Article XIV — Annexation, Supplemental Declarations

Section 14.01 — Annexations, Generally

Any or all of the Subsequent Phase Property may be annexed to and made subject to this Master Declaration by any of the methods hereinafter set forth. In this Article XIV, any reference to the “Annexed Property” or to an “Annexed Phase” shall mean the property that is described in a duly Recorded Declaration of Annexation or Supplemental Declaration.

Section 14.02 — Unilateral Annexations

Declarant has the right, as to the Subsequent Phase Property (i.e., the lands more particularly described in Exhibit “B”) to annex any or all of that Subsequent Phase Property so as to be subject to this Master Declaration and so that membership in the Master Association shall be appurtenant to ownership of Lots or Separate Interests within the annexed Phase.

Section 14.03 — Other Annexations

In addition to annexations effected by the Declarant pursuant to Section 14.02, annexations of other real property may be made by Declarant with the approval by vote or written consent of Members entitled to exercise not less than two-thirds of the Voting Power of each class of membership of the Master Association. After the Class B membership has ceased, the affirmative vote of at least two-thirds of the voting power of Members other than Declarant shall be required to approve annexations pursuant to this Section 14.03. Upon obtaining the requisite approval of the Members pursuant to this Section, Declarant shall Record a Declaration of Annexation and, if appropriate, a Supplemental Declaration, as more particularly described in Sections 14.04 and 14.05 of this Article.

Section 14.04 — Declaration of Annexation

(a) Effect of Recordation of a Declaration of Annexation. Any annexation of portions of the Subsequent Phase Property to the Development authorized by this Master Declaration shall be made by Recording a Declaration of Annexation, or other similar instrument, with respect to the additional real property which shall be executed by Declarant or the Owner thereof and shall extend this Master Declaration to such real property. The Recordation of such a Declaration of Annexation shall constitute and effectuate the annexation of the additional real property described therein, and thereupon said real property shall become and constitute a part of Development, become subject to this Declaration and encompassed within the general plan and scheme of the covenants, conditions and restrictions contained herein, and become subject to Assessment by the Master Association and to the functions, powers and jurisdiction of the Master Association, and the Owners of Lots or Separate Interests in said real property shall automatically become Members of the Master Association.

(b) Contents of Declaration of Annexation. The Declaration of Annexation shall include the following:

(i) Legal Description of the Annexed Property. A legal description of the property included in the annexed property, separately identifying Lots and Separate Interests;

(ii) Statement Regarding Commencement of Assessments. The Declaration of Annexation shall provide for a specified date on which Assessments shall commence for Lots or Separate Interests in the annexed Phase, provided that the date specified may not be later than the first day of the first month following the month in which the first Lot in the annexed Phase is conveyed to an Owner;

(iii) Application of Equitable Servitudes. A statement that all of the covenants, conditions and restrictions of this Master Declaration shall apply to property within the Annexed Phase in the same manner as if the annexed property was originally covered by this Master Declaration; provided, however, that additional or revised covenants, conditions and restrictions applicable to the annexed property (collectively, “supplemental restrictions”), may be imposed when, in the sole discretion of the Declarant, it is deemed necessary or appropriate and to impose supplemental restrictions in order to reflect differences in the nature, Design or use of the Improvements to be constructed on Lots or Separate Interests in the annexed Phase.

Supplemental restrictions may not alter the general common plan or scheme created by this Master Declaration, revise any restriction imposed by a governmental entity as a condition of Subdivision Map approval (without the consent of that entity) or revoke, modify or add to the covenants, conditions and restrictions imposed by this Master Declaration with respect to portions of the Development initially subject to this Master Declaration or real property annexed to the Development prior to the annexed Phase. If supplemental restrictions are considered necessary or appropriate for a particular Phase, they shall be set forth in a Supplemental Declaration attached to, or incorporated in, the Declaration of Annexation (see Section 14.05, below).

Additional real property may be annexed to the Development and become subject to this Master Declaration in accordance with this section. Although the present intention of the Declarant is to develop the Subsequent Phase Property as part of the Development in conformance with a plan of phased development, nothing in this Master Declaration shall be construed or interpreted to commit the Declarant to the annexation of any portion of the Subsequent Phase Property to the Development in accordance with any present planning.

Section 14.05 — Supplemental Declarations

(a) Authority to Record Supplemental Declarations. During the course of developing the Property, it may become necessary or appropriate for Declarant to Record a Supplemental Declaration. Recordation of Supplemental Declarations by Declarant with the consent of Declarant (such consent not to be unreasonably withheld) is hereby approved.

(b) Content of Supplemental Declarations. Any Supplemental Declaration shall describe the portion of the Subsequent Phase Property to which it is to apply, recite that the Supplemental Declaration is being Recorded pursuant to the authority conferred by this Section 14.05 and may include, without limitation:

(i) Specification of Property Use Restrictions Applicable to the Annexed Property. Property use restrictions and design and building standards which shall apply solely to the Lots (and any Improvements constructed thereon) within the annexed Phase;

(ii) The Creation of a Sub-Association with Jurisdiction Over Property in the Annexed Phase. It is possible that portions of the Subsequent Phase Property may be developed by the Declarant or by a Merchant Builder as a project that is subject to either the Davis-Stirling Act or the Commercial/Industrial Act and, should that occur, the development would need to be managed by a Sub-Association comprised of the Owners of Separate Interests in that Phase.

Section 14.06 — Reconciling Conflicts Among Documents

This Master Declaration shall control if there is any conflict between any Declaration of Annexation or Supplemental Declaration and the provisions of this Master Declaration; provided, however, that to the extent that any provision hereof is expressly modified by a Supplemental Declaration, no conflict shall be deemed to exist; and, provided further, that this Master Declaration and any Supplemental Declaration shall be construed so as to be consistent with one another to the extent that the reconciliation of provisions is reasonably possible. However, the inclusion in any Supplemental Declaration of covenants, conditions, restrictions, rights, reservations, easements, equitable servitudes, limitations, liens or charges which are more restrictive or more inclusive than in the Governing Documents shall not be deemed to constitute a conflict with the provisions of this Master Declaration.

Section 14.07 — De-Annexation and Amendment

Any Declarant has the right, at its sole option, to (a) amend a Declaration of Annexation or a Supplemental Declaration; or (b) remove from the Development any property described in a Recorded Declaration of Annexation or a Supplemental Declaration by executing and Recording a rescission of such document, so long as both of the following conditions are satisfied at the time of the execution of the amendment or rescission: (i) no Lot in the annexed Phase encumbered by the Declaration of Annexation and/or Supplemental Declaration has been conveyed to an Owner; and (ii) Assessments have not commenced for any Lot in such annexed Phase.

Section 14.08 — Taxes and Assessments

All taxes and other assessments relating to any Subsequent Phase Property that is duly annexed to the Development in accordance with Sections 14.02 and 14.03, above, covering any period prior to annexation of the Phase shall be paid or otherwise provided for by the Declarant or other entity that is the owner of the annexed Phase.

Section 14.09 — Infrastructure Improvements

All intended infrastructure improvements in Phases that are annexed to the Development pursuant to Sections 14.02 and 14.03, above, shall be substantially completed or bonded to the satisfaction of the local governmental agency with authority therefor and the Federal National Mortgage Association prior to annexation and shall be consistent with the initial improvements of the initial Phase of the Overall Development in terms of the quality of construction.

Section 14.10 — Effect of Annexation

(a) Application of Declaration to Annexed Phase. The Recordation of a Declaration of Annexation shall constitute and effectuate the annexation of the Subsequent Phase Property described therein, and thereupon the annexed Phase shall become and constitute a part of the Development, and be subject to, and encompassed within, the general plan and scheme of this Master Declaration, subject only to such modification in said general plan as may be imposed by the Declaration of Annexation or by a Supplemental Declaration. Lots and Separate Interests within the annexed Phase shall thereupon become subject to Assessment by the Master Association and to the functions, powers and jurisdiction of the Master Association, and the Owners of Lots and Separate Interests within the annexed Phase shall automatically become Members of the Master Association. Any private roads which are included within the annexed Phase shall be subject to an easement in favor of the Master Association, free of all liens and encumbrances, other than liens, rights of way or other encumbrances disclosed on the preliminary title report for the annexed Phase and approved by the Master Association.

(b) The Obligation of the Master Association Board to Approve Revisions to the Master Association Budget Resulting From Annexation of a New Phase. After a new Phase has been annexed, the Board shall approve a budget, which is substantially based upon the operating budget accepted by the California Department of Real Estate in connection with the Public Report for that Phase, for the remainder of the current fiscal year for use upon commencement of Regular Assessments against Lots and Separate Interests within the annexed Phase.

Section 14.11 — Amendment of Annexation Provisions

After the conversion of Class B membership to Class A membership, and until such time as the Declarant no longer has any rights of unilateral annexation pursuant to Section 14.02, above, this Article may not be amended without the written consent of the Declarant, unless at the time of the amendment all property constituting Subsequent Phase Property has been annexed to the Development.