Section 1. Administration of Project

The owners and each of them, together with all parties bound by this Declaration, covenant and agree that the administration of the project shall be in accordance with the provisions of this Declaration, the By-lays and such rules and regulations as may be adopted by the Board, and amendments, changes and modifications thereto as may come into effect from time to time. In the event of any inconsistency between the time of this Declaration and provisions of the By-Laws or said rules and regulations, the provisions of this Declaration shall prevail.

Section 2. Authority of Board

Prior to the organizational meeting (first meeting of owners) and thereafter until their successors are elected, the initial Board or its duly appointed successors, shall manage the affairs of the Association. The Board, as constituted from time to time, shall at all times be responsible for the day-to-day operations and management of the affairs of the Association and shall have the sole power and duty to perform and carry out the powers and duties of the Association, as set forth herein and in the By-Laws, together with the powers and duties otherwise expressly delegated to the Board by this Declaration or the By-Laws, except for action or activity expressly set forth herein or in the By-Laws or the California Corporations Code, as requiring the vote or assent of members of the Association or a given percentage thereof. Without limiting the generality of the foregoing, the Board shall have the following powers and duties:

(a) To enforce the applicable provisions of this Declaration, the By-Laws and other instruments for the management and control of the project. The Board shall have the right to adopt reasonable rules (and to impose reasonable monetary penalties for the violation thereof) and to amend the same from time to time relating to the use of the Common Area and any recreational and other facilities situated thereon, by owners and their tenants or guests and conduct of such persons with respect to automobile parking, outside storage of boats, trailers, bicycles and other objects, disposal of waste materials, drying of laundry, control of pets and other activities which, if not so regulated, might detract from appearance of the community or offend or cause inconvenience or danger to persons residing or visiting therein. Such rules may provide that the owner whose occupants leave property on the Common Area in violation of the rules, may be assessed to cover the expense incurred by the directors in removing such property and storing or disposing thereof. The directors may provide in such rules for reasonable rental charges to be made with respect to the use of any storage areas or facilities which may exist on the Common Area, provided that such charge shall, in no way, impose liability on the directors or any of the Board members for damage or loss to property so stored, it being intended that the use of any such storage area or facility be solely at the risk of the person using the same. A copy of such rules and all amendments thereto shall be mailed to each owner and a copy shall be posted in one or more places on the Common Area where the same may be conveniently inspected.

(b) To pay taxes and assessments which are or could become a lien on the Common Area or some portion thereof.

(c) To delegate its power to committees, officers or employees.

(d) To Contract for materials and/or services for the Common Area or the Association, with the term of any service contract limited to a duration of one year, terminable upon thirty (30) days notice, except with the approval of a majority of the Association members, other than Declarant.

(e) To maintain the Common Area, all improvements thereon and all utilities thereunder, except those maintained by public utility companies, in good clean, attractive and sanitary order and repair.

(f) To operate all recreational equipment and facilities located within the Common Area.

(g) To repaint exterior surfaces of all buildings situated on the properties as such repairing is required, in order to preserve the attractiveness of the community. Painting of exterior surfaces shall be deemed to include front doors, shutters, window trim, pot shelves, masonry, exterior walls, underneath side of roof overhangs and garage doors.

(h) To maintain the portion of the project not occupied by the units, in good, clean, attractive and sanitary order and repair.

(i) To maintain, repair and paint the roofs of all buildings situated on the property.

(j) To pay premiums, taxes and other assessments against the Common Area.

(k) To meet the costs of any liability insurance and fire insurance of the Common Area, fidelity bonds, Board of Directors error and omissions insurance, out-of-pocket expenses of the Board relating to the operation of the Association, legal and accounting fees and including, without limitation, fees of any manager hereinbefore provided and a reasonable reserve for contingencies with respect to the Common Area.

(l) The Association shall obtain and maintain comprehensive public liability insurance insuring the Association, any manager, the Declarant and the owners and occupants of condominiums, and their respective family members, guests, invitees and the agents and employees of each, against any liability incident to the ownership or use of the Common Area and including, if obtainable, a cross-liability or Severability of interest endorsement insuring each insured against liability to each other insured. The limits of such insurance shall not be less than $500,000.00 covering all claims for death, personal injury and property damage arising out of a single occurrence. Such insurance shall include coverage against water damage liability, liability for non-owned and hired automobiles, liability for property of others and any other liability or risk customarily covered with respect to projects similar in construction, location and use. The Association shall also obtain and maintain a master or blanket policy of fire insurance for the full insurable value of all of the improvements within the project. The form, consent and term of the policy and its and its endorsements and the issuing company, must be satisfactory to all institutional mortgages. If more than one institutional mortgages has a loan of record against the project, or any part of it, the policy and endorsements shall meet the maximum standards of the various institutional mortgages represented in the project. 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. Except as provided herein, no owner can separately insure his unit or any part of it against loss by fire or other casualty covered by any insurance carrier under this provision, and diminution in insurance proceeds otherwise payable pursuant to the following paragraph dealing with payment of insurance proceeds to a trustee that result from the existence of such other insurance will be chargeable to the owner who acquired other insurance, and the owner will be liable to the Association to the extent of any such diminution. An owner can insure his personal property against loss. In addition, any improvements made by an owner to the real property within his unit may be separately insured by the owner, but the insurance is to be limited to the type and nature of coverage commonly known as tenant's improvements. All such insurance that is individually carried must contain a waiver of subrogation rights by the carrier as to other owners, the Association and Declarant.All insurance proceeds payable under the foregoing paragraphs, and subject to the rights of the mortgagees, may be paid to a trustee, to be held and expended for the benefit of the owners, mortgagees and others, as their respective interests shall appear. Said trustee shall be a commercial bank in the jurisdiction where the project is located, that agrees in writing to accept such trust. If repair or reconstruction is authorized, the Board shall have the duty to contract for such work as provided for in this Declaration.The Board may and, if required by any mortgage, shall purchase and maintain demolition insurance in adequate amounts to cover demolition in case of total or partial destruction and a decision not to rebuild, and a blanket policy of floor insurance. The Board also shall purchase and maintain worker's compensation insurance to the extent that it is required by law, for all employees of the project. The Board may also purchase and maintain fidelity bonds or insurance (which shall be in an amount not less than 150% of each year's estimated annual operating expenses and reserves and shall contain an endorsement of coverage of any person who may serve without compensation) sufficient to meet the requirements of any mortgagee. The Board shall purchase and maintain such insurance on personal property owned by the Association, and any other insurance that it deems necessary or that is required by any mortgagee.An owner may carry whatever personal liability and property damage liability insurance with respect to his condominium that he desires. However, any such policy shall include a waiver of subrogation clause acceptable to the Board and to any mortgagee.The Board is appointed attorney-in-fact by each owner to negotiate and agree on the value and extent of any loss under any policy carried pursuant to the foregoing paragraphs. The Board 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. Any mortgagee has the option to apply insurance proceeds payable on account of a condominium in reduction of the obligation secured by the mortgage or such mortgagee.

(m) To enter on any privately owned lot or unit where necessary in connection with construction, maintenance or repair for the benefit of the Common Area or the owners in common.

(n) To send to each member of the Association, written notice of regular and special meetings. Except in emergency situations, at least ten (10) days notice of any meeting shall be provided. The notice shall specify the date, time and place of the meeting and in the case of a special meeting, the nature of the business to be undertaken.

(o) To prepare or cause to be prepared a financial statement (including a balance sheet and income and expense statement) of the affairs of the Association, as follows: (I) as of the last day of the month closest in time to the six (6) months following close of escrow for the sale of the first unit by Declarant to an owner. Said financial statement shall reflect the financial condition of the Association as of said date and shall summarize the financial transactions in which the Association was involved during the period between the close of the first sale and the date of the financial statement. The financial statement shall include a schedule of assessments received or receivable, itemized by unit and shall include the name of the person or entity assessed. A copy of said financial statement shall be distributed personally by mail to each of the members of the Association and upon written request, to all first mortgagees, within sixty (60) days after the date of the financial statement; (ii) as of the last day of each fiscal year of the Association: said financial statement shall reflect the financial condition of the Association as of said date and shall summarize the financial transactions in which the Association was involved during the period between the close of the first sale of a unit or the last of such financial statements and the date of the current financial statement. Said financial statement shall include an external audit by an independent public accountant for each fiscal year in which the gross income to the Association exceeds $75,000.00, and a copy of the financial statement shall be distributed personally or by mail to each member of the Association and, upon written request, to all first mortgagees within ninety (90) days following the end of each fiscal year; (iii) to cause a pro forma operating statement (budget) for the Association to be prepared for the second and each succeeding fiscal year of the Association, a copy of which shall be distributed personally or by mail to each of the members of the Association not less than sixty (60) days prior to the beginning of the fiscal year to which the budget relates.

(p) To establish and collect regular assessments to defray expenses attributable to ownership, use and operation of the Common Area and facilities with said assessments to be levied against each owner, including Declarant.

(q) To establish and collect special assessments for capital improvements or other purposes on the same basis as regular assessments.

(r) To file liens against unit owners because of non-payment of assessments duly levied and to foreclose said liens.

(s) To receive complaints regarding violations of this Declaration, the By-Laws or other instruments for the management and control of the Association; to hold hearings to determine whether or not to discipline members of the Association who violate said management documents; to suspend the use privileges and voting rights of members who violate said management documents after hearing on the alleged violation has been held pursuant to the By-Laws and to impose reasonable monetary penalties.

(t) To acquire and hold for the benefit of the unit owners, tangible and intangible personal property and to dispose of same by sale or otherwise.

(u) To bond any members of the management body which participates in the management of the affairs of the Association.

(v) Any professional management body selected by Declarant or by the initial Board prior to the organization meeting, shall be employed to mange only until the next annual owners meeting after the organizational meeting, at which time the continuance of the same or the selection of another body or agent shall be determined by a majority vote of the Board, other than Declarant. Neither Declarant, nor its agent, nor the Board shall enter into any contract which binds the Association for a period in excess of one year and which is terminable upon thirty (30) days' notice, renewable for successive one-year periods, unless said contract is approved by a majority of the Association members, with the following exceptions: (I) a management contract, the terms of which have been approved by the FHA or VA; (ii) a contract with a public utility company if the rates charges for materials or services are regulated by the Public Utilities Commission, provided that the term of the contract shall not exceed the shortest them for which the supplier will contract at regulated rates; and (iii) prepaid casualty and/or liability insurance policies of not to exceed three (3) years' duration, provided that the policy permits for short-rate cancellation by the insured.

(w) The Board shall carry worker's compensation insurance covering all persons employed by it in the performance of its responsibilities under this Declaration and may obtain fidelity bonds for such of its employees as it may deem advisable.

(x) With respect to each contract made by the Board for repainting of exterior surfaces of building(s) and car storage spaces and each contract for work and/or materials related to the maintenance, repair, rebuilding or replacement of any building, structure or other improvement situated on the Common Area in which the amount to be paid by the Board exceeds $500.00, the Board shall secure at least three (3) bids from responsible contractors and shall accept the lowest responsible bid so obtained. If the amount of the contract exceeds $1,000.00, the Board shall require the contractor to furnish a completion bond assuring completion of the work and payment of all labor and materials bills for which a lien on the Common Area or any residential unit, could be claimed. The Board shall require from each contractor which it engages, satisfactory evidence that adequate worker's compensation and liability insurance is carried with respect to employees and activities of such contractor. In cases where a completion bond is not required, the Board shall require labor and material releases to be furnished by the contractor prior to making payment to same, unless the Board deems suck requirements to be impractical or unnecessary to afford protection against liens.

(y) Only with the written assent of a majority of the voting power of the Association residing in members other than the Declarant: (1) to incur aggregate expenditures for capital improvements to the Common Area in any fiscal year in excess of five (5%) of the budgeted gross expenses of the Association of that fiscal year; (2) sell, during any fiscal year, property of the Association having an aggregate fair market value greater than five (5%) of the budgeted gross expenditures of the Association of that fiscal year; (3) pay compensation to members of the Board or to officers of the Association performed in the conduct of Association business, provided that the Board may cause a member or officer to be reimbursed for expenses incurred in carrying on the business of the Association.