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Pardee Homes CC&R for Cottonwood Canyon
Rgcorded gas riot been co pate -whh Recording Requested By: , Y L, O RSO When Recorded Mail to: RiVEE'RSIDE CC_.1Lj1 TY CALIFORNIA Pardee Construction Company M 5 l! PAGE SIZE OA PCOR NOCOR S)AF RUSC. 10880 Wilshire Boulevard, Suite 1900 Los Angeles, California 90024 Attn.:Barbara Bail A R L if COPY LONG REFOND NCHG EXAM DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF EASEMENTS OF COTTONWOOD CANYON HILLS COMMUNITY ASSOCIATION TABLE OF CONTENTS PAGE DECLARATION................... ......... -------- ----------------------------------------- ARTICLEI DEFINITIONS....................................................................................................I Section1. A-nnexable Area.......................................••------..................................------.........-----2 Section 2. Architectural Review Committee.........................................................................2 Section3. Articles...................................._... ------------------. ------........................ ......................2 Section4. Association ................•------.....................................................................................2 Section 5. Board or Board of Directors--•..............................................................................2 Section6. By-Laws........................................................................................... ---------------3 Section 7. Intentionally Omitted........................•-•-•---...------........................----------................3 Section 8. Common Expenses..---' .......................--•--...........--..........----..................................3 Section9. County...................................................................................................................3 Section10. Declarant... ............................................................................ ..................3 Section 11. Declarant's Delegate.............................................................................................3 Section 12. Declaration ............... :..........................3 Section 13. Intentionally Omitted...........................................................................................3 Section14. Delegate.......................................•-•-...............-----........ ....-----..........................3 Section15. Delegate District.....----'-. •..............................•----....---... ......................................3 Section 16. Eligible Insurer or Guarantor..............................................................................3 Section 17. Eligible Mortgage Holder or Eligible Holder......................................................3 Section18. Fiscal Year......................................'---....---...-----'---'--"------.....---...--------------............4 Section 19. Governing Documents......................................................................... ----------'---'-4 Section 20. Improvements_...... .............. ........................... ........... ...........................4 Section 21. Maintenance Funds................ "---'-...-------'----...........................-----------•-----'----......4 Section 22. Maintenance Guidelines.......................................................................................4 Section 23. Maintenance Property.......................................... 002P3EL.A146A-3 Revised 32/28/00 first American Title Company has recorded (PUD) this instrument by request as an accom-modation only and has not examined it for regularity and sufficiency or as to its effect upon the title to any real property that may be described herein. -- Recorded Document No. 3088 ----- Section 24. Intentionally Omitted...........................................................................................4 Section25. Member................................................. ----••---........................................----•-.........5 Section 26. Merchant Builder.........................................•---------•-•••---•----------------••---•.............--.5 Section27. Mortgage----------------------------------------------------------------------------------------------------------------5 Section28. Mortgagee-------•......................••...........---------.......--•-•------...--................................5 Section29. Mortgagor.................................... •........................................................................5 Section30. Owner........... .......................................................•-•----------...----------------•••--............5 Section31. Person.-•--•---------------------------•------...------•--------•-•--------...................._........._......._.......5 Section 32. Phase of Development..................•.....•--........................................_..............._......5 Section 33. Professional Manager...........................................................................................5 Section34. Project....................................................................................................................5 Section35. Public Report---- --------------------------------------------------------•--...----•--•---•• --------------..........6 Section 36. Record and Recordation........................................................................................6 Section37. Rules..............•-------------•-•--..............---•-------•--------•-................ .--.6 Section38. State...................:...................................................................................................6 Section 39. Subdivision Interest..............................................................................................6 Section 40. Supplemental Declaration................................_.._........._.__........_._...............-..._....6 ARTICLE 11 MEMBERSHIP AND VOTING RIGHTS IN ASSOCIATION..........................6 Section 1. Qualifications and Transfer of Membership.......................................................6 Section 2. Classes of Membership-•-----------• -••••..............•-•-•••-••..................-------•-•...---- ---------6 Section 3. Delegate Districts;Appointment of Delegates•....•..............................................8 ART1 CLE III ASSESSMENTS..................................•--.......-•••--•--...........•............................... -..13 Section 1. Covenant to Pay Assessments.............................................................•---------.......13 Section 2. Purpose of Assessments............................................................•-•--.----------------------13 Section 3. Regular Assessments/Reserve Funds................................••................................13 Section 4. Special Assessm-ents.............................................................................................16 Section5. Uniform Rate.........................................................................................................17 Section 6- Commencement of Assessments..........................................................................17 Section 7. Subordinate to First Mortgage.............•........ Section 8. Assessment for Taxes............................--.............................................. ..18 Section 9. Enforcement Powers.................•...••.......................--..............................._...._........18 Section 10. Lien Against Subdivision Interest.......................................................................18 Section 11. Foreclosure of Assessment Lien...........................................................................18 Section 12_ Intentionally Omitted............................................................................................19 Section 13. Assessment Certificate.........................................................................................19 Section 14. Limited Exemption From Assessment................................................................19 ARTICLE IV POWERS AND DUTIES OD ASSOCIATION..................................................19 Section1. Elect Officers.................................. .............-...............................-----•...................20 Section 2. Management and Control.....................................................................................20 Section3. Principal Office............... .......... •----•----- ................................ .............................20 Section 4. Incur Indebtedness...............................................................................................20 Section 5. Obtaining Insurance........................................................................................• ...20 002P3ELA]46A-3 Revised 12/28/00 (PUD) ii Section 6. Notice of Cancellation of Insurance or Fidelity Bond.........................................22 Section 7. Utilities.............. Section 8. Maintenance Property .........................................................................................22 Section 9_ Enforcement and Litigation,Arbitration,Mediation and Administrative Proceeding.........................................................................•--.----•-22 Section 10. Services and Supplies...........................................................................................22 Section 11. Employment of Professional Manager and Agents.............................................22 Section 12. Maintenance Contract..........................................................................................23 Section13. Taxes.....................................................•--..................................._............•.............23 Section14. Discipline...................................•--.........................................................................23 Section 15. Notice of Default.....................................-----•-•--•-•--....--•-•--•-•--------..........---............23 Section 16. Notice of Taking......................----..........................................................................23 Section 17. Notice of Damage..................................................................................................23 Section18. Defense.........................................................................................................•--•-••..23 Section 19- Delegation of Power..........................•----.....--•---•.......--•---....---•-•......••................•-•-23 Section20. Rules......................................................................................................................24 Section 21. Right to grant Easements.....................................................................................24 Section 22. Availability of Documentation.............•.---...........................................................24 Section 23. Budget and Financial Statements.......................................................................25 Section 24. Additional Duties........................................•-------.............---.....------............_..........28 Section 25. Limitations on Powers of Association .................................................................29 Section 26. Limitation of Liability.-----••-•................................................................................30 Section 27. Scope of Association Authority to Pursue Litigation..........................................30 Section 28. Compliance with NPDES.....................................................................................31 Section 29. Provision of Utilities and Telecommunication Services.....................................31 ARTICLE V MAINTENANCE PROPERTY PERMITED USES AND LIMITATIONS ONUSE....................................................................... .........................................31 Section 1. Restricted Uses.....................................................................................................32 Section 2. Restriction on Change..........................................................................................32 Section 3. Improvements and Uses of Maintenance Property............................................32 Section 4. Limitation on Construction..................................................................................32 Section 5. Mineral Exploration................................................................................ ............33 Section 6. Declarant's Exemption...........................•-----------------------------•----••-........................33 Section7. Nuisances......................................................... ....................................................33 Section 8. Maintenance Property Damage or Neglect.......... .......... .............. ....................33 Section 9_ Declarant's Plans and Specifications...................................................................34 ARTICLE; VI MAINTENANCE OF MAINTENANCE PROPERTY AND EASEMENTS .............................................................................................34 Section 1. Easement for Maintenance..................................................................................34 Section2. Maintenance------. ..................................................................................................34 Section 3. Standards of Maintenance by Association ..........................................................34 Section 4. Duties of Association------•-----••--------------------•-----.............--•-•-•----.......------------.........34 002P3ELA746A-3 Revised 12/28/00 (PUD) lil ``` .... ............ ' / � Sectioa5. Private Sewer System &Pump Station ..............................................................34 Section 8. Owner's Easement of --'_.---_-_------'-_---.---'34 Section 7. Delegation of Enjoyment--....._-''----'.-----____..___....___._____.____35 Section 8` Waiver wf Enjoyment............................................................................................35 ARTICLE VII RIGHTS OF ELIGIBLE MORTGAGE HOLDERS AND ElIGIBLE INSURERS OR GUARANTORS ''----'--------'-----------'-----'-'—'°° Section Notice of Action.....................................................................................................35 Section 2- Other Provisions for Eligible Mortgage Holders.................................................36 ARTICLE]nI I DAMAGE,DESTRUCTION AND COkMEMNATION OF MAINTENANCE Section 1' Damage and Destruction Affecting the Maintenance Property.........................37 Section 2. Partial mrTotal Destruction.................................................................................37 Sectino3. Condemnation-...----'-----------________.____________________...___37 � ARTICLE}X ............................................. ................................................-.3O 8mctimol. Right ofBbfhmcenuemt....................................................................................... ....38 Gnmtiwo2. Alternative Dispute Resolution ...........................................................................38 Section3' Nm Waiver................................................................................... —------- ...............38 ARTICLE X 39 Section3' Residential Use.....................................................................................................39 Section2' Improvements.......................................................................................................um Sectioo3. Sanitary Facilities.................................................................................................4O Section 4. Antennae;Satellite Dishes...................................................................................40 Section 5. Oil,Water and Mineral Operations.....................................................................41 Section 6. Ground Cover Ryqiiirwzuoot............... .................................................................4X Section 7. Maintenance o{Subdivision Interests.................................................................42 Section8. Trees;Vegetation.................................................................................... .............42 Section9' Nuisances..............................................................................................................42 � SoctmoI0' Repair of Improvements'--'------.---.--...--.--.------_--.—__'42 Gectiooll' Easements...................................................................... ......................................43 Soutiom12LSigns............................................................................................................ .........43 Qectino13' Sales Offiow............................................................................................................48 Sectionl4' Animals................................................ .................................................................43 Section 15' Walls and Fences -_'---'---__--------''.—..--.---.—_—.------..43 8ectionl6' Construction nf Walls.......................................................... ................................44 Sectiool\L Drainage ................ ......................... .................................................... ............-44 Secbmol0L Provision for Architectural Approvals.................................. ..............................44 Section 89. Membership and Rights nf Appointmentof Architectural Review Cooumittee45 � Section 28. Approvaloy Committee.........................................................................................46 Sexduo2I Basis for Approval ofImprovements .-_—.-----.-------_--.-- ...... 002P3EL^146A-3 Revised 12/28100 0pVD> )v ' Section 22. Liability of Committee Members.........................................................................46 Section23. Views........................................................... .........................................................46 Section24. Painting•------•---•..................•-•-------•--...._..............................................................--.47 Section25. Clotheslines......................................• ............................................-•.....................47 Section 26. Commercial Vehicles and Recreational Vehicles...............................................A7 Section27. Garage Doors..............................•---------•----------.....--................................--•----........48 Section 28. Drainage Slope............... Section 29. Post-Construction Entry Rights...........................................................................48 Section 30. Slope-Control Areas................ ........................................•----.............................48 Section 31. No Impairment of Liens.......................................................................................49 Section32. Solar Eguipment..................•-------•---•----••-----.......................--------....._..--------..........50 Section 33. Mutual Covenants.....--•---••----•-•............................................................................50 Section 34. Enforcement Costs................................................................................................50 ARTICLEXl GENERAL PROVISIONS....................................................................................50 Section1. Severability.................................................................................................••--•----_50 Section2. Amendments.........................................................................................................50 Section 3. Material Amendments.......................................... ...............................................51 Section 4. Extension of Declaration................................................................._....................52 Section.5. Attorneys Fees..........................................•-•----.........................................------......52 Section 6. Special Responsibilities of Association................................................................52 Section 7. Declarant and Merchant Builder Exemption.....................................................53 Section8. Owners'Compliance----------------•-•---•-----•---------........................•........-------------•-.-.....55 Section.9- Notices.............. Section 10. Examination of Books ..............................................................•-•---••-................._.55 Section 11. Meetings, Notice and Representation .................................................................55 Section12- Captions............ ............................................. ......................................................55 Section13. Vote of Membership-................................................................................ ............56 Section I4. Annexation of An:nexable Area............................................................................56 Section 15. Waiver of Right to Jury Trial and Agreement to Trail by Judge in Court of Competent Jurisdiction Without a Jury..........................................................58 Section16. Litigation.......................................... ----.............................------•-----------.................58 Section 17. Conflicting Provisions...........................................................................................59 Section 18. Singular Includes Plural......................................................................................59 002P3ELA 146A-3 Revised 12/28/00 (PUD) V DECLARATION OF COVENANTS, CONDITIONS AND RESTRIC IONS AND GRANT OF EASEMENTS OF COI 1'ONWOOD CANYON HILLS COMMUNITY ASSOCIATION THIS DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF EASEMENTS is made this-2 C'It2-day of December , 20 00 by PARDEE CONSTRUCTION COMPANY,a California corporation,hereinafter called "Declarant". This Declaration is made with reference to the following RECITALS: A. Declarant is the owner of real property located in the City of Lake Elsinore, County of Riverside,State of California,hereinafter called the"Real Property",described as follows: Lots 496 and 649 of Tract 23848-1 recorded on February 7. 1991 as MB_229/41-43•together with Lots 497 through 503.Lot 597 and Lots 645 through 648 of Tract 23848-3 recorded on February 7 1991 as MB 229147-50:together with Tract 23848-4'recorded on December 8. 2000 as MB 298/93-97-together with Tract 23848-6 recorded on December 8.2000 as MB 298/98-101. B. Declarant is also the owner of certain real property, more particularly described in Exhibit "A" attached hereto and incorporated herein by reference (the "Annexable Area"), which property Declarant may wish to subject to a common plan of development together with the Real Property,by annexation- Upon such annexation,such Annexable Area shall be deemed to be part of the Real Property for the purposes of this Declaration- C. Declarant has deemed it desirable to create a "master planned community" (as defined in Section 2792-32 of Title 10 of the California Code of Regulations) which is also a common interest development pursuant to the Davis-Stirling Common Interest Development Act, to be governed by the Association (as hereinafter defined) formed under the Nonprofit Mutual Benefit Corporation Law of the State of California to which shall be delegated and assigned the power and functions of (1) owning, maintaining and administrating the Maintenance Property (as hereinafter defined) for the use of its Members (as hereinafter defined) and authorized guests, (2) administering and enforcing this Declaration, and (3) collecting and disbursing the assessments and charges hereinafter created in accordance with this Declaration. D. Declarant desires that each Subdivision Interest (as hereinafter defined) shall have appurtenant to it a membership in the Association, which will be the management body for the overall Project (as hereinafter defined). 002P3ELA146A-3 Revised 12/28/00 (P1JD) I E. Before selling or conveying any interest in the Real Property, Declarant desires to subject the Real Property to certain covenants,conditions and restrictions in accordance with a common plan for the benefit of Declarant and any and all present and future owners of the Real Property and any property annexed thereto pursuant to this Declaration. NOW, THEREFORE, Declarant declares that the Real Property and any additional real property that may be annexed thereto is, and shall be, held, conveyed, hypothecated, encumbered, ]eased, rented, used, and occupied subject to the following limitations, restrictions, easements, reservations, covenants, conditions, servitudes, liens, and charges, all of which are declared and agreed to be in furtherance of a plan of planned development as described in California Civil Code Sections 1350-1372 for the subdivision, improvement, protection, maintenance, and sale of each ownership interest within the Real Property and any additional real property that may be annexed thereto, all of which are declared and agreed to be for the purpose of enhancing, maintaining, and protecting the value and attractiveness of the Real Property and such additional property annexed thereto_ All of the limitations, restrictions, easements, reservations, covenants, conditions, servitudes,liens, and charges provided herein shall run with the land,shall be binding on and inure to the benefit of all parties having or acquiring any right, title, or interest in the Real Property (including any additional property annexed thereto), are for the benefit of the Real Property, and shall be binding on and inure to the benefit of the successors in interest of such parties_ Declarant further declares that it is the express intent that this Declaration satisfy the requirements of California Civil Code Section I353. ARTICLE I DEFINITIONS Unless the context otherwise specifies or requires, the terms defined in this ARTICLE 1, for all purposes of this Declaration, shall have the meanings herein specified. Section 1. "Annexable Area"means the real property described in Exhibit"A", all or any portion of which property may be made subject to this Declaration pursuant to the provisions of Section 14 of Article XII hereof. Section 2. "Architectural Review Committee"means the committee of persons appointed and acting pursuant to Section 19, Article X of the Declaration, whose duties include, without limitation, the review and approval or disapproval of plans for improvements to the Real Property, except for improvements constructed by Declarant. Section 3. "Articles" means the Articles of Incorporation of the Association as they may from time to time be amended. Section 4. "Association" means the COTTONWOOD CANYON HILLS COMMUNITY ASSOCIATION, a California nonprofit mutual benefit corporation, its successors and assigns. Section 5. "Board"or"Board of Directors"means the governing body of the Association. 002P3ELA146A-3 Revised 3 2/28100 (PUD) 2 Section 6. "By-Laws" means the By-Laws of the Association_ as they may from time to time be amended. Section 7. Intentionally omitted. Section 8. "Common Expenses" means the expenses of operating the Association and any reasonable reserve for such purposes as found and determined by the Board and all sums designated as common expenses of the Owners by or pursuant to the Governing Documents. Section 9. "County" means Riverside County, California, the county in which the Project is located. Section 10. "Declarant" means Pardee Construction Company, a California corporation, and its successors and assigns, if such successors or assigns are assigned the rights of Declarant pursuant to Article XI Section 7,or if such successor or assignee is a Mortgagee acquiring Declarant's interest in the Project by foreclosure or deed in lieu of foreclosure- Section 11. "Declaranfs Delegate„ means the Delegate appointed by Declarant pursuant to Section 3(c) of Article II hereof,to represent Declarant and all Merchant Builders and to cast the Class A and Class B votes of the Declarant and all Merchant Builders, as further provided in this Declaration and in the By-Laws. Section 12_ "Declaration" means this Declaration of Covenants, Conditions and Restrictions and Grant of Easements and all amendments,modifications and supplements thereto. Section 13. Intentionally omitted. Section 14. "Delegate' means (i) Declarant's Delegate, and (ii) a natural Person appointed pursuant to Section 3(b)of Article 11 hereof, to represent all of the Members (exclusive of Declarant and Merchant Builders) within a Delegate District to vote on their behalf, as further provided in this Declaration and in the By-Laws. All provisions of this Declaration and the By-Laws pertaining to the appointment, removal, qualification or action of Delegates shall be equally applicable to all alternate Delegates appointed pursuant to Article 11 herein. Section 15. "Delegate Distract" means a geographical area in the Project in which a single Delegate represents the collective voting power of all Members (other than Declarant and Merchant Builders who shall be represented by Declarant's Delegate) owning Subdivision Interests within such geographical area. The Delegate Districts shall be established in the manner specified in Article 11 herein. Section 16. "Eligible Insurer or Guarantor" means an insurer or governmental guarantor of a first Mortgage on the Property or any portion thereof who has requested notice of certain matters in accordance with ARTICLE VII herein. Section 17. "Ehibble Mortgage Holder" or "Eligible Holder" means a holder of a first Mortgage on the Real Property or any portion thereof who has requested notice of certain matters from the Association in accordance with ARTICLE VII herein. 002P3ELAI46A-3 Revised I2/28/00 (PUD) 3 Section 18- "Fiscal Year" means the year from January 1 through December 31 of the same calendar year. However, the Fiscal Year of the Association is subject to change from time to time as the Board may determine. Section 19. "Governing Documents' means the Declaration, the Articles, the By-Laws, and any Rules established by the Board, as the same may be amended from time to time, including all exhibits thereto_ Section 20. "Improvements" means all structures, construction, and landscaping of every type and kind, whether above or below the land surface, including but not limited to buildings, outbuildings, recreational facilities, carports, signs, roads, driveways, fences, screening walls, retaining walls, hedges, windbreaks, plantings, planted trees, grass and shrubs, sprinkler and irrigation systems,poles and signs. Section 21. "Maintenance Funds"means the accounts created for the Association receipts and disbursements in connection with its maintenance obligations pursuant to Article VI hereof. Section 22. "Maintenance Guidelines' means the guidelines for the ordinary and necessary maintenance, repair, replacement and preservation of the Maintenance Property. Among other things, the Maintenance Guidelines specify suggested maintenance levels, recommended intervals for regularly scheduled maintenance items, and the scope of required maintenance practices and procedures. The Maintenance Guidelines shall be provided to the Association by Declarant and, subject to Section 6 of Article V hereof,may be supplemented, amended and updated by the Board. Section 23. "Maintenance Property" means (i) all real property (including the Improvements thereon) and personal property owned or to be owned by the Association for the common use (where a right to use has been granted) and enjoyment of the Owners, (ii) all real property (including the Improvements thereon)over which the Association or the Owners own or will own an easement for the use, care or maintenance therefor, and (iii)those portions of public property and public right-of-ways (including any walls, median strips, slopes, berms, landscaping, trails, parkway areas, sidewalks, intersection plazas, irrigation and drainage systems, and other Improvements thereon)designated to be maintained by the Association pursuant to this Declaration, any Supplemental Declaration, any agreement between a local governmental agency and Declarant, a Merchant Builder or the Association, or on any recorded subdivision or parcel map. Maintenance Property shall include any wall or fence which (A) separates a Subdivision Interest from the immediately adjoining Maintenance Property, whether such wall or fence is located wholly or partially within the Maintenance Property or the Subdivision Interest, or(B)is otherwise designated as a Maintenance Property in any Supplemental Declaration; provided that Maintenance Property shall not include any wall or fence that is the maintenance responsibility of any local governmental agency. Maintenance Property may include real property which has been offered for dedication to a local governmental agency for public access, use or maintenance, such as roads, trails, parks and other recreational or open space amenities and Improvements. Such portions of the Maintenance Property shall be maintained by the Association in the same manner as all other Maintenance Property until._the offer of dedication is accepted, whereupon such property shall be maintained by the accepting local governmental agency and shall no longer constitute a part of the Maintenance Property. Section 24. Intentionally omitted. 002P3ELA 14GA-3 Revised 12/28/00 (PUD) 4 Section 25. "Member" means every person entitled to membership in the Association as provided herein. Section 26. "Merchant Builder" means a Person who acquires a portion of the Real Property for the purpose of developing such portion for resale to the general public; provided, however,that the term "Merchant Builder"shall not mean Declarant. Section 27. "Mortgage" means a deed of trust, as well as a mortgage, encumbering any Subdivision Interest_ Section 28. "Mortgagee" means a beneficiary under, or holder of, a deed of trust, as well as a mortgagee of a Mortgage, encumbering a Subdivision Interest. Section 29. "Mortgagor" means the trustor of a deed of trust, as well as a mortgagor of a Mortgage, encumbering a Subdivision Interest. Section 30. "Owner" means the record owners, whether one (1) or more persons or entities,of fee simple title to any Subdivision Interest which is a part of the Real Property,including contract buyers, but excluding those having such interest merely as security for the performance of an obligation. Section 31. "Person" means a natural individual, or a corporation, limited liability company,partnership or other entity with the legal right to hold title to real property. Section 32. "Phase of Development' shall mean (i) the Real Property described in Recital A of this Declaration; or (ii) any property designated as a Phase of Development in a recorded Supplemental Declaration annexing such property to the Real Property, or, if not so designated, all of the property annexed to the Real Property pursuant to a single recorded Supplemental Declaration. Section 33. "Professional Manager" means a person or firm which has been engaged in the business of managing condominium and/or planned development projects similar to the Project in the County on a full time basis for a period of not less than five (5)years immediately preceding his, her or its employment by the Association. No person or firm may be hired to manage the Project unless such person qualifies as a Professional Manager. A Professional Manager may be an employee of the Association or an independent contractor, employed by the Association pursuant to the Governing Documents, and assigned the duties, power and functions of the Association, as limited by the Governing Documents, terms of employment and applicable law, rules and regulations. No Professional Manager or any officer, director, shareholder, principal, partner or employee thereof may be an officer or director of the Association. Section 34. "Proiect" means the Real Property (including any additional real property annexed thereto)and all structures, improvements and residential projects constructed or developed, _ or to be constructed or developed, thereon. 002P3EL.Al96A-3 Revised 32/28/00 (PUD) 5 Section 35. `Public Report" means a Final Subdivision Public Report issued by the California Department of Real Estate in compliance with Sections 11000 et sea. of the California Business and Professions Code,or any similar California statute hereafter enacted. Section 36. "Record" and "Recordation" means, with respect to any document, the recordation of said document in the Office of the County Recorder of the County of Riverside,State of California. Section 37. "Rules" means the rules adopted by the Board for the regulation of the Maintenance Property, as they may be amended from time to time- Section 38. "State"means the State of California. Section 39. "Subdivision Interest"means each of(i)the lots and condominium units(and the improvements constructed thereon)within the property described in paragraph A of the Recitals of the Declaration, and (ii) such additional lots and condominium units (and the Improvements constructed thereon)as may hereafter be brought within the jurisdiction of the Association and made subject to this Declaration. Section 40. "Supplementary Declaration" means a recorded declaration annexing additional property to the Real Property and subjecting such additional property to this Declaration. Such Supplementary Declaration may, but is not required to, impose, expressly or by reference, additional restrictions and obligations on the annexed property. ART]CLE 11 MEMBERSHIP AND VOTING RIGHTS IN ASSOCIATION Section 1. Qualifications and Transfer of Membership. Every Owner, including Declarant, shall be a Member of the Association. Membership shall be appurtenant to and may not be separated from ownership of any Subdivision Interest. Each Owner is obligated promptly, fully and faithfully to comply with and conform to this Declaration, the Articles, the By-Laws and the Rules. Membership in the Association shall not be transferred, pledged or alienated in any way, except upon the sale or encumbrance of the Subdivision Interest to which it is appurtenant, and then only to the purchaser, in the case of a sale, or Mortgagee, in the case of an encumbrance of such Subdivision Interest. Any attempt to make a prohibited transfer shall be void. In the event any Owner shall fail or refuse to transfer the membership registered in his/her name to the transferee of his/her Subdivision Interest, the Association shall have the right to record the transfer upon its books and thereupon the transferor shall have no further right, title or interest in or to the membership. Declarant's Class C Membership may not be partially assigned or held by more than one (1)Person, and may not be transferred except to a successor to all or a part of Declarant's rights under this Declaration. Section 2. Classes of Membership. The Association shall have three (3)classes of voting Membership as follows: 002P3ELA14GA-3 Revised 12/28/00 (PUD) 6 (1) Class A. The Class A Members are all Owners, except that Declarant and Merchant Builders shall not be Class A members for so long as there exists a Class B Membership. Class A Members are assigned one (1) vote for each Subdivision Interest owned by such Member. All votes cast by the Class A Members within a Delegate District shall be carried by the Delegate representing such Members to an Association meeting of the Delegates, and shall be cast by the Delegate on behalf of such Class A Members in accordance with Section 3(g) below concerning Voting Proposals- (h) Class B. The Class B Members are Declarant and the Merchant Builders. The Class B Members are assigned three (3) votes for each Subdivision Interest which is both subject to assessments and owned by such Member. Votes of the Class B Members shall be cast by Declaranes Delegate on behalf of the Class B Members. The Class B Membership shall be converted to Class A Membership on the earlier to occur of the following(the"Class B Termination Date'): (A) The date on which seventy-five percent (75%) of the Subdivision Interests proposed for the overall Project (including the Annexable Area)have been conveyed to Class A Members; (B) The fifth (501) anniversary of the most recent conveyance to a Class A Member of the first Subdivision Interest in any Phase of Development in the overall Project under the authority of a Public Report;or. (C) The twenty-fifth (25=b) anniversary of the first conveyance of a Subdivision Interest to a Class A Member in the overall Project under the authority of a Public Report. (iii) Class C. The Class C Member shall be Declarant irrespective of whether Declarant is or is not an Owner. The Class C Membership shall have only the following voting power: (i) Prior to the Class C Conversion Date (as hereinafter defined), the Class C Member is entitled to solely elect a majority of the members of the Board of Directors; (h) commencing on the Class C Conversion Date and continuing until the Class C Termination Date (as hereinafter defined), the Class C Member is entitled to solely elect twenty percent (20%) (rounded to the next whole number) of the members of the Board of Directors (e.g. if the Board consists of three (3) or five (5) members, then the Class C Member is entitled to solely elect one (1) member of the Board; if the Board consists of seven (7) members, then the CIass C Member may solely elect two (2) members of the Board). The "Class C Conversion Date" shall be the same date as the Class B Termination Date described in Subsection (ii)above. The Class C Membership shall terminate on the earlier to occur of the following (the "Class C Termination Date"): 002P3ELA146A-3 Revised 12/28/00 (PUD) 7 (A) The date on which ninety percent (90%) of the Subdivision Interests in the overall Project (including the Annexable Area)have been conveyed to Class A Members; (B) The fifth (51h) anniversary of the most recent conveyance to a Class A member of the first Subdivision Interest in Phase of Development in the overall Project under the authority of a Public Report; (C) The twenty-fifth (250h)anniversary of the first conveyance of a Subdivision Interest to a Class A member in the overall Project under the authority of a Public Report. Section 3. Delegate Districts:Appointment of Delegates. The Real Property shall be divided into Delegate Districts and, subject to Section 3 below, Delegates shall be selected as follows: (a) Delegate Districts. The Real Property described in Recital A of this Declaration shall comprise Delegate District No. 1_ As additional property is annexed to ethereal Property and made subject to this Declaration, the Delegate Districts within the annexed property shall be established by Declarant in the respective Supplemental Declarations for such annexed property. (b) Appointment of Delegates. In each Delegate District, a Delegate (and alternate Delegate) representing all Owners in such Delegate District other than Declarant and the Merchant Builders shall be appointed and may be removed by the Board of Directors of the Association, or by a committee appointed by the Board for the purpose of appointing Delegates (the "Delegate Committee")_ (c) Appointment of Declarant's Delegate. Declarant is entitled to appoint one (1) Delegate ("Declarant's Delegate") to represent Declarant and the Merchant Builders at all meetings of the Association and to cast all of the Class A and Class B votes which Declarant and Merchant Builders are entitle to cast pursuant to this Declaration and the By-Laws. At any time in its sole discretion, Declarant may change the Person which it has appointed to serve as Declarant's Delegate and may also designate an alternate Declarant's Delegate to act in such capacity when Declarant's Delegate is absent or otherwise unable to act. Declarant must give written notice to the Board before any such appointment or replacement is effective. (d) Qualification. Each Delegate must be (i) an authorized agent or employee of Declarant or a Merchant Builder, or(ii) a Member who resides in the Project. Where a Member is a corporation, partnership, or other entity, the authorized agent of such entity shall be eligible to serve as a Delegate_ Delegates must act personally at an Association meeting of the Delegates or by written ballot, and may not act by proxy. If a Delegate is not present at a meeting of the Delegates, then the alternate Delegate for such absent Delegate may attend the meeting and exercise all rights, powers and votes to which the absent Delegate would be entitled. If the previously absent Delegate arrives prior to the adjournment of a meeting, the alternate Delegate shall have no further power to act in the place of such Delegate; provided that such relinquishment of authority by the 002P3ELA 14 GA-3 Revised 12/28/00 (PUD) 8 alternate Delegate shall not invalidate any matter previously voted or acted upon by the alternate Delegate in his or her temporary capacity as a Delegate. (e) Term,Vacancy and Removal of Delegates. The term of office of each Delegate appointed pursuant to subparagraph (b)above shall expire each year on the ninetieth (90)day prior to the date of the annual meeting of Delegates. Each Delegate shall hold office until a successor has been appointed or until the Delegate's death, resignation, removal, judicially determined mental incompetence,or failure to satisfy the qualifications of a Delegate. Delegates may serve consecutive terms (whether as a Delegate, alternate Delegate, or any combination thereof)- Delegate vacancies occurring for any reason other than expiration of a Delegate's term shall be filled by the alternate Delegate, and if there is no alternate Delegate, then by the Board or the Delegate Committee in case of a Delegate for a Delegate District, or by Declarant in case of Declarants Delegate. Subject to the eligibility and vacancy provisions herein, each such person shall serve the remainder of the unexpired term of the office of the predecessor Delegate, or until a successor is appointed. Delegates appointed by the Board of Directors or the Delegate Committee may be removed by action of the Board or the Delegate Committee. (f) Voting By Delegates. Subject to Section (g) below, the Delegate for the Members of a Delegate District other than Declarant and the Merchant Builders shall exercise the voting power of all such Members represented by him or her. Declarant's Delegate shall exercise all of the Class A and Class B voting power of Declarant and the Merchant Builders. All votes represented by Declaranes Delegate shall be cast in the manner directed by Declarant- Any Class C vote shall be cast by Declarant. (g) Voting Proposals. All voting rights of Members shall be subject to the provisions of this Declaration. The Board of Directors shall from time to time discuss, determine and prepare written voting proposals regarding matters which are required to be approved by the Members under this Declaration ("Voting Proposal"). The Board shall first submit the Voting Proposal to a vote of the Members in each Delegate District pursuant to Section(1)below. Then the Delegates shall cast the voting power represented by the Delegates at an Association meeting of the Delegates held pursuant to the By-Laws. Delegates may not exercise any discretion whatsoever when casting the voting power represented by the Delegates. The Delegates are merely vote carriers. Accordingly, when voting on a Voting Proposal, each Delegate shall cast all of the votes which he or she represents "for" or "against" such Voting Proposal (or for individual candidates in the case of the election of directors)as follows: (i) 1 strutted Votes. The votes of Declarant and all Owners actually voting, whether in person, by proxy or written ballot ("Instructed Votes"), shall be cast by their respective Delegates in the same manner as such votes were actually cast by Declarant and the other voting Owners;and (ii) Absentee Votes. Votes attributable to Owners within a Delegate District who have not voted on such Voting Proposal (`Absentee Votes")shall be cast"for and "against"such Voting Proposal (or for individual candidates in the case of the election of directors)in the same proportions as all of the Instructed Votes were cast. 00MELA AAA-3 Revised 12/28/00 (PUD) 9 (h) Specified Actions. As long as there exists a Class B Membership, any Voting Proposal which is required by this Declaration to be approved by a majority or greater percentage of the total voting power of the Association ("Specified Actions") shall require the approval of Delegates casting the specified percentage of the voting power of both the Class A and Class B Memberships_ Upon termination of the Class B Membership, all Specified Actions shall require the approval of(1) the specified percentage of the voting power of all Delegates, and (2) such specified percentage of the voting power of the Delegates exclusive of votes attributable to Declarant and all Merchant Builders. The term Specified Action as used herein specifically excludes matters requiring a mere majority vote of a quorum of the voting power as represented by the Delegates pursuant to the By-Laws- (i) Meeting of Delegate District Members. Voting Proposals shall be submitted to a vote of the Members as follows: (i) Notice:Record Date. It is the duty of the Secretary of the Association to call a meeting of the Members in each Delegate District to vote upon each Voting Proposal to be submitted to the Delegates. Written notice of the meeting shall be sent to each Member of record and to each first Mortgagee of a Subdivision Interest which has filed a written request for notice with the Secretary at least thirty(30)but not more than sixty (60)days prior to such meeting. Such notice shall be considered served two(2)business days after said notice, with postage prepaid, has been deposited in a regular depository of the United States mail. The Board of Directors may fix a date as the record date for the determination of the Members entitled to notice of any meeting of the Members of a Delegate District. The record date as so fixed shall be not less than thirty (30)nor more than sixty (60) days prior to the date of the meeting. If the Board does not fix a record date for notice to Members of a Delegate District, the record date for notice shall be the close of business on the fifth (5tb) business day preceding the day on which notice is given. In addition, the Board may fig a date in the future as a record date for the determination of the Members entitled to vote at any meeting of the Members of a Delegate District. The record date so fixed shall be not more than sixty (60)days prior to the date of the meeting_ If the Board does not fix a record date for determining Members entitled to vote, Members on the day of the Delegate District meeting who are otherwise eligible to vote are entitled to vote at the meeting. Written notice of a meeting shall state the place, date and time of the meeting and those Voting Proposals that are to be presented for action by the Members of the Delegate District. In the case of Voting Proposals for the election of the directors, the notice to Members (i) must set forth procedures for nominating candidates for the Board, (ii) must specify that cumulative voting procedures shall be followed for all elections of directors where more than one (1) vacancy is being filled, and (iii) may, but need not, specify a date for closing nominations of candidates, which date shall be identical for all Delegate Districts and not more than thirty(30)days prior to the date of the meeting. There shall be no nominations of candidates. from the.floor of the meetings of Members in the Delegate Districts. Prior to a meeting of Members within a Delegate District at which votes will be cast for the election of directors, the Secretary of the Association shall furnish the 002P3ELA]46A-3 Revised 12/28/00 (PUA) 10 chairperson of such Delegate District meeting with a list of all Members who have been placed in nomination for election to the Board. (h) Special Meeting- A special meeting of the Members in a Delegate District may be called by written request(1)by a Merchant Builder for such Delegate District, who is then a Class B Member, (2)by Declarant,if Declarant is then a Class B or Class C Member, (3) by the Delegate representing such Delegate District, or (4) by the Members in the Delegate District having not less than five percent (5%) of the total voting power within such Delegate District. To be effective, such written request must be delivered to the President,a Vice President,the Secretary,or the Professional Manager of the Association. The Board shall then cause ten (10) days notice to be given to Members in such Delegate District that a meeting will be held at a time and place fixed by the Board not less than ten (10) days, nor more than forty-five(45)days after receipt of the written request. Notice of special meetings shall specify the general nature of the business to be undertaken and that no other business may be transacted. 6) Proxies. Every Member entitled to attend, vote at or exercise consents with respect to any meeting of the Members in any Delegate District may do so either in person, or by a representative, known as a proxy, duly authorized by an instrument in writing, filed with the Board of the Association prior to the meeting to which it is applicable. Any proxy may be revoked at any time by written notice to the Board or by attendance in person by such Member at the meeting for which such proxy was given. In any event, no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy, except that the maximum term of any proxy shall be three (3) years from the date of execution. Such powers of designation and revocation may be exercised by the guardian of any such Member's estate or by his or her conservator, or in the case of a minor having no guardian, by the parent having custody of such minor, or during the administration of any such Member's estate, by his or her executor or administrator where the latter's interest in such property is subject to administration in his or her estate. Any form of proxy shall afford an opportunity therein to specify a choice between approval and disapproval of each Voting Proposal or group of related Voting Proposals intended, at the time the proxy is distributed, to be acted upon at the meeting for which the proxy is solicited, and shall provide, subject to reasonable specified conditions, that where the person solicited specifies a choice with respect to any such matter,the vote shall be cast in accordance with such specifications. (k) Chairperson: Voting Rights. An Association officer or a representative of the Professional Manager shall chair the Delegate District meeting and the chairperson shall designate a secretary to transcribe minutes of the meeting. Voting by Members at Delegate District meetings shall be by secret written ballot. The right to vote in any Delegate District may not be severed or separated from the ownership of the Subdivision Interest to which it is appurtenant, except that any Member may give a revocable proxy in the manner described above, or may assign his or her right to vote to a contract purchaser, a lessee, employee or tenant actually occupying his or her Subdivision Interest or to the Mortgagee of the Subdivision Interest for the term of the lease or Mortgage. Any sale, transfer or conveyance of a Subdivision Interest to a new Owner or Owners shall operate automatically to transfer the vote appurtenant to such Subdivision Interest to the new Owner, subject to (1) any record date established pursuant to Section (i) above, and (2) any outstanding assignment of the right to vote to a contract purchaser, lessee or Mortgagee as provided 002P3ELA14GA-3 Revised 12/28/00 (PUD) I1 herein. If there is more than one (1) record Owner of any Subdivision Interest, any and all of the Members owning such Subdivision Interest may attend any meeting of the Members, but the vote attributable to the Subdivision Interest so owned shall not be increased by reason thereof. Co- Owners owning the majority interest in a Subdivision Interest may from time to time designate in writing one (1) of such Owner to vote. Fractional votes shall not be allowed, and the vote for each Subdivision Interest shall be exercised,if at all, as a unit. Where no voting co-Owner is designated, or if the designation has been revoked,the vote for the Subdivision Interest shall be exercised as the co-Owners owning the majority interests in the Subdivision Interest shall determine. However, no vote shall be cast for any Subdivision Interest if the co-Owners present in person or by proxy cannot agrees to how the vote will be cast. Unless the Board receives a written objection in advance from a co-Owner,it shall be conclusively presumed that the voting co-Owner is acting with the consent of all other co-Owners. (1) Action by Written Ballot. Any Voting Proposal which may be acted upon at a meeting of the Members in a Delegate District may be voted upon without a meeting by written ballot. Ballots shall be solicited in the same manner as provided in Section(i)above for the giving of notice of meetings of Members. Such solicitations shall also specify (1)the voting power represented by Delegates which is necessary to meet the quorum requirements, (2) the percentage of approvals necessary to approve the action, (3)the procedures for casting Instructed and Absentee Votes by the Delegates pursuant to Sectiow(g) above, and (4) the time by which ballots must be received in order to be counted. The form of written ballot shall afford an opportunity to specify a choice between approval and disapproval of each Voting Proposal and shall provide that, where the Member specifies a choice,the vote shall be cast in accordance therewith. (m) Voting Reports. In order to verify compliance with the foregoing voting requirements,each ballot cast by a Delegate shall contain.such Delegate's certification of the following information: (i)the total number of Class A and/or Class B votes represented by such Delegate;(ii)the total number of Class A and/or B"Instructed Votes"represented by the Delegate which are cast"for"and"against"the Voting Proposal (or for individual candidates in the case of the election of directors)pursuant to Subsection(g)(i) above;and (iii)the total number of"Absentee Votes"to be cast by such Delegate"for"and"against"the Voting Proposal(or for individual candidates in the case of the election of directors)pursuant to Subsection(g)(ii)above. The inspector of election appointed by the chairperson of the meeting shall tabulate the total number of Class A and Class B votes cast by all Delegates in each of the foregoing categories in order to determine whether the necessary approvals have been obtained. It will be conclusively presumed for purposes of all Association business that Declarant's Delegate and each Delegate casting votes on behalf of Declarant and the other Owners in a Delegate District will have acted with the authority and consent of Declarant and all such other Owners. All agreements and determinations lawfully made by the Association in accordance with the voting procedures established herein and in the By-Laws shall be deemed to be binding upon all Members, Owners and their representative successors and assigns. 002MLAI GA-3 Revised I2/28/00 (PUD) 12 ARTI CLE I I ASSESSMENTS Section 1. Covenant to Pay Assessments. The Declarant and each Merchant Builder, for each Subdivision Interest owned by it within the Project that is expressly made subject to the assessments set forth in this Declaration, hereby covenant and each Owner of any Subdivision Interest by acceptance of a deed therefor, whether or not it shall be so expressed in such deed, is deemed to covenant and agrees to pay to the Association: regular and special assessments levied in accordance with the provisions of this Declaration, and to allow the Association to enforce any assessment lien established in accordance with the provisions of this Declaration by nonjudicial proceedings under a power of sale or by any other means authorized by law. Each such assessment, plus interest, costs, including attorneys' fees and penalties shall be the personal obligation of the person or persons who were the Owner(s) of such Subdivision Interest at the time when the assessment fell due. If there is more than one Owner of a particular Subdivision Interest, each of such Owners shall be jointly and severally liable for such assessment. Each Owner shall be responsible for (i) notifying the Association of any pending change or transfer of title to his Subdivision Interest and (ii) paying any and all due and unpaid assessments including interest, costs, penalties and attorneys' fees related thereto, if any, levied against his Subdivision Interest prior to andlor concurrent with any such transference of title. The personal obligation for delinquent assessments shall not pass to an Owner's successors in title unless expressly assumed by them. No Owner of a Subdivision Interest may exempt himself/herself from liability for his/her contribution toward the Common Expenses by waiver of the use or enjoyment of any of the Maintenance Property or by abandonment of his/her Subdivision Interest. Each Owner, to the extent permitted by law, waives the protection of any declared homestead or homestead exemption under the laws of the State of California as applied to any action to enforce the assessments levied by the Association. The Association shall provide notice by first-class mail to the Owners of any increase in the regular or special assessments of the Association,not less than thirty (30)nor more than sixty(60)days prior to the increased assessment becoming due. The Declarant shall have the right, but not the obligation, to pay all or any portion of Owners' assessments as a marketing incentive, pursuant to agreements between Declarant and such Owners. Declarant shall also have the right to enter into subsidization agreements with the Association. Section 2. Ppoose of Assessments. The assessments levied by the Association shall be used exclusively to protect, enhance and maintain the recreation, health, safety and welfare of the residents in the Project and for the improvement, maintenance,replacement,repair and operation of the Maintenance Property and the improvements and personal property in the Maintenance Property that are owned or maintained by the Association, as set forth in this Declaration, and to further any other purpose that is for the common benefit of the Owners in their use and enjoyment of the Project. Section 3. Reeular Assessments/Reserve_Funds. Not more than ninety (90) days nor less than sixty (60) days before the beginning of each Fiscal Year of the Association, the Board shall meet for the purpose of establishing the regular annual assessment for the forthcoming Fiscal Year. At such meeting the Board shall review the preliminary pro forma operating budget prepared in accordance with the provisions of Section 23 of Article IV hereof, any written comments received - from Members and Mortgagees, and such other related information that has been made available to the Board. After making any adjustments that the Board considers appropriate, the Board, subject to the restrictions described in this provision and without the requirement for a vote of the Owners, shall establish the regular assessment for the forthcoming Fiscal Year. 002P3ELA]96A-3 Revised 12/28/00 (PU D) 13 Each annual regular assessment shall include a portion for reserves in such amount as the Board in its discretion considers appropriate to meet the cost of the future repair, replacement, or additions to the major components of the Maintenance Property improvements ("Major Components") that the Association is obligated to maintain and repair. Reserve funds shall be deposited in a separate account and the signatures of at least two persons who shall either be members of the Board, or one officer who is not a member of the Board and a member of the Board, shall be required to withdraw money from the reserve account. Except as provided below,no money shall be transferred from a reserve fund to the Association's general operating fund and reserve funds may not be expended for any purpose other than the repair, restoration, replacement, or maintenance of, or litigation involving the repair,restoration,replacement,or maintenance of,Major Components that the Association is obligated to maintain. Notwithstanding the foregoing, the Board may authorize the temporary transfer of money from a reserve fund to the Association's general operating fund to meet short term cash flow requirements or other expenses, provided the Board has made a written finding, recorded in the Board's minutes, explaining the reasons that the transfer is needed, and describing when and how the money will be repaid to the reserve fund- The transferred funds shall,be restored to the reserve fund within one (1)year of the date of the initial transfer, except that the Board may, on the making of a finding supported by documentation that a temporary delay is in the best interest of the Project, temporarily delay the restoration. The Board shall exercise prudent fiscal management in delaying restoration of these funds and in restoring the expended funds to the reserve account, and shall, if necessary, levy a special assessment to recover the full amount of the expended funds within the time limits required by California Civil Code §1365.5 (as such section may be hereafter amended, supplemented or superseded). This special assessment is subject to the limitation imposed by California Civil Code §1366 and the restrictions imposed herein below. The Board may, at its discretion, extend the date the payment on the special assessment is due. Any extension shall not prevent the Board from pursuing any legal remedy to enforce the collection of an unpaid special assessment_ When the decision is made to use reserve funds or to temporarily transfer money from the reserve fund to pay for litigation, the Association shall notify the Members of the Association of that decision in the next available mailing to all Members pursuant to Section 5016 of the Corporations Code, and of the availability of an accounting of those expenses. Unless the Governing Documents impose more stringent standards, the Association shall make an accounting of expenses related to the litigation on at least a quarterly basis. The accounting shall be made available for inspection by Members of the Association at the Association's office. At least once every three (3) years, the Board shall cause a study of the reserve account requirements to be conducted if the current replacement value of the Major Components that the Association is obligated to repair,replace,restore, or maintain is equal to or greater than one-half of the gross budget of the Association for any Fiscal Year. The Board shall review this study annually and shall consider and implement necessary adjustments to the Board's analysis of the reserve account requirements as a result of that review. The study shall, at a minimum,include: 002P3ELA146A-3 Revised 12/28/00 (PUD) 14 (i) identification of the Major Components that the Association is obligated to repair, replace, restore, or maintain that, as of the date of the study, have a remaining useful life of less than thirty(30)years; (ii) identification of the probable remaining useful life of the Major Components identified in subparagraph (i) as of the date of the study; (iii) an estimate of the cost of repair, replacement, restoration, or maintenance of the Major Components identified in subparagraph (i)during and at the end of their useful life;and (iv) an estimate of the total annual contribution necessary to defray the cost to repair, replace, restore, or maintain Major Components identified in subparagraph (i) during and at the end of their useftil lives after subtracting total reserve funds as of the date of the study. As used herein, "reserve accounts" means money that the Board has identified for use to defray the future repair or replacement of, or additions to, those Major Components that the Association is obligated to maintain; and "reserve account requirements" means the estimated funds that the Board has determined are required to be available at a specified time to repair, replace, or restore those Major Components that the Association is obligated to maintain. Unless the Association is exempt from federal or state income taxes, including without limitation an exemption under Internal Revenue Code Section 528 and Revenue and Taxation Code Section 23701t, all reserve funds to the extent possible, shall be designated and accounted for as capital contributions to the Association, and the Board shall take such steps as may be reasonably necessary under federal and state tax laws to prevent the reserve funds from being taxed as income of the Association,including, if necessary, maintaining the reserve funds in segregated accounts and not commingling the fund with general operating funds. Annual increases in regular assessments for any Fiscal Year shall not be imposed unless the Board has complied with subdivision (a)of Civil Code Section 1365 (as such section may be hereafter amended, supplemented or superseded) with respect to that Fiscal Year, or has obtained the approval of Owners, constituting a quorum, casting a majority of the votes at a meeting or election of the Association conducted in accordance with Chapter 5(commencing with Section 7510)of Part 3 of Division 2 of Title I of the Corporations Code and Section 7613 of the Corporations Code (as such sections may be hereafter amended, supplemented or superseded). Notwithstanding any other provision in this Declaration to the contrary, the Board may not impose a regular assessment that is more than twenty percent (20%) greater than the regular assessment for the Association's preceding Fiscal Year or impose special assessments which in the aggregate exceed five percent (5%) of the budgeted gross expenses of the Association for that Fiscal Year without the approval of a majority of the votes at a meeting of the Delegates of the Association at which a quorum is present conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title I of the Corporations Code and Section 76I3 of the Corporations Code (as such sections may be hereafter amended, supplemented or superseded). For the purposes of this section, quorum means a majority of the voting power of the membership of the Association. This Section does not limit assessment increases necessary for emergency situation. For purposes of this Section, an emergency situation is any one of the following: 002P3ELAl46A-3 Revised 12/28/00 (PUD) 15 (a) An extraordinary expense required by an order of a court. (b) An extraordinary expense necessary to repair or maintain the Project or any part of it for which the Association is responsible where a threat to personal safety on the property is discovered. (c) An extraordinary expense necessary to repair or maintain the Project or any part of it for which the Association is responsible that could not have been reasonably foreseen by the Board in preparing and distributing the proforma operating budget under Civil Code Section 1365. However, prior to the imposition or collection of an assessment under this Subsection (c), the Board shall pass a resolution containing written findings as to the necessity of the extraordinary expense involved and why the expense was not or could not have been reasonably foreseen in the budgeting process and the resolution shall be distributed to the Members with the notice of assessment. Unless the Board is required by law to give greater notice, at least ten (10) days prior to the commencement of any regular or special assessment,the Board shall give each Owner written notice of the amount of assessment, and the due date (or due dates if paid in installments, and the amount of each installment). The notice need only be given once for any assessment paid in installments. Unless the Board specifies otherwise, the installment due dates shall be the first day of each month. Regular and special assessments levied pursuant to the governing documents are delinquent fifteen (15) days after they become due. If an assessment is delinquent the Association may recover all of the following: (a) Reasonable costs incurred in collecting the delinquent assessment, including reasonable attorney's fees. (b) A late charge not exceeding ten percent (le%) of the delinquent assessment or ten dollars ($10),whichever is greater_ (c) Interest on all sums imposed in accordance with this section, including the delinquent assessment, reasonable costs of collection, and late charges, at an annual percentage rate not to exceed twelve percent (12%), commencing thirty (30) days after the assessment becomes due. Section 4. Special Assessments. Subject to the restrictions described in Section 3above, the Board may levy a special assessment if the Board, in its discretion, determines that the Association's available funds are or will become inadequate to meet the estimated expenses of the Association, including the maintenance of appropriate reserves, for a particular Fiscal Year for any reason, including, but not limited to, unanticipated delinquencies, costs of construction, unexpected repairs or replacements of capital improvements or otherwise. The Board shall determine the amount necessary to meet the estimated expenses, and if the amount is approved by a majority vote of the Board, it shall become a special assessment. The Board, in its discretion, may levy the entire assessment immediately or levy it in installments over a period it considers appropriate. The Association may also levy a special assessment against any Member to reimburse the Association for costs incurred in bringing a Member and his Subdivision Interest into compliance with the provisions 002P3ELA146A-3 Revised 12128f00 (PUD) 16 of this Declaration, the Articles, the By-Laws and the Rules, and any amendments thereto, which special assessment may be levied upon the vote of the Board after notice and an opportunity for a hearing which satisfy the requirements of Section 7341 of the California Corporations Code (as such section may be hereafter amended, supplemented or superseded), as set forth in ARTICLE VIII, Section 5 of the By-Laws; provided, however, this special assessment may not become a lien against the Member's Subdivision Interest that is enforceable by a power of sale under Civil Code Sections 2924, 2924b and 2924c (as such sections may be hereafter amended, supplemented or superseded). This restriction on enforcement is not applicable to late payment penalties for delinquent assessments or charges imposed to reimburse the Association for loss of interest or for collection costs, including reasonable attorneys' fees, for delinquent assessments. Unless the Association is exempt from federal or state income taxes,including without limitation an exemption under Internal Revenue Code Section 23701t, the Board shall take such steps as may be reasonably necessary to prevent the special assessment from being included in the Association's income for federal and state income tax purposes, including, if necessary, depositing the funds in a segregated account, not commingling the funds with any other funds of the Association, and using the funds solely for the purpose for which they were levied. Section 5. I3niform Rate Both regular assessments and special assessments, including but not limited to special assessments to raise funds for the rebuilding or major repair of the Maintenance Property, shall be fixed at a uniform rate for all Subdivision Interests. Such assessments may be collected on a monthly basis or otherwise as determined by the Board. Section 6. Commencement of Assessments. The regular assessments provided for herein shall commence as to all Subdivision Interests in a particular Phase of Development on the first day of the month following the conveyance of the first Subdivision Interest requiring a Public Report issued by the Department of Real Estate to an Owner in that Phase. The Board shall determine and fix the amount of the annual regular assessment against each Subdivision Interest at least thirty (30) days in advance of each annual assessment. Written notice of the annual assessment shall be sent to every Owner subject thereto. The due dates shall be established by the Board. The Association shall,upon demand, and for a reasonable charge,furnish a certificate signed by an officer of the Association setting forth whether the assessments on a specified Subdivision Interest have been paid. A properly executed certificate of the Association as to the status of assessments on a Subdivision Interest is binding upon the Association as of the date of its issuance. Section 7. Subordinate to First Mortgage. The lien of the assessments provided for herein shall be subordinate to the hen of any first Mortgage upon any Subdivision Interest. Sale or transfer of any Subdivision Interest shall not affect the assessment lien. However, the sale or transfer of any Subdivision Interest as the result of the exercise of a power of sale or a judicial foreclosure involving a default under the first Mortgage shall extinguish the Lien of such assessments as to payments which become due prior to such sale or transfer. No sale or transfer shall relieve such Subdivision Interest from lien rights for any assessments thereafter becoming due. Where the Mortgagee of a first Mortgage of record or other purchaser of a Subdivision Interest obtains title to the same as a result of foreclosure, such acquirer of title, his successors and assigns, shall not be liable for the share of the Common Expenses or assessments by the Association chargeable to such Subdivision Interest which became due prior to the acquisition of title to such Subdivision Interest by such acquirer. Such unpaid share of Common Expenses or assessments shall be deemed to be Common Expenses collectible from all of the Subdivision Interests including such Subdivision Interest by such acquirer. 00MELA 146A-3 Revised 12/28/00 (PUD) 17 Section 8. Assessment for Taxes. In the event that any taxes are assessed against those portions of the Maintenance Property owned by the Association,rather than against the individual Subdivision Interests,said taxes shall be added to the annual regular assessment and,if necessary, a special assessment may be levied against the Subdivision Interests in the amount equal to said taxes,to be paid in two(2)installments. Assessments levied under this Section 8 shall not be subject to the provisions of Section 3 above. Section 9. Enforcement Powers. The Association has the right to collect and enforce assessments. In addition to the other enforcement powers described in this Declaration and subject to the restriction on the enforcement of monetary penalties described herein, the Association may enforce delinquent assessments, including delinquent installments, by suing the Owner directly on the debt established by the assessment, or by establishing alien against the Owner's Subdivision Interest as provided in Section 10 below and foreclosing the lien through either judicial proceedings or nonjudicial proceedings under a power of sale as provided in Section 11 below. The Association may commence and maintain a lawsuit directly on the debt without waiving its right to establish a lien against the Owner's Subdivision Interest for the delinquent assessment. In any action instituted by the Association to collect delinquent assessments, accompanying late charges, or interest, the prevailing party shall be entitled to recover costs and reasonable attorneys'fees. Section 10. Lien Aeainst Subdivision Interest. A delinquent assessment or installment, together with any accompanying late charges, interest, costs (including reasonable attorneys' fees), and penalties as may be authorized under this Declaration shall become alien on the Subdivision Interest against which the assessment was levied on the Recordation of a notice of delinquent assessment in the Office of the County Recorder of the County. The notice shall describe the amount of the delinquent assessment or installment, the related charges.authorized by this Declaration, a description of the Subdivision Interest, the name of the Owner, and if the lien is to be enforced by power of sale under nonjudicial foreclosure proceedings, the name and address of the trustee authorized by the Association to enforce the lien by sale. The notice shall be signed by any officer of the Association, or any employee or agent of the Association authorized to do so by the Board. Unless the Board considers the immediate recording of the notice to be in the best interests of the Association, the notice shall not be recorded until fifteen (15)calendar days after the Association has delivered a written notice of default and demand for payment. If the delinquent assessment or installment and related charges are paid or otherwise satisfied, the Association shall record a notice of satisfaction and release of lien. Section 11_ Foreclosure of Assessment Lien. The Board may enforce any assessment lien established under this Article,by filing an action for judicial foreclosure or,if the notice of delinquent assessment contained the name and address of the trustee authorized by the Association to enforce the lien by nonjudicial foreclosure, by recording a notice of default in the form described in Civil Code §2924c(b)(1) (as such section may be hereafter amended, supplemented or superseded)to commence a nonjudicial foreclosure. Any nonjudicial foreclosure shall be conducted in accordance with the requirements of Civil Code §§2924, 2924b, 2924c, 2924f, 2924g, 2924h and 2924j (as such sections may be hereafter amended, supplemented or superseded) that apply to nonjudicial foreclosures of mortgages or -deeds of trust. The sale shall be conducted by the trustee named in the notice of delinquent assessment or by a trustee substituted in accordance with the provisions of Civil Code §2934a (as such section may be hereafter amended, supplemented or superseded). The Association may bid on the Subdivision Interest at the sale, and may hold, lease, mortgage, and convey the 002P3ELA)46A-3 Revised ]2/28/00 (PUDJ) 18 acquired Subdivision Interest. If the default is cured before the sale, or before completing a judicial foreclosure,including payment of all costs and expenses incurred by the Association, the Association shall record a notice of satisfaction and release of lien, and, on receipt of a written request by the Owner, a notice of rescission of the declaration of default and demand for sale. Section 12. Intentionally omitted. Section 13. Assessment Certificate. A certificate executed under penalty of perjury by any two (2) members of the Board and acknowledged shall be conclusive upon the Association and the Owners in favor of any and all persons who rely thereon in good faith as to the matters therein contained, and any Owner (including Declarant) shall be entitled to such a certificate setting forth the amount of any due and unpaid assessments with respect to his Subdivision Interest(or the fact that all assessments due are paid if such is the case)within ten (10) days after demand therefor and upon payment of a reasonable fee, not to exceed Ten Dollars ($10.00), which may be fixed by the Board. Section 14. Limited Exemption From Assessment. The Declarant, Merchant Builders and any other Owner of a Subdivision Interest are exempt from the payment of that portion of any assessment that is for the purpose of defraying expenses and reserves directly attributable to the existence and use of a common facility that is not complete at the time assessments commence. This exemption from the payment of assessments shall be in effect until the earliest of the following events: (a) A notice of completion of the common facility has been recorded;or (b) The common facility has been placed into use. ARTICLE IV POWERS AND DUTIES OF ASSOCIATION The Association shall have all the powers of a nonprofit mutual benefit corporation organized under the General Nonprofit Mutual Benefit Corporation Law of California, subject only to such limitations on the exercise of its powers as are set forth in the Articles, the By-Laws, and this Declaration. It shall have the power to do any lawful thing that may be authorized, required, or permitted to be done by the Association under this Declaration, the Articles, and the By-Laws, and to do and perform any act that may be necessary or proper for or incidental to,the exercise of any of the express powers of the Association, including,without limitation, the acts enumerated below. Subject to other provisions of this Declaration and to the limitations of the Articles and the By-Laws and the California Corporations Code as to action to be authorized or approved by the Members,all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Association shall be controlled by, the Board. Without prejudice to such general powers but subject to the same limitations, it is hereby expressly declared that the Association shall have the following powers and duties: 002F3ELA146A-3 Revised 12/28/00 (PUD) 19 Section 1. Elect Officers. To select and remove all the officers, agents and employees of the Association,prescribed such powers and duties for them as may not be inconsistent with law, the Articles, the By-Laws or this Declaration, and, subject to the provisions of the By-Laws, to fix their compensation. Section 2. Management and Control. To conduct, manage and control the affairs and business of the Association, and to make Rules not inconsistent with law, the Articles, the By-Laws or this Declaration as they deem best, including rules and regulations for the operation of the Maintenance Property. Except as provided below, the Association shall at all times employ a Professional Manager to manage and conduct the business of the Association, subject to the provisions of Section 11 below. Professional management shall be required until the Association elects to self manage in accordance with the provisions of Section 2(b)of Article VII hereof. Section 3. Principal .Office. To change the principal office for the transaction of the business of the Association from one location to another within the County and to designate a place within the Project or as close thereto as possible within the County for the holding of any membership meeting or meetings. Section 4. Incur Indebtedness. To borrow money and incur indebtedness for the purposes of the Association, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecation or other evidences of debt and securities therefor, with the vote or written assent of two-thirds (2/3) of the voting power of each class of Members of the Association. Section 5_ Obtaining Insurance. To obtain and maintain in force the following policies of insurance: (a) Bodily injury liability insurance,.with limits of not less than $200,000 per person and $1,000,000 per occurrence, and property damage liability insurance with a deductible of not more than $1,500 and a limit of not less than $500,000 per accident, insuring against liability for bodily injury, death and property damage arising from the activities of the Association or with respect to property under its jurisdiction. (b) Fidelity insurance in the form of a bond in an amount equal to one hundred and fifty percent (150%) of the Association's annual assessments including reserves which names the Association as obligee and protects against misuse and misappropriation of Association property by members of the Board, officers, trustees and employees of the Association, and any management agent and its officers, agents and employees whether or not such persons are compensated for their services. (c) Workers'Compensation Insurance covering any employee of the Association. (d) Casualty insurance covering fire and extended coverage insurance and any other perils that the Association shall deem advisable for the full insurable value of all of the Improvements within the Maintenance Property. "Full insurable value" means the actual replacement value, exclusive of the cost of excavating, foundations and footings. The form, content and term of the policy and its endorsements and the issuing company must be satisfactory to all institutional first Mortgagees. If more 002P3ELAI46A-3 Revised ]2/28/00 (PUD) 20 than one institutional first Mortgagee has a loan of record against a Subdivision Interest in the Project, the policy and endorsements shall meet the maximum standards of the various institutional first mortgagees represented in the Project. To the extent available, the policy shall contain an agreed amount endorsement or its equivalent; an increased cost of construction endorsement or a contingent liability from operation of building laws endorsement or their equivalent; an extended coverage endorsement; vandalism, malicious mischief coverage; a special form endorsement; and a determinable cash adjustment clause or a similar clause to permit cash settlement covering full value of the Improvements in case of partial destruction and a decision not to rebuild. The policy shall provide amounts of coverage as shall be determined by the Board. The policy shall name as insured the Association, the Owners and Declarant, as long as Declarant is an Owner, and all mortgagees as their respective may appear, and may contain a loss payable endorsement in favor of the Insurance Trustee. (e) Errors and omissions insurance on a claims-made basis covering all current and prior officers and directors of the Association and all members of the Architectural Review Committee. Such policies shall not contain any exclusions or exceptions for claims asserted against officers, directors or Delegates appointed by Declarant or Persons who were DecIarant's agents or employees or who served during Declaranes ownership of any Subdivision Interest in the Project. The provisions of this subparagraph (e) cannot be amended or deleted without prior written approval of Declarant. (f) Such additional or different insurance coverage, as the Board shall deem necessary or expedient to carry out the Association functions as set forth in this Declaration, the Articles and the By-Laws or as may be required by law or by governmental agencies, or by the Federal National Mortgage Association or similar organizations. The Association is authorized to negotiate and agree on the value and extent of any loss under any policy carried pursuant to subparagraph (d) above. The Association is granted full right and authority to compromise and settle any claim or enforce any claim by legal action or otherwise and to execute releases in favor of any insurer. The liability insurance referred to above shall name as separately protected insureds, Declarant, the Association, the Board, and their representatives, members and employees, and the Association Members (as a class), with respect to any liability arising out of the maintenance or use of any Maintenance Property. Such policy or policies shall protect each of the insureds as if each were separately insured under separate policies; provided, however, that such policies shall not require the insurers to pay any amount in excess of the maximum limits stated therein. Every policy of insurance obtained by the Association, whether or not required to be obtained pursuant to the provisions of this Declaration, shall expressly waive any and all rights of subrogation against Declarant,its representatives and employees,and all Members. The insurance premium on the policies provided by the Association shall be a Common Expense to be included in the monthly assessments levied by the Association, and the portion of such payments necessary for the insurance premiums shall be held in a separate account of the 002P3ELAI96A-3 Revised 12/28/00 (PUD) 21 Association and shall be used solely for the payment of the premiums on the insurance policies as such premiums become due. Section G. Notice of Cancellation of Insurance or Fidelity Bond. Upon written request to the Association identifying (i) the name and address of the holder, insurer or governmental guarantor of any first Mortgage encumbering any Subdivision Interest and (ii) the number or address of such Subdivision Interest, to notify the same in writing at least ten (10)days prior to any lapse, cancellation or material modification of any insurance policy or fidelity bond maintained by the Association. Section 7. Utilities. To pay all charges for water, electricity, gas, and other utility services for the Maintenance Property- Section 8- Maintenance_Property. To manage, operate, maintain and repair the Maintenance Property and those Improvements located thereon that are owned by the Association, or the management, operation, maintenance and repair of which are the Association's obligation under this Declaration or any other instrument to which the Association is a party or by which the Association is bound,including the restoration and replacement of any such Improvements owned by the Association,or the restoration and replacement of which is the Association's obligation under this Declaration or such other instrument, at any time and from time to time as the Board may determine desirable or necessary; and to make capital expenditures for and on behalf of the Association with the vote or written assent of a majority of the voting power of each class of Members of the Association. The Association shall have the right to enter upon any Subdivision Interest in connection with construction, maintenance or emergency repair of the Maintenance Property. Section_9. Enforcement and Litigation. Arbitration. Mediation and Administrative Proceedings. To enforce the provisions of the Declaration, the Articles and By-Laws of the Association, the Rules the provisions of any agreement to which the Association is a party. Subject to compliance with Section 1354 of the Civil Code, the Association is authorized to institute, defend, settle or intervene on behalf of the Association in litigation, arbitration,mediation, or administrative proceedings solely in matters pertaining to (a)enforcement of the Governing Documents, (b)damage to the Maintenance Property, (c)damage to the Subdivision Interests,if any,which the Association is obligated to maintain or repair, or (d) damage to the Subdivision Interests which arises out of, or is integrally related to, damage to the Maintenance Property or Subdivision Interests, if any, that the Association is obligated to maintain or repair. Section 10. Services and Supplies. To contract and pay for maintenance, gardening, utilities, materials, supplies and services relating to the Maintenance Property, and to employ personnel necessary for the operation and maintenance of the same, including legal and accounting services. Section 11. Employment of Professional Manager and Agents. To employ the services of a Professional Manager, and other employees, to manage and conduct the business of the Association, and to the extent not inconsistent with the laws of the State and upon such conditions as are otherwise deemed advisable by the Association, to delegate to the Professional Manager any of its powers granted under this Declaration; provided that any agreement for management or person hired as Professional Manager shall not exceed one (1) year, renewable by agreement of the parties OO2P3ELA196A-3 Revised 12/28/00 (PUD) 22 for successive one (1)year periods and shall be terminable by the Association upon thirty (30) days written notice. Section 12. Maintenance Contract. To enter into a maintenance service contract with any person, corporation or other entity for the maintenance of the Maintenance Property, including materials and/or services for the Maintenance Property or the Association, provided that any such contract shall be for a period of one (1)year,renewable by agreement of the parties for successive one (1)year periods and any such contract shall be terminable by the Association upon thirty (30) days written notice. Section 13. Taxes. To pay any taxes and governmental special assessments which are or could become a lien on the Maintenance Property or any portion thereof_ Section 14. Discipline. To initiate and execute disciplinary proceedings against Members for violations of the provisions of the Articles, the By-Laws, this Declaration or the Rules, subject to the requirements of Corporations Code Section 7341 (as such section may be hereafter amended, supplemented or superseded). Section 15. Notice of Default_ Upon the written request of any holder, insurer or governmental guarantor of a first Mortgage encumbering any Subdivision Interest, to notify the same in writing of any default by the Owner of such Subdivision Interest in the performance of the Owner's obligations under the By-Laws or this Declaration which is not cured within thirty (30) days. Section 16_ Notice of Taking_ The Association shall give, if required by the Federal Nome Loan Mortgage Corporation or Federal National Mortgage Association, notice in writing at the addresses to be supplied by the Association by Federal Nome Loan Mortgage Corporation for that organization and Federal National Mortgage Association for that organization of any loss to or taking of any Subdivision Interest or those portions of the Maintenance Property owned by the Association and/or its Members if such loss or taking exceeds $10,000.00, and of any damage to a Subdivision Interest if such damage exceeds $1,000.00. Section 17. Notice of Damage. Upon the written request of any holder, insurer or governmental guarantor of a first Mortgage encumbering any Subdivision Interest, to give timely written notice to the same of any substantial damage to or destruction of any Subdivision Interest or any portion of the Maintenance Property and, if any Subdivision Interest, or any portion thereof, or the Maintenance Property, or any portion thereof, is made the subject of any condemnation or eminent domain proceeding or is otherwise sought to be acquired by a condemning authority, to give timely written notice to the some of any such proceeding or proposed acquisition. Section 18. Defense. To prosecute or defend, in the name of the Association, any action affecting or relating to the Maintenance Property or the property owned by the Association, and any action in which all or substantially all of the Owners have an interest. Section 19. Deleeation of Powers. To delegate.any of its powers hereunder to others, including committees,officers and employees, or the Professional Manager. 002P3ELA146A-3 Revised 12/28/00 (PUD) 23 Section 20. Rules. To adopt, amend, repeal and enforce rules and regulations known as the "Rules", governing, among other things,the Maintenance Property,and the Subdivision Interests. "Me Rules may restrict and govern the use of Maintenance Property, if any right to use the Maintenance Property has been granted, by any Owner, by the family of such Owner, or by any invitee, licensee or lessee of such Owner; provided, however, that with respect to use of such Areas, the Rules may not unreasonably discriminate among Owners. Said Rules may also include parking restrictions and limitations, limitations upon vehicular travel, restrictions on the type or types of vehicles which may be permitted to use such Maintenance Property, outside storage of boats, trailers, bicycles and other objects, disposal of waste materials, drying of laundry, control of pets, architectural controls and restrictions on the maintenance of landscaping or other improvements on any property which obstruct the vision of motorists or which create a hazard for vehicular or pedestrian traffic, and restrictions on other activities which, if not so regulated, might detract from the appearance of the Project, or offend or cause inconvenience or danger to persons residing in or visiting the Project. A copy of the Rules, as they may from time to time be adopted, amended or repealed shall,if the Board deems it appropriate, be posted at a prominent place or places within the Maintenance Property and-the Project, where appropriate, and shall be given to each Member and, upon written request therefor, to all first Mortgagees either personally or mailed by first-class, registered or certified mail, postage prepaid to his or her address appearing on the books of the Association or supplied by him or her to the Association. If no address is supplied, a copy of said Rules shall be deemed given if mailed to the address of the Subdivision Interest owned by such Member. Copies of such Rules shall be posted and circulated to each Member in the manner set forth above not less than ten (10) days and not more than sixty (60) days before the Rules may be deemed to be in full force and effect. A copy of the Rules, as adopted, amended or released,may be recorded and shall have the some force and effect as if they were set forth herein and were a part of the Declaration. The Rules may provide that the Owner of a Subdivision Interest whose occupant leaves property on the Maintenance Property in violation of the rules may be assessed after appropriate notice and an opportunity for a hearing before the Board which satisfies the requirements of Section 7341 of the California Corporations Code as set forth in the By-Laws and a two-thirds (2/3) vote of approval by the Board to cover the expense incurred by the Association in removing such property and storing or disposing thereof. The Board may suspend the voting rights and right to use the recreational facilities located on the Maintenance Property of an Owner who is in default in the payment of any assessment for any period during which such assessment remains unpaid, and for a period not to exceed thirty (30)days for any infraction of the Rules after reasonable written notice and an opportunity for a hearing before the Board which satisfies the requirements of Section 7341 of the California Corporations Code as set forth in the By-Laws. Prior to election of the Board,Declarant shall have the right to adopt, amend and enforce Rules,as provided above. Section 21. Rieht to Grant Easements. To grant permits, licenses and.easements under, through and over those portions of the Maintenance Property owned by the Association for utilities, roads and other purposes which are reasonably necessary or useful for the proper maintenance and operation of the Project. Section 22. Availability of Documentation. To make available to any prospective purchaser of a Subdivision Interest, any Owner of a Subdivision Interest, any first Mortgagee and the holders, insurers and guarantors of a first Mortgage on any Subdivision Interest, current copies of the Declaration, the Articles, the By-Laws, the Rules, the most recent financial statement of the Association, a statement in writing as to the amount of the Association's current regular and special assessments and fees as well as any assessments levied upon the Owner's Subdivision Interest which 002P3ELAI46A-3 Revised 12/28/00 (PIJD) 24 are unpaid and the amount of any late charges, interest and costs of collection which, as of the date of the statement, are or may be made alien on the Subdivision Interest, and any other documents which may be required by applicable law, including but not limited to the provisions of Civil Code Section 1368. "Available" as used in this paragraph shall at least mean available for inspection upon request during normal business hours or under other reasonable circumstances. Section 23. Budget and Financial Statements. In addition to all other duties of the Association as set out in this Declaration and By-Laws, it shall be the duty of the Board to have the Association prepare budgets and financial statements and have them distributed to all of its Members as follows: (a) A balance sheet rendered as of an accounting date that is the last day of the month closest in time to six (6) months from the date of closing of the first sale of a Subdivision Interest (the "accounting date"), and an operating statement for the period commencing with the date of closing of the first sale and ending on the accounting date shall be distributed to each Owner and any Mortgagee that has requested a copy within sixty (60) days after the accounting date. The operating statement shall include a schedule of assessments received or receivable identified by the Subdivision Interest number and the name of the Owner assessed- (b) A pro forma operating budget shall be distributed to the Members not less than forty- five (46)days nor more than sixty (60) days prior to the beginning of the Fiscal Year. The budget shall include all of the following: (1) The estimated revenue and expenses on an accrual basis. (2) A summary of the Association's reserves based upon the most recent review or study conducted pursuant to Civil Code Section 1365-5, which shall be printed in bold type and include all of the following: (A) The current estimated replacement cost, estimated remaining life, and estimated useful life of each Major Component. (B) As of the end of the Fiscal Year for which the study is prepared: (i) The current estimate of the amount of cash reserves necessary to 'repair, replace, restore, or maintain the Major Components. (ii) The current amount of accumulated cash reserves actually set aside to repair, replace, restore, or maintain Major Components. (C) The percentage that the amount determined for purposes of clause (ii) of subparagraph (B)is of the amount determined for purposes of clause (i)of subparagraph (B)_ 002P3LLA14GA•3 Revised 12/28/00 (PUD) 25 (3) A statement as to whether the Board has determined or anticipates that the levy of one or more special assessments will be required to repair, replace, or restore any Major Component or to provide adequate reserves therefor. (4) A general statement addressing the procedures used for the calculation and establishment of those reserves to defray the future repair, replacement, or additions to those Major Components that the Association is obligated to maintain. (5) The original budget shall include, without limitation, the following items as reserves: (i) alterations; (ii) painting; (iii) roof replacement and maintenance for roofs based upon the life expectancy of the existing roof, (iv) recap, restripe and seal coating of all asphalt; (v) irrigation and landscaping; and (vi)inflation reserve. In lieu of the distribution of the pro forma operating budget, the Board may elect to distribute a summary of the pro forma operating budget to all Members with a written notice that the pro forma operating budget is available at the business office of the Association or at another suitable location within the boundaries of the Project and that copies will be provided upon request and at the expense of the Association. If any Member requests that a copy of the pro forma operating budget be mailed to the Member, the Association shall provide the copy to the Member by first-class United States mail at the expense of the Association and delivered within five (6) days. The written notice that is distributed to each of the Members shall be in at least 10-point bold type on the front page of the summary of the budget. (c) An annual report shall be prepared, consisting of a balance sheet rendered as of the last day of the Fiscal Year, an operating statement for the Fiscal Year, and a statement of changes in financial position for the Fiscal Year. A copy of the annual report shall be distributed to each Owner and any Mortgagee that has requested a copy within one hundred twenty (120) days after the close of the Fiscal Year. In any Fiscal Year in which the gross income of the Association exceeds $75,000 (or such amended sum as may be applicable under the then current law), a copy of the review of the annual report prepared by a licensee of the California State Board of Accountancy in accordance with generally accepted accounting principles shall be distributed with the annual report. If the annual report is not reviewed by an independent accountant, the report shall be accompanied by the certificate of an authorized officer of the Association that the report was prepared from the books and records of the Association without independent audit or review. (d) A statement describing the Association's policies and practices in enforcing lien rights or other legal remedies for default in payment of its assessments against its Members shall be annually delivered to the Members during the 60-day period immediately preceding the beginning of the Association's Fiscal Year- (e) A summary of the Association's general liability insurance policy that states all of the following: 002P3ELA14GA-3 Revised 12/28/00 (PUD) 26 (1) The name of the insurer_ (2) The policy limits of the insurance. (3) If an insurance agent, as defined in Section 1621 of the Insurance Code, an insurance broker, as defined in Section 1623 of the Insurance Code, or an agent of an insurance agent or insurance broker has assisted the Association in the development of the general liability policy limits and if the recommendations of the insurance agent or insurance broker were followed. (4) The insurance deductibles. (5) The person or entity that is responsible for paying the insurance deductible in the event of loss. (6) Whether or not the insurance coverage extends to the real property improvements to the Subdivision Interests. (f) A summary of the Association's earthquake and flood insurance policy, if one has been issued, that states all of the following. (1) The name of the insurer. (2) The policy limits of the insurance- (3) The insurance deductibles- (4) The person or entity that is responsible for paying the insurance deductible in the event of loss. (g) A summary of the liability coverage policy for the directors and officers of the Association that lists all of the following: (1) The name of the insurer. (2) The limits of the insurance- (b) Notwithstanding the provisions of subparagraphs (e), (f) and (g), the Association shall, as soon as reasonably practical, notify the Members by first class mail if any of the policies have been canceled and not immediately replaced. If the Association renews any of the policies or a new policy is issued to replace an insurance policy of the Association, and where there is no lapse in coverage, the Association shall notify the Members of that fact in the next available mailing to all Members pursuant to Section 5016 of the Corporations Code. To the extent that the information to be disclosed pursuant to subparagraphs (e), (f) and (g) is specified in the insurance policy declaration page, the Association may meet the requirements of those subparagraphs by making copies of that page and distributing it to all its Members. 002NELA l•f 6A-3 Revised 2 2/29/00 (PUD) 27 Section 24. Additional Duties_ The Board of Directors shall do the following- (a) Review a current reconciliation of the Association's operating accounts on at least a quarterly basis. (b) Review a current reconciliation of the reserve accounts on at least a quarterly basis. (c) Review, on at least a quarterly basis, the current year's actual reserve revenues and expenses compared to the current year's budget. (d) Review the most current account statements prepared by the financial institutions where the Association has its operating and reserve accounts. (e) Review an income and expense statement for the Association's operating and reserve accounts on at least a quarterly basis. (f) Inspect and maintain roofs on any improvements within the Maintenance Property at least twice a year in the spring and fall of each year, or more frequently, if so required, as per specifications to be provided by Declarant. (g) Inspect and maintain drainage with respect to the Maintenance Property at least once a year in November of each year, or more frequently, if so required, at which time all drain gates, basins and lines shall be cleared and cleaned. Keep all swales and drainage channels in the Maintenance Property clear and free of debris and all drainage facilities functioning as originally designed and not alter grading on the Project as originally provided. The purpose of the inspection shall be to(i)determine whether the Maintenance Property is being maintained adequately in accordance with the Maintenance Guidelines and such other prudent maintenance practices appropriate for Improvements such as those comprising the Maintenance Property, (ii) identify the condition of the Maintenance Property and any Improvements thereon including the existence of any hazards or defects and the need for performing additional maintenance, refurbishment, replacement, or repair, and (iii) recommend preventive actions (such as root pruning and tree removal) which may be taken to reduce potential maintenance costs to be incurred in the future. All of the Maintenance Property and Improvements thereon including, but not limited to all structures, gates, walls, walkways, irrigation systems, landscaping, and drainage devices thereon shall be inspected. The Board may employ such experts .and consultants as are necessary to perform the inspection and make the report. (h) Seal and restripe all asphalt required to be maintained by the Association in the Maintenance Property at least every two years, or more frequently, if required or appropriate, using two coats of a guard top or walk top type sealer. (i) Replace caulking at least once a year, or more frequently, if so required, around the coping and decking of any swimming pool. 00MELA 3 4 fiA-3 Revised ]2/28/00 (PUD) 28 (j) Maintain all landscaping in the Maintenance Property as per the following minimiun maintenance standard: (1) All planting areas shall be kept free of leaves and debris. (2) Lawn and ground cover shall be kept mowed and/or trimmed regularly (3) All plantings shall be kept in a healthy and growing condition. Fertilization, cultivation, spraying and tree pruning are to be performed as a part of a regular maintenance program- (4) Stakes, guys and ties on trees shall be checked regularly to ensure the correct function of each. Ties shall be adjusted to avoid creating abrasions or girdling of the trunk or stem. (5) Damage to plantings shall be corrected within thirty (30)days of occurrence. (6) Irrigation systems shall be kept in working condition. Adjustment, replacement of malfunctioning parts, and cleaning of systems,shall be a part of the regular maintenance program. Section 25. Limitations on Powers of Association. Except with the vote or written assent of the Owners holding more than fifty percent (50%) of the voting rights of each class of Owners, if two classes exist, or, if only one class exists, more than fifty percent (50%) of the voting rights of all Owners and more than fifty percent (50%) of the voting rights of all Owners other than Declarant, the Board shall not take any of the following actions: (a) Incur aggregate expenditures for capital improvements to the Maintenance Property in any Fiscal Year in excess of five percent(5%)of the budgeted gross expenses of the Association for that Fiscal Year; (b) Sell during any Fiscal Year property of the Association having an aggregate fair market value greater than five percent (5%) of the budgeted gross expenses of the Association for that Fiscal Year; (c) Pay compensation to members of the Board or to officers of the Association for services performed in the conduct of the Association's business, provided that the Board may reimburse a member of the Board for expenses incurred in carrying on the business of the Association; or (d) Enter into a contract with a third person to furnish goods or services for the Maintenance Property or the Association for a term longer than one (1)year,with the following exceptions: (1) A management contract, the terms of which have been approved by the Federal Housing Administration or U.S.Department of Veterans Affairs; 002P3ELA 7 96A-3 Revised 12128100 (PUD) 29 (2) A contract with a public utility company if the rates charged for the materials or services are regulated by the Public Utilities Commission, provided the term does not exceed the shortest term for which the supplier will contract at the regulated rate; (3) Prepaid casualty or liability insurance policies not to exceed three (3) years' duration provided the policy permits short rate cancellation by the insured; (4) Lease agreements for laundry room fixtures and equipment not to exceed five (5) years duration provided the Declarant does not have a direct or indirect ownership interest of ten percent (10%) or more in any lessor under such agreements; (5) Agreements for cable television services and equipment not exceeding five(5) years in duration provided the supplier is not an entity in which the Declarant has a direct or indirect ownership interest of ten percent (10%)or more;and (6) Agreements for sale or lease of burglar alarm and fire alarm equipment, installation and services not exceeding five (5)years' duration, provided that the suppliers are not entities in which the Declarant has a direct or indirect ownership interest of ten percent(1051o)or more. (7) A contract for a term not to exceed three (3)years that is terminable by the Association after no longer than one (1)year without cause, penalty or other obligation upon ninety (90) days written notice of termination to the other party- Section 26. Limitation of Liability. No director, officer, committee member, employee, or other agent of the Association, including Declarant or any agent of Declarant when acting in such capacity, shall be liable to any Owner or any other party,including the Association, for any damage, loss, or prejudice suffered or claimed on account of any act,omission, error, or negligence of any such person if such person has acted in good faith and in a manner such person believed to be in the best interests of the Association. Without limiting the generality of the foregoing, no director, officer, committee member, employee or other agent of the Association, including Declarant or any agent of Declarant when acting in such capacity, shall be liable to any Owner or any other party, including the Association,for any failure to commence,prosecute, settle or defend any claim relating to defects in the design or construction of the Project or any Improvements therein, if such person has acted in good faith and in a manner such person believed to be in the best interests of the Association. Section 27. Scope of Association Authority to Pursue Litigation. (a) Neither the Association, nor any person on behalf of the Association, shall commence or maintain any legal action, arbitration, or other proceeding, except to pursue those claims specifically enumerated in section 383 of the California Code of Civil Procedure, as it way be amended from time to time. The right and capacity of the Association to act for itself, or in any representative capacity, shall be limited to claims based upon the following matters: 002P3ELAI46A-3 Revised ]2l28100 (PUD) 30 (1) Enforcement of the Governing Documents; (2) Damage to the Maintenance Property; (3) Damage to separate interests (as defined in Civil Code section 13510))which the Association is obligated to maintain or repair;and (4) Damage to the separate interests which arises out of, or is integrally related to, damage to the Maintenance Property or separate interests that the Association is obligated to maintain or repair. The above categories may be modified or supplemented only to the extent of any modification or supplementation of California Code of Civil Procedure section 383. (b) The Association shall not join with any legal action, arbitration, or other proceeding brought by the Association pursuant to paragraph (a), a claim of any individual, or any class action or other representative_ The Association shall not enter into any agreement to share attorneys'fees or costs with any person or entity pursuing a claim as an individual, or as a class action or other representative. (c) Any Member or any party to any action or proceeding to which the Association is a party shall have the right to enforce this section and/or to enjoin violation of this section upon application to a court of competent jurisdiction. Such Member or other party may recover attorneys' fees and costs in the event such Member or other party prevails in any such action or proceeding. Section 28. Compliance with NPDES. The Project is subject to all Federal,State and local requirements of the National Pollutant Discharge Elimination System ("NPDES)adopted pursuant to the Federal Clean Water Act. Pursuant to NPDES,the County has adopted a Water Quality Management Plan for the Project('Water Management Plan")which identifies certain Best Management Practices("BMP)to reduce the discharge of pollutants to storm water facilities. In performing its maintenance obligations pursuant to the Restrictions, the Association shall comply with all Water Management Plan BMP requires, as amended. Section 29. Provision of Utilities and Telecommunication Services. Declarant and/or the Association, by a majority vote of its Members,may elect,but shall not be obligated,to provide utilities and/or telecommunications services to the Project as may be permitted by and pursuant to applicable law. ART]CLE V MAINTENANCE PROPERTY PERMITTED USES AND LIMITATIONS ON USE 002PULA i 4GA-3 Revised 12/28/00 (PUD) 31 Section 1. Restricted Uses. The following locations have been designated as entry monumentation areas and may contain walls, landscaping and signs: Cottonwood Hills Road and Railroad Canyon Road. Section 2. Restrictions on Change. No improvement, excavation or work which in any way alters any Maintenance Property from its natural or existing state on the date such Maintenance Property was transferred to or otherwise came under the jurisdiction of the Association shall be made or done except upon strict compliance with and within the restrictions and limitations of the following provisions of this Section. Section 3. Improvements and Uses of Maintenance Property. Except as otherwise provided herein, the Maintenance Property shall be improved and used (to the extent the Association or the Owners as a whole are entitled to use the same)only for the following purposes: (a) affording pedestrian and vehicular movement within the Real Property, including access to the Subdivision Interests; (b) recreational use of any recreational facilities within the Project by the Owners and occupants of Subdivision Interests and their guests, subject to Rules established by the Board. (c) beautification of the Maintenance Property and providing privacy to the residents of the Real Property through landscaping and such other means as the Board shall deem appropriate. (d) at the election of Declarant and the Association, provision of utilities and/or telecommunications services to the Project. Section 4. Limitation on Construction. No person other than the Association,Declarant, Merchant Builders (with Declarants written approval) or their duly authorized agents shall construct, reconstruct, refinish, alter or maintain any improvement upon, or shall make or create any excavation or fill upon, or shall change the natural or existing drainage of, or shall destroy or remove any tree, shrub, or other vegetation from any Maintenance Property. The Association may, at any time,as to any Maintenance Property: (a) Reconstruct, replace or refinish any improvement or portion thereof upon any such Maintenance Property (to the extent that such work is not done by a governmental entity, if any, responsible for the maintenance and upkeep of such Maintenance Property),in accordance with the plans filed by Declarant with the Board pursuant to Section 9 below. (b) Construct,reconstruct, replace or refinish any road improvement or surface upon any portion of the Maintenance Property used as a road, driveway or parking area in accordance with the plans filed by Declarant with the Board pursuant to Section 9 below. 002P3ELA 3 46A-3 Revised 32/28/00 (PU D) 32 (c) Replace injured or diseased trees, shrubs or other vegetation in the Maintenance Property, and plant trees, shrubs and other vegetation to the extent that the Association deems necessary for the conservation of water and soil or for aesthetic purposes;and (d) Place and maintain upon the Maintenance Property such signs as the Association may deem appropriate for the proper identification,use and regulation thereof. Except as provided above, no change, alteration or modification to the Maintenance Property, including the removal of trees, shrubs or other vegetation thereon or any pruning or trimming thereof which would alter height or width by more than five percent (5%), shall be made which is not in accordance with the plans filed by Declarant with the Board pursuant to Section 9 hereof without the affirmative vote of fifty-one percent (51%) of each class of Members at a special meeting thereof, duly called and held, notice of which shall specifically state the proposed change, alteration or modification to be made to the Maintenance Property. Section 5. Mineral Exploration. No property owned by the Association within the Maintenance Property shall be used in any manner to explore for or to remove any water, oil or other hydrocarbons,minerals of any kind, gravel,earth,or any earth substance of any kind. Section 6. DeclaranVs Exemption. Nothing contained in the Declaration shall be construed to prevent the erection or maintenance by Declarant, or its duly authorized agents,within the Maintenance Property or Subdivision Interests owned by Declarant of signs, flags or other improvements necessary or convenient to the development,sale,operation or other disposition of the Project, or any part thereof, or other property within the master planned community of which the Project is a part except such signs, flags or other improvements shall not be on or within any Subdivision Interest not owned by Declarant. Section 7. Nuisances. No rubbish or debris of any kind shall be placed or permitted to accumulate upon or adjacent to the Maintenance Property, and no odors shall be permitted to arise therefrom, so as to render any such property or any portion thereof unsanitary, unsightly, offensive or detrimental to any other property in the vicinity thereof or to its occupants. No nuisance shall be permitted to exist or operate upon any such property so as to be offensive or detrimental to any other property in the vicinity thereof or its occupants. Section 8. Maintenance Property Damage or Neglect. If any maintenance, repair or replacement of the Maintenance Property is necessitated in the sole judgment of the Board as a result of the willful or negligent act or neglect of a Merchant Builder, its employees, agents or invitees, or an Owner, his family, guests, or invitees, such maintenance, repairs or replacements shall be performed at the expense of such Merchant Builder, or Owner,after notice of hearing, and a special assessment therefor shall be levied against such Merchant Builder or Owner; provided, however, that the liability of Merchant Builder or Owner for such damage to the Maintenance Property shall not be absolute, but shall only be that for which the Merchant Builder or Owner is legally responsible under California Law. The foregoing shall include, without limitation, any settlement damage to any walls and wall footings adjoining a Subdivision Interest or Maintenance Property caused by any excavation, construction or excess irrigation occurring on such adjacent Subdivision Interest or Maintenance Property. 002NEi.A WA-3 Revised 12/28/00 (PUD) 33 Section 9. Declarant's Plans and Specifications. Declarant and Merchant Builders shall provide the Board with plans and specifications for the purpose of maintaining a permanent record of Improvements constructed on any Maintenance Property. ARTI CLE VI MAINTENANCE OF MAINTENANCE PROPERTY AND EASEMENTS Section 2_ Easement for Maintenance. The Association is hereby granted a right and easement over, under, upon and across the Maintenance Property for the purpose of planting and maintaining grass, flowers, shrubs, trees and irrigation and other Iandscaping appurtenances, and for the purpose of installing, constructing and maintaining fences and retaining and other walls, monument signs, equipment and facilities for the provision of utilities and/or telecommunications services, antennas for reception of television signals or other forms of electromagnetic radiation, including satellite dishes, sidewalks, paths and steps, directional signs, lighting facilities and any other improvements permissible by law and not prohibited by existing easements. Section 2. Maintenance. The Association shall maintain,or provide for the maintenance of all Maintenance Property and shall keep all Improvements of whatever kind and for whatever purpose from time to time located thereon (to the extent the maintenance of the same is the legal obligation of the Association)in good order and repair. The Association shall establish Maintenance Funds with the assessments collected pursuant to Article III hereof for the purpose of such maintenance. In the maintenance of the Maintenance Property, the Association shall at all times strictly comply with the conditions of all applicable federal, state and Iocal laws, including the laws and ordinances of the County. Any and all irrigation systems installed in the Maintenance Property shall be automatic. Section 3. Standards of Maintenance by Association. Standards of maintenance for the Maintenance Property to be adhered to by the Association have been established by Declarant. The Board shall have the right to establish standards of maintenance for the Maintenance Property more stringent than those initially established by Declarant;provided, however, standards of maintenance less stringent than those initially established by Declarant shall not be allowed. Section 4. Duties of Association. The Association shall adhere to the standards of maintenance for the Maintenance Property established as provided in Section 3above. Section 5. Private Sewer System and Pump Station The Association shall maintain and provide for the maintenance and repair of any private sewer system and pump station(s) or water pump station(s)if applicable to the Project. Section 6. Owner's Easement of Enioyment. Every Owner is hereby granted a right and easement of enjoyment of the Maintenance Property within the Project and such easement shall be appurtenant to and shall pass with title to every Subdivision Interest subject to the following provisions- 002P3ELAI46A-3 Revised 12/28/00 (PUD) 34 (a) The right of the Board or the Association to establish uniform rules and regulations .pertaining to the Maintenance Property, including, but not limited to, rules with respect to the number of guests using the recreational facilities on the Maintenance Property. (b) The right of the Board or the Association to suspend the voting rights and right to use of any of the recreational facilities by an Owner for any period during which any assessment against his/her Subdivision Interest remains unpaid and delinquent,and for a period not to exceed thirty (30) days for any single infraction of By-Laws, Declaration and Rules provided that any suspension of such voting rights, except for failure to pay assessments, shall be made only by the Association after notice and hearing given and held in accordance with the By-Laws- (c) The right of Declarant and its successors and assigns together with the employees, agents and representatives thereof, to the non-exclusive use of the Maintenance Property in connection with the display and sale of Subdivision Interests within the Project, which right Declarant hereby reserves; provided that no such use by Declarant or its sales agents or representatives shall otherwise restrict the Owners in their enjoyment of the Maintenance Property within the Project. Section 7. Delegation of Enjoyment_ Any Owner may delegate, in accordance with the By-Laws,his right of enjoyment to the Maintenance Property and facilities to the members of his/her family,and his/her tenants or contract purchasers who reside in the Subdivision Interest. Section 8. Waiver of Enjoyment. No Owner may exempt himself/herself from personal liability for assessments duly levied by the Association, nor release the Subdivision Interest owned by him/her from the liens and charges hereof, by waiver of the enjoyment of the Maintenance Property or by abandonment of his/her Subdivision Interest. ARTICLE VII RIGHTS OF ELIGIBLE MORTGAGE HOLDERS AND ELIGIBLE INSURERS OR GUARANTORS Section 1. Notice of Action. Upon written request to the Association, identifying the name and address of the holder, insurer or guarantor and the Subdivision Interest number or address, any such Eligible Mortgage Holder or Eligible Insurer or Guarantor will be entitled to timely written notice of: (a) Any condemnation loss or any casualty loss which affects a material portion of the Project or any Subdivision Interest on which there is a first Mortgage held, insured, or guaranteed by such Eligible Mortgage Holder or Eligible Insurer or Guarantor, as applicable; (b) Any delinquency in the payment of assessments or charges owed by an Owner of a Subdivision Interest subject to a first Mortgage held, insured or guaranteed by such 002P3ELA246A•3 Revised )2128/00 (PUD) 35 Eligible Holder or Eligible Insurer or Guarantor, which remains uncured for a period of thirty(30)days; (c) Any lapse, cancellation or material modification of any insurance policy or fidelity bond maintained by the Association; (d) Any proposed action which would require the consent of a specked percentage of Eligible Mortgage Holders as specified in Section 2 below or in Section 3 of ARTICLE XI herein. The Association shall not be obligated to confirm receipt of such notice. Section 2. Other Provisions for Eligible Mortgage Holders. To the extent permitted by applicable law,Eligible Mortgage Holders shall also be afforded the following rights: (a) Any restoration or repair of the Project, after a partial condemnation or damage due to an insurable hazard, shall be performed substantially in accordance with this Declaration and the original plans and specifications,unless other action is approved by at least fifty-one percent (51"/0) of the Eligible Mortgage Holders and the prior consent (by vote or written consent) of Members representing sixty-seven percent (67%)or more of the voting power of each class of Members;provided,however,in the event the Class B membership has been converted to Class A membership, then a vote by sixty-seven percent(67%)or more of the total voting power of the Association comprised of at least sixty-seven percent (67%) of the votes of Members other than Declarant shall be required; (b) Any decision to establish self management by the Association shall require the prior written approval of at least fifty-one percent (51%) of the Eligible Mortgage Holders and the prior consent (by vote or written consent) of Members representing sixty- seven percent (67%) or more of the voting power of each class of Members;provided, however, in the event the Class B membership has been converted to Class A membership, then a vote by sixty-seven percent (67%) or more of the total voting power of the Association comprised of at least sixty-seven percent (67%) of the votes of Members other than Declarant shall be required. 002P3ELA146A-3 Revised )2/28/00 (PUD) 36 ART]CLE Vill DAMAGE,DESTRUCTION AND CONDEMNATION OF MAINTENANCE PROPERTY Section I. Damage and- Destruction Affecting the Maintenance Property_ If any Improvements owned by the Association on the Maintenance Property are damaged or destroyed by fire or other casualty, and the restoration and repair of such Improvements is the legal obligation of the Association,then_ (a) if the available insurance proceeds initially offered or paid by the insurer do not exceed the sum of Five Thousand Dollars ($5,000.00), such insurance proceeds shall be paid to the Board; (b) if the provisions of subparagraph (a)above are inapplicable, then: (1) all insurance proceeds shall be paid to a bank or trust company (as an "Insurance Trustee") to be held for the benefit of the Owners and their Mortgagees and the holders of, or under their sales contract, as their interests shall appear. The Board is authorized on behalf of the Owners, to enter into an agreement, consistent with this Declaration, with such Insurance Trustee, relating to its powers, duties and compensation, as the Board may approve;and (2) The Board shall proceed under Section 2 below. Section 2. Partial or Total Destruction. In the event of partial or total destruction of Improvements owed by the Association on the Maintenance Property, it shall be the duty of the Association to restore and repair the same to its former conditions as promptly as practicable and in a lawful and workmanlike manner- The proceeds of any insurance written pursuant to ARTICLE IV, Section 5 shall be made available for such purpose and the Association or the Insurance Trustee, as the case may be, shall distribute the proceeds of all insurance policies to the contractors engaged in such repair and restoration in appropriate progress payments, subject to the prior rights of Mortgagees whose interest may be protected by said policies. In the event that the amount available from the proceeds of such insurance policies for such partial reconstruction shall be inadequate, a special assessment of the Owners, with each Subdivision Interest contributing its share to be determined as set forth in ARTICLE 111, Section 4 herein, shall be levied to provide the necessary funds for such reconstruction, over and above the amount of any insurance proceeds available for such purpose. Section 3. Condemnation. If an action for condemnation of all or a portion of the Maintenance Property owned by the Association is proposed or threatened by any governmental agency having the right of eminent domain, then, after approval by vote or written consent of at least fifty-one percent (51%) of all the Owners and with the prior written consent of seventy-five percent (75%) of all Eligible Mortgage Holders, the Maintenance Property, or a portion of it may be sold and 002P3ELA]46A-3 Revised 12/28/00 (PUD) 37 conveyed to the condemning authority by the Association or its designees acting as the attorney-in- fact of all Owners under an irrevocable power of attorney,which each Owner by accepting a deed to a Subdivision Interest in the Project grants to the Board and which shall be coupled with the interest of all other Owners,for a price deemed fair and equitable by the Board- On such a sale,the proceeds shall be distributed equally to each Owner and their Mortgagees as their respective interests may appear. If the Maintenance Property, or a portion of it, is not sold but is instead taken, the award shall be apportioned among the Owners and their respective Mortgagees by the terms of the judgment of condemnation, and if not so apportioned, then the award shall be distributed equally to each Owner and their Mortgagees as their respective interests may appear. ARTICLE IX ENFORCEMENT Section 1. Right of Enforcement. The Association, any Owner, Merchant Builder, so long as such Merchant Builder owns part of the Real Property,Declarant,so long as Declarant owns part of the Real Property or owns any of the Annexable Area, shall have the right to enforce,by any proceedings at law or in equity, all covenants, conditions, restrictions and reservations now or hereafter imposed by the provisions of this Declaration. Each Owner shall have a right of action against the Association for any failure by the Association to comply with the provisions of this Declaration,the Articles or the By-Laws. Section 2. Alternative Dispute Resolution_ The Board is hereby authorized to perform any act reasonably necessary to resolve any civil claim or action through alternative dispute resolution proceedings such as mediation, binding arbitration, or non-binding arbitration proceedings. The Board is hereby authorized to perform the following acts: (a) Provide, or in good faith attempt to provide, one hundred twenty (120) days advance notice of the Board's intent to initiate the prosecution of any civil action and of the nature and basis of the claim to every Member of the Association and every entity or person who is a prospective party to the civil action, provided that notice can be given (1) more than one hundred twenty (120) days prior to the expiration of any pertinent statute of limitations, and (2) without prejudice to the Association's right to enforce the Governing Documents, and further provided that no such notice need be given prior to the filing of an action in small claims court or an action solely to enforce assessment obligations. (b) Prior to initiating the prosecution of a civil action solely for declaratory relief or injunctive relief to enforce the Governing Documents, or for declaratory relief or injunctive relief to enforce the Governing Documents in conjunction with a claim for monetary damages not in excess of five thousand dollars ($5,000), to endeavor to submit the matter to alternative dispute resolution in compliance with the provisions of Section 1354(b)of the Civil Code. (c) Immediately after initiating the prosecution or defense of any civil action, making a reasonable effort, in good faith, to meet and confer with every 0023>3RLA246A-3 Revised J2/28/00 (PUD) 38 person who is a party concerning appropriate processes for resolving the civil action, including available alternative dispute resolution proceedings; concerning appropriate processes for avoiding or reducing costs or losses by the parties associated with the action; providing an opportunity to cure any alleged defect in the Maintenance Property or facilities which is the basis for the action; and providing for the scope of discovery, if any, to be conducted prior to the inception of any alternative dispute resolution procedure. (d) Considering diversion of the prosecution or defense of any civil action to alternative dispute resolution proceedings such as mediation, non-binding arbitration, or binding arbitration- (e) Agreeing to participate and participating fully and in good faith in the resolution of any civil action through any alternative dispute resolution proceedings, including but not limited to mediation, non-binding arbitration, and binding arbitration, and paying costs reasonably incurred by the Association on account of those alternative dispute resolution proceedings. Section 3. No Waiver_ Failure by the Association, Declarant or any Owner to enforce any provision of this Declaration shall in no event be deemed a waiver of the right to do so thereafter- ART]CLE X COVENANTS AND USE RESTRICTIONS,ARCHITECTURAL CONTROL Section 1. Residential Use. Except as provided in Article XI, Section 7, with respect to Declarant, each Subdivision Interest shall be used for private, one-family residence purposes exclusively and no part of the Project shall be used or caused,allowed or authorized to be used in any way, directly or indirectly,for any business, commercial,manufacturing,mercantile,storing, vending or other non-residential purpose, without the prior written consent of the Board. In deciding whether or not to permit an otherwise nonconforming use hereunder, the Board shall consider the potential effect upon traffic in the Project and interference with or annoyance of neighbors; notwithstanding the foregoing, a nonconforming use shall never be permitted unless such use is incidental to the residential use of the Subdivision Interest and is permitted by applicable law. Section 2. Improvements. Each Subdivision Interest shall be used for private, one- family residence purposes exclusively; however, Subdivision Interests owned by Declarant and Merchant Builders may be used by Declarant, Merchant Builders and their designees as models, sales offices and construction offices for the purpose of developing, improving and selling Subdivision Interests within the Real Property. Declarant and Merchant Builders shall have the right to construct one or two-story residential dwellings on Subdivision Interests they own. Except as provided in the preceding sentence, and except for residences and other improvements constructed by Declarant and Merchant Builders, no structure whatsoever, other than a one-family, private residence may be erected or maintained on any Subdivision Interest at any time, and except for residences and other improvements constructed by Declarant and Merchant Builders, and no 002P3ELA 1 46A-3 Revised 12/28/00 (PUTS) 39 building, structure or other improvement of any kind shall be erected, constructed, altered or maintained on any Subdivision Interest in excess of one story; provided, however, for those Subdivision Interests upon which a two-story residential dwelling has previously been erected by Declarant or a Merchant Builder, a two-story residential dwelling may be erected, constructed, altered or maintained thereon. No garage or carport shall be used as a living area or used for purposes other than those uses normally attendant to a garage or carport. Section 3_ Sanitary Facilities. All lavatories and toilets shall be built indoors and connected with the sewer system. Section 4- Antennae,Satellite Dishes. No antennae or other device for the transmission or reception of radio, television or video signals or any other form of electromagnetic radiation, including but not limited to, a dish or other device capable of transmitting or receiving signals for cable, satellite or television systems, shall be erected, used or maintained outdoors above ground on any Subdivision Interest, except as provided below: (a) An Owner may install a satellite dish or antenna for the reception of television or video signals ("Dish') on his or her Subdivision Interest if such Owner can demonstrate to the satisfaction of the Architectural Review Committee Architectural Review Committee that the Dish will not be visible: (i) from any street, alley or the Maintenance Property within the Project; and (ii) from any other Subdivision Interest, or if visible from any other Subdivision Interest, the Owner has either obtained the written consent of all Owners of the Subdivision Interests from which the Dish can be seen, or the Dish is disguised to be indistinguishable from the Improvements otherwise allowed on a Subdivision Interest and such Owner complies with the provisions of subparagraphs(b)and(c)below- (b) Prior to the installation of the Dish, the Owner shall submit to the Architectural Review Committee detailed plans depicting the Dish and showing the dimensions and proposed location of the Dish and any landscaping or other screening to be installed to shield the Dish from view ("Dish Plans") and any necessary written consents establishing that the requirements of subparagraph (a) above have been fully satisfied. The submission and approval process shall be the same as set forth in Section 20 of this Article X_ The decision of the Architectural Review Committee shall not be willfully delayed. The Architectural Review Committee may impose "reasonable restrictions"upon the location and visibility of the Dish. As used herein, "reasonable restrictions" means those restrictions that do not significantly increase the cost of the video or television antenna system,including all related equipment,or significantly decrease its efficiency or performance,including,but not limited to those reasonable restrictions set forth in Civil Code Section 1376. (c) If the Dish Plans are approved by the Architectural Review Committee, the Dish shall be installed in strict compliance with the Dish Plans and any deviation from such Dish Plans shall require the prior written approval of the Architectural Review Committee. Each Ownex hereby grants the Architectural Review Committee the right to inspect such Owner's Subdivision Interest to determine that the Dish has been installed in strict compliance with the Dish Plans. If the Architectural Review Committee determines that the installation of the Dish is not in strict compliance OOMELA MGA-3 Revised 32/28/00 (PUD) 40 with the Dish Plans, it shall notify the Owner and the Owner shall immediately take such action as may be necessary to bring the Dish into compliance with the Dish Plans or shall remove the Dish from the Subdivision Interest. Section 5. Oil. Water and Mineral Operations. No tools or equipment and no derrick or other structure designed for use in boring for oil, gas, or other kindred substances, or designed for use in boring for water, or designed for use in any mining operation or exploration shall hereafter be erected or placed upon such realty; and no Owner of any of said Subdivision Interest shall ever consent to the use of the surface of the land, or any portion of the subsurface thereof,by any lessee under any lease to be negotiated or under any lease now of record affecting any of said Subdivision Interest, which lease pertains to the exploration, mining or operating for oil, gas or other hydrocarbon substances and the taking, storing,removing and disposition of same. sectaom.6. Ground Cover Requirement. If Declarant or a Merchant Builder has not provided a lawn for the front yard of a Subdivision Interest, then the Owner of said Subdivision Interest shall install thereon, within four (4)months after the date of conveyance by Declarant or a Merchant Builder to the Owner of title to said Subdivision Interest or the date of occupancy thereof, whichever occurs first, a front yard Iawn or a ground cover acceptable to the Association. Each Owner shall have installed on his or her Subdivision Interest, within four (4)months after the date of conveyance by Declarant or a Merchant Builder to the Owner of title to the Subdivision Interest or the date of occupancy thereof, whichever occurs first, a side and rear yard lawn or ground cover or other Iandscaping acceptable to the Association_ Should any Owner fail to comply with the provisions of this section, the Association may, at any time (i) initiate legal proceedings to enforce compliance with this Section 6, or (ii) upon thirty (30) days written notice to the Owner of its intention to do so, enter upon said Subdivision Interest and install a lawn, ground cover or other landscaping and recover the cost thereof from said Owner. The Association shall notify the Owner of the Subdivision Interest in writing of the costs incurred, which shall constitute a personal obligation of the Owner of the Subdivision Interest. In the event such Owner fails to pay the Association the amount due within ten (10) days after receipt of such written notice, the Association may enforce such obligation in the same manner provided by law with respect to any other contractual obligation, or in accordance with the provisions of Article III of this Declaration. Section 7. Maintenance of Subdivision Interests. No rubbish, brush, weeds, undergrowth, debris of any kind or character shall ever be placed or permitted to grow or accumulate upon any Subdivision Interest, or any portion thereof, so as to render said premises a fire hazard, unsanitary, unsightly, offensive or detrimental to any other Real Property in the vicinity or the occupants thereof. The Owner of each Subdivision Interest for himself/herself, his successors and assigns agrees to care for, irrigate, cultivate,prune and maintain in good condition any and all trees, lawns and shrubs growing on the Subdivision Interest and should Owner or his successors or assigns fail to do so, or fail to keep said realty free from rubbish,brush,weeds,undergrowth or debris of any character, the Association may, at any time, (i)initiate legal proceedings to enforce compliance with this Section 7, or (ii) upon thirty (30) days written notice to such Owner or his successors and assigns, of its intention so to do, enter upon said Subdivision Interest and remove such rubbish, brush, weeds, undergrowth or debris or replace dead lawn, trees or plants and assess said Owner or his successors or assigns for the cost thereof. The Association shall notify Owner or his successors or assigns in writing of the cost thereof, and in the event such person or persons fails to reimburse the Association for its costs and expenses, such charges shall constitute a lien on that Owner's Subdivision Interest, which may be enforced by the Association in accordance with the provisions of 002P3ELA]46A-3 Revised 12/28/00 (PUD) 41 Article III of this Declaration, including, without limitation, the provisions of Sections 8, 9 and 10 of Article 111. Section 8. Trees: Vegetation. No tree, shrub, hedge, plant, vegetation, foliage or landscaping which exceeds the height of the residence or which could eventually grow to a height exceeding the height of the residence or which could interfere with the view from any other Subdivision Interest shall be planted, installed or maintained upon any Subdivision Interest unless prior to the planting or installation thereof, a complete description of the species, actual and potential height and shape thereof, and proposed location within the Subdivision Interest have been submitted to and approved in writing, as to species,height,shape appearance and as to the effect on the view or visibility from or afforded by any other Subdivision Interest or Real Property, by the Architectural Review Committee. In the event the Committee fails to approve or disapprove such description and the contents thereof within sixty (60) days after the submission thereof to it, then such description shall be deemed disapproved. The method of submission shall be by mailing of a first class United States Mail Certified Receipt Requested letter to any current member of the Architectural Review Committee. The sixty (60) day period shall begin to run on the date of receipt of said letter by the Committee member. Notvithstanding any other provisions herein to the contrary, the foregoing restrictions shell not apply to trees, shrubs, hedges, plants, vegetation, foliage or landscaping planted by Declarant or Merchant Builders. Section 9. Nuisances. No odors shall be permitted to arise from any Subdivision Interest so as to render such Subdivision Interest unsanitary, unsightly, offensive or detrimental to any other Subdivision Interest; and no nuisance shall be permitted to exist or operate upon any Subdivision Interest so as to be offensive or detrimental to any other Subdivision Interest or to the Owners thereof, without limiting the generality of the foregoing provisions, horns, whistles, bells or other sound devices, except devices used exclusively for security purposes and which are approved by Declarant, the Association or the Architectural Review Committee, or bright lights which may disturb occupants of the neighborhood, shall be located, used or placed upon any Subdivision Interest; no Owner shall permit any thing or condition to exist upon any Subdivision Interest which shall induce,breed or harbor infectious plant diseases or noxious insects, and no noxious or offensive trade or activity shall be carried on upon any Subdivision Interest, nor shall anything be done thereon which is or may become an annoyance or nuisance to the project. Section 10. Repair of Improvements. No improvements (including but not limited to dwelling units, garages, carports, walls and fences) shall be permitted to fall into disrepair and all Improvements shall at all times be kept in good condition and repair and adequately painted or otherwise finished. Any and all repairs, redecorations, modifications or additions, interior or exterior, shall fully comply with all applicable building code requirements, rules and restrictions. Roof ventilators,if any, shall be painted within three (3) months of installation to match the color of the roof to which it is or will be attached. Any violation of this provision may be enforced by the same parties and in the same manner as provided in Section 7 above. Section I_ Easements. Easements for installation and maintenance of utilities and drainage facilities may have been conveyed as shown on the recorded plat and otherwise of record. Whether or not such easements constitute a part of the Maintenance Property, neither the Association nor any Owner shall take any action which would interfere with the reasonable and 002P3ELAl46A-3 Revised 12/28/00 (PUD) 42 normal use and operations of such easements. If a drainage facility located on a Subdivision Interest requires maintenance, the Owner of such Subdivision Interest shall maintain it in good condition and repair. Section 12. Sians. No billboards, signs or advertising of any kind, excepting a conventional "for sale", "for rent" or "for exchange" sign, and not more than two (2) conventional. security company signs shall be erected or maintained upon any of said Subdivision Interest without the prior written consent of the Architectural Review Committee, except that this restriction shall not apply to Declarant or to any entity owned or controlled by Declarant,or to Merchant Builders as provided in Section 7 of Article XI. No permitted sign shall exceed two(2)feet in height or width. Section, 18- Sales Office. Declarant, Merchant Builders and their sales agents may, during the sale campaign of the Subdivision Interests in the Real Property and/or interests in other real property owned by Declarant or Declarant's affiliates in the general vicinity thereof,maintain on the property owned by it in the Real Property, or in the Maintenance Property, a real estate office, model homes, parking facilities, lights, decorative entrance wall lot areas, and such signs, flags and sales aids as it may desire to promote such sales. Section 14. Animals. No animals,fowl,reptiles,poultry,fish or insects of any kind ("animals")may be raised,bred or kept on any Subdivision Interest or Maintenance Property within the Project,except that a reasonable number of birds,fish,dogs,cats or other customary household pets may be kept on a Subdivision Interest;provided that they are not kept,bred or maintained for any commercial purpose,nor in unreasonable quantities nor in violation on any applicable local ordinance or any other provision of this Declaration, and such limitations as may be set forth in the Rules. As used in this Declaration"unreasonable quantities"ordinarily means more than four(4) household pets per Subdivision Interest;provided,however,that the Board of Directors may determine that a reasonable number in any instance is more or less. The Association,acting through the Board of Directors,may prohibit maintenance of any animal that constitutes,in the opinion of the Board, a nuisance to other Owners of Subdivision Interests in the Project. Animals belonging to Owners, occupants or their licensees,tenants or invitees within the Project must be kept within an enclosure or an enclosed yard or on a leash or other restraint being held by a person capable of controlling the animal. Furthermore,to the extent permitted by law,each Owner shall be liable to each and all remaining Owners, their families, guests,tenants and invitees for any unreasonable noise or damage to person or property caused by any animals brought or kept upon the Project by such Owner or by members of his or her family,or his or her tenants or guests. It shall be the absolute duty and responsibility of each Owner to clean up after such animals which have used any portion of the Project. Section 15. Walls and Fences. There are walls and/or fences around and within the Project which were constructed or are to be constructed by Declarant and Merchant Builders and are subject to tbis Declaration. It shall be the duty of every Owner of a Subdivision Interest to maintain and repair all walls and fences located within such Owner's Subdivision Interest and,if necessary, to replace said walls and fences as originally constructed. The Owner shall remove all graffiti from said walls and fences or paint over such graffiti within forty-eight (48) hours after such graffiti first appears. No changes or alterations shall be made to said walls and/or fences except as may be approved by the Architectural Review Committee. In the event the need for repair of said walls 002P3E1.A]46A-3 Revised 12/28/00 (PUD) 43 and/or fences is caused by the willful or negligent acts of an Owner or his or her family, guests or invitees, the liability of the Owner for the cost of such repair shall be determined according to the laws of the State of California_ It shall be the duty of each Owner of a Subdivision Interest on which a wall or fence is located to maintain said wall or fence and to obtain and maintain in force property and casualty insurance on a current replacement cost basis on such walls or fences. If such Owner fails to promptly repair or replace a damaged or destroyed wall or fence, or remove graffiti, the Association shall perform such work at the Owner's expense. In such event, any insurance proceeds an Owner may receive for any damage or destruction to the wall or fence located on his Subdivision Interest shall be paid to the Association which shall as promptly as practicable and in a Iawful and workmanlike manner restore and repair the block wall and/or fence to its former condition_ If an Owner fails to pay to the Association any such insurance proceeds, or to reimburse the Association for the cost of the work, then the Association shall have the right to file a lien upon the Subdivision Interest of such Owner- The Association is hereby granted a right and easement over, under, upon and across each Subdivision Interest wherein the aforesaid perimeter wall and/or fence is located for the purpose of repairing and,if necessary,replacing said walls. Section 16. Construction of Walls. No fence, wall, hedge, construction, or obstruction shall be installed or constructed upon any Subdivision Interest in the Project except the residence, garage, or other out building permitted to be erected under the provisions of these restrictions, unless such fence,hedge,wall,construction or obstruction is originally constructed by Declarant or is designed so as to be provided with one opening for every three (3)feet of length at ground level and so as to permit free drainage of waters falling upon the Subdivision Interest or flowing across the Subdivision Interest from an adjoining Subdivision Interest, nor shall any such fence, wall, hedge, construction or obstruction be installed or erected unless prior to the commencement thereof complete working plans and specification therefor have first been submitted to the Architectural Review Committee for its approval or rejection thereof, and that Committee shall have given its written approval. Section 17. Drainage. Each Owner agrees for himself or herself and his or her successors and assigns that he or she will not in any way interfere with the natural or established drainage of water over, under or through his Subdivision Interest from an adjoining or other Subdivision Interest in the Project, including runoff from the roof of an adjoining Owner, or that be will make adequate provisions for proper drainage in the event the Association determines it is necessary to change the natural or established flow of water drainage over the Owner's Subdivision Interest. For the purposes hereof"natural" drainage is defined as the drainage which would naturally occur at the time the overall approved grading plan of said Project has been completed by the Declarant. For the purposes hereof, "established" drainage is defined as the drainage which occurred or which would occur at the time the overall grading of the Project, including the finish grading of each Subdivision Interest in the Project, was completed by the Declarant. In the event an Owner interferes with the natural or established drainage over his or her Subdivision Interest or any other Subdivision Interest or the Maintenance Property or if an Owner causes flooding or over saturation of any other Subdivision Interest or the Maintenance Property, such Owner shall be deemed to be in violation of this Declaration. Compliance with the provisions of this section shall be enforced as provided in Article IX of this Declaration. Section 18. Provision for Architectural Approvals_ Except as to construction of Improvements by Declarant and the Merchant Builders in any Phase of Development in the Project, no building, fence, wall, or other structure shall be commenced, erected, or maintained on the Real 002P3ELA]46A-3 Revised 12/28/00 (FUD) 44 Property,nor shall any Improvement be made which affects the natural or established drainage from the Subdivision Interest, nor shall any exterior addition or change or alteration in any such Improvements on the Real Property,including the following by way of illustration but not limitation, solar or heating systems; pools, spas, ponds, fountains; landscaping, stonework, or concrete work; related mechanical, plumbing, or electrical facilities; awnings or patio covers, be made, until the plans and specifications showing the nature, kind, shape, materials, location and proposed construction schedule of the same have been submitted to and approved in writing by the Architectural Review Committee provided in Section 20 below. Notwithstanding the foregoing, each Merchant Builder must obtain Declarant's written approval of all construction and development activities of such Merchant Builder,in lieu of Architectural Review Committee approval. Whenever in this Declaration the prior consent or approval of the Association is required as a condition to any action by an Owner affecting any alterations, changes, additions, or modification, the Association through the Board may delegate to the Architectural Review Committee the right and duty to grant or withhold such consent or approval. In the event the Architectural Review Committee or its designated representatives fails to approve or disapprove such design and location within sixty (60) days after the plans and specifications have been submitted to it,such plans and specifications shall be deemed disapproved. The Board may require that every submission of a request for approval in connection with any proposed Improvement be accompanied by a fee to be paid to the Association in an amount not to exceed $I50.00. Section 19. Membership and Rights of Appointment of Architectural Review Committee. The Architectural Review Committee shall consist of not less than three(3)nor more than five(6)members. Any member shall have the right to resign at any time. The members of the Committee shall not be entitled to any compensation for services performed but shall be entitled to reimbursement for costs advanced. The foregoing shall not preclude payment of compensation approved by the Board to architects or similar professionals who assist the Committee in performing its duties hereunder. (i) Appointment By Declarant. Declarant may appoint and remove a majority of the members of the Architectural Review Committee,which appointees need not be Members of the Association,until the earlier to occur of(i)the date on which ninety percent(90%)of the Subdivision Interests proposed for the Project(including the Annexable Area)have been conveyed to Class A Members, or(ii)the fifth (51n)anniversary of the most recent conveyance to a Class A Member of the first Subdivision Interest in any Phase of Development in the Project under the authority of a Public Report. (ii) Appointment By the Board. The Board may appoint and remove those members of the Architectural Review Committee which Declarant is not authorized to appoint until such time as Declarant's rights of appointment shall have expired,and thereafter the Board may appoint and remove all members of the Architectural Review Committee. Architectural Review Committee members appointed by the Board must be Members of the Association at all times during their service on the Architectural Review Committee,and shall serve for a term of one (1)year or until their respective successors are appointed. 002P3ELA]96A-3 Revised 12/28/00 (PUD) 45 (iii) Notice of A ointment. Whenever an Architectural Review Committee member is appointed or removed while both Declarant and the Board have rights of appointment,written notice of such appointment or removal must be given by the appointing party to the other party. Section 20. Approval of Committee. The Architectural Review Committee's approval as required in this Declaration shall be in writing. In the event that the Architectural Review Committee, or its designated representative, fails to approve or disapprove any plan, specification, design or plot plan within sixty (60) days after the same shall have been submitted to it, then such plans and specifications shall be deemed to have been disapproved by the Committee. The method of submission shall be by the mailing of a first class United States Mail Certified Return Receipt Requested letter to any current member of the Architectural Review Committee. The sixty (60) day period shall begin to run on the date of receipt of said letter by the Committee member. Section 21. Basis for Approval of Improvements. The Architectural Review Committee shall grant the requested approval only if said Committee determines, in its sole and absolute discretion,that: (a) The proposed Improvement conforms to this Declaration and particularly to the requirements and restrictions of this Section, and to the Rules in effect at the time the application for approval was submitted; (b) The proposed Improvement is compatible with the standards of the Project and the purposes of this Declaration as to quality of workmanship and materials; (c) The proposed Improvement is compatible with the architectural quality of the Project and will not depreciate the value of the Project. Section 22. Liability of Committee Members. Neither Declarant, the Association nor any member of the Architectural Review Committee shall be liable for damages to anyone submitting plans and specifications to it for approval or to any Owner, occupant or guest,by reason of a mistake in judgment,negligence or nonfeasance arising in connection with the approval or disapproval of any plans and specifications. Anyone who submits plans and specifications to the Architectural Review Committee shall be deemed to have agreed by submission of such plans and specifications, and every Owner and occupant of any Subdivision Interest, or any part of the Real Property, agrees, by acquiring title and/or possessory rights thereto, that he or she will not bring any action or suit against Declarant, the Association, any member of the Architectural Review Committee or its designated representative for the recovery of damages by reason of any such approval or disapproval- Section 23. Views. There are no views in the Project which are protected to any extent by this Declaration,and no Owner who becomes subject to the term hereof shall thereby obtain any view rights whatsoever. Each Owner,by accepting a deed to a Subdivision Interest,acknowledges that any construction or installation by Declarant or a Merchant Builder or by any other Owners following Architectural Review Committee approval may impair the view of such Owner and each Owner hereby consents to such impairment. 002P3ELA I46A-3 Revised I2128/00 (PUD) 46 Section 24. Paintine. No building,including without limitation, garages,shall be painted or repainted other than in its original colors unless the new color has been approved by the Architectural Review Committee. Section 25. Clotheslines. No clotheslines shall be placed nor shall any clothes be hung in any manner whatsoever on any Subdivision Interest in a location, including but not limited to the garage door,visible from a public street. Section 26. Commercial Vehicles and Recreational Vehicles. "Commercial Vehicles" and "Recreation Vehicles" (as those terms are defined below)shall be subject to the following prohibitions and restrictions- . (a) As used herein the term "Commercial Vehicle" shall be defined as: (i) any vehicle with a sign displayed on any part thereof advertising any kind of business or other venture; or (ii) any vehicle on which racks, materials, ladders and/or tools are visible; or(iii)any vehicle with a body type normally employed as a business vehicle whether or not a sign is displayed on any part thereof, or(iv)a truck of greater than one (1)ton capacity; or (v) a van other than one used solely as a family passenger van; or (vi) a bus. A Commercial Vehicle may be defined as such even if such vehicle does not have a commercial license plate. (b) As used herein, the term "Recreational Vehicle" shall include, without limitation, motorhomes, buses, trailer coaches, trailers, boats or other watercraft, aircraft or campers. The term "Low Profile Recreational Vehicle" shall mean those of the following listed Recreational Vehicles that do not exceed seven (7) feet in height: speedboats, canoes, kayaks, dune buggies,jet skies, motorcycles and any other Recreational Vehicles, if any, that may be deemed low profile and approved by the Architectural Review Committee from time to time. (c) No Commercial Vehicle or Recreational Vehicle may be parked on any Subdivision Interest(unless the entire vehicle is located within a garage) or on any street or alley at any time,except as permitted below: (i) A Commercial Vehicle not owned or operated by an Owner or an occupant of a Subdivision Interest may be parked temporarily on said Subdivision Interest or on the street in front of said Subdivision Interest during such time as the operator of such Commercial Vehicle is delivering goods or providing services to the Owner or occupant of said Subdivision Interest. (ii) No Recreational Vehicles owned by an Owner or occupant of a Subdivision Interest may be parked on said Subdivision Interest or in the street in front of such Owner's or occupant's Subdivision Interest except that (A) a Recreational Vehicle may be so parked while being loaded or unloaded for a period not to exceed forty-eight(48) hours in any seven (7) day period; and (B) a Low Profile Recreational Vehicle may be parked in the side yard of a Subdivision Interest, provided that such Low Profile Recreational Vehicle is parked entirely within the side yard and is adequately screened from view from the street. (iii) Recreational Vehicles owned by persons visiting an Owner or occupant may be parked in front of such Owner's or occupant's Subdivision Interest while such person is visiting, provided that such Owner or occupant first obtains the written consent of the 002P3ELAI46A-3 Revised 32/28/00 (PUD) 47 Board, but in no event shall such Recreational Vehicle be so parked for a period exceeding seven (7) days. (iv) On those Subdivision Interests on which Declarant has constructed a Recreational Vehicle parking space ("RV space"), a Recreational Vehicle may be parked within such RV space. In addition, no Commercial or Recreational Vehicle or any automobile, van, motorhome or truck or equipment; may be dismantled, repaired or serviced on any Subdivision Interest, street or alley in any area visible from adjoining property or public street. Section 27. Garage Doors- No garage door is to be left open except: (a)at such time as a vehicle is entering or leaving said garage; or (b) when the Owner or occupant of such Subdivision Interest is working in such garage,not to exceed four(4)hours per day;however,such work shall not include any activity which is prohibited by Section 25 above. Notwithstanding the foregoing, garage doors may be left open to a height of up to two(2)feet if necessary to ventilate heat from the garage during very hot weather. Section 28, Drainage Slope. Each Owner of a Subdivision Interest agrees for himself or herself, his or her heirs, assigns, or successors in interest that he or she will permit free access by Owners of adjacent or adjoining Subdivision Interests to slopes or drainageways located on his or her Subdivision Interest which affect said adjacent or adjoining Subdivision Interests, when such access is essential for the maintenance of permanent stabilization on said slopes, or maintenance of the drainage facilities for the protection and use of Real Property other than the Subdivision Interest on which the slope or drainageway is located. Section 29. Post-Construction EnLu Rights. Declarant or its designee shall have the right to enter upon each Subdivision Interest in the Project for the purpose of planting and maintaining the slope banks as required. Said right of entry shall exist for a period not to exceed ninety (90)days after the completion of the construction of all residential structures in the Project,at which time said right of entry and maintenance shall terminate. Section 30. Slone-Control Areas. There may be Slope-Control Areas on the property which is the subject of these Covenants, Conditions and Restrictions. "Slope-Control Areas" shall mean those Subdivision Interests in this Project within which lie areas which are constituted as sloped, banked or hillside and which extend three (3) feet or more in vertical height. The Slope- Control Areas shall be designated in the Supplemental Declarations. Each Owner of a Subdivision Interest severally agrees for himself, his heirs, assigns and successors in interest with respect to his or her Subdivision Interest as follows: (a) No structures, planting or other material shall be placed or permitted to remain along,under or upon, nor shall any act be committed or act or omission suffered to be committed with respect to Slope-Control Areas which may damage or interfere with established slope ratios, create erosion or slide problems, or which may damage, obstruct, alter or retard the direction of the established drainage of water along, under, upon or within Slope-Control Areas or the flow of water through drainage channels located along, under, upon or within Slope-Control Areas. 002P3ELAI4GA-3 Revised I=8100 (PUD) 48 ............. ..... ........ (b) Each Owner of a Subdivision Interest shall continuously maintain and preserve the Slope-Control Area which lies within such Subdivision Interest at his or her own expense, including but not limited to, adequately watering, fertilizing, replacing, trimming vegetation and improvements thereon, all in conformity to generally accepted horticultural and slope preservation standards. (c) In the event any Owner shall fail or refuse to perform any of the aforesaid obligations, the Association shall upon twenty-four(24)hours notice have the right to enter upon such Subdivision Interest for the purpose of performing said obligations, and shall not be liable for trespass for so doing. (d) In addition to any other right or remedy provided in this Declaration, there is hereby created in favor of the Association, the right to claim alien on such Subdivision Interest in an amount equal to the reasonable cost to the Association of performing such obligations, together with interest thereon, at ten percent (IO%) per annum from the date such obligations are performed,and all costs of collection which may be paid or incurred by the Association in connection therewith, including reasonable attorneys'fees, which may be enforced by Declarant or its successors in interest, any Owner or the Architectural Review Committee in the same manner provided by law with respect to any other contractual obligation. Upon recordation of such a claim of lien, the lien claimed therein shall immediately attach and become effective in favor of the Association,subject only to the limitations hereinafter set forth. Such a lien shall have priority over all other liens created subsequent to the recordation of such claim of Lien, except for only liens for real property taxes on any such Subdivision Interest, assessments on such Subdivision Interest in favor of any municipal or other governmental body, and the lien of any Mortgage. Any such lien may be foreclosed by appropriate judicial proceedings or otherwise, as may be prescribed by the laws of the State of California from time to time in effect,and court costs, expense of sale, and reasonable attorneys' fees shall be allowed to the extent permitted by law, in addition to all other amounts secured by said lien- The Association shall be entitled to bid at any foreclosure sale of such Subdivision Interest and to purchase it at such sale and to thereafter hold, lease, mortgage and convey the same. The Association shall be entitled to receive, out of proceeds of any foreclosure sale, all amounts secured by such lien together with all expenses of collection and sale and reasonable attorneys' fees, and the excess remaining shall be paid to the owner of the Subdivision Interest which is sold. Section 3I. No Impairment of Liens. No violation of any of the covenants, conditions or restrictions in this Declaration, nor any of the rights or rights to claim alien or liens created hereunder upon any Subdivision Interest in the Project shall defeat or render invalid the Tien of any holder of any indebtedness, or the renewal, extension or refinancing thereof, made in good faith and for value, and secured by any recorded Mortgage upon such Subdivision Interest in favor of or for the benefit of any agency or officer of the United States of America, any agency or officer of the State of California, any institutional lender (meaning any bank, insurance company, savings and loan association, or building and loan association), Declarant, any wholly-owned corporate subsidiary of Declarant, or any corporation of which Declarant is a wholly-owned subsidiary, and the rights, remedies and liens created hereby upon any such Subdivision Interest shall be subject and subordinate thereto; provided that, immediately after any power of sale or court foreclosure of any such Mortgage by sale of such Subdivision Interest, this Declaration shall be binding upon and 002P3ELAJ 46A-3 Revised 12/28/00 (PUD) 49 effective against any Owner(including Declarant)whose title is derived through such a trustee's sale or court foreclosure, and the same rights and remedies shall attach and a new claim of lien shall automatically be created on such Subdivision Interest under the applicable provisions hereof, without further act,to secure payment of any and all assessments levied hereunder, after the date of such trustee's sale or court foreclosure. Section 32. Solar Equument. No solar equipment, including but not limited to solar collectors and solar panels, shall be installed until approval of the Architectural Review Committee has been obtained, which approval will not be unreasonably withheld, as to (i) type of solar equipment to be installed, and (ii) location thereof_ The Architectural Review Committee may impose reasonable restrictions on the solar energy system as set forth in California Civil Code Section 714 (as such section may be hereafter amended,supplemented or superseded). Section 33. MutuaI Covenants. Except as otherwise provided herein, the Association and each Owner,including without limitation Declarant, for so long as it owns any of the Real Property or the Annexable Area, shall have the right to enforce any or all of the provisions of the covenants, conditions and restrictions upon any other Owner or Owners. In order to enforce said provision or provisions, any appropriate judicial proceeding in law or in equity may be initiated and prosecuted by such Owner or Owners. Failure by the Association or any Owner(including Declarant)to enforce any provision of this Declaration shall in no event be deemed a waiver of the right to do so thereafter. Section 34. Enforcement Costs. If any Owner, Declarant or the Association seeks to enforce the provisions of this Declaration, the party in violation of this Declaration shall pay all reasonable expenses incurred by the party enforcing the provisions hereof, including but not limited to reasonable attorneys'fees. ARTICLE XI GENERAL PROVISIONS Section I. Severability. The provisions of this Declaration shall be deemed independent and severable, and the invalidity or partial invalidity or unenforceabibty of any provision or provisions shall not invalidate any other provisions. Section 2. Amendments. Before the close of the first sale of a Subdivision Interest in the Project to a purchaser other than Declarant, this Declaration and any amendments to it may be amended in any respect or revoked by the execution by Declarant and any Eligible Mortgage Holder of record of an instrument amending or revoking the Declaration. Before the close of the first sale of a Subdivision Interest in a second or subsequent Phase of Development in the Project to a purchaser other than Declarant, any Supplementary Declaration recorded pursuant to Section 14 below with respect to such Phase of Development may be amended in any respect or revoked by the execution of an instrument amending or revoking the Supplementary Declaration by Declarant and any Eligible Mortgage Holder of record of the property described in the Supplementary Declaration. The amending or revoking instrument shall make appropriate reference to this Declaration and its amendments and shall be acknowledged and recorded in the office of the County Recorder of the 002P3ELA 146A-3 Revised 12/28/00 (PUD) 50 County. After the close of the first sale of a Subdivision Interest in the Project to a purchaser other than Declarant, this Declaration may be amended at any time and from time to time by an instrument in writing signed by Members representing seventy-five percent (75%) or more of the voting power of each class of Members unless the Class B membership has been converted to Class A membership, in which event, seventy-five percent (755/6)of the total voting power of the Association comprised of at least seventy-five percent(75%) of the votes of Members other than Declarant shall be necessary to amend this Declaration. Such amendment shall become effective upon the recording thereof with the Office of the County Recorder; provided, however, that no change may be made to material provisions herein without the prior written consent of Eligible Mortgage Holders, all as more particularly set forth below in Section 3 below. Notwithstanding the foregoing provision or any other provision of this Declaration, the percentage of the voting power necessary to amend a specific Clause or provision shall not be less than the percentage of affirmative votes prescribed for action to be taken under that clause. Notwithstanding any provision herein to the contrary, any addition or amendment made to the Governing Documents in order to correct a technical error or for clarification purposes may be made by Declarant without membership approval. Section 3. Material Amendments. (a) In addition to the consent of the Members in accordance with Section 2above, the approval of at least fifty-one percent(51%) of the Eligible Mortgage Holders shall be required to add or amend any material provisions of the Governing Documents, which establish,provide for, govern or regulate any of the following_ (1) Voting; (2) Assessments, assessment liens or subordination of such liens; (3) Reserves for maintenance, repair and replacement for the Maintenance Property; (4) Insurance or fidelity bonds; (5) Rights to use of the Maintenance Property; (6) Responsibility for maintenance and repair of the several portions of the Project; (7) Expansion or construction of the Project or the addition, annexation or withdrawal of property to or from the Project; (8) Boundaries of any Subdivision Interest; (9) The interests in the Maintenance Property; (10) Convertibility of Subdivision Interest into Maintenance Property or of Maintenance Property into Subdivision interest; 00MELA1 4GA-3 Revised 12/28/00 (Pilo) SI (11) Leasing of Subdivision Interests; (12) Imposition of any right of first refusal or similar restriction on the right of an Owner to sell, transfer or otherwise convey his or her Subdivision Interest; (13) Any provisions which are the express benefit of Mortgage Holders, Eligible Mortgage Holders or Eligible Insurers or Guarantors. (b) An addition or amendment to the Governing Documents shall not be considered material if it is for the purpose of correcting technical errors, or for clarification only. An Eligible Mortgage Holder who receives a written request to approve additions or amendments who does not deliver or post to the requesting party a negative response within thirty (30)days shall be deemed to have approved such request. Section 4. Extension of Declaration. Each and all of these covenants, conditions and restrictions shall terminate on December 31. 2050, after which date they shall automatically be extended for successive periods of ten (10) years unless the Owners have executed and recorded at any time within six(6)months prior to December 31, 2050, or within six (6)months prior to the end of any such ten (10)year period,in the manner required for a conveyance of real property, a writing in which it is agreed that said restrictions shall terminate on December 31 2050 or at the end of any such ten(10)year period. Section 5. Attorneys Fees. In the event the Association, Declarant or any Owner shall commence litigation to enforce any of the covenants, conditions or restrictions herein contained, the prevailing party in such litigation shall be entitled to costs and expenses of the suit including reasonable attorney's fees. Section 6. Special Responsibilities of Association. In the event that the improvements to be installed by Declarant to the Maintenance Property have not been completed prior to the issuance of a Final Subdivision Public Report covering the Project, and in the further event that the Association is the obligee under a bond to secure performance by the Declarant to complete such improvements, then if such improvements have not been completed and a Notice of Completion filed within sixty (60) days after the completion date specified in the Planned Construction Statement appended to the bond, the Board shall consider and vote upon the question of whether or not to bring action to enforce the obligations under the bond. If the Association has given an extension in writing for the completion of any such improvement then the Board shall consider the vote on said question if such improvements have not been completed and a Notice of Completion filed within thirty (30) days after the expiration of the extension period. In the event that the Board determines not to take action to enforce the obligations secured by the bond, or does not vote on the question as above provided, then in either such event, upon petition signed by Members representing five percent(5%) of the total voting power of the Association, the Board shall can a special meeting of the Members of each Delegate District and then an Association meeting of the Delegates to consider the question of overriding the decision of the Board or of requiring the Board to take action on the question of enforcing the obligations secured by the bond. Said meeting of Members shall be held not less than thirty-five (35) days nor more than forty-five (45) days following receipt of the petition. At the Association meeting of the Delegates, a vote of a majority of the voting power of the Members of the Association cast by the Delegates on behalf of the Members, excluding the vote of Declarant, to take action to enforce the obligations under the bond shall be deemed to be the decision of the Association, 002P3ELA3 46A-3 Revised 12/28/00 (PUD) 52 and the Board shall thereafter implement the decision by initiating and pursuing appropriate action in the name of the Association. Section 7. Declarant and Merchant Builder Exemption. (a) Interest of Declarant. The Real Property described in Recital A of this Declaration is a portion of a larger parcel of land which Declarant is causing to be developed into a master planned community. Declarant has created a master plan for the development of the Project which includes objectives which have been formulated for the common good and preservation of property values within the community. Each Owner of a Subdivision Interest which is part of the Project acknowledges by acceptance of a deed or other conveyance therefor,whether or not it shall be so expressed in any such deed or other instrument,that Declarant has a substantial interest to be protected with regard to assuring compliance with and enforcement of, the covenants,conditions,restrictions and easements contained in this Declaration and any amendments thereto and any Supplemental Declarations recorded pursuant to this Declaration. Notwithstanding any other provisions of the this Declaration, until such time as(i)Declarant owns no Subdivision Interests within the Project or the Annexable Area,or(h)the twenty-fifth (2501)anniversary of the conveyance of the first Subdivision Interest in the Project,whichever occurs later,the following actions,before being undertaken by the Delegates,the Members or the Association, shall first be approved in writing by Declarant: (i) Amendments and Actions Reouirine Approval. Any amendment to this Declaration or action requiring the approval of Declarant pursuant to this Declaration,and any amendment or action requiring the approval of first Mortgagees pursuant to this Declaration, (the Association shall provide Declarant with all notices and other documents to which a Beneficiary is entitled pursuant to this Declaration,provided that Declarant shall be furnished such notices and other documents without making written request); (ii) Annexation. The annexation to the Project of real property other than the Annexable Area pursuant to Section14 below; (iii) Capital Improvement Assessments. The levy of a capital improvement assessment for the construction of new facilities not originally included in the Maintenance Property; (iv) Service/Maintenance Reductions. Any significant reduction of maintenance of the Maintenance Property or other services or entering into contracts for maintenance or other goods and services benefiting the Association or the Maintenance Property at contract rates which are fifteen percent(15%)or more below the reasonable cost for such maintenance, goods or services as determined by Declarant in its reasonable discretion;or (v) Architectural Review Committee Rules. Any supplement or amendment to the Architectural Review Committee Rules. 002P3ELA14GA-3 Revised 12/28/00 (PUD) 53 (b) Exemptions_ Nothing in this Declaration shall limit and no Owner,or the Association shall do anything to interfere with the right of Declarant and Merchant Builders, either directly or through their respective agents and representatives, to subdivide,resubdivide,sell,resell,rent or rerent any portion of the Project,or the right of Declarant or a Merchant Builder to complete excavation,grading, construction of Improvements or other development activities to and on any portion of the Project owned by Declarant or a Merchant Builder,as applicable;or to alter the foregoing and its construction plans and designs,or to construct such additional Improvements as Declarant or a Merchant Builder deems advisable in the course of development of the Project so long as any Subdivision Interest in the Project or any portion of the Annexable Area is owned by Declarant or a Merchant Builder- Such right shall include,but shall not be limited to,carrying on by Declarant, a Merchant Builder and their respective agents and representatives of such grading work as may be approved by applicable government agencies having jurisdiction, and erecting, constructing and maintaining on the Project such structures,signs and displays as may be reasonably necessary for the conduct of its business of completing the work and disposing of the same by sale,lease or otherwise. Any material alteration in the construction plans for any Improvement in a Phase of Development owned or developed by Declarant or a Merchant Builder as to which VA or FHA has issued a "project approval"shall require the approval of FHA,VA or both,as applicable. Each Owner,by accepting a deed to a Subdivision Interest,hereby acknowledges that any construction or installation by Declarant or a Merchant Builder may impair the view of such Owner, and hereby consents to such impairment. This Declaration shall not limit the right of Declarant or a Merchant Builder,at any time prior to acquisition of title to a Subdivision Interest by a purchaser from Declarant or a Merchant Builder, to establish on that Subdivision Interest, as the case may be, additional licenses,easements,reservations and rights-of-way to itself, to utility companies,or to others as may from time to time be reasonably necessary to the proper development and disposal of the Project and Annexable Area;provided, however,if VA and FHA has issued a"project approval"with regard to any Subdivision Interest in the Project owned or developed by Declarant or a Merchant Builder which is to be subject to any of the actions set forth herein,then FHA,VA or both shall have the right to approve any such grants as provided herein. Prospective purchasers,Declarant and Merchant Builders shall have the right to use.any and all portions of the Maintenance Property for access to the sales and leasing facilities of Declarant and Merchant Builders. Declarant and Merchant Builders may use any structure or vehicles owned,respectively,by Declarant or Merchant Builders in the Project as model home complexes,or real estate sales or leasing offices provided that such uses shall terminate when all Subdivision Interests owned by Declarant or such Merchant Builders have been sold to.Class A Members pursuant to a Public Report, at which time Declarant and Merchant Builders shall restore their respective structures to their previous appearance. All or any portion of the rights of Declarant or a Merchant Builder, as applicable, hereunder and elsewhere in this Declaration may be assigned by Declarant or such Merchant Builder, as applicable,to any successor in interest to any portion of Declaranes or Merchant Builder's interest in any portion of the Project or the Annexable Area(including,without limitation, to 002P3ELA396A-3 Revised 3 2/28/00 (PUD) 54 any Merchant Builder)by an express recorded written assignment which specifies the rights of Declarant or such Merchant Builder so assigned. Notwithstanding any other provision of this Declaration,for so long as Declarant owns any portion of the Project or the Annexable Area,the prior written approval of Declarant, as developer of the Project,will be required before any amendment to this Section 7 shall be effective. (c) Easement,Relocation. Any easements over those portions of the Maintenance Property the fee title to which has not been made subject to the Declaration shall be subject to relocation,modification or termination by Declarant in order to accommodate the final plan of development for the future Phase of Development in which such portions of the Maintenance Property are located. Such relocation, modification or termination shall be set forth in the recorded Supplemental Declaration annexing fee title to such portions of the Maintenance Property to the Declaration. Notwithstanding the foregoing,no such relocation,modification or termination shall prevent access to any Subdivision Interest. Section 8. Owners' Compliance. Each Owner, tenant or occupant of a Subdivision Interest shall comply with the provisions of this Declaration, the By-Laws, decisions and resolutions of the Association or its duly authorized representative, as lawfully amended from time to time, and failure to comply with any such provisions, decisions, or resolutions shall be grounds for an action to recover sums due,for damages,or for injunctive relief. Section 9. Notices. Any Owner who encumbers his/her Subdivision Interest shall furnish the Association the name and address of the Mortgagee, and the Association shall maintain such information in a book entitled "Trust Deeds of Subdivision Interests". The Association shall report to such Mortgagee any unpaid assessments due from the Owner of such Subdivision Interest at the same time as the Association makes demand of the Owner thereof for the payment of such assessment. Each Mortgagee shall also be entitled to timely written notification from the Association of any other default by its Owner-Trustor in the performance of such Owner's obligations under the terms and provisions of this Declaration which shall not have been cured within thirty (30) days after written notice to such Owner-Trustor by the Association specifying such default, and written notification of substantial damage to or destruction of any part of the Maintenance Property as provided for in ARTICLE VII,herein. Section 10. Examination of Books. The representative of any Mortgagee or other lender shall have the right to examine the books and records of the Association during reasonable business hours. A copy of the financial statements required under Section 23 of Article IV of this Declaration shall be mailed to each lender who requests same within the time limit prescribed therein. Section 11. Meetines, Notice and Representation. Eacb Mortgagee who has furnished the Association with an address as set out in Section 9 above shall be given notice of all meetings of the Association membership on the same basis as members and shall be permitted to designate a representative to attend all such meetings. Section 12. Cautions. The captions appearing at the commencement of the Sections hereof are descriptive only and for convenience in reference. Should there be any conflict between 002P3ELAI96A-3 Revised I2/28100 (PUD) 55 any such caption and the Section at the head of which it appears, the Section and not the caption shall control and govern in the construction of this Declaration. Section 13. Vote. of Membership_ Except as otherwise provided in the Governing Documents, if the Class B membership has been converted to Class A membership, then wherever the provisions of this Declaration,the Articles or the By-Laws call for membership approval of action to be taken by the Association, the vote or written assent of a bare majority of the total voting power of the Association, comprised of at Ieast the percentage of the voting power of members other.than Declarant prescribed for action under any such provision,shall be necessary for such approval. Section 14. Annexation of Annexable Area. (i) Annexation. Declarant and Merchant Builders may,but shall not be require to,at any time or from time to time,add to the Real Property covered by this Declaration all or any portion of the Annexable Area by recording a Supplemental Declaration with respect to the Annexable Area covered thereby. Annexable Area maybe added to the Real Property without the approval of the Owners,Delegates,or Association if the annexation is in accordance with a plan of development approved by the Department of Real Estate of the State of California and a Supplemental Declaration is recorded covering the applicable portion of the property to be annexed. Property other than that described in the preceding sentence may be annexed to the Real Property upon approval in writing of the Association,pursuant to vote or written consent of a two-thirds(2/3)majority of the voting power of its Members excluding Declarant,and the approval of Eligible Mortgage Holders as may be required under this Declaration. Upon approval, the Owner of the annexed property may file of record a Supplemental Declaration. (h) Declaration Coverage. Upon recording a Supplemental Declaration covering any portion of the Annexable Area or any other property annexing the same to the Real Property,the covenants,conditions and restrictions contained in this Declaration shall apply to such Annexable Area or other property in the same manner as if it were originally covered by this Declaration and originally constituted a portion of the Project,subject to the provisions of the applicable Supplemental Declaration. (iii) Supplemental Declaration Content. The Supplemental Declaration annexing Annexable Area or any other property to the Real Property shall contain at least the following provisions: a) Declaration Reference. A reference of this Declaration, which reference shall state the date of recordation hereof and the Instrument Number or other relevant recording data of the County Recorder's office; b) Extension of Comprehensive Plan. A statement that the provisions of this Declaration shall apply to the Annexable Area or other property as set forth therein;and 002P3ELA14GA-3 Revised 12/28/00 (PUD) 56 c) Description_ A description of the Annexable Area or any other property annexed,including any Maintenance Property. (iv) Approval of Annexations. Each Supplemental Declaration shall be signed by Declarant and by each record owner of the Annexable Area or other property being annexed. If any annexation of additional property requires the approval of the Members as herein provided,each Supplemental Declaration must be signed by the record owner of the property being annexed and by an officer of the Association,certifying that the approval of the requisite percentage of Members has been obtained. (v) Phasing;Amendments. A Supplemental Declaration may cover one (1)or more Phases of Development,as designated in such Supplemental Declaration. A Supplemental Declaration which specifies that the Annexable Area or any other property being annexed shall comprise a single Phase of Development may be amended prior to the commencement of assessments within such Annexable Area or other annexed property by an amendment to such Supplemental Declaration executed by all parties required to sign the Supplemental Declaration and thereafter recorded,which amendment(i) specifies that the Annexable Area or other annexed property shall comprise more than one (1)Phase of Development and identifies each such Phase of Development within the Annexable Area or other annexed property, and (ii) identifies which portions of the Maintenance Property,if any,described in the previously recorded Supplemental Declaration are to be included in each such designated Phase of Development. (vi) Deannexation and Amendment. (a) By Declarant. Declarant may unilaterally amend a Supplemental Declaration or delete all or a portion of a Phase of Development from coverage of this Declaration and the jurisdiction of the Association, so long as Declarant is the Owner of all of such Phase of Development (other than publicly owned property and dedicated Maintenance Property), and provided that(1)a Notice of Deletion of Territory or an amendment to the Supplemental Declaration,as applicable,is recorded in the same manner as the applicable Supplemental Declaration was recorded, (2)no Class A or Class B membership vote has been exercised with respect to any portion of such Phase of Development,(3)assessments have not yet commenced with respect to any portion of such Phase of Development,(4)there has been no close of escrow for the sale of any Subdivision Interest in such Phase of Development for which a Public Report is required, (5)the Association has not made any expenditure or incurred any obligations with respect to any portion of such Phase of Development,and (6)if such Phase of Development consists of property as to which VA or FHA has issued a "project approval"(i.e.has agreed to guarantee or insure loans secured by Mortgages on Subdivision Interests located in 00MELAI 96A-3 Revised 12/28/00 (PUD) 57 such Phase of Development),VA,FNA or both, as applicable,have approved such deannexation or amendment. (b) By Merchant Builders.Merchant Builders may amend a Supplemental Declaration or delete all or any portion of a Phase of Development from coverage of this Declaration and the jurisdiction of the Association, so long as such Merchant Builder or Declarant and such Merchant Builder together are the Owners of all of such Phase of Development(with the exception of publicly owned property and dedicated Maintenance Property)and Declarant has consented in writing to such amendment or deletion by executing the appropriate Notice of Deletion of Territory or amendment to the Supplemental Declaration,.as applicable. Section 15. Waiver of Right to JpU Trial and Agreement to Trial by Judge in Court of Competent Jurisdiction Without a Jury. All claims,causes of action, counterclaims,cross complaints and defenses in any civil action (including class actions),proceeding or hearing arising out of or relating to this Declaration,the Project,the sale of any Subdivision Interest or home to any Owner,the construction of the Project or any home or other improvements in the Project,brought by:(a)any Owner,or any person representing any Owner,against Declarant or a Merchant Builder, or their successors-in-interest; (b)any Owner,or any person representing any Owner against any party other than Declarant or Merchant Builders or their successors-in-interest,if such other party has waived its right to a jury trial;(c)Declarant or its successors-in-interest or any Person representing Declarant or its successors-in-interest against any Owner;or(d)a Merchant Builder, or its successors-in-interest or any Person representing a Merchant Builder or its successors-in- interest against any Owner(hereinafter collectively"Claims")shall be tried in a court of competent jurisdiction before a judge without a jury. This section is not intended to waive an Owner's right to a jury trial on claims,causes of action,counterclaims, cross complaints or defenses brought by or against any party other than Declarant,its successors-in-interest, employees,agents, representatives or affiliated companies in those cases where such other party has and invokes the right to a jury trial. "Claims"shall include,but are not limited to claims relating to alleged construction defects, alleged misrepresentations by Declarant,or Merchant Builders or Declaranes or Merchant Builders'alleged failure to disclose material facts to any Owner-Declarant,Merchant Builders, all Owners, and their successors-in-interest, shall be deemed to have expressly waived their constitutional right to trial by jury on any of the Claims by acquiring an interest in, or taking title to a Subdivision Interest or other real property subject to this Declaration. Section 16. Litigation. Before the Association commences an action for damages against the builder of the Project (i.e.,Declarant or Merchant Builders)based upon a claim for defects in the design or construction of the Project, the Association shall comply with all provisions of Civil Code Section 1375, as such section may be hereafter amended, supplemented or superseded. Not later than thirty (30) days prior to filing of any civil action by the Association against Declarant or other developer of the Project for alleged damage to the Maintenance Property, alleged damage to the separate interests that arises out of, or is integrally related to damage to the Maintenance Property or separate interests that the Association is obligated to maintain or repair, the Board of Directors of the Association shall provide written notice to the Owners in accordance with the provisions of Civil Code Section 1368.4,except to the extent compliance is excused pursuant to Civil Code Section 1375. 002P3ELA14GA-3 Revised 12/28/00 (PUD) 58 Section 17. Conflicting Provisions. In the case of any conflict between this Declaration and the Articles or the By-Laws, this Declaration shall control. In the event of any conflict between the Articles and the By-Laws,the Articles shall control. Section. 18. Singular-Includes Plural. Whenever the context of this Declaration requires same, the singular shall include the plural, and vice versa, and the masculine shall include the feminine and the neuter,and vice versa. All agreements and determinations lawfully made by the Association in accordance with the voting percentages established in this Declaration or in the By-Laws, shall be deemed to be binding on all Owners of Subdivision Interests,their successors and assigns. IN WITNESS WHEREOF, the undersigned, being Declarant herein, has executed this instrument the day and year first hereinabove written. PARDEE CONSTRUCTION COMPANY a California corporation By David Scoll,Senior Vice President B y Barbara Bail,Assistant Secretary STATE OF CALIFORNIA } )SS_ COUNTY OF LOS ANGELES ) On 1A2 8 2000 before me, i L. /! o A a Notary Public in and for said County and State, personally appeared David Scoll as Senior Vice President and Barbara Bail as Assistant Secretary._ _personally known to me(or proved to me on the basis of satisfactory evidence)to be the person(s)whose name(s) -ie/are subscribed to the within instrument and acknowledged to me that-heAahe/they executed the same in his/her/their authorized capacity(ies), and' that by -#ti�ltheir signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official sea]. GRADY L OM Cncrxr>lsaTon#178d164 G No tvy PWAC-C.dtcerio Signature ZQ*C"rmbph3sDocaMD4 Los Aroeies Comty 002P3ELA146A-3 Revised 12/28/00 (PUD) 59 ANNEXABLE AREA kRCEL 1 : 3CTION 11 , TOWNSHIP 6 SOUTH, RANGE 4 WEST, SAN BERNARDINO MERIDIAN IN THE OUNTY OF RIVERSIDE, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT 3EREOF. KCEPTING THEREFROM RAILROAD CANYON ROAD, AS DESCRIBED BY DEED TO THE )LINTY OF RIVERSIDE, RECORDED MAY 24 , 1949 IN BOOK 1078, PAGE 585 OF ?FILIAL RECORDS . .jSO EXCEPTING THAT PORTION DESCRIBED AS FOLLOWS : 'GINNING AT A POINT ON THE SOUTHERLY BOUNDARY OF A COUNTY ROAD AS 'SCRIBED BY DEED TO THE COUNTY OF RIVERSIDE, RECORDED MAY 24 , 1949 IN )OK 1078, PAGE 585 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, ZOM WHICH POINT THE NORTHEAST CORNER OF SAID SECTION 11 BEARS NORTH 530 )' 00" EAST, 4 , 249 .40 FEET; THENCE ALONG SAID SOUTHERLY BOUNDARY ON A 130 . 00 FOOT RADIUS CURVE LEFT (THE LONG CHORD OF WHICH BEARS SOUTH 840 00" EAST, 265 -30 FEET) 265 . 90 FEET; THENCE SOUTH 25° 20' 30" WEST, 16 .82 FEET; [ENCE NORTH 640 39' 30" WEST, 250 . 00 FEET; THENCE NORTH 25' 20' 30" EAST, 18 .08 FEET TO THE POINT OF BEGINNING. DSO EXCEPTING THAT PORTION WHICH LIES WITHIN TRACT 23848-4 RECORDED ON :CEMBER 8, 2000 AS MB 298/93-97 ,SO EXCEPTING THAT PORTION WHICH LIES WITHIN TRACT 23848-6 RECORDED ON 'CEMBER 8, 2000 AS MB 298/98-101 RCEL 2 : CTION 12, TOWNSHIP 6 SOUTH, RANGE 4 WEST, SAN BERNARDINO MERIDIAN, IN E COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL AT THEREOF. CEPTING THEREFROM LOTS 496 AND 649 OF TRACT 23848-1 RECORDED ON FEBRUARY 1991 AS MB 229/41-43 SO EXCEPTING LOTS 497 THROUGH 503 , LOT 597 AND LOTS 645 THROUGH 648 ALL TRACT 23848-3 RECORDED ON FEBRUARY 7, 1991 AS MB 229/47-50 EXHIBIT "A" 146D©-C.DOC (12/21/00) cK PAGE I OF 3 ,LSO EXCEPTING THAT PORTION WHICH LIES WITHIN TRACT 23848-4 RECORDED ON ►ECEMBER 8, 2000 AS MB 298/93-9-7 .LSO EXCEPTING THAT PORTION WHICH LIES WITHIN TRACT 23848-6 RECORDED ON ECEMBER 8, 2000 AS MB 298/98-101 EXHIBIT "A" 4rOD-c-noc 112/21/00) CH PAGE 2 OF 3 S '7 'ARCEL 3: :ECTION 7, TOWNSHIP 6 SOUTH, RANGE 3 WEST, SAN BERNARDINO MERIDIAN, IN TjjE 'OUNTY OF RIVERSIDE, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT HEREOF. i ARCEL 4 : ' F HE NORTHWEST QUARTER OF THE NORTHWEST QUARTER; AND THE WEST HALF OF THE DUTHWEST QUARTER OF THE NORTHWEST QUARTER OF SECTION 8, TOWNSHIP 6 SOUTH, kNGE 3 WEST, SAN BERNARDINO MERIDIAN, IN THE COUNTY OF RIVERSIDE, STATE ? CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT THEREOF_ r - EXHIBIT "A" ;609-c.Ooc 1]2/2ltQO) G!t PAGE 3 OF 3