PREANNEXATION AGREEMENT (REVISED) FOR RECORDATION WITH THE RECORDER S OFFICE OF THE COUNTY OF SANTA CLARA

Recording Requested By: CITY OF SARATOGA After Recordation Return To: CITY OF SARATOGA Attn: City Clerk 13777 Fruitvale Avenue Saratoga, CA 95070 PREANNEXATION AGREEMENT (REVISED) FOR RECORDATION WITH THE RECORDER S OFFICE OF THE COUNTY OF SANTA CLARA Page 1 of 9

SOUTH THUNDER, LLC PREANNEXATION AGREEMENT (REVISED) THIS PREANNEXATION AGREEMENT (Agreement) is made and entered into the 7th day of September, 2011, by and between the CITY OF SARATOGA (City), a municipal corporation of the State of California, and the SOUTH THUNDER LLC (Owner). The Agreement is made operative and effective as of April 20, 2011. The Owner and the City are collectively referred to herein as the Parties. RECITALS A. WHEREAS, Owner is the owner of a certain undeveloped parcel of real property (approximately 2.68 acres) located in the County of Santa Clara within the City Sphere of Influence and Urban Service Area and more particularly described in Exhibit A, attached hereto and incorporated herein by this reference ("Annexation Property"), as to which property Owner has applied to the City to obtain final annexation approval; B. WHEREAS, Owner is also the owner of a certain parcel of real property (approximately 35.13 acres in size) adjoining the Annexation Property and located entirely within the City of Saratoga and more particularly described in Exhibit B, attached hereto and incorporated herein by this reference ("Principal Property"), which said Principal Property has been subject to a Williamson Act Contract which was originally entered into with the County of Santa Clara. Pursuant to Government Code Section 51243, when the Principal Property was annexed to the City of Saratoga in 2006, the City succeeded to all rights, duties, and powers of the County under the Contract. The Principal Property is currently developed with a single family dwelling, garage, hay barn, utility barn (with an upstairs apartment), stables, a horse riding arena, pool house, and workshop; C. WHEREAS, Owner submitted an Integrated Annexation Package including but not limited to a Development Proposal to the City seeking to obtain a Conditional Use Permit with a Variation from Standards for its existing stables, and approval to remodel and increase the square footage of the single family dwelling located on the Principal Property by 2907 square feet; D. WHEREAS, approval of the Development Proposal was materially based on a requirement that the Development Proposal include merger of Principal Property and Annexation Property into a single legal parcel for planning and land use purposes (such that the development potential for a single family dwelling on the Annexation Property was extinguished); E. WHEREAS, Owner currently has no future plans for use or development of the Principal Property and/or the Annexation Property other than the proposed Use Permit for existing stables and expansion of the existing single family dwelling contained in the Development Proposal; F WHEREAS, annexation of the Annexation Property to the City in accordance with the terms of this Agreement will result in rational comprehensive planning and foster predictability, certainty, economy and efficiency in future land use planning; Page 2 of 9

G. WHEREAS, concurrent with annexation of the Annexation Property to the City, Owner agreed to merge the Principal Property with the Annexation Property into a single legal parcel (the "Merged Property") for planning and land use purposes, which Merged Property is more particularly described in Exhibit C, attached hereto and incorporated herein by this reference, and pursuant to said agreement executed a Notice and Deed of Voluntary Merger of the Annexation Property and Principal Property, which Deed was recorded as Document No. 21191123 in the office of the County Recorder, County of Santa Clara, California on May 26, 2011, and rescinded the Williamson Act Contract for the Principal Property and simultaneously re-entered a Williamson Act Contract covering the entire Merged Property, which Williamson Act Contract was recorded as Document No. 21191124 in the office of the County Recorder, County of Santa Clara, California on May 26, 2011, and applied for and received a Conditional Use Permit and Variation from Standards and Design Review Approval for the benefit of the entire Development Proposal located on the Principal Property; H. WHEREAS, during the period that Owner has been processing the annexation of the Annexation Property and its merger with the Principal Property and the related Development Proposal, the two members who have been the sole owners of Owner STLLC have also been in the process of reallocating their joint ownerships of properties owned by STLLC and other entities between themselves. This reallocation of ownerships resulted in an untimely transfer by grant deeds executed on April 28, 2011 of both the Annexation Property and the Principal Property out of STLLC to another entity, Grace PB LLC, owned solely by one of the two members of STLLC. Upon realization of the untimeliness of the transfer, Grace PB LLC, by and through its sole member manager, and STLLC, by and through its two members and its manager, rescinded both transfers to Grace PB LLC by the execution of a Rescission Agreement, effective as of April 28, 2011, and Grace PB LLC has executed, and on August 23, 2011 recorded, Rescission Deeds by which it has remised, released and quitclaimed all its interest in both the Principal Property (Document No. 21287993) and the Annexation Property (Document No. 21287994) back to STLLC, thus restoring title to both properties in STLLC effective as of April 28, 2011; I. WHEREAS, CITY has ratified its prior adoption of its Resolution Nos. 11-026, 11-027, and 11-028 related to its April 20, 2011 approvals of the Integrated Annexation Package (including but not limited to Owner s Development Proposal) by its adoption of Resolution No. at its regular meeting on September 7, 2011, and City and Owner seek to resolve any issue with respect to the effectiveness of the South Thunder LLC Preannexation Agreement (Document No.12191125) previously recorded in the office of the County Recorder, Santa Clara County, on May 26, 2011 (the Original Preannexation Agreement ); J. WHEREAS, the purpose of this Agreement is to set forth the City's and Owner's respective responsibilities and understandings in pursuing and achieving annexation of the Annexation Property and approval of the Development Proposal; hence, the Parties intend and agree that the Annexation Property be annexed to the City subject to the following specified agreements and conditions. Page 3 of 9

AGREEMENT NOW, THEREFORE, in consideration of the foregoing, the Parties hereby agree as follows: l. Annexation. A Resolution Initiating Annexation has been approved by the City Council. The Owner and City have agreed that for the purposes and goals and subject to the agreements and conditions set forth in the Recitals above and in order to provide for rational long-term land use planning that the Annexation Property would be processed for final annexation into the City. The City has taken the steps necessary to achieve annexation of the Annexation Property at the soonest reasonable opportunity, including referral of the matters in paragraph 2 below to staff and the Planning Commission. The Owner has consented to annexation of the Annexation Property and agreed to support said annexation. This revised Preannexation Agreement is being executed by the parties in light of the circumstances described in the Recitals above and in order to resolve any issue with respect to the effectiveness of, and to ratify all the acts taken by the parties pursuant to, the Original Preannexation Agreement. 2. Application and Approval for Use Permit for Stables and Expansion of Single Family Dwelling. The Owner has formally submitted to the City a Development Proposal, a copy of which was attached to the Original Preannexation Agreement as Exhibit C (Development Proposal) and is incorporated herein by this reference, which included the following essential elements: a. Conditional Use Permit and Variation from Standards. The Owner shall submit a complete Application and obtain City approval for a Conditional Use Permit for the stables and a Variation of Standards as to site area, site coverage and/or floor area for the entire Development Proposal to be located on the Merged Property; b. Parcel Merger. The Owner shall submit to the City a complete, executed and recordation ready and acceptable Notice and Deed of Voluntary Merger for Parcel Merger and otherwise promptly initiate and diligently pursue to completion all necessary steps to merge the Annexation Property with the Principal Property into a single legal parcel (the "Merged Property") for planning and land use purposes (such that the development potential for a single family dwelling on the Annexation Property will be extinguished). The necessary steps for such merger shall be a new recorded Notice and Deed of Voluntary Merger for Parcel Merger. The merger shall constitute a material basis of the support for the approval of the Integrated Annexation Package and the required findings for the Variation from Standards, and the Merged Property shall not be subsequently subdivided so long as any portion of the resulting Merged Property is subject to a Williamson Act Contract, or the City's AP-OS overlay zoning district has not been removed by the City; c. Williamson Act Contract. The Owner shall submit a complete application and obtain City approval to rescind the Williamson Act Contract on the Principal Property and simultaneously re-enter a Williamson Act Contract covering the entire Merged Property, which Williamson Act Contract shall include the stables and all other existing Page 4 of 9

uses as compatible uses and shall be substantially in the form attached to the Original Preannexation Agreement as Exhibit D and is incorporated herein by this reference; d. Agricultural Preserve/Open Space Overlay. Owner shall submit a complete application and obtain City approval to add AP/OS overlay zoning to the entire Merged Property; and e. General Plan Amendment for Annexation Property. Owner shall submit a complete application and obtain City approval to amend the current Hillside Open Space (H-OS) Pre-General Plan Designation on the Annexation Property to a post-annexation General Plan Designation of Residential Hillside Conservation (RHC); and f. Design Review/Building Permit: Owner shall be required to obtain a Design Review Approval for the expansion of the single family dwelling and a Building Permit(s) as required by the City Code for implementation of the Development Proposal once approved. Owner shall have the option of submitting applications for Design Review and Building Permit as part of the Development Proposal, or may alternatively submit those applications subsequent, and subject, to approval of the Annexation. 3. Final Annexation Process. The City staff and Planning Commission reviewed the Development Proposal submitted under Paragraph 2 above and made recommendations to the City Council which approved the Integrated Annexation Package (including but not limited to the Development Proposal and the Final Annexation) at its regular meeting on April 20, 2011. 4. Survival of Rights and Obligations. The rights and obligations of the Parties as set forth in this Agreement shall survive annexation of the Annexation Property to the City. 5. LAFCO. An executed LAFCO Certificate of Completion of Annexation, dated June 20, 2011, has been issued by LAFCO and received by the City and the annexation has become final. 6. Legal Action. Any party may, in addition to any other rights or remedies herein provided, institute legal action to cure, correct, or remedy any default, enforce any covenant or agreement herein, enjoin any threatened or attempted violation hereof, enforce by specific performance the obligations and rights of the Parties hereto or obtain any other remedy consistent with this Agreement. In no event shall any party be entitled hereunder to monetary damages for any action or inaction of another party hereunder, including breach of contract. Nothing in this Section shall be deemed to limit any party's rights under the Tort Claims Act or the City's right to collect fees allowable and otherwise due and payable or to impose penalties for violations of City Ordinances. 7. Attorneys Fees and Costs. If legal action by any party is brought because of a breach of this Agreement, or to enforce a provision of this Agreement, each party shall bear their own attorneys fees and costs. 8. Controlling Law. This Agreement shall be construed and enforced in accord with the Page 5 of 9

laws of the State of California. 9. No Joint Venture or Partnership. The Parties hereby renounce the existence of any form of joint venture or partnership between any or all of the Parties and agree that nothing contained herein or in any document executed in connection herewith shall be construed as making any or all of the Parties joint venturers or partners. Further, the Owner is not an agent of the City. 10. Agreement By Owner to Indemnify, Hold Harmless and Defend City as to Action(s) Challenging Approval of Annexation, this Preannexation Agreement and All City Actions Processed Prior To Or Concurrently With The Annexation and as to Damage From Performance of Work Authorized by Any Of Such Actions. Owner (or Owner's successor(s) performing work described in Subsection b. below) hereby agrees to defend, indemnify and hold the City and its officers, officials, boards, commissions, employees, agents and volunteers (collectively "City") harmless from and against: a. any and all claims, actions or proceedings to attack, set aside, void or annul any action by City on the subject Annexation, or any of the proceedings, acts or determinations taken, done or made prior to or concurrently with said Annexation; and b. any and all claims, demands, actions, expenses or liabilities arising from or in any manner relating to the performance of the construction, installation, alteration or grading work by the Owner, or by Owner's successor(s), or by any person acting on their behalf, authorized by any City action described in subparagraph 10.a. above. Owner's obligations under subparagraph 10 above shall prevail over any other provision in this Preannexation Agreement. 11. Cooperation in the Event of Legal Challenge. In the event of any administrative, legal or equitable action or other proceeding instituted by a third party, governmental agency or official challenging the validity of any provision of this Agreement or the integrated annexation proceedings described herein, the Parties shall cooperate in defending the action or proceeding. 12. Notices. All notices or communications required hereunder between the Parties shall be in writing and may be given either personally, by overnight carrier, or by first class mail, addressed to the party intended to be notified. The notice shall be deemed to have been given and received on the date delivered in person, or the date of delivery receipt from the overnight carrier, or five days after deposit with the United States Post Office. Any Party hereto, by giving ten (10) days written notice to the other, may designate any other address as substitution of the address to which the notice or communication shall be given. Notices or communications shall be given to the Parties at the addresses set forth below until duly changed as set forth above. Page 6 of 9

City of Saratoga City Clerk City of Saratoga 13777 Fruitvale Avenue Saratoga, CA 95070 South Thunder LLC/Owner Brooks & Hess William Brooks 577 Salmar Avenue, Second Floor Campbell San Jose, CA 95008 Copy to: Richard S. Taylor City Attorney City of Saratoga Shute Mihaly & Weinberger LLP 396 Hayes Street San Francisco, CA 94102 13. Miscellaneous. a. Successor and Assigns. The covenants, terms, conditions and restrictions of this Agreement shall apply to, bind and inure to the benefit of successors in interest of the Parties hereto, including heirs, assigns, representatives, executors, administrators and all other parties, whether they succeed by operation of law or voluntary acts of the City or Owner. All such successors in interest shall be bound to every provision in this Agreement, whether or not this Agreement is referred to in the instrument by which such successors in interest acquire an interest in Owner's Properties or any thereof. b. Parties in Interest. This Agreement is entered only for the benefit of the Parties executing this Agreement and not for the benefit of any other individual, entity or person. c. Amendment of Agreement. This Agreement may be amended, but only in writing by mutual agreement of the original Parties or their successors in interest. d. Severability. If any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions of this Agreement shall continue in full force and effect, unless the provision held invalid forms a material consideration of this Agreement. e. Change in Law. If a subsequent change occurs in federal or state laws or regulations which precludes compliance with a provision of this Agreement, that provision shall be modified or suspended only to the extent necessary to comply with the federal or state law or regulation. f. Enforceability. Unless this Agreement is amended or terminated pursuant to the provisions of this Agreement, this Agreement shall be enforceable by any party hereto notwithstanding any change hereinafter enacted or adopted in any applicable General Page 7 of 9

Plan or Specific Plan, zoning ordinance, subdivision ordinance or any other land use or building ordinance. g. Entire Agreement. This Agreement, and the conditions referred to herein, and the exhibits attached hereto, constitute the entire understanding and agreement of the parties and supersedes all negotiation(s) or previous agreement(s) of the parties with respect to all or part of the subject matter hereof. No alteration or variation of this instrument shall be valid or binding unless contained in a duly executed written amendment to this Agreement. h. Captions. The captions in this Agreement have been inserted solely for convenience or reference and are not a part of this instrument and shall have no effect upon construction or interpretation. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective representatives as follows: CITY OF SARATOGA, CALIFORNIA a Municipal Corporation Approved as to Form: By: Dave Anderson, City Manager Richard Taylor, City Attorney ATTEST: Ann Sullivan, City Clerk South Thunder, LLC, Owner By: [Authorized Signatory] Approved as to Form: William T. Brooks, Esq. Page 8 of 9

ACKNOWLEDGMENT State of California County of } ss. On, before me, Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 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. Signature ACKNOWLEDGMENT State of California County of } ss. On, before me, Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 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. Signature Page 9 of 9