2 SOUTH,RANGE4 EAST,

SANBERNARDINOBASEANDMERIDIAN,STATEOFCALIFORNIA,ACCORDINGTO THE OFFICIALGOVERNMENTPLATTHEREOF.

EXCEPTINGTHEREFROMTHESOUTHERLY40 FEETAS CONVEYEDTO THECOUNTYOF RIVERSIDE,BYDEEDRECORDEDJULY26, 1949 A5 INSTRUMENTNO.3081 OFOFFICIAL RECORDSOFRIVERSIDECOUNTY,CALIFORNIA.

EXCEPTINGTHEREFROMANYPORTIONLYINGWITHINTRACT32030-1 ASSHOWNON FILEIN BOOK404 PAGES67 THROUGH75 OF MAPS,RECORDSOFRIVERSIDECOUNTY,CALIFORNIA.

ALSOEXCEPTINGTHEREFROMANYPORTIONLYINGWITHINTRACT32030-3 ASSHOWNON FILEIN BOOK419 PAGES29 THROUGH39 OF MAPS,RECORDSOF RIVERSIDECOUNTY, CALIFORNIA.

ALSOEXCEPTINGTHEREFROMALLTHATINTERESTCONVEYEDTO DRHENERGY,INC., A COLORADOCORPORATIONBYDOCUMENTRECORDEDOCTOBER13, 2006, ASINSTRUMENT NO.2006-0756951OFOFFICIALRECORDSOF SAIDCOUNTY.SAIDINTERESTIS FURTHER DESCRIBEDAS FOLLOWS:

A. ANYANDALL(I) OILRIGHTS,(II) MINERALRIGHTS,(III) NATURALGASRIGHTS,(IV)

RIGHTSTO ALLOTHERHYDROCARBONSBYWHATSOEVERNAMEKNOWN,(V)GEOTHERMAL

HEATRIGHTSOR GEOTHERMALSUBSTANCESTHATMAYBE PRODUCEDFROMTHEPROPERTY, (VI) WATERRIGHTSANDCLAIMSOR RIGHTSTO WATERAND(VII) ALLPRODUCTSDERIVED FROMANYOFTHEFOREGOING(COLLECTIVELY, "SUBSURFACERESOURCES")LOCATEDIN OR

UNDERTHATCERTAINREALPROPERTYSITUATEDINTHECOUNTYOFRIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A"ATTACHEDHERETOANDINCORPORATEDHEREIN (THE"PROPERTY"),TO THE EXTENTSUCHSUBSURFACERESOURCESHAVENOT BEEN PREVIOUSLYRESERVED;AND
B. THE PERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFORANDPRODUCE,

STOREANDREMOVEANYOF THESUBSURFACERESOURCESONORFROMTHEPROPERTY,

INCLUDINGWITHOUTLIMITATIONTHE RIGHTTO WHIPSTOCKOR DIRECTIONALLYDRILLAND

MINE, FROMIANDSOTHERTHANTHE PROPERTY,WELLS,TUNNELSANDSHAFTSINTO,

THROUGHORACROSSTHE SUBSURFACEOF THE PROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLYDRILLEDWELLS,TUNNELSANDSHAFTSWITHINOR

BEYONDTHE EXTERIORLIMITSOF THE PROPERTY,ANDTO REDRILL,RETUNNEL,EQUIP,

MAINTAIN,REPAIR,DEEPENANDOPERATEANYSUCHWELLSOR MINES,BUTWITHOUTTHE 347/020259-0040 .
103691607 a03/23/10

RIGHTTO DRILL,MINE,EXPLORE,OPERATE,PRODUCE,STOREOR REMOVEANYOFTHE

SUBSURFACERESOURCESTHROUGHOR IN THE SURFACEOFTHE PROPERTYORTHEUPPER FIVEHUNDRED(500) FEETOF THE SUBSURFACEOFTHE PROPERTY.)
PARCEL6: (APN'S: 667-100-029, 031 AND038; 667-120-051, 052, 025 THROUGH027)‘ TENTATIVE(TRACT)MAP32030-5, BEINGA SUBDIVISIONOFTHEFOLLOWINGDESCRIBED PROPERTY:

PARCELNO. 1
THESOUTHWEST‘/4OF SECTION28, TOWNSHIP2 SOUTH,RANGE4 EAST, SANBERNARDINO

BASEANDMERIDIAN,STATEOFCALIFORNIA,ACCORDINGTO THEOFFICIALGOVERNMENT PLATTHEREOF.

EXCEPTINGTHEREFROMTHEEAST‘/2OF THESOUTHWEST‘A.

ALSOD(CEPTING THEREFROMTHE EAST‘/2OFTHE NORTHEAST‘A OF THENORTHWEST‘/4 OFTHE SOUTHWEST‘/5OF SAIDSECTION.

AISO EXCEPTINGTHEREFROMTHE SOUTHERLY40 FEETCONVEYEDTO THECOUNTYOF RIVERSIDEBYDEEDFILEDFORRECORDJULY26, 1949 ASINSTRUMENTNO.3081 OF OFFICIALRECORDSOF RIVERSIDECOUNTY,CALIFORNIA.

ALSOB(CEPTING THEREFROMANYPORTIONLYINGWITHINTRACT32030-1 AS SHOWNON FILEIN BOOK404, PAGES67 THROUGH75, OF MAPS,RECORDSOF RIVERSIDECOUNTY, CALIFORNIA.

ALSOEXCEPTINGTHEREFROMALLTHAT INTERESTCONVEYEDTO DRHENERGY,INC., A COLORADOCORPORATIONBYDOCUMENTRECORDEDOCTOBER13, 2006, AS INSTRUMENT NO.2006-0756951OF OFFICIALRECORDSOF SAIDCOUNTY.SAIDINTERESTIS FURTHER DESCRIBEDAS FOLLOWS:

A. ANYANDALL(I) OIL RIGHTS,(II) MINERALRIGHTS,(III) NATURALGASRIGHTS,(IV)

RIGHTSTO ALLOTHERHYDROCARBONS BYWHATSOEVERNAMEKNOWN,(V)GEOTHERMAL

HEATRIGHTSOR GEOTHERMALSUBSTANCESTHAT MAYBEPRODUCEDFROMTHE PROPERTY, (VI) WATERRIGHTSANDCLAIMSOR RIGHTSTO WATER AND(VII) ALLPRODUCTSDERIVED FROMANYOF THEFOREGOING(COLLECTIVELY, "SUBSURFACERESOURCES")LOCATEDIN OR

UNDERTHATCERTAINREALPROPERTYSITUATEDIN THECOUNTYOF RIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A"ATTACHEDHERETOANDINCORPORATEDHEREIN (THE"PROPERTY"),TO THE EXTENTSUCHSUBSURFACERESOURCESHAVENOTBEEN PREVIOUSLYRESERVED;AND
B. THE PERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFORANDPRODUCE,

STOREANDREMOVEANYOFTHE SUBSURFACERESOURCESON OR FROMTHE PROPERTY,

INCLUDINGWITHOUTLIMITATIONTHERIGHTTO WHIPSTOCKOR DIRECTIONALLYDRILLAND

MINE,FROMLANDSOTHERTHANTHEPROPERTY,WELIS, TUNNELSANDSHAFTSINTO,

THROUGHOR ACROSSTHESUBSURFACEOF THE PROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLYDRILLEDWELLS,TUNNELSANDSHAFTSWITHINOR

BEYONDTHE EXTERIORLIMITSOF THEPROPERTY,ANDTO REDRILL,RETUNNEL,EQUIP,

MAINTAIN,REPAIR,DEEPENANDOPERATEANYSUCHWELLSOR MINES,BUTWITHOUTTHE

RIGHTTO DRILL,MINE,EXPLORE,OPERATE,PRODUCE,STOREOR REMOVEANYOFTHE

SUBSURFACERESOURCESTHROUGHOR IN THE SURFACEOFTHEPROPERTYORTHE UPPER 347/020269-0040
103591607 a03/23/10 '4"

FIVEHUNDRED(S00) FEETOF THESUBSURFACEOF THEPROPERTY.)
PARCELNO. 2:

THE EAST‘/2 OF THE SOUTHWEST‘/4,ANDTHEEAST‘/2 OF THE NORTHEAST‘A:OFTHE NORTHWEST‘A:OFTHE SOUTHWESTM:OF SECTION28, TOWNSHIP2 SOUTH,RANGE4 EAST,

SANBERNARDINOBASEANDMERIDIAN,STATEOF CALIFORNIA,ACCORDINGTO THE OFFICIALGOVERNMENTPLATTHEREOF.

EXCEPTINGTHEREFROMTHE SOUTHERLY40 FEETASCONVEYEDTO THECOUNTYOF RIVERSIDE,BYDEEDRECORDEDJULY26, 1949 ASINSTRUMENTNO. 3081 OF OFFICIAL RECORDSOF RIVERSIDECOUNTY,CALIFORNIA.

ALSOEXCEPTINGTHEREFROMANYPORTIONLYINGWITHINTRACT32030-1ASSHOWNON FILEIN BOOK404, PAGES67 THROUGH75, OF MAPS,RECORDSOF RIVERSIDECOUNTY, CALIFORNIA.

ALSOEXCEPTINGTHEREFROMANYPORTIONLYINGWITHINTRACT32030-3AS SHOWNON FILEIN BOOK419, PAGES29 THROUGH39, OF MAPS,RECORDSOFRIVERSIDECOUNTY, CALIFORNIA.

A150 EXCEPTINGTHEREFROMALLTHATINTERESTCONVEYEDTO DRHENERGY,INC.,A COLORADOCORPORATIONBYDOCUMENTRECORDEDOCTOBER13, 2006, ASINSTRUMENT NO. 2006-0756951OF OFFICIALRECORDSOF SAIDCOUNTY.SAIDINTERESTIS FURTHER DESCRIBEDAS FOLLOWS:

A. ANYANDALL(I) OIL RIGHTS,(II) MINERALRIGHTS,(III) NATURALGASRIGHTS,(IV)

RIGHTSTO ALLOTHERHYDROCARBONS BYWHATSOEVERNAMEKNOWN,(V)GEOTHERMAL

HEATRIGHTSOR GEOTHERMALSUBSTANCESTHATMAYBEPRODUCEDFROMTHEPROPERTY, (VI) WATER RIGHTSANDCLAIMSOR RIGHTSTO WATERAND(VII) ALLPRODUCTSDERIVED FROMANYOF THE FOREGOING(COLLECTIVELY, "SUBSURFACERESOURCES")LOCATEDIN OR

UNDERTHATCERTAINREALPROPERTYSITUATEDIN THE COUNTYOF RIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A“ATTACHEDHERETOANDINCORPORATEDHEREIN (THE "PROPERTY"),TO THEEXTENTSUCHSUBSURFACERESOURCESHAVENOTBEEN PREVIOUSLYRESERVED;AND
B. THE PERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFORANDPRODUCE,

STOREANDREMOVEANYOFTHE SUBSURFACERESOURCESONORFROMTHEPROPERTY,

INCLUDINGWITHOUTLIMITATIONTHERIGHTTO WHIPSTOCKOR DIRECTIONALLYDRILLAND

MINE,FROMLANDSOTHERTHANTHEPROPERTY,WELLS,TUNNELSANDSHAFTSINTO,

THROUGHORACROSSTHE SUBSURFACEOFTHEPROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLYDRILLEDWELLS,TUNNELSANDSHAFTSWITHINOR

BEYONDTHEEXTERIORLIMITSOF THE PROPERTY,ANDTO REDRILL,RETUNNEL,EQUIP,

MAINTAIN,REPAIR,DEEPENANDOPERATEANYSUCHWELLSOR MINES,BUTWITHOUTTHE

RIGHTTO DRILL,MINE,B(PLORE, OPERATE,PRODUCE,STOREOR REMOVEANYOFTHE SUBSURFACERESOURCESTHROUGHORIN THESURFACEOFTHEPROPERTYORTHEUPPER.

FIVEHUNDRED(500) FEETOF THESUBSURFACEOFTHE PROPERTY.)
PARCEL3:

THATPORTIONOF THE EAST‘/2OF SECTION29, TOWNSHIP2 SOUTH,RANGE4 WEST, SAN

BERNARDINOBASEANDMERIDIAN,STATEOF CALIFORNIA,ACCORDINGTO THEOFFICIAL GOVERNMENTPLATTHEREOF.
347/02026943040
103691607 a03/23/I0 '5‘

COMMENCINGAT THE SOUTHEASTCORNEROF SAIDSECTION29; THENCENORTHERLY ALONGTHEEASTERLYBOUNDARYOF SAIDSECTION29, A DISTANCEOF906 FEETTO THE TRUE POINTOF BEGINNING;THENCEWESTERLYANDPARALLELTHESOUTHERLYBOUNDARY OF SAIDSECTION29, A DISTANCEOF 528 FEETTHENCENORTHERLYANDPARALLELWITH THEEASTERLYBOUNDARYOFSAIDSECTION29, A DISTANCEOF 577 FEET;THENCE EASTERLYANDPARALIJELWITHTHESOUTHERLYBOUNDARYOF SAIDSECTION29, A DISTANCEOF 528 FEETTOTHE EASTERLYBOUNDARYOF SAIDSECTION29; THENCE SOUTHERLYALONGTHEEASTERLYBOUNDARYOF SAIDSECTION29, A DISTANCEOF 577 FEETTO THETRUEPOINTOF BEGINNING.

ALSOEXCEPTINGTHEREFROMALLTHATINTERESTCONVEYEDTO DRHENERGY,INC., A COLORADOCORPORATIONBYDOCUMENTRECORDEDOCTOBER13, 2006, AS INSTRUMENT NO. 2006-0756951OF OFFICIALRECORDSOF SAIDCOUNTY.SAIDINTERESTIS FURTHER DESCRIBEDAS FOLLOWS:

A. ANYANDALL(I) OILRIGHTS,(II) MINERALRIGHTS,(III) NATURALGASRIGHTS,(IV)

RIGHTSTO ALLOTHERHYDROCARBONS BYWHATSOEVERNAMEKNOWN,(W GEOTHERMAL

HEATRIGHTSORGEOTHERMALSUBSTANCESTHATMAYBE PRODUCEDFROMTHE PROPERTY, (VI) WATERRIGHTSANDCLAIMSOR RIGHTSTO WATERAND(VII) ALLPRODUCTSDERIVED FROMANYOF THEFOREGOING(COLLECTTVELY,"SUBSURFACERESOURCES")LOCATEDIN OR

UNDERTHATCERTAINREALPROPERTYSITUATEDINTHECOUNTYOF RIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A"ATTACHEDHERETOANDINCORPORATEDHEREIN (THE "PROPERTY"),TO THEEXTENTSUCHSUBSURFACERESOURCESHAVENOTBEEN PREVIOUSLYRESERVED;AND
B. THE PERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFORANDPRODUCE,

STOREANDREMOVEANYOFTHESUBSURFACERESOURCESONOR FROMTHE PROPERTY,

INCLUDINGWITHOUTLIMITATIONTHERIGHTTO WHIPSTOCKOR DIRECTIONALLYDRILLAND

MINE,FROMLANDSOTHERTHANTHE PROPERTY,WELLS,TUNNELSANDSHAFTSINTO,

THROUGHORACROSSTHE SUBSURFACEOFTHEPROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLYDRILLEDWELIS,TUNNEISANDSHAFTSWITHINOR

BEYONDTHEEXTERIORLIMITSOFTHE PROPERTY,ANDTO REDRILL,RETUNNEL,EQUIP,

MAINTAIN,REPAIR,DEEPENANDOPERATEANYSUCHWELLSOR MINES,BUTWITHOUTTHE

RIGHTTO DRILL,MINE,EXPLORE,OPERATE,PRODUCE,STOREOR REMOVEANYOFTHE

SUBSURFACERESOURCESTHROUGHOR IN THESURFACEOFTHEPROPERTYORTHEUPPER FIVEHUNDRED(500) FEETOFTHESUBSURFACEOFTHEPROPERTY.)
PARCELNO. 4:

THENORTH165 FEETOFTHEREALPROPERTYDESCRIBEDAS FOLLOWS:

THATPORTIONOFTHEEAST‘/2OF SECTION29, TOWNSHIP2 SOUTH,RANGE4 EAST,SAN

BERNARDINOBASEANDMERIDIAN,STATEOFCALIFORNIA,ACCORDINGTO THEOFFICIAL GOVERNMENTPLATTHEREOF.

COMMENCINGATTHESOUTHEASTCORNEROF SAIDSECTION29; THENCENORTHERLY ALONGTHE EASTERLYBOUNDARYOF SAIDSECTION,A DISTANCEOF 329.0 FEETTO THE TRUE POINTOF BEGINNING;THENCEWESTERLYANDPARALLELWITHTHESOUTHBOUNDARY OF SAIDSECTION,A DISTANCEOF 528.0 FEET;THENCENORTHERLYANDPARALLELWITH THE EASTERLYBOUNDARYOF SAIDSECTION,A DISTANCECF 577.0 FEET;THENCEEASTERLY ANDPARALLELWITHTHE SOUTHBOUNDARYOF SAIDSECTIONA DISTANCEOF 528.0 FEET;

THENCESOUTHERLYALONGTHE EASTERLYBOUNDARYOF SAID SECTION,A DISTANCEOF 347l020Z69—0040
103691607 2103/23/10
'6‘

577.0 FEETTO THETRUEPOINTOF BEGINNING.

ALSOEXCEPTINGTHEREFROMALLTHATINTERESTCONVEYEDTO DRHENERGY,INC., A COLORADOCORPORATIONBYDOCUMENTRECORDEDOCTOBER13, 2006, ASINSTRUMENT NO.2006-0756951OF OFFICIALRECORDSOF SAIDCOUNTY.SAIDINTERESTIS FURTHER DESCRIBEDAS FOLLOWS:

A. ANYANDALL(I) OILRIGHTS,(II) MINERALRIGHTS,(III) NATURALGASRIGHTS,(IV)

RIGHTSTO ALLOTHERHYDROCARBONS BYWHATSOEVERNAMEKNOWN,(V)GEOTHERMAL

HEATRIGHTSORGEOTHERMALSUBSTANCESTHATMAYBEPRODUCEDFROMTHEPROPERTY, (VI) WATERRIGHTSANDCLAIMSOR RIGHTSTO WATERAND(VII) ALLPRODUCTSDERIVED FROMANYOFTHE FOREGOING(COLLECTIVELY, "SUBSURFACERESOURCES")LOCATEDIN OR

UNDERTHATCERTAINREALPROPERTYSITUATEDIN THE COUNTYOF RIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A"ATTACHEDHERETOANDINCORPORATEDHEREIN (THE"PROPERTY"),TO THEEXTENTSUCHSUBSURFACERESOURCESHAVENOTBEEN PREVIOUSLYRESERVED;AND
B.THEPERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFORANDPRODUCE,

STOREANDREMOVEANYOFTHESUBSURFACERESOURCESON ORFROMTHEPROPERTY,

INCLUDINGWITHOUTLIMITATIONTHE RIGHTTO WHIPSTOCKOR DIRECTIONALLYDRILLAND

MINE,FROMLANDSOTHERTHANTHEPROPERTY,WELIS,TUNNEISANDSHAFTSINTO,

THROUGHORACROSSTHESUBSURFACEOFTHE PROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLYDRILLEDWELLS,TUNNELSANDSHAETSWITHINOR

BEYONDTHEEXTERIORLIMITSOF THEPROPERTY,ANDTO REDRILL,RETUNNEL, EQUIP,

MAINTAIN,REPAIR, DEEPENANDOPERATEANYSUCHWELLSOR MINES,BUTWITHOUTTHE

RIGHTTO DRILL,MINE,EXPLORE,OPERATE,PRODUCE, STOREOR REMOVEANYOFTHE

SUBSURFACERESOURCESTHROUGHORIN THE SURFACEOFTHEPROPERTYORTHEUPPER FIVEHUNDRED(500) FEETOF THE SUBSURFACEOFTHEPROPERTY.)
PARCELNO. 5:

THAT PORTIONOFTHEEAST‘/2 OFSECTION29, TOWNSHIP2 SOUTH,RANGE4 EAST,SAN

BERNARDINOBASEANDMERIDIAN,STATEOFCALIFORNIA,ACCORDINGTO THEOFFICIAL

GOVERNMENTPLATTHEREOF
COMMENCINGATTHESOUTHEASTCORNEROF SAIDSECTION29; THENCENORTHERLY ALONGTHE EASTERLYBOUNDARYOFSAIDSECTION29, A DISTANCEOF 329 FEETTO THE TRUEPOINTOF BEGINNING;THENCEWESTERLYANDPARALLELWITHSOUTHERLYBOUNDARY OF SAIDSECTION29, A DISTANCEOF 528 FEET;THENCENORTHERLYANDPARALLELWITH THE EASTERLYBOUNDARYOF SAIDSECTION29, A DISTANCEOF 577 FEET;THENCE EASTERLYANDPARALLELWITHTHESOUTHERLYBOUNDARYOF SAIDSECTION29, A DISTANCEOF 528 FEET;THENCESOUTHERLYANDALONGTHEEASTERLYBOUNDARYOF SAID SECTION29, A DISTANCEOF 577 FEETTO THETRUEPOINTOF BEGINNING.

EXCEPTINGTHEREFROMTHE NORTH165 FEETTHEREOF.

ALSOB(CEPTING THEREFROMALLTHATINTERESTCONVEYEDTO DRHENERGY,INC., A COLORADOCORPORATIONBYDOCUMENTRECORDEDOCTOBER13, 2006, AS INSTRUMENT NO. 2006-0756951 OF OFFICIALRECORDSOF SAIDCOUNTY.SAIDINTERESTIS FURTHER DESCRIBEDAS FOLLOWS:

A. ANYANDALL(1) OILRIGHTS,(11)MINERALRIGHTS,(111)NATURALGASRIGHTS, (IV)

RIGHTSTO ALLOTHERHYDROCARBONS BYWHATSOEVERNAMEKNOWN,(V) GEOTHERMAL 347/020269-0040
103691607 2103/23/10
'7‘

HEATRIGHTSOR GEOTHERMALSUBSTANCESTHAT MAYBEPRODUCEDFROMTHEPROPERTY, (VI) WATERRIGHTSANDCLAIMSOR RIGHTSTO WATERAND(VII)ALLPRODUCTSDERIVED FROMANYOF THE FOREGOING(COLLECTIVELY, "SUBSURFACE RESOURCES")LOCATEDIN OR

UNDERTHATCERTAINREALPROPERTYSITUATEDINTHECOUNTYOF RIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A"ATTACHEDHERHOANDINCORPORATEDHEREIN (THE "PROPERTY"),TO THE EXTENTSUCHSUBSURFACERESOURCESHAVENOTBEEN PREVIOUSLYRESERVED;AND
B. THE PERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFORANDPRODUCE,

STOREANDREMOVEANYOFTHESUBSURFACERESOURCESONORFROMTHE PROPERTY,

INCLUDINGWITHOUTLIMITATIONTHERIGHTTO WHIPSTOCKOR DIRECTIONALLY DRILLAND

MINE,FROMLANDSOTHERTHANTHE PROPERTY,WELLS,TUNNELSANDSHAFTSINTO,

THROUGHOR ACROSSTHE SUBSURFACEOFTHEPROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLYDRILLEDWELLS,TUNNELSANDSHAFTSWITHINOR

BEYONDTHE EXTERIORLIMITSOF THE PROPERTY,ANDTO REDRILL,RETUNNEL,EQUIP,

MAINTAIN,REPAIR,DEEPENANDOPERATEANYSUCHWELLSOR MINES,BUTWITHOUTTHE

RIGHTTO DRILL,MINE,EXPLORE,OPERATE,PRODUCE,STOREORREMOVEANYOFTHE

SUBSURFACERESOURCESTHROUGHOR IN THESURFACEOF THEPROPERTYORTHE UPPER FIVEHUNDRED(500) FEETOFTHE SUBSURFACEOFTHE PROPERTY.)
PARCELNO. 6:

THAT PORTIONOFTHEEAST‘/2OF SECTION29, TOWNSHIP2 SOUTH,RANGE4 EAST,SAN

BERNARDINOBASEANDMERIDIAN,STATE OFCALIFORNIA,ACCORDINGTO THE OFFICIAL GOVERNMENTPLATTHEREOF.

COMMENCINGAT THE SOUTHEASTCORNEROF SAIDSECTION29; THENCEWESTERLYALONG THE SOUTHERLYBOUNDARYOF SAIDSECTION29, A DISTANCEOF 528 FEETTO THETRUE POINTOF BEGINNING;THENCECONTINUINGWESTERLYALONGTHESAIDSOUTHERLY BOUNDARYOF SAIDSECTION29, A DISTANCEOF 528 FEET;THENCENORTHERLYAND PARALLELWITHTHEEASTERLYBOUNDARYOF SAIDSECTION29, A DISTANCEOF 2640 FEET; THENCEEEERLY ANDPARALLELWITH THESOUTHERLYBOUNDARYOF SAIDSECTION29, A DISTANCEOF 528 FEET;THENCESOUTHERLYANDPARALLELWITHTHE EASTERLYBOUNDARY OF SAIDSECTION29, A DISTANCEOF 2640 FEETTO THETRUEPOINTOF BEGINNING.

ALSOEXCEPTINGTHEREFROMALLTHAT INTERESTCONVEYEDTO DRHENERGY,INC., A COLORADOCORPORATIONBYDOCUMENTRECORDEDOCTOBER13, 2006, AS INSTRUMENT NO. 2006-0756951OFOFFICIALRECORDSOF SAIDCOUNTY.SAIDINTERESTIS FURTHER DESCRIBEDAS FOLLOWS:

A. ANYANDALL(I) OILRIGHTS,(II) MINERALRIGHTS,(III) NATURALGASRIGHTS,(IV)

RIGHTSTO ALLOTHERHYDROCARBONS BYWHATSOEVERNAMEKNOWN,(V) GEOTHERMAL

HEATRIGHTSORGEOTHERMALSUBSTANCESTHAT MAYBEPRODUCEDFROMTHEPROPERTY, (VI) WATERRIGHTSANDCLAIMSOR RIGHTSTO WATERAND(VII) ALLPRODUCTSDERIVED FROMANYOF THE FOREGOING(COLLECTIVELY, "SUBSURFACERESOURCES")LOCATEDIN OR

UNDERTHAT CERTAINREALPROPERTYSITUATEDIN THE COUNTYOF RIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A"ATTACHEDHERETOANDINCORPORATEDHEREIN (THE "PROPERTY“),TO THE EXTENTSUCHSUBSURFACERESOURCESHAVENOT BEEN PREVIOUSLYRESERVED;AND
B.THEPERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFORANDPRODUCE,

STOREANDREMOVEANYOF THESUBSURFACERESOURCESON OR FROMTHE PROPERTY,

INCLUDINGWITHOUTLIMITATIONTHERIGHTTO WHIPSTOCKOR DIRECTIONALLYDRILLAND 347/020269-0040
103691607 a03/23/10 '8"

MINE,FROMLANDSOTHERTHANTHEPROPERTY,WELLS,TUNNELSANDSHAFTSINTO,

THROUGHORACROSSTHESUBSURFACEOF THEPROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLYDRILLEDWELLS,TUNNELSANDSHAFISWITHINOR

BEYONDTHEEXTERIORLIMITSOF THE PROPERTY,ANDTO REDRILL,RETUNNEL,EQUIP,

MAINTAIN,REPAIR, DEEPENANDOPERATEANYSUCHWELLSOR MINES,BUTWITHOUTTHE

RIGHTTO DRILL,MINE,EXPLORE,OPERATE,PRODUCE,STOREOR REMOVEANYOFTHE

SUBSURFACERESOURCESTHROUGHORIN THESURFACEOFTHE PROPERTYORTHE UPPER FIVEHUNDRED(500) FEETOFTHESUBSURFACEOFTHE PROPERTY.)
PARCEL7: (APN‘S:667-080-006; 667-100-029, 031 AND038; 667-120-051, 052 AND024) TENTATIVE(TRACT)MAP32030-6, BEINGA SUBDIVISIONOFTHEFOLLOWINGDESCRIBED PROPERTY:

PARCELNO. 1:

THESOUTH‘/2OF THE NORTHWEST‘/4OFSECTION28, TOWNSHIP2 SOUTH,RANGE4 EAST,

SANBERNARDINOBASEANDMERIDIAN,STATEOF CALIFORNIA,ACCORDINGTOTHE OFFICIALGOVERNMENT PLATTHEREOF.
'
ALSOEXCEPTINGTHEREROMALLTHATINTERESTCONVEYEDTO DRHENERGY,INC.,A COLORADOCORPORATIONBYDOCUMENTRECORDEDOCTOBER13, 2006, ASINSTRUMENT NO. 2006-0756951OF OFFICIALRECORDSOF SAIDCOUNTY.SAIDINTERESTIS FURTHER DESCRIBEDAS FOLLOWS:

A. ANYANDALL(I) OIL RIGHTS,(II) MINERALRIGHTS,(III) NATURALGASRIGHTS,(IV)

RIGHTSTO ALLOTHERHYDROCARBONS BYWHATSOEVERNAMEKNOWN,(V) GEOTHERMAL

HEATRIGHTSOR GEOTHERMAL SUBSTANCESTHATMAYBEPRODUCEDFROMTHE PROPERTY, (VI) WATERRIGHTSANDCLAIMSOR RIGHTSTO WATERAND(VII)ALLPRODUCTSDERIVED FROMANYOFTHEFOREGOING(COLLECTIVELY, “SUBSURFACERESOURCES")LOCATEDIN OR

UNDERTHATCERTAINREALPROPERTYSITUATEDIN THECOUNTYOF RIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A"ATTACHEDHERETOANDINCORPORATEDHEREIN (THE"PROPERTY"),TO THEEXTENTSUCHSUBSURFACERESOURCESHAVENOTBEEN PREVIOUSLYRESERVED;AND
B. THE PERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFORANDPRODUCE,

STOREANDREMOVEANYOFTHE SUBSURFACERESOURCESONOR FROMTHE PROPERTY,

INCLUDINGWITHOUTLIMITATIONTHE RIGHTTO WHIPSTOCKOR DIRECTIONALLY DRILLAND

MINE,FROMLANDSOTHERTHANTHE PROPERTY,WELLS,TUNNELSANDSHAFTSINTO,

THROUGHORACROSSTHE SUBSURFACEOFTHE PROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLYDRILLEDWELLS,TUNNEISANDSHAFTSWITHINOR

BEYONDTHEEXTERIORLIMITSOFTHEPROPERTY,ANDTO REDRILL,RETUNNEL,EQUIP,

MAINTAIN,REPAIR,DEEPENANDOPERATEANYSUCHWELLSOR MINES,BUTWITHOUTTHE

RIGHTTO DRILL,MINE,E)(PLORE,OPERATE,PRODUCE,STOREORREMOVEANYOFTHE

SUBSURFACERESOURCESTHROUGHORIN THE SURFACEOFTHE PROPERTYORTHEUPPER FIVEHUNDRED(500) FEETOFTHESUBSURFACEOFTHE PROPERTY.)
PARCELNO. 2:

THESOUTHWEST‘/4OF SECTION28, TOWNSHIP2 SOUTH,RANGE4 EAST,SANBERNARDINO

BASEANDMERIDIAN,STATEOFCALIFORNIA,ACCORDINGTO THE OFFICIALGOVERNMENT PLATTHEREOF.
347/o2o2e9.uo4o
103691607 a03/23/IO ~9-

EXCEPTINGTHEREFROMTHEEAST‘/2OFTHESOUTHWEST‘/4.

ALSOEXCEPTINGTHEREFROMTHE EAST‘/2OFTHENORTHEAST‘/4OF THENORTHWEST‘/1 OFTHE SOUTHWESTM1OF SAIDSECTION.

ALSOB(CEPTING THEREFROMTHESOUTHERLY40 FEETCONVEYEDTO THECOUNTYOF RIVERSIDEBYDEEDFILEDFORRECORDJULY26, 1949 ASINSTRUMENTNO.3081 OF OFFICIALRECORDSOF RIVERSIDECOUNTY,CALIFORNIA.

EXCEPTINGTHEREFROMANYPORTIONLYINGWITHINTRACT32030-I ASSHOWNONFILEIN BOOK404 PAGES67 THROUGH75 OF MAPS,RECORDSOFRIVERSIDECOUNTY,CALIFORNIA.

ALSOEXCEPTINGTHEREFROMALLTHATINTERESTCONVEYEDT0 DRH ENERGY,INC., A COLORADOCORPORATIONBYDOCUMENTRECORDEDOCTOBER13, 2006, ASINSTRUMENT NO.2006-0756951OF OFFICIALRECORDSOF SAIDCOUNTY.SAIDINTERESTIS FURTHER DESCRIBEDAS TOLLOWS:

A. ANYANDALL(I) OILRIGHTS,(II) MINERALRIGHTS,(III) NATURALGASRIGHTS,(IV)

RIGHTSTO ALLOTHERHYDROCARBONS BYWHATSOEVERNAMEKNOWN,(V)GEOTHERMAL

HEATRIGHTSORGEOTHERMALSUBSTANCESTHATMAYBEPRODUCEDFROMTHE PROPERTY, (VI) WATERRIGHTSANDCLAIMSOR RIGHTSTO WATERAND(VII) ALLPRODUCTSDERIVED FROMANYOFTHE FOREGOING(COLLECTIVELY, "SUBSURFACERESOURCES")LOCATEDIN OR

UNDERTHATCERTAINREALPROPERTYSITUATEDIN THECOUNTYOF RIVERSIDE,STATEOF CALIFORNIADESCRIBEDIN EXHIBIT"A"ATTACHEDHERETOANDINCORPORATEDHEREIN (THE "PROPERTY"),TO THE EXTENTSUCHSUBSURFACERESOURCESHAVENOTBEEN PREVIOUSLYRESERVED;AND
B.THE PERPETUALRIGHTTO DRILL,MINE,EXPLOREANDOPERATEFORANDPRODUCE,

STOREANDREMOVEANYOF THESUBSURFACERESOURCESON OR FROMTHE PROPERTY,

INCLUDINGWITHOUTLIMITATIONTHE RIGHTTO WHIPSTOCKOR DIRECTIONALLYDRILLAND

MINE,FROMLANDSOTHERTHANTHEPROPERTY,WELLS,TUNNELSANDSHAFTSINTO, ‘THROUGHORACROSSTHE SUBSURFACEOFTHE PROPERTY,ANDTO BOTTOMSUCH

WHIPSTOCKEDOR DIRECTIONALLY DRILLEDWELLS,TUNNELSANDSHAFTSWITHINOR

BEYONDTHE EXTERIORLIMITSOFTHE PROPERTY,ANDTO REDRILL,RETUNNEL,EQUIP,

MAINTAIN,REPAIR,DEEPENANDOPERATEANYSUCHWELLSOR MINES,BUTWITHOUTTHE

RIGHTTO DRILL,MINE, EXPLORE,OPERATE,PRODUCE,STOREOR REMOVEANYOFTHE

SUBSURFACERESOURCESTHROUGHOR INTHESURFACEOFTHEPROPERTYORTHE UPPER FIVEHUNDRED(500) FEETOF THESUBSURFACEOF THEPROPERTY.)
PARCELNO. 3:

THE EAST‘/2 OFTHESOUTHWEST‘A,ANDTHE EAST‘/2OFTHENORTHEAST‘/4 OFTHE NORTHWEST‘A OFTHESOUTHWEST‘/4OF SECTION28, TOWNSHIP2 SOUTH,RANGE4 EAST,

SANBERNARDINOBASEANDMERIDIAN,STATEOFCALIFORNIA,ACCORDINGTO THE OFFICIALGOVERNMENTPLATTHEREOF.

EXCEPTINGTHEREFROMTHESOUTHERLY40 FEETASCONVEYEDTO THE COUNTYOF RIVERSIDE,BYDEEDRECORDEDJULY26, 1949 AS INSTRUMENTNO. 3081 OF OFFICIAL RECORDSOFRIVERSIDECOUNTY,CALIFORNIA.

B(CEPTING THEREFROMANYPORTIONLYINGWITHINTRACT32030-1 AS SHOWNON FILEIN BOOK404 PAGES67 THROUGH75 OF MAPS,RECORDSOF RIVERSIDECOUNTY,CALIFORNIA. 347/0202690040
103691607 1103/23/10 -10-