Section 4.01 Number and Qualification. The affairs of the Association shall be governed and managed by a Board of Directors composed of five (5) Persons , each of whom, except for those appointed and serving as first Directors, must either be a Unit Owner or an agent of Grantor for so long as Grantor owns a Condominium in the Project. The authorized number of Directors may be changed by a duly adopted amendment to the By-Laws. Directors shall not receive any salary or compensation for their services as Directors unless such compensation is approved by the vote or written consent of Members representing at least a majority of both the Class A and Class B voting power; provided, however, that (1) nothing herein contained shall be construed to preclude any Director from serving the Association in some other capacity and receiving compensation therefore, and (2) any Director may be reimbursed for his actual expenses incurred in the performance of his duties.

Section 4.02 Powers and Duties. The Board of Directors has the powers and duties necessary for the administration of the affairs of the Association and may do all such acts and things as are not by law or by these By-Laws directed to be exercised and done by the Members. The Board of Directors shall not enter into any contract for a term in excess of one (1) year, without the vote or written consent of the Members representing at least a majority of the Class A and Class B voting power. except for (1) any contract of a minimum term with a public utility company regulated by the Public Utilities Commission (such as Southern California Edison Company) which requires a term in excess of one (1) year, (2) a management contract the terms of which have been approved by the Veterans Administration or the Federal Housing Administration, and (3) prepaid casualty or liability insurance policies of not to exceed three years duration, provided that the policies permit short term cancellation by the Association.

Section 4.03 Special Powers and Duties. Without prejudice to such foregoing general powers and duties and such power and duties as are set forth in the Declaration, the Board of Directors is vested with, and responsible for, the following powers and duties.

• The power and duty to select, appoint, and remove all officers, agents and employees of the Association, to prescribe such powers and duties for them as may be consistent with law, with the Articles of Incorporation, the Declaration and these By-Laws to fix their compensation and to require from them security for faithful service when deemed advisable by the Board.
• The power and duty to conduct, manage and control the affairs and business of the Association, and to make and enforce such rules and regulations therefor consistent with law, with the Articles of Incorporation, the Declaration and these By-taws, as the Board may deem necessary or advisable.
• The power but not the duty to change the principal office for the transaction of the business of the Association from one location to another within the County of Orange, as provided in Article I hereof, to designate any place within said County for the holding of any annual or special meeting or meetings of Members consistent with the provisions of Article III, Section 3.02 hereof; and to adopt and use a corporate seal and to alter the form of such seal from time to time, as the Board, in its sole judgment, may deem best provided that such seal shall at all times comply with the provisions of law.
• With the approval of Members representing at least three fourths (3/4ths) of the voting power of the Association residing in each class of members and with the consent of the first Mortgagees, if any, of the approving Members, the power but not the duty to borrow money and to incur indebtedness for the purposes of the Association, and to cause to be executed and delivered therefor, in the Association's name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidences of debt and securities therefor.
• The power and duty to fix and levy from time to time Annual Assessments, Special Assessments, and Reconstruction Assessments upon Members, as provided in the Declaration, to fix and levy from time to time in any fiscal year Capital Improvement Assessments applicable to that year only for capital improvements; to determine and fix the due date for the payment of such assessments, and the date upon which the same shall become delinquent; provided, however, that such assessments shall be fixed and levied only to provide for the payment of the Common Expenses of the Association and of taxes and assessments upon real or personal property owned, leased, controlled or occupied by the Association, or for the payment of expense for labor rendered or materials or supplies used and consumed, or equipment and appliances furnished for the maintenance, improvement or development of such property or for the payment of any and all obligations in relation thereto, or in performing or causing to be performed any of the purposes of the Association for the general benefit and welfare of its Members, in accordance with the provisions of the Declaration. 'The Board of Directors is hereby authorized to incur any and all such expenditures for any of the foregoing purposes and to provide, or cause to be provided, adequate reserves for replacements as it shall deem to be necessary or advisable in the interest of the Association or welfare of its Members. The funds collected by the Board of Directors from the Members, attributable for replacement reserves, for maintenance costs which cannot normally be expected to occur on an annual basis and for capital improvements, shall at all times be held in trust for the Members and shall not be commingled with other assessments collected from the Members. Disbursements from such trust reserve fund shall be made only in accordance with the provisions of the Declaration. Such Annual Assessments, Reconstruction Assessments, Special Assessments and Capital Improvement Assessments shall be fixed in accordance with the provisions of the Declaration. Should any Member fail to pay such assessments before delinquency, the Board of Directors in its discretion is authorized to enforce the payment of such delinquent assessments as provided in the Declaration.
• The power and duty to enforce the provisions of the Declaration, these By-Laws or other agreements of the Association.
• The power and duty to contract for and pay for, as reasonably necessary, fire, casualty, blanket liability, malicious mischief, vandalism, errors and omissions, liquor liability and other insurance, insuring the Members, the Association, the Board of Directors and other interested parties, in accordance with the provisions of the Declaration, covering and protecting against such damages or injuries as the Board deems advisable (which may include without limitation, medical expenses of persons injured on the Common Areas).
• The power and duty to contract for and pay maintenance, legal. accounting, gardening, common utilities, materials and supplies, services and other Common Expenses relating to the Common Areas, and relating to the Units only to the extent not separately metered or charged, and to employ personnel necessary for the operation of the Project, including legal and accounting services, and to contract for and pay for Improvements on the Common Areas.
• The power but not the duty to delegate its powers according to law, and subject to the approval of the Member, to adopt these By-Law.
• The power but not the duty to grant: easements where necessary for utility and other purposes over the Common Areas for the benefit of the Members of the Association.
• The power and duty to adopt such Rules and Regulations as the Board may deem necessary for the management of the Project, which Rules and Regulations shall become effective and binding after (1) they are adopted by a majority of the Board at a meeting called for that purpose, or by the written consent of such number of Directors attached to a copy of the Rules and Regulations of the Association, and (2) they are posted in a conspicuous place in the Common Area. Such Rules and Regulations may concern, without limitation, use Common Areas; signs; collection and disposal of refuse; minimum standards of property maintenance consistent with the Declaration and the procedures of the Architectural Committee; and any other matter within the jurisdiction of the Association as provided in the Declaration, provided, however, that such Rules and Regulations shall be enforceable only to the extent that they are consistent with the Declaration, the Articles of Incorporation and these By-Laws, and the Rules and Regulations may not be used to amend any of said documents.
• The power and duty to keep, or cause to be kept, a complete record of all acts and corporate affairs of the Association and to present a statement thereof to the Members at he annual meeting of the Members and at any occur time that such statement is requested by at least ten percent (10%) of the Members who are entitled to vote.
• The power but not the duty to appoint a Membership Committee composed of at least one (1) Director and at least one (1) Association Member at large. The Membership Committee shall be responsible for contacting all purchasers of Condominiums in the Project as soon as any transfer of title to a condominium is discovered. The Membership Committee shall further attempt to establish initial contact with all Members who are delinquent in the payment of any assessments or other charges due the Association.
• The power but not the duty to sell property of the Association, provided, however, that the prior vote or written approval of a majority of the voting power of both Class A and Class B Members and the first Mortgagees, if any, of the approving Members must be obtained to sell during any fiscal year any 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.

Section 4.04 Management Agent. The Board of Directors may engage for the Association on a professional management agent at a compensation established by the Board to perform such duties and services as the Board shall authorize. Such agreement, and any other contract provided for services by Grantor, must provide for termination by either: party for cause upon no more than thirty (30) days• written notice, and without cause nor payment of a termination fee, upon no more than ninety (90) days prior written notice .

Section 4.05 Election and Term of Office.

• At the first annual meeting of the Members, new Directors shall be elected by secret written ballot by the Members as provided in these By-Laws, and all positions on the Board of Directors shall be filled at that election. In the event that an annual meeting is not held, or the Board is not elected thereat, the Board my be elected at any special meeting of the Members held for that purpose. Each Director shall hold office until his successor has been elected or until his death, resignation, removal or judicial adjudication of mental incompetence. The term of office of each Director elected at the first annual meeting and the term of office of each Director elected to fill a vacancy created by the expiration of the term of office of the respective past Director shall be one (1) year. The term of office of each Director elected to fill a vacancy create by the resignation, death or removal of his predecessor shall be the balance of the unserved term of his predecessor. Any person serving as a Director may be re-elected, and there shall be no limitation on the number of terms during which he may serve. Each Member may accumulate his votes for the election and removal of Directors as provided in this Article IV. At any election of the Board, each Member may give one or more candidates for Director a number of votes equal to the share of the voting power as set forth in the Declaration,multiplied by number of Directors to be elected.
• Notwithstanding the foregoing, whenever (1) notice is given for an election of Directors of the Board and (2) upon such date Grantor is either (i) entitled to exercise a Class B vote, or (ii) entitled to exercise a majority of the voting power of the Association, and (3) upon such date the Members other than Grantor do not have a sufficient percent of the voting power of the Association to elect a number of Directors representing at least twenty percent (20%) (though not less than one (1) of the entire Board through the foregoing cumulative voting procedure, then such notice shall also provide for the following special election procedure. Election of Directors shall be first apportioned to the Members other than Grantor until the aggregate number of Directors on the Board elected by such Members other than Grantor represents at least twenty percent (20%) (though not less than one (1) of the entire Board. Any resident Unit Owner shall be an eligible candidate for the special election upon receipt by the Secretary of a Declaration of Candidacy, signed by the candidate, at any time prior to the election. Such election shall be by secret ballot unless a majority of the Members other than the Grantor determine otherwise. The person or persons receiving the greatest number of votes cast by the Members either than Grantor shall be elected to the Board in a co-equal capacity with all other Directors. The remaining Members on the Board shall be elected through the customary cumulative voting procedure outlined above.

Section 4.06 Books, Audit. The Board of Directors shall cause to be maintained a full set of books and records showing the financial condition of the affairs of the Association in a manner consistent with generally accepted accounting principles. A pro forma operating statement (budget ) for each fiscal year shall be distributed to the Members not less than sixty (60) days before the beginning of the fiscal year. A balance sheet and an operating (income) statement for the Association shall be prepared as of an accounting date which shall be the last day of the month closest in time to six (6) months following the date of closing of the first sale of a Unit to a Member , and shall be distributed to each Member (and to any institutional first Mortgagee of a Condominium in the Project upon request) within sixty (60) days of such accounting date. Such operating statement shall include a schedule of assessments received or receivable itemized by Unit number and by the name of the person or entity assessed. Thereafter, the Board shall prepare and distribute to each member (and to any institutional first Mortgagee of a Condominium in the Project upon request), within ninety (90) days of the last day of the Association's fiscal year, an annual report as provided in the Declaration. All financial statements contained in any such annual report for any fiscal year in which the gross income of the Association exceeds $75,000 shall be audited by an independent public accountant. In any fiscal year where such independent audit is not required, the annual report shall include the certification of an authorized officer of the Association that such statements were prepared without audit from the books and records of the Association.

All books, records and papers of the Association shall be made available for inspection and copying by any Member or his duly appointed representative at the principal office of the Association or at such other place within the Project as the Board may prescribe. The Board shall establish reasonable rules with respect to (1) notice to be given to the custodian of the records by the Member desiring to make the inspection, (2) hours and days of the week when such an inspection may be made and (3) payment of the cost of reproducing copies of documents requested by a Member. Every Director shall have the absolute right at any reasonable time to inspect all books, records and documents of the Association, and the physical properties owned or controlled by the Association. The right of the inspection by a Director shall include the right to make extracts and copies of documents.

Section 4.07 Vacancies. Vacancies in the Board of Directors caused by any reason other than the removal of a Director by a vote of the Member of the Association shall be filled by vote of the majority of the remaining Directors, even though they may constitute less than a quorum and each person elected shall be a Director until a successor is elected at the next annual meeting of the Members of the Association, or at a special meeting of the Members called for that purpose. A vacancy or vacancies shall be deed to exist in case of death, resignation, removal or judicial adjudication of mental incompetence of any Director, or in case the Members fail to elect the full number of authorized Directors at any meeting at which such election is to take p!ace.

Section 4.08 Removal of Directors. At any regular or special meeting of the Members duly called, any one or more of the Directors may be removed with or without cause by a majority vote of the Members of the Association, and a successor may then and there be elected to fill the vacancy thus created. Any Director whose removal has been proposed by the Members shall be given an opportunity to be heard at the meeting. If more than one Director is to be removed at any one time, each Member may accumulate his votes and vote for or against such removal of one or more of the Directors, exercising a number of votes equal to his share of the voting power as set forth in the Declaration, multiplied by the number of Directors sought to be removed. Where the entire Board of Directors is not removed at one time, no Director shall be removed if the number of votes cast against his removal or not consenting in writing to such removal, would be sufficient to elect such Director if voted cumulatively at an election at which the same total number of votes were cast (or, if such action is taken by written ballot, all votes entitled to be voted were cast) and the entire number of Directors authorized at the time of the director's most recent election were then being elected. If any or all of the Directors are so removed at a meeting, new Directors may be elected at the same meeting. Notwithstanding the foregoing, any Director who has been elected to office solely by the votes of Members other than Grantor pursuant to Section 4.05 of this Article IV may be removed from office prior to the expiration of his term of office only by the vote of at least a simple majority of the voting power residing in Members other than Grantor.

Section 4.09 Organization Meeting of Board. The first regular meeting of a newly elected Board of Directors (“organization meeting”) Shall be held within ten (10) days of election of the Board, at such place as shall be fixed and announced by the Directors at the meeting at which such Directors were elected, for the purpose of organization, election of officers and the transaction of other business. No notice shall be necessary to the newly elected Directors in order legally to constitute such meeting; provided that (1) a majority of the whole Board shall be present when the time and place are announced at the membership meeting and (2) the meeting is held on the same day and at the same place as the meeting of the Members at which the newly constituted Board was elected.

Section 4.10 Regular Meetings of Board. Regular meetings of the Board ot Directors shall be open to all Members, provided that Members who are not Directors may not participate in any deliberation or discussion at such regular meetings unless expressly so authorized by a vote of a majority of a quorum of the Board of Directors. Regular meetings may be held at such time and place within the project as shall be determined, from time to time, by a resolution adopted by a majority of a quorum of the Directors, provided, however, that such meetings shall be held no less frequently than quarterly. Notice of the time and place of regular meetings of the Board of Directors shall be given to each Director, personally or by mail, telephone or telegraph, at least four (4) days prior to the date named for such meeting and shall be posted at a prominent place or places within the Common Areas.

Section 4.11 Special Meetinqs of Board. Special meetings of the Board Diirecton shall be open to all Members, provided that Member who are not Directors may not participate in any deliberation or discussion at such special meetings, unless expressly so authorized by a vote of a majority of a, quorum of the Board of Directors. Special meetings may be called by the President or by any two (2) Directors. At least seventy-two (72) hours notice shall be given to each Director, personally or by mail, telephone or telegraph, which notice shall state the time, place (as herinabove provided) and the purpose of the meeting; and shall be posted a.t a prominent place or places within the Common Areas. If served by mail, each such notice shall be sent, postage prepaid, to the address of each Director reflected on the records of the Association, and shall be deemed given, if not actually received earlier, at 5:00 o'clock p.m. on the second day after it is deposited i.n a regular depository of the United States mail as provided herein. Whenever any Director has been absent from any special meeting of the Board, an entry in the Minutes to the effect that notice has be en duly given shall be conclusive and incontrovertible evidence that due notice of such meeting was given to such Director, as require by law and as provided herein.

Section 4.12 Waiver of Notice. Before or at any meeting of the Board of Directors, any Director may, in writing, waive personal notice of such meeting and such waiver shall be deemed equivalent to the giving of such notice to such Director. Attendance by a Director at any meeting of the Board shall be a waiver by him of person notice of the time and place thereof. If all the Directors are present at any meeting of the Board, no notice to Directors shall be required and any business may be transacted at such meeting. The transactions of any meeting of the Board, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if (1) a quorum be present, (2) notice to the Members of such meeting was posted all provided in Section 4.10 of this Article IV, and ( 3) either before or after the meeting, each of the Directors not present signs a written waiver of notice, a consent to holding such meeting, or an approval of the Minutes thereof, All such waivers, consents and approvals shall be filed with the records of the Association or made a part of the Minutes of the meeting.

Section 4.13 Action Without Meeting. Until the Close of Escrow for the sale of the first Condominium in the Project to a purchaser pursuant to a Final Subdivision Public Report, the Directors shall have the right to take any action in the absence of a meeting which they could take at a meeting by obtaining the written consent of all the Directors. Any action so approved shall have the same effect as though taken at a Meeting of the Directors, and such consents shall be filed with the records of the Association. Following the Close of Escrow for the sale of the first Condominium, all actions by the Board shall be taken at a duly called and noticed meeting.

Section 4.14 Quorum and Adjournment. Except as otherwise expressly provided herein, at all meetings of the Board of Directors, a majority of the Directors shall constitute a quorum for the transaction of business, and the acts of the majority of the Directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors. If at any meeting of the Board of Directors, there is less than a quorum present, the majority of those present may adjourn the meeting from time to time. At any such reconvened meeting, any business which might have been transacted at the meeting as originally called may be transacted without further notice if a quorum is present.

The Board of Directors may, with the approval of a majority of a quorum of the Directors, adjourn a meeting and reconvene in executive session to discuss and vote upon personnel matters, litigation in which the Association is or may become involved and orders of business of a similar nature. The nature of any and all business to be considered in executive session shall first be announce in open session.

Section 4.15 Fidelity Bonds. The Board of Directors by require that all officers an employees of the Association handling or responsible for Association funds shall furnish adequate fidelity bonds. The premiums on such bonds shall be paid by the Association.

Section 4.16 Committees. The Board of Directors, by resolution, may from time to time designate such committees as it shall desire, and may establish the purposes and powers of each such committee created. The resolution designating and establishing the committee shall provide for the appointment of its members, as well as a chairman, shall state the purposes of the committee, and shall provide for reports, termination, and other administrative matters as deemed appropriate by the Board.

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