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HomeMy WebLinkAboutCT 96-01; Carlsbad Ranch Hotel Timeshare Resort; Tentative Map (CT) (4)DECLARATION OF COVENANTS. CONDITIONS, MID RESTRICTIONS FOR CONDOMINIUM INTERESTS IN GRAND PACIFIC PALISADES RESORT TABLE OF CONTENTS RECITALS 1 ARTICLE 1 3 DEFINITIONS 3 1.01 "Accessible Facilities/Amenities Units" 3 1.02 "Annexable Property" 3 1.03 "Annexable Property #1" (or Phase II Property) . . 3 1.04 "Annexable Property #2" (or Phase II Property) . . 3 1.05 "Annexation" 4 1.06 "Annexed Property" 4 1.07 "Annual Fixed Week/Floating Unit Vacation Ownership" 4 1.08 "Annual Floating Week/Floating Unit Vacation Ownership" 4 1.09 "Annual Owner" (or "Annual Vacation Ownership Owner") 5 1.10 "Annual Ownership" (or "Annual Vacation Ownership") 5 1.11 "Annual Vacation Ownership" 5 1.12 "Annual Vacation Ownership Owner" . 5 1.13 "Articles" 5 1.14 "Assessments" 5 1.15 "Assigned Unit" 5 1.16 "Assigned Unit Type" 5 1.17 "Assigned Use Week" 6 1.18 "Assigned Vacation Unit" (or "Assigned Unit") . . 6 1.19 "Assigned Vacation Unit Type" (or "Assigned Unit Type") 6 1.20 "Association" 6 1.21 "Association General Use Real Property" 6 1.22 "Association Personal Property" 7 1.23 "Association Property" 7 1.24 "Association Real Property" 7 1.25 "Association Restricted Use Real Property" .... 7 1.26 "Association Rules and Regulations" 7 1.27 "Basic Expenses" 7 1.28 "Biennial Fixed Week/Floating Unit Vacation Ownership" 8 1.29 "Biennial Floating Week/Floating Unit Vacation Ownership" 9 1.30 "Biennial Owner" (or "Biennial Vacation Ownership Owner") 9 1.31 "Biennial Ownership" (or "Biennial Vacation Ownership") 9 1.32 "Biennial Vacation Ownership" 9 1.33 "Biennial Vacation Ownership owner" 10 1.34 "Board" 10 1.35 "Bonus Time/Rental Use" 10 gra11-03\docs\ccrs.01 (August 31, 1998) 1.36 "Budget" 10 1.37 "Bylaws" 10 1.38 "Calendar" 10 1.39 "Check-in Day" 11 1.40 "Check-in Time" and "Check-out Time" 11 1.41 "Common Area" 11 1.42 "Common Furnishings" 11 1.43 "Condominium" 11 1.44 "Condominium Interest" 11 1.45 "Condominium Interest Owner" 11 1.46 "Condominium Ownership Operation" 11 1.47 "Condominium Plan" 11 1.48 "Condominium Unit" 12 1.49 "Declarant" 12 1.50 "Declaration" 12 1.51 "Declarant Annual Vacation Ownership" 12 1.52 "Declarant Biennial Vacation Ownership" 12 1.53 "Declaration Condominium Interest" ... 12 1.54 "Declarant Vacation Ownership" 12 1.55 "Designated Vacation Unit" 13 1.56 "Development" 13 1.57 "Distributable Net Proceeds" 13 1.58 "Even Use Year" 13 1.59 "Exchange Program" 13 1.60 "Exchange User" 13 1.61 "Facilities/Amenities Condominium" 14 1.62 "Facilities/Amenities Condominium Owner" . . . . 14 1.63 "Facilities/Amenities Condominium Owner's Personal Prop-erty" 14 1.64 "Facilities/Amenities Condominiums Operation" . . 15 1.65 "Facilities/Amenities Condominiums Owner(s) Rules and Regulations" 15 1.66 "Facilities/Amenities Unit" 15 1.67 "Facilities/Amenities Unit Designation Symbol" . . 16 1.68 "Fiscal Year" 16 1.69 "Fixed Week" 16 1.70 "Floating Unit" 16 1.71 "Floating Week" 16 1.72 "High Season" 16 1.73 "Hotel Owner(s) Use Rights Declaration" 16 1.74 "Improvements" 16 1.75 "Land" 17 1.76 "Maintenance Week" 17 1.77 "Managing Agent" 17 1.78 "Member" 17 1.79 Membership" 17 1.80 "Module" 17 1.81 "Module I" 17 1.82 "Module Ii" 17 1.83 "Module III" 17 1.84 "Mortgage" 17 gra11-03\docs\ccrs.01 . . (August 31, 1998) 11 1 1.85 "Mortgagee" 17 1.86 "Night" 17 1.87 "Nondesignated Vacation Units" 17 1.88 "Ocean View Unit" 18 1.89 Ocean View Vacation Unit" (or "Ocean View Unit") . 18 1.90 "Odd Use Year" 18 1.91 "Original Deed" 18 1.92 "Owner" 18 1.93 "Ownership" 18 1.94 "Park View Unit" 18 1.95 "Park View Vacation Unit" (or "Park View Unit") . 18 1.96 "Permitted User" 18 1.97 "Phase" (or "Module") 19 1.98 "Phase I" (or "Module I") 19 1.99 "Phase II" (or "Module II") 19 1.100 "Phase III" (or "Module III") 19 1.101 "Phase I Property" 19 1.102 "Phase II Property" (or "Annexable Property #1") 19 1.103 "Phase III Property" (or "Annexable Property #2") 19 1.104 "Prime Summer Season" 19 1.105 "Project" 19 1.106 "Project Basic Expenses" 20 1.107 "Project Diagram" 20 1.108 "Project Special Expenses" 20 1.109 "Pro Rata Share" :..: . ... 20 1.110 "Purchase Agreement" 20 1.111 "Real Property" 20 1.112 "Rules and Regulations" 20 1.113 "Special Expenses" 21 1.114 "Sole Basic Expenses" 21 1.115 "Sole Special Expenses" 21 1.116 "Unit" 21 1.117 "Unit Type" 21 1.118 "Use Program" 21 1.119 "Use Week" 21 1.120 "Use Year" 21 1.121 "Vacation Condominium" 21 1.122 "Vacation Ownership" (or "Ownership") ...... 22 1.123 "Vacation Ownership Operation" 22 1.124 "Vacation Ownership Owner" (or "Owner") 22 1.125 "Vacation Ownership Use Program" (or "Use Program") 22 1.126 "Vacation Unit" 23 1.127 "Vacation Unit Designation Symbol" 23 1.128 "Vacation Unit Type" (or "Unit Type") 23 1.129 "Week Day" . . . 23 1.130 "Weekend" 23 ARTICLE 2 23 gra11-03\docs\ccrs.01 . . . (August 31, 1998) 111 VARIOUS RIGHTS, OBLIGATIONS, AND RESTRICTIONS RELATED TO OWNERSHIP, USE AND POSSESSION, MAINTENANCE, TAXES, EXPENSES, MORTGAGING, AND LEASING AND RENTING 23 2.01. Right of Vacation Ownership Owners to Use Vacation Units, Related Rights and Duties, and Prohibitions ... 23 a. Exclusive Right to Use a Vacation Unit and Common Furnishings Therein 23 b. Types of Vacation Ownerships 24 c. Nonexclusive Right to Use Accessible Facilities/ Amenities Units 24 d. Nonexclusive Right to Go Over and Upon Association General Use Property to Access Vacation Unit and Facilities/Amen-ities Units 25 e. "Day-Use" 25 f. Should an Owner Be Prevented from Using and Possessing a Vacation Unit 25 g. Upkeep of Property. 25 h. No Use or Occupancy Permitted if Owner is in Breach of Obligations 26 i. Limited Period of Use and Occupancy 26 j. Use by Others; Owner Still Responsible. ... 26 k. Failure to Vacate 26 1. Maintenance Week. 28 2.02 Right of Facilities/Amenities Condominium Owner to Use Facilities/Amenities Unit and Association General Use Property 28 2.03 Right to Lease/Rent Vacation Units 28 a. Designated Vacation Unites 28 1. By Owner other than Declarant. .... 28 2. By Association—"Bonus Time/Rental Use" 28 b. Nondesignated Vacation Units - Declarant's Right to Rent 30 c. All Lease or Rental Agreements to Be in Writing 30 2.04 Right of Facilities/Amenities Condominium Owner to Lease/ Rent Owner's Facilities/Amenities Unit. . . 30 2.05 Overall Responsibility for Respective Operations within Project 30 a. Responsibility for the Project, Association Personal Property, and Vacation Ownership Operation 30 b. Responsibility for the Facilities/Amenities Condomi-niums Operation 31 2.06 Responsibility for Maintenance 31 a. Association Property. 31 b. Facilities/Amenities Condominium Owner's Personal Property in Facilities/Amenities gra11-03\docs\ccrs.01 (August 31, 1998) IV Units. . . 31 c. Common Furnishings in Vacation Units. ... 31 d. Right of Association to Perform Maintenance upon a Facilities/Amenities Condominium Owner's Nonperformance 32 e. Arbitration of Disputes 32 2.07 Allocation of Association Expenses and Sharing of Certain Expenses with Hotel Project 32 a. General Theory and Basis for Allocation of Condo-minium Owners Association Expenses and Assessments 32 1. Sole Basic and Special Expenses. . 32 2. Project Basic and Special Expenses 33 b. Board to Determine Expense Type 33 c. Arbitration of Disputes 33 d. Sharing of Certain Expenses With Hotel. ... 34 2.08 Allocation of Distributable Net Proceeds Among Owners 34 a. General 34 b. Allocation Determination 34 c. "Fair and Equitable Basis" 35 d. Payment Subject to Prior Claims 35 2.09 Owner's Obligations to Pay Taxes 35 2.10 Right to Mortgage Condominium Interest and First Mortgagee Safety 35 2.11 Right to Enter Other Condominium Units 35 2.12 Easements for Encroachments. 36 2.13 Easements and Certain Other Rights Reserved by Declarant to Which Owners Take Subject 36 a. Easements Reserved by Declarant with Respect to Development 36 b. Owner's Acknowledgment of Easement Rights 38 c. Indemnification of Owners. 38 2.14 Easements in Favor of Hotel Owners and Users. . . 38 2.15 Nonseverability of Components of Condominium upon Transfer of a Condominium Interest 38 2.16 Subordination of Tenancy-in-Common Attributes to Declaration and Prohibition Against Partition of Condominium Units 39 2.17 Common Furnishings and Association Property. ... 39 2.18 Limitations on Partition of Common Area 39 2.19 Specific Use Restrictions. 40 a. Use of Vacation Units 40 b. No Nuisances. 40 c. Signs 41 d. No Advertising Materials. 41 e. No Animals. 41 f. Garbage and Refuse Disposal 41 g. Antennae; External Fixtures 41 gra11-03\docs\ccrs.01 (August 31, 1998) II* h. No clotheslines 41 i. No Car Maintenance. 41 2.20 Indemnification of Associations and Owners. ... 41 ARTICLE 3 42 PROTECTION OF THE REAL PROPERTY, ASSOCIATION PERSONAL PROPERTY, COMMON FURNISHINGS, AND FACILITIES/AMENITIES CONDOMINIUM OWNERS' PERSONAL PROPERTY FROM LIENS 42 3.01 Real Property, Association Personal Property, Common Furnishings, and Any Facilities/Amenities Condominium Owner's Personal Property to Be Maintained Free of Liens 42 3.02 Association to Defend Certain Actions. 43 3.03 Payment of Lien. 43 3.04 Reimbursement to Association 44 ARTICLE 4 44 THE ASSOCIATION 44 4.01 Association. 44 4.02 Membership in Association 44 4.03 Transfer of Membership 44 4.04 Classes of Membership. 45 a. With Respect to Matters Pertaining to Only the Project and/or the Association Personal Property 45 1. Class "A" Membership 45 2. Class "B" Membership 45 3. Class "C" Membership. 45 4. Class "D" Membership. 46 b. With Respect to Matters Pertaining to Only the Vacation Ownership Operation 46 4.05 Member Voting: Standard Quorum and Vote Required 46 a. With Respect to Matters Pertaining to Only the Project and/or Association Personal Property. 46 1. Where Class "C" Membership Has Not Yet Been Converted to Class "A" and/or Class "B" Membership 47 2. Where Class "C" Membership Has Been Converted to Class "A" and/or Class "B" Membership 47 b. With Respect to Matters Pertaining to Only the Vacation Ownership Operation 48 1. Where Class "C" Membership Has Not Yet Been Converted to Class "A" and/or Class "B" Membership 48 2. Where Class "C" Membership Has Been Converted to Class "A" and/or Class "B" Membership 48 c. Each Member to Vote 49 gral1-03\docs\ccrs.01 (August 31, 1998) VI 4.06 Procedural Rules 49 ARTICLE 5 49 ASSOCIATION'S RIGHTS, POWERS, AND DUTIES; AND MANAGING AGENT 49 5.01 General Rights, Powers, and Duties 49 a. Administration and Services 49 b. Conveyance of Association Property to Association 49 c. Power of the Board of Directors 49 d. Vesting of Rights, Powers, and Duties. ... 49 5.02 Specific Rights, Powers, and Duties of the Association and Services to the Owners 50 a. Delegate Authority 50 b. Enter Contracts 50 c. Borrow Money. 50 d. Establish Rules and Regulations 50 e. Right to Enter. 50 f. Maintain and Repair Association Property, Common Area and Common Furnishings 51 g. Pay Taxes and Assessments 51 h. Provide and Pay for Utilities 51 i. Enforce Declaration, Bylaws, and Rules and Regulations 51 j. Levy and Collect Assessments, Pay Expenses, and Change Fiscal Year 52 k. Obtain and Pay Cost of Legal and Accounting Services 52 1. Obtain and Pay Cost of Insurance 52 m. Maintain Bank Accounts 52 n. Prepare and Distribute Financial Information . 52 1. Prepare Budget 52 2. Prepare Annual Report 53 0. Provide Minutes and Agenda 53 p. Prepare Statement of Assessment Enforcement Policy 54 q. Issue Statements of Status 54 r. Compile Register 54 s. Do Other Necessary or Proper Acts 54 5.03 Right, Power, and Duty to Engage Managing Agent . 55 a. Delegation of Authority 55 b. Term 55 c. Termination for Cause 55 d. Resignation 55 e. Enumeration of Powers and Duties 55 f. Compensation 55 g. Record Maintenance 56 h. Reports 56 1. Fidelity Bonding 56 j. Errors and Omissions Insurance 56 gra11-03\docs\ccrs.01 . . (August 31. 1998) VI1 .1 k. Right of Entry 56 1. Employment of Subagents 56 m. Authority to Administer Vacation Ownership Use Program 56 n. Limitation on Powers of the Managing Agent . . 56 5.04 Limited Liability 57 ARTICLE 6 58 ASSESSMENTS AND PERSONAL CHARGES 58 6.01 Creation of Personal Obligations; Purpose of Assessments; Theory and Basis for Allocation of Association Expenses and Assessments; and Apportionment of Assessments Among Vacation Ownership Owners 58 a. Creation of Personal Obligations 58 b. Purpose of Assessments 58 c. Theory and Basis for Allocation of Association Expenses and Assessments. 59 d. Apportionment of Assessments Among Vacation Owner-ship Owners 59 6.02 Regular Annual Assessments 60 a. Purpose of Regular Annual Assessments .... 60 b. Preparation and Adoption of Final Budget and Determination of Aggregate Regular Annual Assessments Determination 60 c. Allocation and Levy of Regular Annual Assessments among Owners 60 d. Notice of Assessment, Due Date(s), Delinquency Date(s), and Method of Payment 60 e. Commencement of Accrual of Regular Annual Assessments ..... 61 f. Excess Collections 61 g. Monetary Limitations on Regular Annual Assessments 61 1. With Respect to Assessments Pertaining to Only the Project and/or Association Personal Property: 62 2. With Respect to Assessments Pertaining to Only the Vacation Ownership Operation . . 62 6.03 Special Assessments . 62 a. Purpose 62 b. How Special Assessments Imposed 63 1. With Respect to Assessments Pertaining to Only the Project and/or Association Personal Property 63 2. With Respect to Assessments Pertaining to Only the Vacation Ownership Operation . . 64 3. Exceptions 64 c. Method of Levy 64 1. Where Levy Is Against All Condominium gra11-03\docs\ccrs.01 (August 31, 1998) Vlll Interest Owners or all Vacation Ownership Owners 65 2. Where Individual Special Assessment Is In- volved 65 d. Notice of Assessment, Due Date(s), Delinquency Date(s), and Method of Payment 65 6.04 Capital Needs Assessments 66 a. Purpose 66 b. How Capital Needs Assessments Imposed .... 66 c. Method of Levy 66 d. Notice of Assessment, Due Date(s), Delinquency Date(s), and Method of Payment 67 6.05 Personal Charges 67 a. Purpose 67 b. Payment and Delinquency 68 ARTICLE 7 68 ENFORCEMENT OF RESTRICTIONS 68 7.01 General Provisions 68 a. General Power and Right to Bring Actions ... 68 b. Rights and Remedies Cumulative 69 c. Association May Delegate 69 d. Limited Forfeiture Rights 69 7.02 Certain Specific Enforcement Powers and Rights . . 69 a. Suspension of Rights and Privileges for Failure to Pay Assessments or Other Charges 69 1. General. 70 2. Required Procedures. 71 3. Limited Exception When Violation Is for Failure to Pay Assessment or Other Charges 71 c. Continuing Lien to Secure Payment of Assessments 71 1. Lien Creation 71 2. Procedure for Enforcement of Lien. ... 72 (b) Recording of Notice of Default and Lien 72 (c) Lien Foreclosure 73 (d) Proceeds from Lien Foreclosure 74 (e) Title of Foreclosure Purchaser 74 (f) Release of Lien 74 3. Lien Priority and First Mortgages .... 75 ARTICLE 8 75 ASSOCIATION INSURANCE 75 8.01 Required Policies 75 a. Fire and Extended Coverage on All Condominium Owners Association Property and Common gra11-03\docs\ccrs.01 (August 31, 1998) IX Furnishings 75 b. Liability Insurance 75 c. Fidelity Bond 76 d. Association Officer and Director Insurance . . 76 e. Workmen's Compensation Insurance 76 f. Loss of Income Insurance. 76 g. Any Other Insurance 77 8.02 Insurance Procedures 77 a. General 77 b. Notice of Cancellation 77 c. Annual Review of Policies 77 d. Payment of Premiums 77 8.03 Fire and Extended Coverage on All Facilities/Amenities Condominium Owners1 Personal Property 77 ARTICLE 9 77 DAMAGE TO OR DESTRUCTION OF PROJECT 77 9.01 When Duty to Repair and Restore Project Is Man- datory 77 9.02 When Duty to Repair and Restore Project Is to Be Determined by Owners 78 a. If Owners and Mortgagees Determine to Repair and Restore the Project, Association Personal Property, and Common Furnishings 78 b. If Owners and Mortgagees Determine Not to Repair and Restore the Project, Association Personal Property, and the Common Furnishings 79 9.03 Damage or Destruction of Association Personal Property Only 79 9.04 Damage or Destruction of Common Furnishings Only . 79 9.05 Distribution of Distributable Net Proceeds from Insurance Proceeds 79 ARTICLE 10 80 CONDEMNATION 80 10.01 Definitions 80 10.02 Determination of Total Taking to Be Made by Owners 80 10.03 Board to Represent Owners in Proceedings 81 10.04 Repair on Partial Taking 81 10.05 Distribution of Distributable Net Proceeds from Condemnation Award 81 ARTICLE 11 82 SALE OF ALL ASSOCIATION PROPERTY AND ALL COMMON FURNISHINGS 82 11.01 When Condominium Interest Owners Shall Have Been Deemed to Have Determined to Sell All Association Property and All Common Furnishings. ....... 82 gra11-03\docs\ccrs.01 (August 31. 1998) X a. On Destruction or Condemnation of Project ... 82 b. By Vote After December 31, 2068 82 11.02 Procedures Relating to Sale of All Association Property All Common Furnishings 82 a. General Power and Authority Granted to Association 83 b. Grant of Special Power of Attorney 83 c. Property to Be Offered for Sale 83 d. Property to Be Appraised 84 e. Sale Price Factors 84 f. Petition for Sale 84 g. Distribution of Net Proceeds from Sale .... 84 h. Arbitration of Disputes 84 ARTICLE 12 85 SPECIAL PROVISIONS FOR ENFORCEMENT OF DECLARANT'S OBLIGATIONS 85 12.01 General 85 12.02 Periodic Statements Required from Declarant ... 85 12.03 Required Board Discussion and Vote 86 12.04 Board Action to Enforce Declarant's Obligations . 86 12.05 Sole Director Action to Enforce Declarant's Obligations 86 12.06 Arbitration with Respect to Question of Declarant's Fulfillment of Obligation(s) . 87 ARTICLE 13 87 PROJECT PHASING AND ANNEXATION PROCEDURE 87 13.01 Declarant's Right to Phase, Vary Phasing, or Refrain from Phasing 87 13.02 Annexation in Connection with Phasing 88 a. Declarant's Right to Annex. 88 b. How Annexation Accomplished 88 13.03 Possible Impact and Effects of Subsequent Development 88 13.04 Possible Discontinuation of Construction 88 a. General 88 b. Special Power Of Attorney Granted to Association to Change Legal Description. . . 89 c. Amendment 90 d. Time Limit(s) for Annexation(s) 90 1. Annexation of Annexable Property #1. .90 2. Annexation of Annexable Property #2. .90 ARTICLE 14 90 DESIGNATION OF VACATION UNITS TO USE PROGRAM 90 14.01 Designated Vacation Units 90 14.02 Nondesignated Units 91 14.03 Initially Designated Units. 91 14.04 Subsequent Designation of Nondesignated Units. . 91 14.05 Procedure for Designating Nondesignated Units. . 91 14.06 Reservation Safeguards for Owners of Annual and gra11-03\docs\ccrs.01 (August 31, 1998) XI Biennial Floating Week/Floating Unit Vacation Ownerships. 92 ARTICLE 15 93 SPECIAL PROVISIONS REQUIRED BY CITY OF CARLSBAD 93 15.01 General Enforcement by the City 93 15.02 Failure of Association to Maintain Common Area Lots and Easements. 93 15.03 Special Assessments Levied by the City. .... 93 15.04 Notices of Public Hearing from City 94 ARTICLE 16 95 16.01 Amendment of Declaration 95 a. Where Class "C" Membership Has Not Yet Been Converted to Class "A" and/or Class "B" Membership. 95 b. Where Class "C" Membership Has Been Converted to Class "A" and/or Class "B" Membership .... 95 c. Other Conditions and Terms 95 d. Protection of Beneficiaries of First Deeds of Trust 95 e. Protection of Declarant 97 16.02 Term and Earlier Termination of Declaration ... 97 a. Term of Declaration 97 b. Earlier Termination of Declaration 97 c. Survival of Certain Provisions and Association 97 16.03 Notices 97 16.04 Notification of Sale of Owner's Vacation Ownership 98 16.05 Indemnification of Directors, Officers, Employees, and Other Agents 98 16.06 Severability and the Rule Against Perpetuities . . 98 16.07 Interpretation 98 16.08 No Waiver 98 16.09 Personal Covenant 98 16.10 Arbitration of Disputes 99 16.11 Attorneys' Fees And Costs 99 16.12 Successors 99 EXHIBIT "A": Calender of Use Weeks 101 EXHIBIT "B": Project Diagram for Grand Pacific Palisades. . 102 EXHIBIT "C": Description of Annexable Property #1 103 EXHIBIT "D": Description of Annexable Property #2 104 EXHIBIT "E": Declaration of Annexation 105 gra!1-03\docs\ccrs.01 (August 31, 1998) XI1 Biennial Floating Week/Floating Unit Vacation Ownerships. 92 ARTICLE 15 93 SPECIAL PROVISIONS REQUIRED BY CITY OF CARLSBAD 93 15.01 General Enforcement by the City 93 15.02 Failure of Association to Maintain Common Area Lots and Easements. 93 15.03 Special Assessments Levied by the City. .... 93 15.04 Notices of Public Hearing from City 94 ARTICLE 16 95 16.01 Amendment of Declaration 95 a. Where Class "C" Membership Has Not Yet Been Converted to Class "A" and/or Class "B" Membership. 95 b. Where Class "C" Membership Has Been Converted to Class "A" and/or Class "B" Membership .... 95 c. Other Conditions and Terms 95 d. Protection of Beneficiaries of First Deeds of Trust 95 e. Protection of Declarant 97 16.02 Term and Earlier Termination of Declaration ... 97 a. Term of Declaration 97 b. Earlier Termination of Declaration ...... 97 c. Survival of Certain Provisions and Association 97 16.03 Notices . 97 16.04 Notification of Sale of Owner's Vacation Ownership 98 16.05 Indemnification of Directors, Officers, Employees, and Other Agents 98 16.06 Severability and the Rule Against Perpetuities . . 98 16.07 Interpretation 98 16.08 No Waiver 98 16.09 Personal Covenant 98 16.10 Arbitration of Disputes 99 16.11 Attorneys' Fees And Costs 99 16.12 Successors. 99 EXHIBIT "A": Calender of Use Weeks 101 EXHIBIT "B": Project Diagram for Grand Pacific Palisades. . 102 EXHIBIT "C": Description of Annexable Property #1 103 EXHIBIT "D": Description of Annexable Property #2 104 EXHIBIT "E": Declaration of Annexation 105 gral1-03\docs\ccrs.01 (August 31, 1998)Xll DECLARATION OF COVENANTS. CONDITIONS. AND RESTRICTIONS FOR CONDOMINIUM INTERESTS IN GRAND PACIFIC PALISADES RESORT This DECLARATION OF COVENANTS, CONDITIONS, AND RESTRICTIONS FOR CONDOMINIUM INTERESTS IN GRAND PACIFIC PALISADES RESORT (the "Declaration") , is made on , 1998, by Grand Pacific Palisades LLC, a California limited liability company (the "Declarant") , with reference to the following facts, and is as follows: RECITALS A. Declarant is the owner of certain real property located at , Carlsbad, California, legally described as: Lot 2 of Carlsbad Ranch Hotel and Timeshare Resort C.T. 96-01, according to Map No. in the City of Carlsbad, County of San Diego, State of California, filed in the Office of the County Recorder of San Diego County on , 1998 (the "Land") . B. Declarant has constructed, or is in the process of constructing, upon the Land a four (4)-building condominium project consisting of: (i) 161 Vacation Condominiums, in which Declarant will offer for sale, and sell, Vacation Ownerships (time-share estates); and (ii) 14 Facilities/Amenities Condominiums which will be retained by Declarant (collectively known as "the Grand Pacific Palisades Resort" or sometimes as simply the "Project"). C. The Declarant presently intends to develop the Project in three (3) Phases (also known as Modules). Phase I is presently intended to consist of the construction upon the Land of 71 Vacation Condominiums and the 14 Facilities/Amenities Condominiums. Phase II is presently intended to consist of the construction upon the Land of 72 Vacation Condominiums. Phase III is presently intended to consist of the construction upon the Property of the final 18 Vacation Condominiums upon the Land. The location upon the Land of each such Phase is as delineated on the Condominium Plan. D. The foregoing Project, together with the hotel as constructed, or to be constructed, on a separate lot adjoining the Land, is part of the larger resort development known as "Grand Pacific Palisades Resort and Hotel." E. By this Declaration, Declarant intends to establish a common scheme and general plan of restrictions for the benefit of all Condominium Interest Owners in the Project relating to: (i) the administration, management, and operation of the Vacation Ownership gral1-03\docs\ccrs.01 (August 31, 1998) 1 Operation, including the use, occupancy, enjoyment, clean-up, and renting of the Vacation Units; (ii) the purchase, ownership, holding, conveyance, mortgaging, and encumbering of each Vacation Ownership; (iii) the administration, management, and operation of the Facilities/Amenities Condominiums Operation, including the use, occupancy, enjoyment, clean-up, and leasing of the Facilities/ Amenities Units; (iv) the purchase, ownership, holding, conveyance, mortgaging, and encumbering of each Facilities/Amenities Condominium, and (v) the use, maintenance, upkeep, repair, restoration, and replacement of the Association Property. (Each of the terms used in the foregoing Recital paragraphs, with capitalized first letters, is defined in Article 1 below.) NOW, THEREFORE, in furtherance of the foregoing intent, Declarant hereby declares that: (i) the Vacation Ownership Operation shall be administered, managed and operated, (ii) each Vacation Unit shall be used, occupied, enjoyed, kept clean, and rented, (iii) the Common Furnishings shall be used, maintained, kept clean, repaired, restored, and/or replaced, (iv) each Vacation Ownership interest in a Vacation Condominium shall be purchased, owned, held, conveyed, mortgaged and encumbered, (v) the Facilities/Amenities Condominium Ownership Operation shall be administered, managed, and operated, (vi) each Facilities/Amenities Unit shall be used, occupied, enjoyed, and kept clean, (vii) each Facilities/Amenities Condominium Interest shall be purchased, owned, held, conveyed, mortgaged and encumbered, and (viii) the Association Property shall be used, maintained, kept clean, repaired, restored, and/or replaced, all as subject to each of the covenants, conditions, and restrictions set forth in this Declaration, as this Declaration may from time to time be amended, and any Rules and Regulations which may be made pursuant to this Declaration, all of which covenants, conditions, restrictions, and rules and regulations are hereby declared to be in furtherance of a common scheme and general plan established for the purpose of enhancing the value, desirability, and enjoyment of the Real Property, each Vacation Condominium, each Facilities/Amenities Condominium, each Vacation Unit, each Facilities/Amenities Unit, each Vacation Ownership in a Vacation Condominium, and each and every interest therein. All such covenants, conditions, restrictions, and rules and regulations are, in accordance with Section 1468 of the California Civil Code, made for the direct benefit of the Real Property, including each Facilities/Amenities Condominium, each Vacation Condominium, each Facilities/Amenities Unit, each Vacation Unit, each Vacation Ownership in a Vacation Condominium, and each and every interest therein, and shall constitute covenants running with the land and equitable servitudes and liens, and shall be binding upon, and shall be for the benefit of, the Real Property, including each Vacation Condominium, each Facilities/Amenities Condominium, each Vacation Condominium, each Vacation Unit, each Facilities/Amenities Unit, each Vacation gra11-03\docs\ccrs.01 (August 31, 1998) 2 Ownership in a Vacation Condominium, and each and every interest therein, and shall further be binding upon, and shall inure to the benefit of, and be enforceable by, the Association, the Declarant, and all Condominium Interest Owners, including without limitation, any and all heirs, executors, administrators, successors, and assigns, including lessees and renters, of any such parties. Each Condominium Interest Owner, by virtue such Owner's accepting a con- veyance of, or by otherwise owning a Vacation Ownership, including Declarant as to all Declarant Condominium Interests, shall be deemed to have covenanted and agreed to faithfully perform each and every obligation required to be performed by such Condominium Interest Owner under this Declaration, the Bylaws, and any Rules and Regulations made pursuant to this Declaration, including without limitation, the payment to the foregoing Association of any and all Assessments imposed hereunder and other moneys owing to it; and each such Condominium Interest Owner further shall be deemed to have covenanted and agreed that such Association shall have all of the rights, powers, duties, and remedies set forth in this Declaration. (Each of the foregoing terms, with capitalized first letters, is defined in Article 1 below.) ARTICLE 1 DEFINITIONS In addition to other definitions provided for in this Declara- tion, the following terms, as used herein, shall have the following meanings: 1.01 "Accessible Facilities/Amenities Units" means the following, and only the following, Facilities/Amenities Units: the Lobby and Front Desk Unit (excluding the marketing desk in lobby), the Office Behind Front Desk Unit , the Gym Unit, and the Adult Pool, Spa and Pool Deck Unit, each as delineated on the Condominium Plan, and each of which, each Vacation Ownership Owner has the nonexclusive right to access, use for its respective intended purpose, and/or visit, pursuant to the terms of such Owner's deed, this Declaration, and the Rules and Regulations. 1.02 "Annexable Property" means either Annexable Property #1 or Annexable Property #2, or both of them. 1.03 "Annexable Property #1" (or Phase II Property) means that portion of the Land owned by Declarant, legally described on Exhibit "C" attached hereto and made a part hereof, which Declarant intends to annex to the Phase I Property as part of Phase II of the Development. 1.04 "Annexable Property #2" (or Phase II Property) means that portion of the Land owned by Declarant, legally described on Exhibit "D" attached hereto and made a part hereof, which Declarant gral1-03\docs\ccrs.01 (August 31, 1998) 3 intends to annex to the combined Phase I and Phase II Property as part of Phase III of the Development. 1.05 "Annexation" means the process of annexing Annexable Property #1 to the Phase I Property, and Annexable Property #2 to the combined Phase I and Phase II Properties, imposing this Declaration thereon, constructing vacation resort and related Improvements thereon, conveying such Annexable Property to the Association, and offering for sale and selling Vacation Ownerships therein. 1.06 "Annexed Property" means Annexable Property #1 or Annexable Property #2, after either of such Annexable Properties has been annexed to the Phase I, or the combined Phase I and Phase II, Real Property. 1.07 "Annual Fixed Week/Floating Unit Vacation Ownership" means a "time-share estate" as defined in California Business and Professions Code Section 11003.5, being here comprised basically of: One; an undivided I/51th fee title interest as a tenant-in- common in a Vacation Condominium; Two; subject to the terms and conditions of the Declaration and the Rules and Regulations, the exclusive right to use and occupy an Ocean View Vacation Unit or a Park View Vacation Unit of a particular Vacation Unit Type, and the Common Furnishings in such Vacation Unit, together with; (i) the nonexclusive right to access, use for their respective intended purposes, and/or visit, the Lobby and Front Desk Unit (excluding the marketing desk in lobby), the Office Behind Front Desk Unit, the Gym Unit, and the Adult Pool, Spa and Pool Deck Unit (called the "Accessible Facilities/Amenities Units"), each as delineated on the Condominium Plan, together with (ii) the nonexclusive right to go to, from, over, upon, under, across and through (as may be applicable) the Association General Use Real Property, as such is delineated on the Condominium Plan, in order to have ingress and egress to and from the foregoing Vacation Unit and each such Accessible Facilities/Amenities Unit, all for a Fixed Week in each Use Year; with Declarant's reserving, however, from One and Two above, for Declarant, certain easements and other rights; and Three; membership for each Vacation Ownership Owner thereof in the Association. 1.08 "Annual Floating Week/Floating Unit Vacation Ownership" means a "time-share estate" as defined in California Business and Professions Code Section 11003.5, being here comprised basically of One: an undivided I/51th fee title interest as a tenant-in-common in a Vacation Condominium; Two: subject to the terms and conditions of the Declaration and the Rules and Regulations, the exclusive right to use and occupy an Ocean View Vacation Unit or a Park View Vacation Unit of a particular Vacation Unit Type, and the Common Furnishings in such Vacation Unit, together with: (i) the nonexclusive right to access, use for their respective intended gra11-03\docs\ccrs.01 (August 31. 1998) 4 purposes, and/or visit, the Lobby and Front Desk Unit (excluding the marketing desk in lobby), the Office Behind Front Desk Unit, the Gym Unit, and the Adult Pool, Spa and Pool Deck Unit (called the "Accessible Facilities/Amenities Units") , each as delineated on the Condominium Plan, together with (ii) the nonexclusive right to go to, from, over, upon, under, across and through (as may be applicable) the Association General Use Real Property, as such is delineated on the Condominium Plan, in order to in order to have ingress and egress to and from the foregoing Vacation Unit and each such Facilities/ Amenities Unit, all for a Use Week, during either High Season or Prime Summer Season (as may be the case) in each Use Year, upon the condition that, before the occurrence of any such use and/or occupancy, such Vacation Unit and Use Week shall have first been reserved by the Vacation Ownership Owner in accordance with the applicable provisions of this Declaration and the Association Rules and Regulations; with Declarant's reserving, however, from One and Two above, for Declarant, certain easements and other rights; and Three; membership for each Vacation Ownership Owner thereof in the Association. 1.09 "Annual Owner" for "Annual Vacation Ownership Owner") means a Vacation Ownership Owner of either an Annual Fixed Week/Floating Unit Vacation Ownership, or an Annual Floating Week/Floating Unit Vacation Ownership. 1.10 "Annual Ownership" for "Annual Vacation Ownership") means either an Annual Fixed Week/Floating Unit Vacation Ownership, or an Annual Floating Week/Floating Unit Vacation Ownership. 1.11 "Annual Vacation Ownership" means this same as "Annual Ownership" as defined in Section 1.10. 1.12 "Annual Vacation Ownership Owner" means the same as "Annual Owner" as defined in Section 1.09. 1.13 i*Articles" means the Articles of Incorporation of the Association, which Articles have been, or shall be, filed in the office of the California Secretary of State, as same may be amended from time to time. 1.14 "Assessments" means, collectively, the following types of financial charges which may be imposed upon the Owners by the Association, as described in Article 6 hereof: Regular Annual Assessments, Special Assessments, and Capital Needs Assessments. 1.15 "Assigned Unit" means the same as "Assigned Vacation Unit" as defined in Section 1.18. 1.16 "Assigned Unit Type" means the same as "Assigned Vacation Unit Type" as defined in Section 1.19. gra11-03\docs\ccrs.01 (August 31, 1998) 1.17 "Assigned Use Week" means that particular Use Week to which a Vacation Ownership Owner is entitled to occupancy of an Assigned Vacation Unit as either: (i) specified in such Owner's Original Deed (or subsequent deed, if a successive Owner), in the case of an Owner of an Annual or Biennial Fixed Week/Floating Unit Vacation Ownership, or (ii) assigned to such Owner by the Association (upon a "first-reserved, first-served basis") in accordance with the applicable provisions of the Association Rules and Regulations, in the case of an Owner of an Annual or Biennial Floating Week/Floating Unit Vacation Ownership. 1.18 "Assigned Vacation Unit" (or "Assigned Unit") means a particular Vacation Unit, of an Assigned Vacation Unit Type, to which a Vacation Ownership Owner (or his Permitted User) is entitled to exclusive use and occupancy for a Use Week, which has been assigned to such Owner by the Association (upon a "first- reserved, first-served basis") in accordance with the applicable provisions of the Association Rules and Regulations. 1.19 "Assigned Vacation Unit Type" (or "Assigned Unit Type") means that particular Vacation Unit Type to which a Vacation Ownership Owner is entitled to use and occupy during such Owner's Use Week as is specified in such respective Owner's Original Deed (or subsequent deed, if a successor Owner). 1.20 "Association" means the GRAND PACIFIC PALISADES OWNERS ASSOCIATION, INC., a California nonprofit mutual benefit corp- oration, the members of which shall be all Condominium Interest Owners. 1.21 "Association General Use Real Property" means that certain Association Real Property, delineated as such on the Condominium Plan, to, from, over, upon, under, across, and through (as may be applicable) which: (i) each Vacation Ownership Owner and his or her family members and guests may go in order to access such Owner's Assigned Vacation Unit, and to access, use for their respective intended purposes, and/or visit, each Accessible Facilities/Amenities Unit as delineated on the Condominium Plan, during such Owner's respective Assigned Use Week, or during any time such Owner is a renter of a Vacation Unit, or is otherwise a guest occupying a Vacation Unit; (ii) each such Vacation Ownership Owner, or each invitee of Declarant, or prospective purchaser of a Vacation Ownership from Declarant, who simply visits the Project, but does not occupy a Vacation Unit, may go in order to have limited access to simply visit the Project; and (iii) each Facilities/Amenities Condominium Owner may go in order to access the particular Facilities/Amenities Unit owned by such Owner, and to access, conduct business in, use for their respective intended purposes, and/or visit, the other Facilities/Amenities Units. gra!1-03\docs\ccrs.01 (August 31, 1998) 1.22 "Association Personal Property" means all property owned, leased or otherwise held for use by the Association, whether upon or outside of the Land, which is not Association Real Property, other than Common Furnishings. 1.23 "Association Property" means all Association Real Property and all Association Personal Property. 1.24 "Association Real Property" means that portion of the Real Property which has been deeded by Declarant to the Association. 1.25 "Association Restricted Use Real Property" means that certain Association Real Property, delineated as such on the Condominium Plan, which is not Association General Use Real Property. 1.26 "Association Rules and Regulations" means the Rules and Regulations adopted, promulgated, and modified from time to time by the Board pursuant to Section 5.02 d. of this Declaration relating to the use and/or occupancy by Vacation Ownership Owners and Permitted Users of the Vacation Units and the Common Furnishings, and/or the operation of the Vacation Ownership Operation, and the use by all Condominium Interest Owners and Permitted Users of the Association General Use Property. 1.27 "Basic Expenses" means either the estimated aggregate amount of costs and expenses, as set forth in the Budget, to be incurred by the Association in connection with its day-to-day administration and management of the Project, the Association Personal Property, and the Vacation Ownership Operation projected for a particular forthcoming Fiscal Year, or the actual aggregate amount of such costs and expenses incurred by such Association as a result of such activities during a particular Fiscal Year, including, without limitation, the costs and expenses required: (i) to maintain, repair, keep clean, repaint, refinish, redecorate, restore, and/or replace, as may be applicable, all Association Real Property, all Association Personal Property, Common Area, and Common Furnishings; (ii) to provide for adequate reserves which will insure that funds are on hand to pay the cost of needed repairs to, and restoration and replacement of, such Association Real Property, Association Personal Property, Common Area, and Common Furnishings; (iii) to administer and operate the Vacation Ownership Use Program; (iv) to pay any exchange company membership fee, (v) to pay the fee(s) charged by Declarant as consideration for Declarant's authorizing the Condominium Interest Owners to park their vehicles in the Garage and Ramps Unit; (vi) to obtain and pay the costs of all utility services to the Vacation Units, the Facilities/Amenities Units and/or to the Association Real Property, to the extent that such costs are not separately billed to the Facilities/Amenities Condominiums Owner(s) or to the Vacation gra11-03\docs\ccrs.01 (August 31, 1998) 7 Ownership Owners, as the case may be; (vii) to pay, as agent of the Condominium Interest Owners, and not as principal, any and all taxes and assessments (real and personal) assessed against, affecting, and/or relating to a Vacation Condominium Vacation Ownership, Facilities/Amenities Condominium, Association Real Property, Association Personal Property, Common Furnishings, and/or any interest therein, to the extent that such taxes are not separately assessed to the Vacation Ownership Owners, or the Facilities/Amenities Condominiums Owner(s), as the case may be; (viii) to pay for any and all assessments and/or other similar governmental charges levied on or attributable to occupancy of the Vacation Units, including, without limitation, any hotel or bed tax or any governmental charge levied in lieu of such hotel or bed tax; (x) to pay for any insurance required by this Declaration or otherwise purchased by the Association; (xi) to compensate for any unpaid Assessment, including the costs of billing and collection, levied by the Association during the previous Fiscal Year against any Condominium Interest Owner who has defaulted in the payment thereof, to the extent that the same is determined by the Board to be uncollectible; (xii) for wages, accounting and legal fees, cleaning fees, repair charges, and other expenses related to administering, managing, and operating the Project, Association Personal Property, and the Vacation Ownership Operation; (xiii) to account for the possibility that some Assessments may not be paid on a current basis; (xiv) to provide for the payment of the fee due the Managing Agent; and (xv) to provide for any other services to the Condominium Interest Owners and/or do any other acts not incon- sistent with this Declaration in connection with the administra- tion, management, and operation of the Project, Association Personal Property, and the Vacation Ownership Operation. 1.28 "Biennial Fixed Week/Floating Unit Vacation Ownership" means a "time-share estate" as defined California Business and Professions Code Section 11003.5, being here comprised basically of: One: an undivided one-half (1/2) fee title interest as a tenant-in-common in an undivided I/51th fee title interest in a Vacation Condominium; Two; subject to the terms and conditions of this Declaration and the Rules and Regulations, the exclusive right to use and occupy an Ocean View Vacation Unit or a Park View Vacation Unit of a particular Vacation Unit Type, and the Common Furnishings in such Vacation Unit, together with: (i) the nonexclusive right to access, use for their respective intended purposes, and/or visit, the Lobby and Front Desk Unit (excluding the marketing desk in lobby), the Office Behind Front Desk Unit, the Gym Unit, and the Adult Pool, Spa and Pool Deck Unit (called the "Accessible Facilities/Amenities Units"), each as delineated on the Condominium Plan, together with (ii) the nonexclusive right to go to, from, over, upon, under, across and through (as may be applicable) the Association General Use Real Property, as such is delineated on the Condominium Plan, in order to in order to have ingress and egress to and from the foregoing Vacation Unit and each gral1-03\docs\ccrs.01 (August 31, 1998) 8 such Accessible Facilities/Amenities Unit, all for a Fixed Week in each Even Use Year or Odd Use Year (as may be the case) ; with Declarant's reserving, however, from One and Two above, for Declarant, certain easements and other rights; and Three: Membership for each Vacation Ownership Owner thereof in the Association. 1.29 "Biennial Floating Week/Floating Unit Vacation Ownership" means a "time-share estate" as defined in California Business and Professions Code Section 11003.5, being here comprised basically of: One: an undivided one-half (1/2) fee title interest as a tenant-in-common in an undivided l/51th fee title interest in a Vacation Condominium; Two; subject to the terms and conditions of this Declaration and the Rules and Regulations, the exclusive right to use and occupy an Ocean View Vacation Unit or a Park View Vacation Unit of a particular Vacation Unit Type, and the Common Furnishings in such Vacation Unit, together with: (i) the nonexclusive right to access, use for their respective intended purposes, and/or visit, the Lobby and Front Desk Unit (excluding the marketing desk in lobby), the Office Behind Front Desk Unit, the Gym Unit, and the Adult Pool, Spa and Pool Deck Unit (called the "Assessable Facilities/Amenities Units"), each as delineated on the Condominium Plan, together with (ii) the nonexclusive right to go to, from, over, upon, under, across and through (as may be applicable) the Association General Use Real Property, as such is delineated on the Condominium Plan, in order to in order to have ingress and egress to and from the foregoing Vacation Unit and each such Accessible Facilities/Amenities Unit, all for a Use Week, during either High Season or Prime Summer Season (as may be the case) in each Even Use Year or Odd Use Year (as may be the case), upon the condition that, before the occurrence of any such use and/or occupancy, such Vacation Unit and Use Week shall have first been reserved by the Vacation Ownership Owner in accordance with the applicable provisions of this Declaration and the Association Rules and Regulations; with Declarant's reserving, however, from One and Two above, for Declarant, certain easements and other rights; and Three: membership for each Vacation Ownership Owner thereof in the Association. 1.30 "Biennial Owner" for "Biennial Vacation Ownership Owner") means the Vacation Ownership Owner of either a Biennial Fixed Week/Floating Unit Vacation Ownership, or a Biennial Floating Week/Floating Unit Vacation Ownership. 1.31 "Biennial Ownership" for "Biennial Vacation Ownership") means either a Biennial Fixed Week/Floating Unit Vacation Ownership, or a Biennial Floating Week/Floating Unit Vacation Ownership. 1.32 "Biennial Vacation Ownership" means the same as "Biennial Ownership as defined in Section 1.31. gra11-03\docs\ccrs.01 (August 31. 1998) 9 1.33 "Biennial Vacation Ownership Owner" means the same as "Biennial Owner" as defined in Section 1.30. 1.34 "Board" means the Board of Directors of the Association. 1.35 "Bonus Time/Rental Use" means each Use Week or portion thereof during which a particular Designated Vacation Unit is available for rental to Owners or members of the public by and for the benefit of the Association by virtue of the fact that: (i) an Owner has checked-out of such Owner's Assigned Unit before the scheduled Check-out Time, or checked-in to such Unit later than the scheduled Checked-in Time; (ii) the Owner who was otherwise entitled to occupy such Unit for such Use Week or portion thereof has had his, her, or its rights and privileges to use and occupy such Unit suspended by the Association in accordance with Section 7.02 below because of failure to pay to the Association, when due, any Assessments or other charges levied by the Association or because of being in other violation of the provisions of this Declaration and/or the Rules and Regulations, and has failed to pay such past due Assessment or cure such other violation by not later than (a) 14 days prior to the applicable Check-in Time for such occupancy, or (b) 20 days prior to the applicable Check-in Time for such contemplated occupancy, where the Owner whose rights and privileges had been suspended due to such Owner's failure to pay any Assessments when due, has had such rights and privileges suspended for a period of two (2) years or more; (iii) the Use Week or portion thereof fell within a scheduled Maintenance Week for such Unit, and the Managing Agent has determined that repairs and maintenance are not required to be made to the Common Furnishings in said Unit during such Period; or (iv) the Use Week or portion thereof had occurred during the 53rd Use Week of a Use Year having 53 Use Weeks therein, the Association being deemed to be the Owner of all Vacation Ownerships which have Fixed Week occurring in the 53rd Use Week of Use Years having 53 Use Weeks. 1.36 "Budget" means the written estimate of the revenue which the Board believes will be received, and Basic Expenses which the Board believes will be incurred, by the Association in connection with its administering and managing the Project, the Association Personal Property, and the Vacation Ownership Operation for each forthcoming Fiscal Year, which Budget the Managing Agent must prepare, and the Board must approve, prior to the commencement of each new Fiscal Year pursuant to Section 5.02 n. below. 1.37 "Bylaws" means the bylaws of the Association, as same may be amended from time to time. 1.38 "Calendar" means each Calendar of Use Weeks established for each consecutive Use Year. The Calendars for Use Years , and are attached hereto as Exhibit "A" and made a part hereof. gra11-03\docs\ccrs.01 (August 31, 1998) 10 1.39 "Check-in Day" means either Friday, Saturday or Sunday, as specified in a Vacation Ownership Owner's Original Deed. 1.40 "Check-in Time" and "Check-out Time" means the scheduled times for Vacation Ownership Owners' arrival at and departure from their Assigned Vacation Units as set forth in the then current Rules and Regulations. 1.41 "Common Area" means all of the airspace area (other than the Vacation Units and the Facilities/Amenities Units) delineated as such on the Condominium Plan. 1.42 "Common Furnishings" means: (i) all movable furniture, furnishings, appliances, fixtures, equipment, and all other personal property from time to time owned, leased, or otherwise held for use, by the Association located, or to be located, within the Vacation Units; (ii) the interior surfaces (such as wallpaper, paint, carpets, and other flooring material) of the perimeter walls, floors, and ceilings bounding the interiors of each Vacation Unit; and (iii) all nonbearing walls and doors (and the surfaces thereof) which are within the perimeter walls of each Vacation Unit. 1.43 "Condominium" means, generally, pursuant to California Civil Code Section 783, an estate in real property as described in Civil Code Section 1351(f), and means here, specifically, either a Vacation Condominium or a Facilities/Amenities Condominium. 1.44 "Condominium Interest" means either a Vacation Ownership in a Vacation Condominium or ownership of a Facilities/Amenities Condominium. 1.45 "Condominium Interest Owner" means an owner or owners in fee title of a Vacation Ownership or an owner or owners in fee title of a Facilities/Amenities Condominium. 1.46 "Condominium Ownership Operation" means the Proj ect, the Association Personal Property, and the Vacation Ownership Operation, as being administered, managed, and operated by the Association, and the Facilities/Amenities Condominiums Operation, as being administered, managed, and operated by the Declarant. 1.47 "Condominium Plan" means that certain Condominium Plan for Vacation and Facilities/Amenities Condominiums in Grand Pacific Palisades Resort recorded , 1998, as Document No. 1998- , of Official Records of the San Diego County Recorder's office, San Diego, California, and any and all amendments which may be made thereto. gra11-03\docs\ccrs.01 (August 31, 1998) 11 1.48 "Condominium Unit" means either a Vacation Unit or a Facilities/Amenities Unit delineated as such on the Condominium Plan. The boundaries of any particular Condominium Unit are the interior surfaces of the perimeter walls, floors, ceilings, windows, and doors of that portion of the structure (part of the Improvements) enclosing such Unit; and each such Unit includes both the portion of the structure as above described and the airspace so encompassed. The following are not a part of any Condominium Unit: any and all bearing walls, columns, floors, roofs, foundations, elevator equipment and shafts, central heating, central refrigeration and central air conditioning equipment, reservoirs, tanks, pumps and other central services, pipes, ducts, flues, chutes, conduits, wires and other utility installations, wherever located, except the outlets thereof when located within such a Unit. In interpreting deeds and plans, the existing physical boundaries of each Condominium Unit or of such a Unit reconstructed in substantial accordance with the original plans therefore shall be conclusively presumed to be its boundaries rather than any metes and bounds expressed in the deed or plan, regardless of settling or lateral movement of the structures enclosing such Unit and regardless of minor variances between boundaries shown on the plans or in a deed and those of any such structures. 1.49 "Declarant" means GRAND PACIFIC PALISADES LLC, a Califor- nia limited liability company, and/or any assigns or other successors in interest to GRAND PACIFIC PALISADES LLC, as developer of the Project and/or as Owner of all or substantially all Declarant Vacation Ownerships. 1.50 "Declaration" means that particular Declaration of Covenants, Conditions and Restrictions for Condominium Interests in Grand Pacific Palisades Resort recorded , 1998, as Document No. 1998- , of Official Records of the San Diego County Recorder's Office, San Diego, California, and any and all amendments which may be made thereto. 1.51 "Declarant Annual Vacation Ownership" means each Annual Vacation Ownership owned by Declarant. 1.52 "Declarant Biennial Vacation Ownership" means each Biennial Vacation Ownership owned by Declarant. 1.53 "Declaration Condominium Interest" means each Condominium Interest owned by Declarant. 1.54 "Declarant Vacation Ownership" means each Declarant Annual Vacation Ownership and each Declarant Biennial Vacation Ownership. Declarant shall be deemed to own Vacation Ownerships in each Nondesignated Vacation Unit as well as (Declarant's unsold gral1 -03\docs\ccrs.01 (August 31, 1998) 12 Vacation Ownerships) in Designated Vacation Units. At any point in time, the number of Declarant Ownerships shall be the difference between 8,211 (the total number of Vacation Ownerships in the Vacation Condominiums intended to be created by Declarant) and the total number of Vacation Ownerships conveyed by Declarant to third parties by Original Deeds (and not thereafter reacquired in any manner by Declarant). In this connection, for voting, Assessment and certain other purposes under this Declaration, each Annual Ownership shall be treated as being one (1) Ownership and each Biennial Ownership being one-half (1/2) of an Ownership. Therefore, if, for illustration purposes, the total number of Biennial Ownerships ultimately created in the Project is 4,000, they shall, for these purposes, constitute an aggregate of 2,000 Ownerships out of the total 8,211 Ownerships in the Project. 1.55 "Designated Vacation Unit" means any of those particular Vacation Units, which Declarant, pursuant to the terms of Article 14 of this Declaration, has from time to time designated and made subject to the Use Program, and, in which, Declarant may offer for sale and/or sell Vacation Ownerships under the authority given it by the California Department of Real Estate. 1.56 "Development" means the Declarant's contemplated development and construction of Improvements upon the Land, in three (3) Phases, into the Grand Pacific Palisades Resort described in Recital Paragraph B above. 1.57 "Distributable Net Proceeds" means the respective shares of any net proceeds which the Association receives under extraordinary circumstances such as from, but not limited to, the sale of the Project, the Association Personal Property, and the Common Furnishings, which are to be paid, respectively, to the Vacation Ownership Owners, and to the Owner(s) of the Facilities/ Amenities Condominiums, pursuant to Section 2.08. 1.58 "Even Use Year" means, with respect to the Vacation Ownership Use Program, each Use Year which falls in an even- numbered calendar year. 1.59 "Exchange Program" means a service provided by an independent organization whereby Vacation Ownership Owners may exchange their respective Use Weeks in a Vacation Condominium for occupancy rights in other projects that have time-sharing programs. 1.60 "Exchange User" means, with respect to the Vacation Ownership Use Program, an owner of an occupancy right in another project that has a timesharing program who occupies an Assigned Unit in the Project during a Use Week pursuant to an Exchange Program. gra11-03\docs\ccrs.01 (August 31, 1998) 13 1.61 I'Facilities/Amenities Condominium" means one of the 14 Condominiums in the Project designed by the Declarant for use as a facility and/or amenity within the Project. These 14 Condominiums are: (i) the Gift Shop Condominium, (ii) the Activities Desk Condominium, (iii) the Lobby and Front Desk Condominium, (iv) the Office Behind Front Desk Condominium, (v) the Gifting/Bell Closet Condominium, (vi) the Owner Relations Office Condominium, (vii) the Meeting Room Condominium, (viii) the Recreation Room Condominium, (ix) the Game Room Condominium, (x) the Office Condominium, (xi) the Gym Condominium, (xii) the Clubhouse Condominium, (xii) the Adult Pool, Spa and Pool Deck Condominium, and (xiv) the Garage and Ramps Condominium. Each such Facilities/Amenities Condominium is comprised basically of the following: One; an undivided l/175th fee title interest in the Common Area delineated as such on the Condominium Plan; Two; the applicable Facilities/Amenities Unit delineated as such on said Condominium Plan; Three; (i) the nonexclusive right to access, conduct business in, use for their respective intended purposes, and/or visit, each other Facilities/Amenities Unit as delineated on the Condominium Plan, together with (ii) the nonexclusive right to go to, from, over, upon, under, across and through (as may be applicable) the Association General Use Real Property, as such is delineated on the Condominium Plan, in order to have ingress and egress to and from each Facilities/Amenities Unit; and Four: membership for its owner in the Association; with Declarant's reserving, however, from One, and Two above, certain easements and other rights. The Declarant shall retain ownership of the Facilities/ Amenities Condominiums, but shall grant certain nonexclusive use rights relating to only the Accessible Facilities/Amenities Units in favor of the Vacation Ownership Owners and in favor of the Owner(s) and users of the Grand Pacific Palisades Hotel Project adjoining the Land. 1.62 "Facilities/Amenities Condominium Owner" means the owner of a Facilities/Amenities Condominium in the Project. 1.63 "Facilities/Amenities Condominium Owner's Personal Prop- erty" means: (i) all movable furniture, furnishings, appliances, fixtures, trade fixtures, equipment, and all other personal prop- erty from time to time owned, leased, or otherwise held for use, by a Facilities/Amenities Condominium Owner located, or to be located, within the particular Facilities/Amenities Unit or Units belonging to such Owner; (ii) the interior surfaces (such as wallpaper, paint, carpets, and other flooring material) of the perimeter walls, floors, and ceilings bounding the interiors of each such Facilities/Amenities Unit; and (iii) all nonbearing walls and doors (and the surfaces thereof) which are within the perimeter walls of each such Facilities/Amenities Unit. gral1-03\docs\ccrs.01 (August 31, 1998) 14 1.64 "Facilities/Amenities Condominiums Operation" means the operation of the 14 Facilities/Amenities Condominiums, as being administered, managed, and operated by the Owner(s) of these Condominiums. 1.65 "Facilities/Amenities Condominiums Owner(s) Rules and Regulations" means any Rules and Regulations adopted, promulgated, and modified from time to time by the Owner(s) of the Facilities/ Amenities Condominiums with respect to the use by all Condominium Interest Owners and Permitted Users of the Facilities/Amenities Units. 1.66 "Facilities/Amenities Unit" means any one of the 14 Facilities/Amenities Condominium Units delineated as such on the Condominium Plan. A Facilities/Amenities Unit Designation Symbol has been assigned to each of these Facilities/Amenities Units, as follows: Fac ilities/Amenities Unit Gift Shop Unit Activities Desk Unit Lobby and Front Desk Unit Office Behind Front Desk Unit Gifting/Bell Closet Unit Owner Relations Office Unit Meeting Room Unit Recreation Room Unit Game Room Unit Office Unit Gym Unit Clubhouse Unit Adult Pool, Spa and Facilities/Amenities Condominium Designation Symbol A-l A-2 A-3 A-4 A-5 A-6 A-7 A-8 A-9 A-10 A-ll A-12 A-13 gra11-03\docs\ccrs.01 (August 31, 1998)15 Pool Deck Unit Garage and Ramps Unit A-14 1.67 "Facilities/Amenities Unit Designation Symbol" means the capital letter "A" followed by the particular number assigned to each Facilities/Amenities Unit on the Condominium Plan and in this Declaration. 1.68 "Fiscal Year" means the one (l)-year period commencing on January 1st of each year and ending on December 31st of that year, which shall be the fiscal year for the operation of the Association, which may be subsequently changed by the Board. 1.69 "Fixed Week" means, as to an Owner of an Annual Fixed Week/Floating Unit Vacation Ownership, that particular Use Week during each Use Year, and as to each Owner of a Biennial Fixed Week/Floating Unit Vacation Ownership, that particular Use Week during either each Even Use Year or each Odd Use Year (as may be the case) as has been granted to such Owner by his, her, or its Original Deed (or subsequent deed, if a successor Owner), during which Use Week such Owner (or such Owner's Permitted User) has the exclusive right to use and occupy an Assigned Unit and the Common Furnishings therein, together with the nonexclusive right to use the Association General Use Real Property for the purposes provided in such deed. 1.70 "Floating Unit" means a Vacation Unit, the exclusive occupancy and use of which is to be assigned by the Association to an Owner for a Use Week (upon a "first-reserved, first-served basis"). 1.71 "Floating Week" means a Use Week for use and occupancy of a Vacation Unit which is to be assigned by the Association to an Owner of either an Annual or Biennial Floating Week/Floating Unit Vacation Ownership (upon "first-reserved, first-served basis"). 1.72 "High Season" means as to an Annual Floating Week/ Floating Unit Vacation Ownership or a Biennial Floating Week/ Floating Unit Vacation Ownership, Use Weeks 1 through 25, and 36 through 52. 1.73 "Hotel Ownerfs) Use Rights Declaration^ means that certain Declaration of Covenants, Conditions, and Restrictions Relating to Hotel Owner(s) Use Rights recorded , 1998, as Document No. 1998- , of Official Records of the San Diego County Recorder's Office, San Diego, California, and any and all amendments which may be made thereto. 1.74 " Improvements" means all or any of the buildings, structures, facilities, appurtenance, landscaping and any and all gra11-03\docs\ccrs.01 (August 31, 1998) 16 other improvements which legally constitute real property, constructed or to be constructed in and upon the Land. 1.75 "Land" means that certain real property legally described in Recital Paragraph A above. 1.76 "Maintenance Week" means, with respect to any particular Vacation Unit, a total of seven (7) Nights in each Use Year reserved by the Association as the period of time during which needed repairs, maintenance, and replacements to the Common Furnishings therein, and/or to the Association Real Property encompassing such Unit, shall be made by the Association. 1.77 "Managing Agent" means the agent engaged by the Board pursuant to and in the manner provided in Section 5.03 of this Declaration. 1.78 "Member" means a member of the Association. 1.79 Membership" means the right of participation which each Member holds in the Association, by virtue of his, her or its being a Condominium Interest Owner. 1.80 "Module" means the same as "Phase" as defined in Section 1.100. 1.81 "Module I" means the same as "Phase I" as defined in Section 1.101. 1.82 "Module II" means the same as "Phase II" as defined in Section 1.102. 1.83 "Module III" means the same as "Phase III" as defined in Section 1.103. 1.84 "Mortgage" means a deed of trust or mortgage encumbering any Condominium Interest. 1.85 "Mortgagee" means the beneficiary of a recorded deed of trust or the holder of a recorded mortgage encumbering any Condominium Interest. 1.86 "Night" means each successive 24-hour period commencing from Check-in Time during any Use Week, except that the last Night during any Use Week, or portion thereof, shall include only that number of hours from the end of the last 24-hour period to Check- out Time on the following day. 1.87 "Nondesignated Vacation Units" means those particular Vacation Units, if any, which Declarant has not, pursuant to the gra11-03\docs\ccrs.01 (August 3T, 1998) 17 terms of Article 14 of this Declaration, designated and made subject to the Use Program. 1.88 "Ocean View Unit" means same as "Ocean View Vacation Unit" as defined in Section 1.89. 1.89 "Ocean View Vacation Unit" (or "Ocean View Unit") means one of Vacation Units 137-154, 237-254, and 337-354, as delineated on the Condominium Plan, and as provided in an Original Deed to an original Vacation Ownership Owner, or in a subsequent deed to a successor Owner. 1.90 "Odd Use Year" means each Use Year which falls in an odd- numbered calendar year. 1.91 "Original Deed" means each grant deed from Declarant recorded after the date hereof which conveys a Vacation Ownership to a member(s) of the general public for use by such member(s) for vacation/restaurant purposes, excluding, however, any deed which conveys all or substantially all Declarant Ownerships and which deed expressly recites that it is not an Original Deed within the meaning of this Declaration. 1.92 "Owner" means either a "Vacation Ownership Owner" as defined in Section 1.124 or a "Facilities/Amenities Condominium Owner" as defined in Section 1.62, depending upon the context. Ii93 "Ownership" means the same as a "Vacation Ownership" as defined in Section 1.124 below. 1.94 "Park View Unit" means the same as "Park View Vacation Unit" as defined in Section 1.95. 1.95 "Park View Vacation Unit" Cor "Park View Unit") means one of Vacation Units 170-179, 182, 270-279, 282, and 370-382, as delineated on the Condominium Plan, and as provided in an Original Deed to an original Vacation Ownership Owner, or in a subsequent deed to a successor owner, which Unit will generally have a view eastward. 1.96 "Permitted User" means as the context dictates, either: (i) as to any Vacation Condominium, any person, other than an Exchange User, who occupies and/or visits an Assigned Vacation Unit, along with, or independently of, an Owner, but in all cases by the express authority of the Owner(s) of the Vacation Ownership entitled to such occupancy, or by the Association as to any Bonus Time/Rental Use, including, but not limited to, an Owner's family members (where children alone on the Project, must be above a specified age), guests, lessees, tenants, renters, agents, employees, business visitors, and/or other invitees, all as may be gra11-03\docs\ccrs.01 (August 31, 1998) 18 clarified and further restricted by the Association Rules and Regulations; and (ii) as to any Facilities/Amenities Condominium, any person who possesses, leases, uses, occupies, and/or otherwise visits, a Facilities/Amenities Unit, along with, or independently of, the Owner of such Unit, but in all cases with the express authority of the Owner(s) of such Unit, including, but not limited to, an Owner's family members, guests, lessees, tenants, renters, licensees, operators, agents, employees, patrons, business visitors, and/or other invitees, all as may be clarified and further limited by the Facilities/Amenities Condominium Owner(s) Rules and Regulations. 1.97 "Phase" for "Module") means any of the three (3) contemplated construction stages of the Project: Phase I, Phase II, or Phase III. The respective location upon the Land of each such Phase is as delineated on the Condominium Plan. 1.98 1'Phase I" (or "Module I'M means the initial construction upon the Land of 71 Vacation Condominiums and 14 Facilities/ Amenities Condominiums. 1.99 "Phase II" for "Module II") means the contemplated or actual construction of 72 Vacation Condominiums upon the Land following the construction of Phase I. 1.100 "Phase III" (or "Module III") means the contemplated or actual construction of the final 18 Vacation Condominiums upon the Land following the construction of Phase II. 1.101 "Phase I Property" means that portion of the Land to be developed in Phase I. 1.102 "Phase II Property" for "Annexable Property #1") means that portion of the Land to be developed in Phase II. 1.103 "Phase III Property" for "Annexable Property #2") means that portion of the Land to be developed in Phase III. 1.104 "Prime Summer Season" means, as to an Annual Floating Week/Floating Unit Vacation Ownership or a Biennial Floating Week/ Floating Unit Vacation Ownership, Use Weeks 26 through 35. 1.105 "Project" means all Real Property which the Declarant has deeded to the Association, that is, the Association Real Property, and that portion of the Common Area within each Phase for which the Land therein has been annexed to the existing Project. The Project excludes: (i) Real Property not yet deeded by the Declarant to the Association; (ii) Association Personal Property, and (iii) Common Furnishings. The Project is known as the Grand Pacific Palisades Resort. The Project, together with the gra11-03\docs\ccrs.01 (August 31, 1998) 19 Association Personal Property, shall be administered, managed, and operated by the Association. 1.106 "Project Basic Expenses" means those portions of the Association Basic Expenses, and their corresponding Assessments, determined by the Association to be attributable to, and payable by, both Vacation Ownership Owners and the Owner(s) of one or more Facilities/Amenities Condominiums. 1.107 "Project Diagram" means the PROJECT DIAGRAM FOR THE GRAND PACIFIC PALISADES RESORT identifying thereon the approximate location and number designation of each Vacation Unit and each Facilities/Amenities Unit, and the approximate location and designation of the buildings and other Improvements to be developed, or as developed, upon the Property, A copy of this Project Diagram, which is comprised of ( ) pages, is attached hereto as Exhibit "B" and made a part hereof. This Project Diagram is not a survey, nor is it based upon a survey, of the Land; and it contains only approximations of the locations, sizes, and configurations of the Vacation Units and Improvements upon or to be developed upon the Land. 1.108 "Project Special Expenses" means those portions of the Association Special Expenses, and their corresponding Assessments, determined by the Association to be attributable to, and payable by, both Vacation Ownership Owners and the Owner (s) of one or more Facilities/Amenities Condominiums. 1.109 "Pro Rata Share" means each respective, fair and equitable percentage (as determined by the Association) of any Project Basic Expenses or Project Special Expenses, and of their corresponding Assessments, determined by the Association to be attributable to, and payable by, either the Vacation Ownership Owners or the Owner (s) of one or more Facilities/Amenities Condominiums, as the case may be. 1.110 "Purchase Agreement" means a Purchase and Sale Agreement and Escrow Instructions between Declarant and the person, persons, or other entity named therein as buyer providing for the sale by Declarant and the purchase by said buyer of one or more Vacation Ownerships, to be conveyed by an Original Deed. 1.111 "Real Property" means all or any of the Land and Improvements thereon. 1.112 "Rules and Regulations" means, collectively, both the "Association Rules and Regulations" as defined in Section 1.26, and the "Facilities/Amenities Condominium Owner(s) Rules and Regulations" as defined in Section 1.65. gra11-03\docs\ccrs.01 (August 31, 1998) 20 1.113 "Special Expenses" means those extraordinary expenses, including capital expenditures, of the Association which are not Basic Expenses and which are expenses for which Special Assessments and/or Capital Needs Assessments are levied pursuant to Article 6 of this Declaration. 1.114 "Sole Basic Expenses" means those portions, if any, of the Association Basic Expenses, and their corresponding Assess- ments, determined by the Association to be attributable to, and payable by, only Vacation Ownership Owners, or, by only the Owner(s) of one or more of the Facilities/Amenities Condominiums, as the case may be. 1.115 "Sole Special Expenses" means those portions, if any, of the Association Special Expenses, and their corresponding Assess- ments, determined by the Association to be attributable to, and payable by, only Vacation Ownership Owners, or, by only the Owner(s) of one or more of the Facilities/Amenities Condominiums, as the case may be. 1.116 "Unit" means, as the context dictates, either a "Vaca- tion Unit" as defined in Section 1.126, or a "Facilities/Amenities Unit" as defined in Section 1.66. 1.117 "Unit Type" means the same as "Vacation Unit Type" as defined in Section. 1.128. 1.118 "Use Program" means the same as "Vacation Ownership Use Program" as defined in Section 1.135. 1.119 "Use Week" means each of the 52 (or in some instances 53) consecutively numbered seven (7) consecutive-Night periods of time listed on each Calendar for any particular Use Year, and includes either a Fixed Week or a Floating Week. Notwithstanding the fact that each Use Week on each Calendar is shown as being comprised of seven (7) consecutive Nights, the Board may, but is under no obligation to, adopt provisions in the Vacation Ownership Rules and Regulations which would allow Vacation Ownership Owners to occupy a Vacation Unit for periods of time which are less than seven (7) consecutive Nights (sometimes called "Split-Use Weeks"), so long as the total, accumulated time of such periods of occupancy does not exceed seven Nights, and so long as the seven (7) Nights occupied do not include more than two (2) Weekend Nights. 1.120 "Use Year" means the particular 52-Use Weeks (or 53rd- Use Week in each year in which there occurs 53-Use Weeks) length of time set forth on each Calendar. 1.121 "Vacation Condominium" means any of the presently contemplated 161 Condominiums in the Project designed by Declarant for vacation use and occupancy. Each such Vacation Condominium is gral1-03\docs\ccrs.01 (August 31, 1998) 21 comprised basically of the following: One: an undivided l/175th fee title interest in the Common Area delineated as such on the Condominium Plan; and Two; a particular Ocean View Vacation Unit or Park View Vacation Unit as delineated on the Condominium Plan, excepting the right to use and occupy such Vacation Unit, except as any such right to use and occupy such Vacation Unit, or an Accessible Facilities/ Amenities Unit, is granted by deed to a Vacation Ownership Owner; with Declarant's reserving, however, from One and Two, above, certain easements and other rights. 1.122 "Vacation Ownership" for "Ownership") means, generally, a time-share estate as defined in California Business and Professions Code § 11003.5, which is an interest in real property, and here specifically, either: (i) an Annual Fixed Week/Floating Unit Vacation Ownership, (ii) an Annual Floating Week/Floating Unit Vacation Ownership, (iii) a Biennial Fixed Week/Floating Unit Vacation Ownership, or (iv) a Biennial Floating Week/Floating Unit Vacation Ownership. The total number of Vacation Ownerships in the Vacation Condominiums intended to be created by Declarant is 8,211 regardless of the respective numbers of Annual Ownerships and Biennial Ownerships conveyed in the Project. In this connection, for voting, Assessment, and certain other purposes under this Declaration, each Annual Ownership shall be treated as being one (1) Ownership, and each Biennial Ownership shall be treated as being one-half (1/2) of an Ownership. Therefore, if, for illustration purposes, the total number of Biennial Ownerships ultimately created in the Project is 4,000, they shall, for these purposes, constitute an aggregate of 2000 Ownerships out of the total 8,211 Ownerships in the Project. 1.123 "Vacation Ownership Operation" means the Vacation Units, the Common Furnishings therein, and the Vacation Ownership Use Program, as being administered, managed, and operated by the Association as a time-share project. 1.124 "Vacation Ownership Owner" (or "Owner") means the owner or owners in fee title of a Vacation Ownership by virtue of his, her, its or their : (i) being the grantee or, collectively, the grantees named in the Original Deed conveying any Vacation Owner- ship; (ii) a successor or successors in interest to each grantee or grantees described in (i) above; and (iii) the Declarant Vacation, with respect to each Declarant Ownership. 1.125 "Vacation Ownership Use Program" (or "Use Program") means the overall policy, system, and operation established by this Declaration, and the Association Rules and Regulations made pursuant thereto, which enable an Owner to exclusively use, occupy, and enjoy an Assigned Vacation Unit and the Common Furnishings therein and to non-exclusively use the Association General Use Real Property, for a Use Week, including, but not by way of limitation, the procedures for cancellation of reservations, splitting of Use 1 -03\docs\ccrs. 01 (August 31, 1998) 22 Weeks, checking-in and checking-out of Units, and the exchange of occupancy rights between Vacation Ownership Owners or by Vacation Ownership Owners under an Exchange Program. 1.126 "Vacation Unit" means any one of the Vacation Units delineated as such on the Condominium Plan. A Vacation Unit Designation Symbol has been assigned to each of these Vacation Units. There are two (2) categories of Vacation Units: Ocean View Vacation Units as defined in Section 1.89 and Park View Vacation Units as defined in Section 1.95. 1.127 "Vacation Unit Designation Symbol" means the capital letter "V" followed by the particular number assigned to each Vacation Unit on the Condominium Plan. j 1.128 "Vacation Unit Type" for "Unit Type") means one of the four (4) different categories of Vacation Units in a Vacation Condominium, based upon a particular Unit's number of bedrooms and bathrooms, square footage, and configuration described and identified on the Project Diagram as either an "A" Unit Type (being 2-bedroom/2-bath), "B" Unit Type (being 1-bedroom/l-bath, "C" Unit Type (also being 1-bedroom/l-bath), or "E" Unit Type (being 3- bedroom/2-bath). 1.129 "Week Day" means any period of time beginning at Check- in Time on a Sunday, Monday, Tuesday, Wednesday, or Thursday and ending at Check-in Time on the next calendar day immediately following. 1.130 "Weekend" means any period of time beginning at Check-in Time on a Friday or Saturday and ending at Check-out Time on the next calendar day immediately following. ARTICLE 2 VARIOUS RIGHTS, OBLIGATIONS, AND RESTRICTIONS RELATED TO OWNERSHIP, USE AND POSSESSION, MAINTENANCE, TAXES. EXPENSES. MORTGAGING. AMD LEASING AMD RENTING 2.01 Right of Vacation Ownership Owners to Use Vacation Units. Related Rights and Duties, and Prohibitions. a. Exclusive Right to Use a Vacation Unit and Common Furnishings Therein. Each Vacation Ownership Owner has been granted in the deed to such Owner's Vacation Ownership the exclusive right to use, possess, and enjoy a Vacation Unit and the Common Furnishings therein in accordance with and subject to the terms of: (1) such deed, (ii) this Declaration, (iii) the Rules and Regulations, and (iv) the Hotel Owners Use Rights Declaration. gra11-03\docs\ccrs.01 (August 31, 1998) 23 b. Types of Vacation Ownerships. Vacation Ownership Owners own one or more of the following types of Vacation Ownerships in the Project: 1. Annual Fixed Week/Floating Unit Vacation Ownership (as defined in Section 1.06); 2. Annual Floating Week/Floating Unit Vacation Ownership (as defined in Section 1.07); 3. Biennial Fixed Week/Floating Unit Vacation Ownership (as defined in Section 1.22); 4. Biennial Floating Week/Floating Unit Vacation Ownership (as defined in Section 1.23). In the instance of categories l. and 3. above (Fixed Week/ Floating Unit Vacation Ownerships) , while an Owner has been granted (in the Original Deed) a particular Use Week (a "Fixed Week") in a specific Vacation Unit delineated on the Condominium Plan, during each Use Year, the Association for each Use Year will assign to such Owner an Assigned Vacation Unit for use and occupancy for such Owner's Fixed Week, which Unit may or may not be the specific Unit granted to such Owner in such Owner's deed (thus the reason for the "Floating Unit" nomenclature) subject to such Owner's first having reserved such Unit on a "first-reserved, first served" basis pursuant to this Declaration and the Rules and Regulations. In the instance of categories 2. and 4. above (Floating Week/Floating Unit Vacation Ownerships), the Association for each Use Year will assign to such Owner both an Assigned Unit for his or her use and occupancy and the Use Week during which the Unit is to be used, subject to such Owner's first have reserved such Unit and Use Week on a "first-reserved, first-served" basis pursuant to the Declaration and the Rules and Regulations. In this connection a reservation for a Use Week must be made prior to Check-in Time on the first day of the Use Week sought to be reserved, but not earlier than 12 months before the commencement of the Use Week desired by the Owner. Under any of the four (4) types of Vacation Ownerships, if for any reason an Owner does not use his or her entire Fixed Week (in the case of Fixed Week/Floating Unit Vacation Ownerships) or assigned use Week (in the case of Floating Week/Floating Unit Vacation Ownerships), there shall be no accrual or carryover of unused time ("Nights"). c. Nonexclusive Right to Use Accessible Facilities/ Amenities Units. Each Vacation Ownership Owner has also been granted in the deed to such Owner's Vacation Ownership the nonexclusive right to access, use for their respective intended gra!1-03\docs\ccrs.01 (August 31, 1998) 24 purposes, and/or visit, the Accessible Facilities/Amenities Units (as defined in Section 1.01 below), and only such Accessible Facilities/Amenities Units, during such Owner's Assigned Use Week. d. Nonexclusive Right to Go Over and Upon Association General Use Property to Access Vacation Unit and Facilities/Amen- ities Units. Each Vacation Ownership Owner has also been granted in the deed to such Owner's Vacation Ownership the nonexclusive right to go to, from, over, upon under, across and through (as may be applicable) the Association General Use Real Property, as such is delineated on the Condominium Plan, in order to have ingress and egress to and from such Owner's Assigned Vacation Unit and the Accessible Facilities/Amenities Units during such Owner's Assigned Use Week. Vacation Owners shall not use any other Association Property except as may be authorized by the Declaration or the Rules and Regulations. e. "Day-Use". Each Vacation Ownership Owner also shall have the right to "day-use" of a Vacation Unit and Accessible Facilities/Amenities Units during such times, and subject to such restrictions and limitations, as are provided in the Rules and Regulations. f. Should an Owner Be Prevented from Using and Possessing a Vacation Unit. If any Vacation Ownership Owner is prevented from using and possessing a Vacation Unit during a Use Year in which such Owner is entitled to such use due to the failure of the Managing Agent or the Association to fulfill its respective obligations to such Owner under this Declaration or the Rules and Regulations, such Owner shall be entitled to receive as compensation for such loss of use, at such Owner's option: (i) a cash payment equivalent to the then fair market rental value for such Owner's Assigned Unit Type; or (ii) the right to use and occupy a Unit of such Owner's Assigned Unit Type during a Use Week in place of the Use Week such Owner had been prevented from using, such Unit to be mutually agreed upon by such Owner and the Managing Agent and subject to availability of Units of such Assigned Unit Type, at no additional charge but otherwise subject to the terms and conditions of this Declaration and the Rules and Regulations. g. Upkeep of Property. Each Vacation Ownership Owner: (i) shall keep such Owner's Assigned Vacation Unit, the Common Furnishings therein, and any and all Association Property such Owner may use, in good, clean and neat condition, reasonable wear and tear excepted, and shall not damage or abuse any such property during such Owner's Assigned Use Week; (ii) shall vacate such Owner's Assigned Vacation Unit at the expiration of such Owner's Use Week and remove all persons and such Owner's property therefrom (excluding, of course, the Common Furnishings therein); and (iii) shall otherwise comply with the Rules and Regulations as may be in effect at the time. In addition to the above, no Owner shall make gra11-03\docs\ccrs.01 (August 31, 1998) 25 or authorize any alterations, additions, or improvements to the Common Furnishings and/or to any Association Property; nor shall such Owner remove from such Unit or from the Project, or alter, any of such Common Furnishings or Association Property. h. No Use or Occupancy Permitted if Owner is in Breach of Obligations. Notwithstanding anything to the contrary contained in this Sections 2.01, but subject to any applicable procedural requirements set forth in Section 7.02 below, no use or occupancy of a Vacation Unit, its Common Furnishings, and Association shall be permitted a Vacation Ownership Owner, if such Owner is in breach of this Declaration or the Rules and Regulations. i. Limited Period of Use and Occupancy. Except as otherwise permitted by this Declaration or the Rules and Regula- tions, no Vacation Ownership Owner shall occupy a Vacation Unit or use the Common Furnishings therein or any Association Property during any time period other than during such Owner's Assigned Use Week. j • Use by Others; Owner Still Responsible. A Vacation Ownership Owner may permit such Owner's Assigned Vacation Unit, during such Owner's Use Week, to be occupied by said Owner's Permitted User(s) (but in no event shall the total occupants be in excess of the number of occupants permitted by the Rules and Regulations) during such Owner's Use Week; but such Owner shall be responsible for any loss, damage, or destruction which occurs to the Common Furnishings or to any Association Property as a result of such permitted use, or as a result of the violation of this Declaration or the Rules and Regulations which may occur during such occupancy, just as if such Owner, had personally occupied such Unit, used the Common Furnishings therein and/or any Association Property. k. Failure to Vacate. If a Vacation Ownership Owner or such Owner's Permitted User (the "Detaining Owner" or "Detaining User") fails to vacate his (or her, its, or their) Assigned Vacation Unit at the end of his Assigned Use Week, or otherwise makes unauthorized use or occupancy of such Unit, or prevents another Owner, Permitted User, and/or Exchange User (called here the "Detained Owner" or "Detained User") from using or occupying a Unit during such Detained Owner's or User's Assigned Use Week, the Detaining Owner and/or Detaining User shall: (i) be subject to immediate removal, eviction, or ejection from the Unit wrongfully used or occupied; (ii) be deemed to have waived any notice required by law with respect to any legal proceedings regarding removal, eviction, or ejection (to the extent that such notices may be waived under California law); (iii) reimburse the Association and the Detained Owner and/or Detained User for all costs and expenses incurred by the latter as a result of such conduct, including but not limited to costs of alternate accommodations, gra11-03\docs\ccrs.01 (August 31, 1998) 26 travel costs, court costs, and reasonable attorneys' fees incurred in connection with removing, evicting, or ejecting the Detaining Owner and/or Detaining User from such Unit, plus costs (including reasonable attorneys' fees) incurred in collecting such reimbursement(s); and (iv) pay to the Detained Owner and/or the Detained User entitled to use and occupy the Unit during such wrongful occupancy, as liquidated damages (in addition to the costs and expenses set forth above), a sum equal to 200 percent of the then fair rental value per day of the Unit for each day or portion thereof, including the day of surrender, during which the Detaining Owner and/or Detaining User prevents use and occupancy of such Unit; provided, however, that if the Detaining User is an Exchange User, the Owner whose Use Week was used by such Exchange User shall have no liability pursuant to the provisions of clauses (i) through (iv) above. The Board shall have the sole discretion for determining the "fair rental value" of such a Vacation Unit; however "fair rental value" for any such Unit shall be based upon the costs of renting comparable accommodations located in the vicinity of the Project. The Association shall use maximum efforts to attempt to remove such Detaining Owner and/or Detaining User from a Vacation Unit, and/or to assist the Detained Owner and/or Detained User in finding alternate accommodations during any such holdover period and to secure, at the expense of the Association, alternate accommodations for any Detained Owner and/or Detained User, which alternate accommodations shall be as near as possible in value to the value of the Detained Owner's and/or Detained User's Assigned Vacation Unit, and the cost thereof shall be assessed to the Detaining Owner (unless the Detaining User was an Exchange User) as a "Personal Charge" (as defined in Section 6.05 below) . In the event that the Association, in its sole discretion, deems it necessary to contract with a holder of outside accommodations for a period greater than the actual period for which the use is being prevented in order to secure alternate accommodations as set forth above, the cost of the entire period shall be assessed to the Detaining Owner as a Personal Charge. Furthermore, if a Vacation Ownership Owner and/or such Owner's Permitted User(s) by an intentional or negligent act renders the Common Furnishings in a Unit uninhabitable or unusable for a subsequent Use Week(s), then: (a) such Owner (and/or Permitted User, if applicable) shall be deemed a Detaining Owner (and/or Detaining User, if applicable); (b) the foregoing provisions of this Section 2.04 shall apply; and (c) such Owner (and Permitted User, if applicable) shall be liable to the Owner(s) and/or Permitted User(s) of a subsequent Use Week(s) , just as if such Owner (and Permitted User if applicable) had refused to vacate the Unit at the end of his, her or their Fixed Use Week(s). For the purposes of this paragraph, the act or negligence of a Permitted User shall be deemed to be the act of the Owner gra11-03\docs\ccrs.01 (August 31, 1998) 27 authorizing occupancy of the Assigned Vacation Unit in question, and both parties shall be deemed liable for such act or negligence. 1. Maintenance Week. A Maintenance Week is that period of time occurring during each Use Year, with respect to any particular Vacation Unit, during which: (i) repairs, restoration and/or replacement of the Common Furnishings within a Vacation Unit, and/or (ii) repairs to the Association Real Property encompassing such Unit, shall be made by the Association. The Association is given the exclusive right to possess each Vacation Unit during such respective Maintenance Week and/or to rent out such Unit to Vacation Ownership Owners or to members of the public during such Maintenance Week, when such repairs and maintenance are not at that time required, as provided in Section 2.03 a. 2. below. 2.02 Right of Facilities/Amenities Condominium Owner to Use Facilities/Amenities Unit and Association General Use Property. Each Facilities/Amenities Condominium Owner shall be entitled to use, possess, and operate such Owner's respective Facilities/ Amenities Condominium and the Association General Use Property for the purposes intended for such in accordance with and subject to the terms of: (i) such Owner's deed to a Facilities/Amenities Condominium, if any, (ii) this Declaration, (iii) any Facilities/ Amenities Condominiums Owner(s) Rules and Regulations, and (iv) the Hotel Owners Use Rights Declaration. 2.03 Right to Lease/Rent Vacation Units. a. Designated Vacation Units. 1. By Owner other than Declarant. Each Vacation Ownership Owner, other than Declarant, may rent out to members of the public such Owner's Assigned Vacation Unit for such Owner's Assigned Use Week or a portion thereof, subject to any provisions relating thereto contained in the Rules and Regulations. Rental moneys therefrom shall be the sole property of such renting Owner. The cost of repair or replacement incurred by reason of damage or destruction to the Common Furnishings and/or to any Association Property, which damage or destruction occurs during and as a result of the lease or rental of such Unit, shall be the responsibility of the Owner renting it. 2. By Association—"Bonus Time/Rental Use11. Should the Association determine that at any time a Designated Vacation Unit is not being occupied by a Vacation Ownership Owner, such Owner's Permitted User(s), or an Exchange User pursuant to this Declaration or the Rules and Regulations, the Association is authorized to rent out to Vacation Ownership Owners, on a strictly "first-come/first-served" reservation basis, and to members of the public, Bonus Time/Rental Use in such a Unit. Any such rental shall be solely for the benefit of the Association, and all revenues gral1-03\docs\ccrs.01 (August 31, 1998) 28 derived shall be placed in the Association's operating account to be used to defray the costs of administering and managing the Vacation Ownership Operation. Each Owner, by virtue of such Owner's becoming an Owner of a Vacation Ownership in the Project, understands and acknowledges that rentals of Bonus Time/Rental Use by the Association are primarily made as a convenience to the Owners, giving them the opportunity to enjoy additional time at the Project, and hereby represents that he, she, or it, as the case may be, is not purchasing his, her, or its Vacation Ownership with any intent to in any way profit from the possibility that, as a result of such rentals of Bonus Time/Rental Use, moneys shall accrue to the benefit of the Association and thereby, indirectly, to each Owner, and that no representations from Declarant and/or its agents have been made to any such effect. Procedures for notifying the Owners of available Units and for an Owner's reservation thereof shall be set forth in the Rules and Regulations. The cost of repair or replacement incurred by reason of any damage and/or destruction to the Common Furnishings in a Unit and/or to any Asso- ciation Property which occurs during and as the result of the rental of such Unit shall be the immediate responsibility of the renter who rented and took occupancy of said Unit, and where a Unit is rented to a member of the public the ultimate responsibility for such damage or destruction shall lie with the Association. (a) When a Vacation Ownership Owner reserves a Vacation Unit for Bonus Time/Rental Use, such Owner shall pay a reasonable rental fee, which shall be fixed from time to time by the Association. The Association shall limit such rental fees to the proportionate cost of its operating such Unit for the period of Bonus Time/Rental Use in question. All rental revenues generated by Bonus Time/Rental Use of Units shall be deposited in the general account of the Association to defray its operating expenses. (b) Reservations for Bonus Time/Rental Use can only be made 21 days or less prior to Check-in-Time on the date which such reservation is sought. (c) An Owner may only have one (1) Bonus Time/Rental Use reservation pending at a time for each Use Week such Owner owns. (d) An Owner may cancel a Bonus Time/Rental Use reservation up to 24 hours in advance of Check-in-Time on the first day of the Bonus Time/Rental Use so reserved without penalty. In the event, however, that an Owner's Bonus Time/Rental Use reservation is canceled 24 hours or less prior to Check-in-Time on the first day of the period reserved, such Owner shall be charged for Bonus Time/Rental Use for the initial day, and the reservation thereafter will be canceled. (e) The Association also has a policy called gral1-03\docs\ccrs.01 (August 31, 1998) 29 "Blue Monday/Blue Tuesday". This is a policy/opportunity by which more Bonus Time/Rental Use is made available to Owners. At any time after 48 hours following an Owner's scheduled Check-in Day, if such Owner has not checked-in or made arrangements for late check- in, the balance of that Owner's Week shall be made available for Bonus Time/Rental Use to other Vacation Ownership Owners. b. Nondesignated Vacation Units - Declarant's Right to Rent. Declarant reserves full right, authority and power to lease or rent out at any time to members of the public any or all of the Nondesignated Vacation Units. Any rental moneys collected from such rentals shall belong entirely to Declarant. The cost of repair or replacement incurred by reason of damage or destruction to the Common Furnishings and/or to any Association Property, which damage or destruction occurs during and as the result of such lease or rental of such Unit, shall be the responsibility of the Declarant. c. All Lease or Rental Agreements to Be in Writing. All leases and rentals of a Vacation Unit shall be in accordance with, and subject to, the terms of: this Declaration and the Rules and Regulations. Except as to Bonus Time/Rental Use as described in Paragraph 2.03 a. 2. above, each lease or rental of a Vacation Unit shall be in writing and shall expressly provide that it is subject to the terms of this Declaration and the Rules and Regulations and that failure to use and occupy the Unit, the Common Furnishings therein, and/or the Association Property in accordance with such terms shall be a default under such lease or rental agreement. 2.04 Right of Facilities/Amenities Condominium Owner to Lease/ Rent Owner's Facilities/Amenities Unit. Each Facilities/Amenities Condominium Owner shall be entitled to lease or rent out such Owner's respective Facilities/Amenities Unit, subject to any applicable terms and/or restrictions provided for in this Declara- tion. Each lessee or renter of a Facilities/Amenities Unit shall occupy such Unit subject to all for the terms and restrictions provided in this Declaration and the Rules and Regulations. Any such lease or rental agreement shall be in writing and shall expressly provide that it is subject to the terms of this Declara- tion and the Rules and Regulations, and that failure to use and occupy a Unit and/or the Association Property in accordance with such terms shall be a default under such lease or rental agreement. 2.05 Overall Responsibility for Respective Operations within Proi ect. a. Responsibility for the Proiect. Association Personal Property, and Vacation Ownership Operation. The Association shall have the right, power and duty to administer, manage, and operate: (i) the Project as a condominium project, (ii) all Association gra11-03\docs\ccrs.01 (August 31, 1998) 30 Property, and (iii) the Vacation Ownership Operation. b. Responsibility for the Facilities/Amenities Condomi- niums Operation. The Declarant shall have the right, power and duty to administer, manage, and operate the Facilities/Amenities Condominiums Operation. 2.06 Responsibility for Maintenance. a. Association Property. The Association shall have the right, power and duty to maintain, repair, keep clean, repaint or otherwise refinish or redecorate, and replace and/or restore, as may be necessary, all Association Real Property and all Association Personal Property, to the standard that all such Property is at all times kept in clean, sanitary, workable, attractive, and "first- class" condition, so that the appearance and value of such Association Property, and the Project as a whole, are preserved. Notwithstanding anything in the above paragraph to the contrary, the Association may delegate to and authorize the Owner (s) of one or more Facilities/Amenities Condominiums (but only by mutual agreement between the Association and such Owner(s)) to perform, and pay for directly, certain maintenance of and upkeep to any Association Property which is used solely or predominantly by such Owner(s) and their Permitted Users. Expenses incurred in connection with such maintenance and upkeep (in lieu of being Sole Basic Expenses or Project Basic Expenses) will in such event be the responsibility of such Owner(s) and not the Association. b. Facilities/Amenities Condominium Owner's Personal Property in Facilities/Amenities Units. The Owner of each Facilities/Amenities Unit shall have the right, power, and duty, at such Owner's expense, to maintain, repair, keep clean, repaint or otherwise refinish or redecorate, and replace and/or restore, as may be necessary, all Facilities/Amenities Condominium Owner's Personal Property belonging to such Owner located within such Unit, to the standard that such Personal Property is at all times kept in clean, sanitary/ workable, attractive, and "first-class" condition, so that the appearance and value of that particular Facilities/ Amenities Unit, and the Project as a whole, are preserved. c. Common Furnishings in Vacation Units. The Associa- tion shall have the right, power and duty, at such Association's expense, to maintain, repair, keep clean, repaint or otherwise refinish or redecorate, and replace and/or restore, as may be necessary, all Common Furnishings in the Vacation Condominiums, to the standard that such Common Furnishings are at all times kept in clean, sanitary, workable, attractive, and "first-class" condition, so that the appearance and value of the Vacation Units, and the Project as a whole, are preserved. gral1-03\docs\ccrs.01 (August 31, 1998) 31 d. Right of Association to Perform Maintenance upon a Facilities/Amenities Condomjnium Owner's Nonperformance. In the event a Facilities/Amenities Condominium Owner fails to perform any of the maintenance required of such Owner under this Section 2.06, the Board shall notify such Owner in writing of the work required. In the event that such work is not performed within 60 days from the delivery of such notice, authorized agents or employees of the Board shall have the right to enter the Facilities/Amenities Unit in question, and/or upon the Association Real Property, as the case may be, to cause such work to be completed and assess the cost thereof to such responsible Owner. e. Arbitration of Disputes. In the event of any irreconcilable dispute between or among any of the following: the Declarant, any Vacation Ownership Owner(s), any Facilities/ Amenities Condominium Owner (s) , and/or the Association, relating to maintenance and upkeep or payment responsibility under this Section 2.06, any of such party may cause the same to be referred to binding arbitration, in accordance with Section 16.09 below. 2.07 Allocation of Association Expenses and Sharing of Certain Expenses with Hotel Prolect. a. General Theory and Basis for Allocation of Condo- minium Owners Association Expenses and Assessments. The Associa- tion shall have the duty to pay for any and all Project Basic Expenses, Project Special Expenses, Sole Basic Expenses and Sole Special Expenses, as each of these terms is defined in Article 1. In turn, the Association shall raise the moneys required to pay these Expenses from the Assessments it levies and collects from all Condominium Interest Owners (that is, from both the Vacation Owner- ship Owners and the Facilities/Amenities Condominiums Owner(s). In this connection, it is determined to be fair and equitable that the Vacation Ownership Owners pay only that portion of these Expenses, and their corresponding Assessments, which are attributable to the Vacation Condominiums, and that the Facilities/Amenities Condo- minium Owner (s) pay only that portion of these Expenses, and their corresponding Assessments, which are attributable to the Facili- ties/Amenities Condominiums. Accordingly, to accomplish the foregoing, the following cate- gories of Condominium Owners Association Expenses have been created: 1. Sole Basic and Special Expenses. Sole Basic Expenses and Sole Special Expenses means those expenses of the Association determined by that Association to be attributable to, and payable by, only Vacation Ownership Owners, or by only Facilities/Amenities Condominium Owners. Therefore, Vacation Ownership Owners, owning the Vacation Condominiums, shall be responsible for paying any and all Sole Basic Expenses and Sole gral1-03\docs\ccrs.01 (August 31, 1998) 32 Special Expenses, and their corresponding Assessments, determined by the Association to be attributable solely to the Vacation Condominiums. Likewise, the Owner(s) of a particular Facilities/ Amenities Condominium shall be responsible for paying any and all Sole Basic Expenses and Sole Special Expenses, and their corresponding Assessments, determined by the Association to be attributable solely to that particular Condominium. 2. Project Basic and Special Expenses. Project Basic Expenses and Project Special Expenses means those expenses of the Association determined by the Association to be attributable to, and payable by, all Condominium Interest Owners (that is, by both Vacation Ownership Owners and the Facilities/Amenities Condominium Owners). b. Board to Determine Expense Type. The Board, in its sole discretion, shall as to each and every Association expense, including each capital expenditure, classify such expense, by expense type, as either a: (i) Project Basic Expense, (ii) Project Special Expense, (iii) Sole Basic Expense, or (iv) Sole Special Expense, with the objective in mind that each such classification shall be "fair and equitable." The determination of what is fair and equitable, as to any particular expense, including any capital expenditure, shall be made after the Board has considered all relevant factors related to such expense. Relevant factors shall include, but not necessarily be limited to: (i) the relative degrees of use of the property or services by the Vacation Ownership Owners and the Facilities/Amenities Condominium Owner (s), respectively, giving rise to such expense; (ii) the relative degrees of benefit resulting from such expense to the Vacation Ownership Owners and the Facilities/Amenities Owners, respectively; (iii) the relative cost of construction of the materials and labor (in final form, constituting Association Real Property) required to house (encompass) the Vacation Units and the various Facilities/Amenities Units, and (iv) the respective square footages of the various Condominium Units whose Owners (whether Vacation Ownership Owners or Facilities/Amenities Condominium Owners) are receiving the benefits from payment of such expense. Notwithstanding anything in the foregoing to the contrary, expenses and capital expenditures incurred in connection with the Vacation Ownership Operation shall be a Sole Basic Expense or Sole Special Expense, as the case may be, of the Vacation Ownership Owners, for which corresponding Assessments shall be levied only against the Vacation Ownership Owners. c. Arbitration of Disputes. In the event of any irreconcilable dispute between or among any of the following: the Declarant, any Vacation Ownership Owner(s), any Facilities/Ameni- ties Condominium Owner, and/or the Association, relating to the determination of expense type by the Board, any such party may gra11-03\docs\ccrs.01 (August 31, 1998) 33 cause the same to be referred to binding arbitration, in accordance with Section 16.09 below. d. Sharing of Certain Expenses With Hotel. Declarant has constructed, or is in the process of constructing, a hotel on certain real property adjoining the Land (the "Hotel Project"). Because the Hotel Project and the Condominium Ownership Operation upon the Land described in this Declaration will both contain buildings and other improvements, and encompass operations, which will serve the vacationing and traveling public, certain cost and operating efficiencies will result to both such operations, if in certain instances, they both will utilize the same firm for providing identical or similar services to the two operations, such as providing for example, but not to be limited to: property management, maid and general housekeeping, and maintenance and repair. In this connection, the Association and the Declarant have entered into a written agreement called the "Grand Pacific Palisades Resort and Hotel Cost-Sharing Agreement," which provides for the allocation between the Association and the owner of the Hotel Project of such commonly-incurred expenses on a fair and equitable basis. 2.08 Allocation of Distributable Net Proceeds Among Owners. a. General. The Association shall allocate in a fair and equitable manner among the various affected Owners, that is, among the Vacation Ownership Owners and the Facilities/Amenities Condominium Owners, or among some of them, or among only Vacation Ownership Owners, or among only Facilities/Amenities Condominium Owners, whichever the facts and equity may dictate, and shall pay to them, any and all moneys it receives which constitute Distribut- able Net Proceeds (as defined in Section 1.57). b. Allocation Determination. The Board shall initially make a determination as to the particular Vacation Units and/or Facilities/Amenities Units to which any such Distributable Net Proceeds are attributable. Following that determination, the Board shall allocate such Distributable Net Proceeds among the respective Owners of such Units. The portion of any such Distributable Net Proceeds attributable to the applicable Vacation Units shall be allocated to the Vacation Ownership Owners in the proportion that the total square footage of all Vacation Units in the Project to which such Distributable Net Proceeds are attributable bears to the total square footage of all those Condominium Units in the Project to which such Distributable Net Proceeds are attributable, and then further allocated by the Board upon a "fair and equitable basis," as defined below, among, and be paid to, such Vacation Ownership Owners. The remaining portion of such Distributable Net Proceeds, attributable to some or all of the Facilities/Amenities Units, shall be allocated by the Board upon a "fair and equitable basis," as defined below, among, and be paid to, the Facilities/Amenities gra11-03\docs\ccrs.01 (August 31, 1998) 34 Condominium Owners to whose Units the remaining Distributable Net Proceeds are attributable. c. "Fair and Equitable Basis". What is a "fair and equitable basis" as the expression is used in Paragraph b. above, shall be a determination made by the Board after it has considered all relevant factors related to making the required allocation. Relevant factors shall include, but not necessarily be limited to: (i) the relative cost of construction of the materials and labor (in final form, consisting of Association Real Property) required to house (encompass) each Facilities/Amenities Unit, and (ii) the respective square footages of the various Facilities/Amenities Condominiums to which such Distributable Net Proceeds are attributable. d. Payment Subject to Prior Claims. Each Owner entitled to receive Distributable Net Proceeds shall receive such Owner's share less: (i) any pending amount due the Association by such Owner, (ii) any taxes due by such Owner to any governmental authority, and (iii) any amounts required by a Mortgagee of such Owner. 2.09 Owner's Obligations to Pay Taxes. Each Condominium Interest Owner shall be obligated to pay all property taxes, assessments, and other charges (real or personal) related to such Owner's Condominium Interest (Vacation Ownership or Facilities/ Amenities Condominium). If these taxes have not been segregated by the County Assessor of San Diego County and billed separately to each Owner, they shall be deemed a Project Basic Expense and shall be paid for from moneys raised by the Regular Annual Assessments. 2.10 Right to Mortgage Condominium Interest and First Mortgagee Safety. Each Condominium Interest Owner shall have the right to mortgage or otherwise encumber all, but not less than all, of such Owner's Condominium Interest (Vacation Ownership or Facilities/Amenities Condominium). Any such mortgage shall be subordinate to all of the provisions of this Declaration, and in the event of foreclosure, the provisions of this Declaration shall be binding upon any Owner whose title is derived through foreclosure by private power of sale, judicial foreclosure, assignment in lieu of foreclosure, tax deed or otherwise. Notwithstanding any other provisions of this Declaration, no breach of the provisions of this Declaration, nor the enforcement of any lien created pursuant to the provisions hereof shall defeat or render invalid the lien of any first (in recording priority) Mortgage upon any Condominium Interest, so long as such first Mortgage has been recorded in the Official Records, of San Diego County, California, and has been given in good faith and for value. 2.11 Right to Enter Other Condominium Units. Any Condominium Interest Owner, such Owner's authorized agent, the Managing Agent, gra11-03\docs\ccrs.01 (August 31, 1998) 35 or any other authorized agent of the Association may enter any Condominium Unit at any time and without having to give notice to any occupant(s) thereof, in order to abate any nuisance or any dangerous, unauthorized, prohibited, or unlawful activity being conducted or maintained therein or to assist (including making repairs or rendering other services) in the event of any emergency involving illness or existing or potential danger to life or property. Any such right to entry shall be exercised in such a manner as to avoid any unreasonable interference with the use and occupancy of the Condominium Unit in question. 2.12 Easements for Encroachments. If any portion of the Association Real Property encroaches upon any Condominium Unit, or if any portion of a Condominium Unit encroaches on any Association Real Property, regardless of the cause, a valid easement shall and does exist for such encroachment and for the maintenance of it as long as it remains; and all Condominium Units and the Common Area are created, made, constructed, and held subject to such easements. If any structure containing a Condominium Unit is partially or totally destroyed and then rebuilt and any encroachment upon the Association Real Property thereby results, a valid easement shall exist for such encroachment and for the maintenance of it for so long as it remains, and all Association Real Property is held subject to such easement. 2.13 Easements and Certain Other Rights Reserved by Declarant to Which Owners Take Subject. a. Easements Reserved by Declarant with Respect to Development. Declarant, on behalf of itself, its successors and/or assigns, and its and their respective agents, employees, concessionaires, contractors, subcontractors, invitees, patrons, and authorized personnel, has reserved, or will reserve, for the respective terms provided for below, certain nonexclusive easements in gross to Declarant, its successors and assigns, and its and their respective agents, employees, and authorized personnel, to, from, over, under, across and through the Land, including Association Real Property, for the following purposes: 1. For doing and performing all acts related to constructing, completing, and/or repairing the Improvements in each contemplated Phase of the Development, including without limitation, maintaining temporary construction-related structures and operating and storing construction equipment, tools, and vehicles; 2. For enabling the discharge of any duty of Declarant, and/or any of Declarant's successors and/or assigns, under this Declaration or under any Purchase Agreement, or as otherwise may be imposed by law; gra11-03\docs\ccrs.01 (August 31, 1998) 36 3. For offering for sale, selling, leasing, renting, or otherwise transferring any Vacation ownership in any Vacation Condominium upon the Land (including any Annexed Property), including any Vacation Ownership reacquired by Declarant through foreclosure or a deed-in-lieu of foreclosure; 4. For maintaining customer relations and for providing post-sale services to the Vacation Ownership Owners; 5. For maintaining laundry and vending machine facilities, and television, radio, and communication antennae, satellite dish(es), flag poles and other external fixtures, and for all replacements thereof; 6. For displaying signs and erecting, maintaining, and operating, in connection with the marketing and sales of Vacation Ownerships and services and products related thereto or of similar nature, and for administrative purposes, model units, and a customer service, sales office and/or administration office complex; 7. For showing unoccupied Vacation Units, including having access thereto over the Association General Use Real Property, to prospective purchasers, lessees, tenants, business visitors and/or guests; and 8. For having and providing switchboard, registration, laundry, mail, maintenance, and related such services in and to the Project, prior to any such services being provided by the Association. Declarant covenants to use each of the above easements in a manner that will reasonably minimize any adverse impact therefrom upon the possession, use, and enjoyment of the Project by the Owners. The terms (duration) for each of the above listed easements shall commence from the date of recordation of this Declaration in the Official Records of San Diego County, California (called here the "Commencement Date"), and shall continue: — As to the easement referred to in Paragraph 1. above, until the earliest of: (i) 15 years from the Commencement Date, or (ii) the date upon which all Vacation Ownerships in the Real Property have been sold (and their escrow closed) by Declarant and/or its successors and assigns if any, and all security interests (such as deeds of trust) representing security held by Declarant and/or its successors and assigns, if any, for credit sales of Vacation Ownerships have been released or reconveyed; and — As to the easements referred to in Paragraphs 3., 6., 7., and 8. above, until the earliest of: (i) 15 years from the gra11-03\docs\ccrs.01 (August 31, 1998) 37 Commencement Date, unless Declarant has recorded during said 15- year period in the Official Records of San Diego County, California, a Declaration of Annexation as described in Article 13 of this Declaration, by which, the Declaration is imposed on any remaining Annexable Property, or (11) if Declarant has recorded the foregoing Declaration of Annexation, until the earliest of 15 years from the date of recordation of any such Declaration of Annexation, or the date upon which all Vacation Ownerships in any such Annexed Property have been sold (and their escrows closed) by Declarant and/or its successors and assigns, if any, and all Mortgages representing security held by Declarant and/or successors and assigns, if any, for credit sales of Vacation Ownerships have been released or reconveyed; and — As to the easements referred to in Paragraphs 2., 4. and 5. above, for the duration of the Project. b. Owner's Acknowledgment of Easement Rights. Each Owner acquiring a Condominium Interest (Vacation Ownership or Facilities/Amenities Condominium) referred to in this Declaration accepts such Owner's Condominium Interest subject to each of the easement rights in favor of Declarant provided for in this Section 2.13. c. Indemnification of Owners. Declarant hereby agrees to indemnify each Condominium Interest Owner against, and hold each such Owner harmless from, any and all claims, liabilities, and demands of any sort, which may arise against any such Owner out of the use by Declarant and/or its agents, employees, contractors, and subcontractors, of any of the easements reserved in this Section 2.13. 2.14 Easements in Favor of Hotel Owners and Users. Each Condominium Interest Owner takes such Owner's Condominium Interest (Vacation Ownership or Facilities/Amenities Condominium) subject to those certain easements in favor of the owner and various users of the hotel constructed, or to be constructed, upon certain real property adjoining the Land, each such easement being identified and described in the Hotel Owners Use Rights Declaration, defined in Section 1.73 below. 2.15 Nonseverabilitv of Components of Condominium upon Transfer of a Condominium Interest. The components of each type of Condominium (Vacation Condominium and Facilities/Amenities Condominium) shall not be separated in ownership from each other, except, of course, Vacation Ownerships within a Vacation Condominium may be separately conveyed. Any attempted sale, conveyance, hypothecation, encumbrance, or other transfer of less than all of these components in any such Condominium shall be null and void. Any sale, conveyance, hypothecation, encumbrance or other transfer of a Condominium Interest shall be deemed to gra11-03\docs\ccrs.01 (August 31, 1998) 38 automatically transfer with it all of said components. In addition, the sale of other transfer of a Condominium Interest shall operate to transfer automatically to the succeeding Owner(s) any and all interest of the prior Owner (s) in any funds in the Association, even if not expressly mentioned in the instruments(s) of transfer. Nothing contained in this Section 2.15, however, shall preclude an Owner from creating a cotenancy or joint tenancy in the ownership of any such Condominium Interest (Vacation Ownership or Facilities/Amenities Condominium) with any other person or persons. 2.16 Subordination Declaration and of Tenancy-in-Common Attributes to nits'Ohibition Against Partition of Condomini It is intended that this Declaration, the Articles, the By-Laws, the Rules and Regulations, and the deed granting any Condominium Interest shall be determinative with respect to the use, possession, enjoyment, management, and disposition of the Project or any interest therein. Accordingly, any and all rights with respect to the use, possession, enjoyment, management, or disposition of all or any portion of the Project or any interest therein to which a Condominium Interest Owner might otherwise have as a tenant-in-common (including, but not limited to, any common law or statutory right jointly to use, possess, or manage commonly owned property) are hereby unconditionally and irrevocably subordinated to this Declaration for so long as this Declaration shall remain in effect. Furthermore, in this connection, no Vacation Ownership Owner may seek or obtain, through any legal procedure, judicial partition of any Vacation Unit, or sale of a Vacation Unit in lieu of such partition; provided, however, the foregoing shall not be deemed to prohibit a sale of a Vacation Unit on termination of the Project or removal of such Unit from the Project in accordance with other provisions of this Declaration. Further, nothing in the foregoing shall be construed to prohibit the sale of a Facilities/Amenities Unit, as part of the sale of the Facilities/Amenities Condominium, of which such Unit is a part, by the Owner of such Facilities/Amenities Unit. 2.17 Common Furnishings and Association Property. The Associa- tion shall from time to time acquire legal title to Common Furni- shings. All such Common Furnishings shall be held, managed, and maintained for the benefit of the Vacation Ownership Owners. The Association shall also acquire Association Real Property from the Declarant and shall purchase certain Association Personal Property. All such Association Property shall be held, managed, and main- tained for the benefit of all Condominium Interest Owners. 2.18 Limitations on Partition of Common Area. Section 1359 of the California civil Code requires that the Common Area remain undivided; and, except as provided below, there shall be no judicial partition of the Common Area. A Condominium Interest Owner(s) may, however, maintain such a partition action as to the gra11-03\docs\ccrs.01 (August 31, 1998)39 entire Project as if all Owners were tenants-in-common in the entire Project in the same proportion as their respective interests in the Common Area. The court shall order partition in such instance only by sale of the entire Project and only upon showing of one of the following: a. More than three (3) years before the filing of the partition action, the Project was damaged or destroyed to the extent that a material part was rendered unfit for its prior use, and the Project has not been rebuilt or repaired substantially to its state prior to the damage or destructions. b. Three-fourths (3/4) or more of the Project was destroyed or substantially damaged, and the Owners holding in the aggregate more than a fifty percent (50%) interest in the Common Area oppose repair or restoration of the Project. c. The Project has been in existence more than fifty (50) years, is obsolete and uneconomic, and Owners holding in the aggregate more than a fifty percent (50%) interest in the Common Area oppose repair or restoration of the project. d. The conditions for a sale of the Project, as set forth in this Declaration, have been satisfied. 2.19 Specific Use Restrictions. In addition to all of the other restrictions herein contained, the use and occupancy of any portion of the Project, including, without limitation, the Vacation Units, the Facilities/Amenities Units, the Association Real Property, the Common Area, the Association Personal Property, and the Common Furnishings, are subject to the following conditions: a. Use of Vacation Units. Each Vacation Unit shall be used strictly for the occupancy, use, and enjoyment of the Vacation Ownership Owners and their Permitted Users; provided, however, Declarant, and its successors and/or assigns, may use any such Units as display models and/or as a sales office complex in connection with offering for sale of Vacation Ownerships to the public, and any such Unit or Units may be used as Declarant's office for administering construction of the Development or other affairs related thereto, as provided more specifically in Section 2.13 above. b. No Nuisances. No noxious, illegal, or offensive activities shall be carried on in any portion of the Project; nor shall anything be done therein or thereon which may be or may become an annoyance or a nuisance which in any way will interfere with the quiet enjoyment of each Condominium Interest Owner's respective use of a Vacation Unit or a Facilities/Amenities Unit or which shall in any way increase the rate of insurance for any part of the Project, or cause any insurance policy to be canceled or gra!1 -03\docs\ccrs.01 (August 31, 1998) 40 cause a refusal to renew any such policy. c. Signs. No sign of any kind shall be displayed for public view from any Condominium Unit or from any other part of the Project without the approval of the Board, except that signs, billboards, and other advertising devices or structures used by Declarant in connection with advertising for sale and selling Vacation Ownerships are expressly permitted. d. No Advertising Materials. No "For Sale" or any other advertising or marketing materials shall be placed upon or in the Vacation Units (except in model Vacation Units), or distributed or displayed upon any other portion of the Project without approval of the Board. e. No Animals. No animals of any kind shall be raised, bred, or kept in any Condominium Unit or on any other portion of the Project. f. Garbage and Refuse Disposal. All rubbish, trash and garbage shall be regularly removed from the Condominium Units and from the reminder of the Project, and shall not be allowed to accumulate thereon. Trash, garbage and other waste shall be kept in sanitary containers. g. Antennae; External Fixtures. No television, radio, or communications antennae, satellite dish(es), flag poles, or other external fixtures, other than those installed and retained by Declarant pursuant to Section 2.13 above, and replacements thereof, or as otherwise approved by the Board shall be constructed, erected or maintained on or within the Project. h. No Clotheslines. No exterior clotheslines shall be erected or maintained anywhere on the Project, nor shall outside laundering or drying of clothes be permitted anywhere on the Proj ect. i. No Car Maintenance. No car maintenance of any nature, except for short-term emergency repairs, shall be permitted on the Project. 2.20 Indemnification of Associations and Owners. Each Condominium Interest Owner shall be liable to the Association and/or to other Condominium Interest Owners, as their respective interests appear, for any damage to, or loss of: Association Property, Common Area, Common Furnishings, and/or a Facilities/ Amenities Condominium Owner's Personal Property, that may be incurred by reason of the negligence or willful act of that Owner, and/or such Owner's Permitted User(s) to the extent that any such damage is not covered by insurance maintained by the Association. Further, each Condominium Interest Owner, for himself, herself, gra11-03\docs\ccrs.01 (August 31, 1998) 41 itself and themselves, and for such Owner's Permitted User(s), agrees to indemnify the Association and each and every other Condominium Interest Owner, and to hold them harmless from, and to defend them against (and pay their reasonable attorneys' fees and costs incurred in such defense) , the claim of any person for personal injury and/or property damage which may result from such Owner's or Permitted User's use and occupancy of a Condominium Unit and/or any other portion of the Project. Nothing in the foregoing shall be deemed to preclude such Association from purchasing insurance on behalf of its Members which insures against said risks. ARTICTiB 3 PROTECTION OF THE REAL PROPERTY, ASSOCIATION PERSONAL PROPERTY. COMMON FURNISHINGS. AND FACILITIES/AMENITIES CONDOMINIUM OWNERS' PERSONAL PROPERTY FROM LIENS 3.01 Real Property. Association Personal Property. Common Furnishings, and Any Facilities/Amenities Condominium Owner's Personal Property to Be Maintained Free of Liens. Except as provided in Section 2.08 above, no Condominium Interest Owner shall permit such Owner's Condominium Interest to be subject to any lien (other than the liens of current real property taxes), claim or charge, the enforcement of which may result in a sale or threatened sale of all or any portion of the Real Property, the Association Personal Property, the Common Furnishings, and/or any Facilities/ Amenities Condominium Owner's Personal Property, or in any interference in the use or enjoyment of the Project by any other Owner. In the event of a threatened sale of the Real Property, the Association Personal Property, the Common Furnishings, and/or any Facilities/Amenities Condominium Owner's Property, or any interest therein, or should the use and enjoyment of any portion of such Real Property, Association Personal Property, Common Furnishings, and/or Facilities/Amenities Condominium Owner's Personal Property, by an Owner be threatened by a reason of any such lien, claim, or charge made against the Condominium Interest of another Owner, or should proceedings be instituted to effect such a sale or interference, any Owner or Owners, or the Association acting on behalf of all Owners, may, but shall not be required to, pay or compromise the lien, claim, or charge without inquiring into the proper amount or the validity thereof. In such event, the responsible Owner(s) whose Condominium Interest was subjected to such lien, claim, or charge shall forthwith pay the amount so paid or expended to the other Owner(s) and/or Association, whomsoever shall have paid or compromised such lien, claim, or charge, together with such reasonable attorneys' fees and related costs as may have been incurred. If the Association pays the lien, claim, or charge, it shall levy a Special Assessment against the responsible Owner(s) whose interest(s) was subject to such claim, lien, or charge for the amount so paid, together with such reasonable gral1-03\docs\ccrs.01 (August 31, 1998) 42 attorneys' fees and related costs as may have been incurred. Furthermore, no Owner shall permit such Owner's interest in any funds from time to time in the possession of the Association, to be made subject to any attachment, lien, claim, charge, or other legal process; and each such Owner shall promptly restore any funds held by the Association with respect to such Owner's Condominium Interest to the extent depleted by reason of the assertion of any such attachment, lien, claim, charge or other legal process and shall reimburse the Association for all reasonable attorneys' fees and other costs incurred with respect thereto. 3.02 Association to Defend Certain Actions. In the event that a lawsuit is brought against all or substantially all of the Owners which will or could result in a lien, claim, charge, or other encumbrance being levied against all of any portion of the Real Property, including their respective Condominium Interests, the Association Personal Property, the Common Furnishings, and/or any Facilities/Amenities Condominium Owner's Personal Property, or any interest therein, the Association shall promptly cause such lawsuit to be defended and/or settled, and all costs of such defense and/or settlement shall be made a Special Assessment to be levied against all of the Owners joined as defendants in such lawsuit; provided, however, in the event that an insurance carrier is obligated to provide such defense under a policy of insurance carried by the Association, the Association shall be relieved of the obligation to provide such defense. Nothing contained herein shall in any way limit the rights of any such Owner(s) to retain counsel of such Owner's choice and expense to represent such Owner(s) in such lawsuit, but in such event, such Owner shall not be relieved of liability for the Special Assessment provided for in this section. 3.03 Payment of Lien. In the event that a lien or encumbrance not covered by California Civil Code Section 1357 (pertaining to mechanics' liens) or any successor statute thereof attaches to all or any portion of the Real Property, including any Condominium Interest, the Association Personal Property, the Common Furni- shings, and/or any Facilities/Amenities Condominium Owner's Personal Property, or any interest therein, by reason of a judgment or otherwise, the Association shall promptly take appropriate steps to remove such lien, including, but not limited to, the payment of money and/or the posting of a bond. The Association shall have the power to borrow money and to take such other steps as are necessary to free such Real Property, Association Personal Property, Common Furnishings, and/or Facilities/Amenities Condominium Owner's Personal Property from any such lien. Simultaneously with any action taken pursuant to this section, the Association shall levy a Special Assessment against: (i) those Owners whose acts or omissions to act caused the lien to be attached to such Real Property, Association Personal Property, Common Furnishings, and/or any Facilities/Amenities Condominium Owner's Personal Property, to gra11-03\docs\ccrs.01 (August 31, 1998) 43 be paid by each such Owner on a pro rata basis, or (ii) all Owners, if the lien in question was not incurred by acts or omissions to act of any particular Owner(s), any such Special Assessment to be in the amount of all costs, including reasonable attorneys fees, which were incurred by the Association in removing such lien. 3.04 Reimbursement to Association. Upon the Association's taking any of the actions (including, without limitation, paying moneys to defend against lawsuits and paying liens, claims, charges) under this article to prevent threatened liens, claims, or charges from being imposed against any portion of the Real Property, including any Condominium Interests, the Association Personal Property, the Common Furnishings, and/or any Facilities/ Amenities Condominium Owner's Personal Property, or to remove said liens, claims or charges once they have become attached thereto, the Association, notwithstanding anything in this Article 3 to the contrary, shall have the right to levy Special Assessments to recoup such moneys paid out against every Condominium Interest Owner, and not only against the particular responsible Owners referred to in Sections 3.01, 3.02, and 3.03 above (called here the "Responsible Owners"), in those instances where the Association believes that such Special Assessments against all such Owners would be in the best financial interests of a majority of all Owners. In such event, however, the Association shall still be required to independently levy Special Assessments against the Responsible Owners for the recoupment of any such levied moneys. ARTICLE 4 THE ASSOCIATION 4.01 Association. Administration, management, and control of the Project, the Association Personal Property, the Vacation Ownership Operation shall be, and is, vested in the Association for the benefit and on behalf of the Condominium Interest Owners, effective upon recordation of the Original Deed evidencing the initial complete sale and conveyance by Declarant of a Vacation Ownership. 4.02 Membership in Association. Each Condominium Interest Owner (Vacation Ownership Owner, including Declarant as to each Declarant Vacation Ownership, and Facilities/Amenities Condominium Owner, including Declarant as to each such Condominium owned by Declarant), shall be a Member of the Association and shall remain a Member thereof until such Owner ceases to be such an Owner. Ownership of a Condominium Interest shall be the sole qualification for Membership. 4.03 Transfer of Membership. The Membership of each Condominium Interest Owner in the Association is appurtenant to and inseparable from such Owner's Condominium Interest (Vacation gra11-03\docs\ccrs.01 (August 31, 1998) 44 Ownership or Facilities/Amenities Condominium), and shall be automatically transferred upon any subsequent transfer or conveyance of such Owner's Condominium Interest to such Owner's transferee; otherwise, said Membership shall be nontransferable, and any attempt to make a prohibited transfer shall be void. 4.04 Classes of Membership. The Association shall have the following classes of voting Membership: a. With Respect to Matters Pertaining to Only the Project and/or the Association Personal Property. With respect to matters pertaining to only the Project and/or the Association Personal Property, the following four (4) classes of Membership shall exist: 1. Class "A" Membership. Class "A" Members shall be all Annual Vacation Ownership Owners, except Declarant as to Declarant Annual Vacation Ownerships (until Declarant as to such Ownerships becomes a Class "A" Member pursuant to Subsection 4.04 c. below) Each Class "A" Member, as to Association matters, shall be entitled to two (2) votes for each Annual Vacation Ownership owned; provided, however, that while an Annual Vacation Ownership may be owned by several Owners, and while all such Owners will be Members, multiple Owners of one (1) Annual Vacation Ownership shall have only two (2) votes, which votes shall be exercised in one block (that is, cast as two [2] votes for or against the matter at issue, and shall not be split), as these multiple Owners, among themselves, shall decide. 2. Class "B" Membership. Class "B" Membership shall be all Biennial Vacation Ownership Owners, except Declarant as to Declarant Biennial Vacation Ownerships (until Declarant, as to such Ownerships, becomes a Class "B" Member pursuant to Section 4.04 c. below). Each Class "B" Member, as to Association matters, shall be entitled to one (1) vote for each Biennial Vacation Ownership owned; provided, however, that while a Biennial Vacation Ownership may be owned by several Owners, and while all such Owners would be Members, multiple Owners of one (1) Biennial Vacation Ownership shall have only one (1) vote, which collective vote shall be exercised as these multiple Owners, among themselves, shall decide. 3. Class "C" Membership. The Class "C" Member shall be the Declarant, who shall be entitled to two (2) votes for each Declarant Annual Vacation Ownership and to one (1) vote for each Declarant Biennial Vacation Ownership. Said Class "C" Membership shall cease and be automatically converted to "regular" Class "A" and/or Class "B" Membership, as appropriate, on the first of the following dates to occur: (i) that date which is the second (2nd) anniversary after the recording date of the first Original Deed of a Vacation Ownership following Declarant's completion of gral1-03\docs\ccrs.01 (August 31, 1998) 45 Phase III of the Development, or (ii) on that date which is the eleventh (llth) anniversary following the recording of the first Original Deed of a Vacation Ownership in Phase I of the Project. At any point in time before the above conversion, Declarant shall be deemed to be the Owner of that number of Vacation Ownerships in the Project equal to the excess of the total number of Vacation Ownerships in both Designated and Nondesignated Vacation Units in each developed Phase (that is, a Phase upon which Improvements have been constructed and in which Declarant may offer for sale and sell Vacation Ownerships) over the total number of such Vacation Ownerships conveyed by Declarant to third parties by Original Deeds (and not thereafter reacquired in any manner by Declarant), keeping in mind that Declarant shall be treated as owning unsold Vacation Ownerships in each Nondesignated Unit in each such developed Phase as well as in each Designated Unit therein. 4. Class "D" Membership. Class "D" Members shall be all Facilities/Amenities Condominium Owners. Each such Class "D" Member, as to Association matters, shall be entitled to 102 votes (51 [the number of Use Weeks for each Vacation Unit] multiplied by 2 [the number of votes allowed to each Owner of an Annual Vacation Ownership]) for each Facilities/Amenities Condominium owned; provided, however, that while a Facilities/ Amenities Condominium may be owned by several Owners, and while all such Owners will be Members, multiple Owners of one such Facilities/Amenities Condominium shall have only the foregoing 102 votes, which votes shall be exercised in one block (that is, cast as 102 votes for or against the matter at issue, and shall not be split), as these multiple Owners, among themselves, shall decide. (Giving each such Facilities/Amenities Condominium Owner 102 votes places each such Owner on an identical parity with the other Members, in that each such Facilities/Amenities Owner uses such Owner's Facilities/Amenities Unit: (i) annually (not biennially), and (ii) for at least the period of each calendar year encompassing at least 51 Use Weeks.) b. With Respect to Matters Pertaining to Only the Vacation Ownership Operation. With respect to matters pertaining to only the Vacation Ownership Operation, the Association shall have the same Class "A", Class "B", and Class "c" Memberships, as provided under Section 4.04 a. above, but shall not have the Class "D" Membership provided under Section 4.04 a. 4. above. 4.05 Member Voting: Standard Quorum and Vote Required. a. With Respect to Matters Pertaining to Only the Project and/or Association Personal Property. With respect to matters pertaining to only the Project and/or Association Personal Property, the standard quorum and vote requirements are as follows: gra11-03\docs\ccrs.01 (August 31, 1998) 46 1. Where Class "C" Membership Has Not Yet Converted to Class "A" and/or Class "B" Membership. Where Class "C" Membership has not yet been converted to Class "A" and/or Class "BH Membership pursuant to Section 4.04 a. 3. above, the presence, either in person or by proxy (or a combination thereof) at any meeting of Members of: (1) the Declarant, (2) Members entitled to cast at least 15 percent of the total votes held by all Members in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (3) Owner(s) of at least eight (8) Facilities/Amenities Condominiums, shall constitute a quorum for any action before the Association, unless a greater requirement is otherwise imposed by this Declaration, the Bylaws, or the Articles; and the vote or written ballot cast in favor of, or against, the issue of Association business in question, as the case may be, at such meeting of: (i) the Declarant, (ii) Members holding at least a majority of the Class "A" and Class "B" Memberships, and (iii) the Owner(s) of at least eight (8) Facilities/Amenities Condominium, then present, in person and/or by proxy, shall constitute approval or disapproval, as the case may be, of the proposal or matter at issue, except where a greater portion of the voting power is otherwise required by this Declaration, the Bylaws, or the Articles. 2. Where Class "C" Membership Has Been Converted to Class "A" and/or Class "B" Membership. Where Class "C" Membership has been converted to Class "A" and/or Class "B" Membership pursuant to Section 4.04 a. 3. above, the presence, either in person or by proxy (or a combination thereof) at any meeting of Members of: (1) Members entitled to cast at least 15 percent of the total votes held by all Members in the Association, (2) Members entitled to cast at least 15 percent of the total votes held by all Members in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (3) the Owner(s) of at least eight (8) Facilities/Amenities Condominiums, shall constitute a cruorum for any action before the Association, unless a greater requirement is otherwise imposed by this Declaration, the Bylaws, or the Articles; and the vote or written ballot cast in favor of, or against, the issue of Association business in question, as the case may be, at such meeting of: (i) Members holding at least a majority of the total votes in the Association, (ii) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (iii) the Owner(s) of at least eight (8) Facilities/Amenities Condominiums, then present, in person or by proxy, shall constitute approval or disapproval, as the case may be, of the proposal or matter at issue, except where a greater portion of the voting power is otherwise required by this Declaration, the Bylaws, or the Articles. gra11-03\docs\ccrs.01 (August 31, 1998) 47 b. With Respect to Matters Pertaining to Only the Vacation Ownership Operation. With respect to matters pertaining to only the Vacation Ownership Operation, the standard quorum and vote requirements are as follows (Note: the Class "D" Members, namely the Owner(s) of the Facilities/Amenities Condominiums, do not have any vote or even Membership with respect to these matters.): 1. Where Class "f." Membership Has Not Yet Been Converted to Class "A" and/or Class "B" Membership. Where Class "C" Membership has not yet been converted to Class "A" and/or Class "B" Membership pursuant to Section 4.04 a. 3. above, the presence, either in person or by proxy (or a combination thereof) at any meeting of Members of: (1) the Declarant, and (2) Members entitled to cast at least 15 percent of the total votes held by all Members in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, shall constitute a quorum for any action before the Association, unless a different requirement is imposed by this Declaration, the Bylaws, or the Articles; and the vote or written ballot cast in favor of, or against, the issue of Association business in question, as the case may be, at such meeting: (i) the Declarant, and (ii) Members holding at least a majority of the Class "A" and Class "B" votes, then present, in person and/or by proxy, shall constitute approval or disapproval. as the case may be, of the proposal or matter at issue, except where a greater portion of the voting power is required by this Declaration, the Bylaws, or the Articles. 2. Where Class "C" Membership Has Been Converted to Class "A" and/or Class "B" Membership. Where Class "C" Membership has been converted to Class "A" and/or Class "B" Membership pursuant to Section 4.04 a. 3. above, the presence, either in person or by proxy (or a combination thereof) at any meeting of Members of: (1) Members entitled to cast at least 15 percent of the total votes held by all Members in the Association, and (2) Members entitled to cast at least 15 percent of the total votes held by all Members in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, shall constitute a quorum for any action before the Association, unless a different requirement is imposed by this Declaration, the Bylaws, or the Articles; and the vote or written ballot cast in favor of, or against, the issue of Association business in question, as the case may be, at such meeting of: (i) Members holding at least a majority of the total votes in the Association, and (ii) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, then present, in person or by proxy, shall constitute approval or disapproval. as the case amy be, of the proposal or matter at issue, except where a greater portion of the voting power is required by the Bylaws, the Articles or this Declaration. gra11-03\docs\ccrs.01 (August 31, 1998) 48 c. Each Member to Vote. Each Member shall make his, her, their or its best efforts, whether in person or by proxy, to attend each Association Member meeting and to vote on each Association matter of business. 4.06 Procedural Rules. Procedural rules relating to Member meetings, Member voting, nomination and election of directors to the Board, Board meetings, director voting, officers, and committees, are set forth in the Bylaws. ARTICLE 5 ASSOCIATION'S RIGHTS. POWERS, AND DUTIES; AMD MANAGING AGENT 5.01 General Rights. Powers, and Duties. a. Administration and Services. Administration, man- agement, and control of the Project, Association Personal Property, and the Vacation Ownership Operation shall be, and is, vested in the Association for the benefit and on behalf of the Condominium Interest Owners. In this connection, the Association, acting alone and/or through its Board, its officers, and/or its other duly authorized representatives, shall, subject to the provisions of the Articles, the Bylaws and this Declaration, exercise all of the powers, rights, and duties herein enumerated, and, except as may be specifically limited herein, all the rights, powers, and duties held by a nonprofit, mutual benefit corporation organized under the laws of the State of California. These rights, powers, and duties of the Association shall, reciprocally, constitute the services to be given by the Association to the Condominium Interest Owners. b. Conveyance of Association Property to Association. The Declarant shall convey and transfer to the Association all Association Real Property, Association Personal Property, and Common Furnishings located within the particular Phase of the Land in which the Declarant has constructed Improvements and in which the Declarant will offer for sale, and sell, Vacation Ownerships, at or prior to the recordation of the Original Deed evidencing the initial completed sale and conveyance of a Vacation Ownership in such Phase. c. Power of the Board of Directors. The Association shall, as a general principle, act through its Board; and the Board shall have the right, power, and duty to act for the Association except as to those actions which require the vote of the Members of the Association. d. Vesting of Rights. Powers, and Duties. The powers, rights, duties, and limitations of the Association set forth in this Article 5 and elsewhere in this Declaration, and in the gra11-03\docs\ccrs.01 (August 31, 1998) 49 Articles and the Bylaws shall vest in and be imposed on the Association concurrently with recordation of the Original Deed evidencing the initial completed sale and conveyance by Declarant of a Vacation Ownership in the Project. 5.02 Specific Rights. Powers, and Duties of the Association and Services to the Owners. Without limiting the foregoing general rights, powers, and duties, or of any Association rights, powers, and duties provided elsewhere in this Declaration, or in the Articles or Bylaws, the Association, for the benefit of the Condominium Interest Owners, is hereby expressly authorized and directed to do all of the following, which shall, reciprocally, constitute the services to be rendered by the Association to all Condominium Interest Owners: a. Delegate Authority. To elect, employ, appoint, assign, and delegate the powers rights, and duties of the Associa- tion to officers, employees, committees, agents, and independent contractors including, without limitation, the Managing Agent; provided, however, that no such delegation shall relieve the Asso- ciation of any ultimate responsibility it may have to perform any such delegated duty. b. Enter Contracts. To enter contracts with third parties for the furnishing of goods or services related to the Project, Association Personal Property, and/or the Vacation Owner- ship Operation. c. Borrow Money. To borrow money as may be needed in connection with the discharge by the Association of its powers, rights, and duties. d. Establish Rules and Regulations. To adopt reason- able Rules and Regulations not inconsistent with this Declaration, the Articles, or the Bylaws relating to the occupancy and/or use by the Condominium Interest Owners and their Permitted Users of the Project, the Association Personal Property, and the Common Furni- shings. A copy of the Rules and Regulations shall be mailed or otherwise delivered to each Owner. Declarant may establish and adopt such Rules and Regulations until the initial Board is selected. Thereafter, the Board shall have this responsibility. e. Right to Enter. To: (i) enter at any time upon any portion of the Association Real Property and the Common Area; (ii) enter any Vacation Unit or Facilities/Amenities Unit, after giving reasonable notice to the Owner(s) or other occupants thereof, where the Unit is then being personally occupied, for any purpose reasonably related to the exercise by the Association of its rights or performance of its duties under this Declaration; and (iii) enter any Vacation Unit or Facilities/Amenities Unit at any time without having to give prior notice, in order to abate any nuisance gral1-03\docs\ccrs.01 (August 31, 1998) 50 or any suspected dangerous, unauthorized, prohibited, or unlawful activity being conducted or maintained therein, or to assist in the event of any emergency involving illness or existing or potential danger to life or property. Any such right of entry shall be exercised in such a manner as to avoid any unreasonable or unnecessary interference with the use and occupancy of any Unit thereby affected. f• Maintain and Repair Association Property. Com-mnn Area and Common Furnishings. To maintain, repair, keep clean, repaint or otherwise refinish or redecorate, and replace and/or restore, as may be necessary or desirable, all Association Real Property, all Association Personal Property, and all Common Area, and any portion thereof, to the standard that all such Association Property, Common Area, and Common Furnishings are at all times kept in clean, sanitary, workable, attractive, and "first-class" condition, so that the appearance and value of such Association Property, Common Area, Common Furnishings, and the Project as a whole, are preserved. g. Pay Taxes and Assessments. As agent of the Condominium Interest Owners and not as principal, to pay all taxes and assessments, real or personal, relating to the Condominium Interests, the Association Real Property, the Common Area, the Association Personal Property, and/or the Common Furnishings, to the extent that such taxes are not separately assessed and billed to such Owners, and to contest or compromise same provided they are paid or a bond insuring payment is posted before the sale or the disposition of any property to satisfy the payment of such taxes. Until such time as (if ever) these taxes have not been separately assessed to each Owner, the moneys required to pay these taxes shall be a Basic Expense of the Association to be paid for from moneys raised by the levy of Regular Annual Assessments. h. Provide and Pay for Utilities. To acquire, provide, and pay for water, sewer, garbage disposal, refuse and rubbish collection, electrical, telephone, gas, and other utility services furnished to the Condominium Units, to the extent that the costs of such utilities are not separately billed to the Owners. The moneys required to pay for these utility services shall be a Basic Expense of the Association to be paid from moneys raised by the levy of Regular Annual Assessments. i. Enforce Declaration. Bylaws, and Rules and Regula- tions. To take all measures necessary to enforce the provisions of this Declaration, the Bylaws, and the Association Rules and Regulations. The Owner(s) of the Facilities/Amenities Condominiums shall be responsible for enforcing any Facilities/Amenities Condo- miniums Owner(s) Rules and Regulations. gral1-03\docs\ccrs.01 (August 31, 1998) 51 j. Levy and Collect Assessments. Pav Expenses, and Change Fiscal Year. To levy, bill, collect, and enforce payment of Assessments against all Owners for the purposes and in the manner provided in Article 6 hereof, and to pay all Basic Expenses and Special Expenses of the Association. k. Obtain and Pay Cost of Legal and Accounting Ser- vices . To obtain and pay the cost of legal and accounting services deemed necessary or proper in connection with the administration, management, and operation of the Project, Association Personal Property, and the Vacation Ownership Operation, and in the performance of any other duties hereunder including enforcement of this Declaration, the Articles, the Bylaws, and/or the Rules and Regulations. In this connection, the Association is hereby granted the express authority to select legal counsel to represent the Association and the Owners collectively in Association legal matters, unless an Owner desires to retain his, her, or its own separate legal counsel at such Owner's own expense. 1. Obtain and Pav Cost of Insurance. To obtain, maintain, and pay the cost of the insurance policies required by this Declaration or as otherwise desired by the Association. m. Maintain Bank Accounts. To deposit: (i) all funds collected from the Assessments levied against Owners pursuant to Article 6 hereof, and (ii) all other amounts collected by the Association in connection with its rights, powers, and duties provided herein, as follows: 1. To deposit all Regular Annual Assessments, Special Assessments, Capital Needs Assessments, and any other income of the Association into a separate federally-insured, readily accessible, institutional money depository account or accounts (called the "General Account or Accounts") selected by the Board. Funds deposited in the General Account(s) may be used by the Association only for the purposes for which such funds have been collected. 2. To redeposit that portion of any Regular Annual Assessments, which the Association shall collect for reserves, within 30 days after their initial deposit into the General Account, into a federally-insured, institutional money depository account as the Board selects, taking into consideration when use of such funds is anticipated (called the "Reserve Account"). n. Prepare and Distribute Financial Information. To regularly prepare Association budgets and financial statements and to distribute copies thereof to each Member as follows: 1. Prepare Budget. To prepare and adopt for each forthcoming Fiscal Year a pro forma Budget of the revenue and Basic gral1-03\docs\ccrs.01 (August 31. 1998) 52 Expenses which the Board expects will be collected/incurred by the Association in connection with the Association's administering and managing the Project, Association Personal Property, and the Vacation Ownership Operation in such forthcoming Fiscal Year. Each such Budget shall be prepared by, or under the direction of, the Board, and a copy thereof shall be distributed to each Owner during the then ending Fiscal Year not more than 60 days nor less than 45 days, prior to the beginning of the forthcoming Fiscal Year to which the Budget applies. Each such Budget shall consist of at least the following information: (i) the estimated revenue and Basic Expenses determined on an accrual accounting basis; (ii) the amount of the total cash reserves of the Association currently available for replacement or major repair of Association Property and Common Furnishings and for contingencies; (iii) an itemized estimate of the remaining life of, and the methods of funding to defray the costs of repair, replacement or additions to Association Property and Common Furnishings; and (iv) a general statement setting forth the procedures used by the Board in the calculation and establishment of reserves to defray the costs of repair, replacement or additions to such Association Property and Common Furnishings. 2. Prepare Annual Report. To prepare and dis- tribute to each Condominium Interest Owner (including each director on the Board) an annual report within 120 days after the close of each Fiscal Year, consisting of the following: (i) a balance sheet of the Association as of the last day of such Fiscal Year; (ii) an operating (income) statement showing the financial results of the operations of the Association for such Fiscal Year; (iii) a statement of net changes in the financial position and operations of the Association for such Fiscal Year; (iv) for any Fiscal Year in which the gross income to the Association exceeds $75,000, a copy of the review or certified audit, to be determined by the Board, of the annual report referred to herein prepared in accordance with generally accepted accounting principles by a licensee of the California State Board of Accountancy; and (v) a list of the names, business mailing addresses, and business, telephone numbers of the directors on the Board. If such annual report is not prepared by an independent accountant, the annual report shall be prepared by an officer or the Managing Agent of the Association and shall be accompanied by the certificate of such officer or Managing Agent certifying that the statement was prepared from the books and records of the Association without independent audit or review. o. Provide Minutes and Agenda. To provide each Condominium Interest Owner with: (i) a copy of the minutes of any Association or Board meeting, within 60 days following the date of such meeting, and (ii) a list of the items of business and the order in which they are to be considered, at each annual or special meeting of the Members of the Association not later than 30 days gra11-03\docs\ccrs.01 (August 31, 1998) 53 nor earlier than 90 days prior to the scheduled date of such meeting, which list shall also contain the name, address, and a brief biographical sketch of each person nominated to stand, or person who has announced his intention to stand, for election to the Board. Mailing of the information referred to in Section 5.02 n. above, and this Section 5.02 o. and Section 5.02 p. below, may be combined where appropriate. p. Prepare Statement of Assessment Enforcement Policy. To prepare and distribute to each Owner annually, within 60 days prior to the beginning of each Fiscal year, a statement of the Association's policies and practices in enforcing its remedies against Condominium Interest Owners for their defaults in the payment of Regular Annual Assessments, Special Assessments, and Capital Needs Assessments including the recording and foreclosing of Liens (referred to in Subsection 7.02 c.) against such Owners' Condominium Interests in the Project. q. Issue Statements of Status. Upon the request of any Owner, Mortgagee, prospective Mortgagee, purchaser, or other prospective transferee of a Condominium Interest, to issue a written statement setting forth any amounts unpaid to the Association with respect to the Condominium Interest in question (called a "Statement of Status"). Such Statement of Status for which a reasonable fee may be charged, shall be binding upon the Association in favor of any person who may rely thereon in good faith. In addition, the Association shall cause its insurer(s) under this fire and extended coverage insurance policy to provide to any Mortgagee with a Certificate of Insurance indicating that such Mortgagee is an additional insured under such policy or policies. r. Compile Register. To compile and keep current an accurate list of all Association Members (the "Register") which Register shall set forth the name, mailing address, and telephone number of each Member. Upon the written request by a Member, this Register shall be made available for inspection and copying by such Member - or by his, her, or its duly appointed representative - at any reasonable time at the office of the Managing Agent upon the Project for a purpose reasonably related to Membership in the Association, all in accordance with the applicable provisions of the Bylaws. Each Member who inspects the Register hereby agrees that he, she, or it will not make any commercial use of same, will not use same for any purpose not directly related to Association business, and will not distribute a copy of the Register to any person who is not a Member. s. Do Other Necessary or Proper Acts. To do all other things or acts which in the discretion of the Association are deemed necessary, desirable, helpful, and/or proper in connection with the administration and management of the Project, Association gra11-03\docs\ccrs.01 (August 31, 1998) 54 Personal Property, and the Vacation Ownership Operation, including, without limitation, initiating legal actions in the name of the Association on behalf of the Owners. 5.03 Right. Power, and Duty to Engage Managing Agent. The Association shall have the authority and duty to employ a reputable firm or proprietorship to be the Managing Agent for the Project, Association Personal Property, and the Vacation Ownership Operation pursuant to a written agreement (the "Management Agreement") , which Agreement shall meet the basic requirements of this Section 5.03. The first Managing Agent shall be appointed by Declarant. Each Management Agreement shall cover at least the following matters: a. Delegation of Authority. Delegate to, authorize and obligate the Managing Agent to perform all of the duties and obligations of the Association specified in Section 5.02 above, subject to the limitations set forth in Subsection 5.03 1. below. b. Term. Provide for a term of management of not more than three (3) years, except that the Management Agreement shall provide that the term will be automatically renewed for successive one (l)-year terms unless a notice of non-renewal is given by either party thereunder at least 90 days prior to the end of the then existing term; provided, however, the Association may not make a determination not to renew said Management Agreement and give such notice of non-renewal, unless such action has been directed by the vote or written consent of: (i) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (ii) the Owner(s) of at least (8) Facilities/Amenities Condominiums. c. Termination for Cause. Provide for termination of the Managing Agent for cause at any time by the Board with pro- vision for arbitration of the issue of whether "cause" existed in accordance with the Commercial Arbitration Rules of the American Arbitration Association, if requested by the Managing Agent. d. Resignation. Provide that the Managing Agent may resign; but, only after it has given to the Association at least 90 days prior written notice of such intention to resign. e. Enumeration of Powers and Duties. Enumerate the powers and duties of the Managing Agent in the operation of the Project, Association Personal Property, and Vacation Ownership Operation including without limitation, administrative, fiscal, maintenance, and enforcement duties. f. Compensation. Provide for compensation to be paid to the Managing Agent not to exceed ten percent of the actual Basic Expenses of the Association, including reserves, but excluding of gra11-03\docs\ccrs.01 (August 31, 1998) 55 the fee of the Managing Agent for the Fiscal Year in question. Such compensation may be increased: (i) if so authorized by the vote or written consent of at least that number of Members' votes required by Section 4.05 a. above to approve a proposal, or (ii) by the Board, if the Association is unable to procure a reputable person or firm to act as Managing Agent without in-creasing such compensation. All overhead expenses of the Managing Agent attributable to its management of the Project, Association Personal Property, and the Vacation Ownership Operation shall be passed through to the Association and the Association shall re-imburse the Managing Agent for such overhead expenses. g. Record Maintenance. Provide what Association, Project, Vacation Ownership Operation, and/or other records are to be maintained by the Managing Agent. h. Reports. Provide what periodic reports and other information relating to the Project, Association Personal Property, and the Vacation Ownership Operation are to be communicated to the Association by the Managing Agent. i. Fidelity Bonding. Provide that Association shall cause the Managing Agent, and any of its employees who have charge of Association funds, to be fidelity bonded, at Association cost, if available, in accordance with Section 8.01 c. below. j. Errors and Omissions Insurance. Provide that the Managing Agent shall purchase and maintain, at its own cost, a policy of insurance, naming the Association as an insured, which policy provides for payment for damage to third parties arising out of any errors or omissions to act by the Managing Agent. k. Right of Entry. Delineate the authority of the Managing Agent and persons authorized by the Managing Agent to enter into the Condominium Units for the purposes set forth in Section 5.02 e. above. 1. Employment of Subagents. Grant authority to the Managing Agent to employ one or more subagents to assist Managing Agent perform its duties hereunder. Program. Provide that the Managing Agent shall administer the Vacation Ownership Use Program, including without limitation, the exchange of occupancy rights by Vacation Ownership Owners under an Exchange Program. n. Limitation on Powers of the Managing Agent. Notwithstanding the powers of the Managing Agent set forth in this Section 5.03, each Management Agreement shall provide that the Managing Agent shall not enter into any contract with a third gra11-03\docs\ccrs.01 (August 31, 1998) 56 person or entity whereby such person or entity will furnish goods or services to the Project, Association Personal Property, and/or the Vacation Ownership Operation for a term longer than one (1) year, unless so authorized by the vote or written consent of at least that number of Members' votes required by Section 4.05 a. above to approve a proposal, or unless the contract is terminable by any party thereto at the end of any one (1) year period, except for: 1. The Management Agreement itself; 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, however, that the term of the contract shall not exceed the shortest term for which the supplier will contract at the regulated rate; 3. Prepaid casualty and/or liability insurance policies not to exceed three (3) years' duration, provided that the policy permits short-rate cancellation by the insured; 4. Any lease of Common Furnishings or any laundry room fixtures and equipment (where such is Association Personal Property), not to exceed five (5) years' duration, provided that the lessor under any such agreement is not an entity in which the Declarant or the Managing Agent has a direct or indirect ownership interest of 10 percent or more; and 5. Any agreements for cable television services and equipment, and/or for satellite dish equipment and service, not to exceed five (5) years' duration, provided that the supplier is not an entity in which the Declarant or the Managing Agent has a direct or indirect ownership interest of 10 percent or more; and 6. Any agreements for burglar alarm services and equipment, not to exceed five (5) years' duration, provided that the supplier is not an entity in which the Declarant or the Managing Agent has a direct or indirect ownership interest of 10 percent or more. 5.04 Limited Liability. Neither the Association nor the Managing Agent, nor any of their sub-agents or employees, shall be responsible for the acts, omissions to act, or conduct of any of the Condominium Interest Owners or for the breach of any obligation by such an Owner arising under this Declaration, the Bylaws, and/or the Rules and Regulations. gra11-03\docs\ccrs.01 (August 31, 1998) 57 ARTICLE 6 ASSESS! 6.01 Creation of Personal Obligations; Purpose of Assessments; Theory and Basis for Allocation of Association Expenses an4 Assessments; and Apportionment of Assessments Among Vacation Ownership Owners. a. Creation of Personal Obligations. Declarant, for each Vacation Ownership it owns, and for each Facilities/Amenities Condominium it owns, hereby covenants, and each other Vacation Ownership Owner, and each other Facilities/Amenities Condominium Owner, if any, by accepting the conveyance of such a Condominium Interest, whether or not it shall be so expressed in such Owner's deed, and/or a by owning a Condominium Interest, shall be deemed to have covenanted and agreed, that, for each such Facilities/ Amenities Condominium and for each such Vacation Ownership owned, to pay to the Association all Regular Annual Assessments, Special Assessments and Capital Needs Assessments as these terms are hereinafter defined and described in Sections 6.02, 6.03, and 6.04, respectively (all of which are collectively referred to as the "Assessments") allocated respectively among them by the Board in accordance with Section 2.07 above, and levied upon them by the Board, which Assessments shall be established, made, and collected as hereinafter provided. These Assessments, together with interest thereon and all costs of collection, including reasonable attorneys' fees, shall be the personal obligation of each Owner at the time the Assessment becomes due and payable. This personal obligation for delinquent Assessments shall not pass to successors- in-title of a Condominium Interest unless expressly assumed by them. In addition, pursuant to Section 7.02 c. below, a continuing lien (called the "Lien") is created in favor of the Association against each Condominium Interest to secure its Owner's or Owners' prompt payment to the Association of each such Assessment. No Owner may waive or otherwise avoid liability for the Assessments by nonuse of a Condominium Unit or of any other rights given to such Owner by virtue of such Owner's deed or other conveyance instrument of a Condominium Interest. Notwithstanding anything in the foregoing to the contrary, Declarant may, in lieu of paying certain Regular Annual Assessments and Special Assessments, enter into a subsidy agreement with the Association with respect to paying certain Basic Expenses and Special Expenses of the Association. b. Purpose of Assessments. The purpose of the Assess- ments is to provide the Association with a vehicle for raising and paying all Basic Expenses and Special Expenses of the Association. All assessments shall be used exclusively to promote the health, safety, welfare and recreation of all Condominium Interest Owners. gra11-03\docs\ccrs.01 (August 31. 1998} 58 c. Theory and Basis for Allocation of Association Expenses and Assessments. The Association shall have the duty to pay for any and all Basic Expenses and Special Expenses incurred by it. In turn, the Condominium Owners Association shall raise the moneys required to pay these Expenses from the Assessments it levies and collects from either: (i) all Condominium Interest Owners (that is, from both the Vacation Ownership Owners and the Facilities/Amenities Condominiums Owner(s)), as a whole, where such expenses pertain to only the Project and/or to the Association Personal Property, or (ii) all Vacation Ownership Owners where such expenses pertain to only the Vacation Ownership Operation, which- ever may be the case. Section 2.07 of this Declaration states the basis for how the Board is to allocate these Basic and Special Expenses, and their corresponding Assessments, by expense type (that is, as a "Project Basic Expense," "Project Special Expense," "Sole Basic Expense," or "Sole Special Expense," between the Vacation Ownership Owners and the Facilities/Amenities Condominium Owners). d. Apportionment of Assessments Among Vacation Owner- ship Owners. All Assessments hereunder levied against Vacation Ownership Owners shall be levied against each such Vacation Ownership Owner (including Declarant as to each Declarant Vacation Ownership), proportionally, based on: (i) the Assigned Vacation Unit Type owned ("A" Unit Type, "B" Unit Type, "C" Unit Type, and "E" Unit Type) and (ii) the type of Vacation Ownership owned (Annual or Biennial), except in those certain instances where such Assessments are to be levied only against certain, and not all, Owners; namely, where Special Assessments are levied against Non- Complying Owner(s) or against Responsible Owner(s) as those terms are used in Section 6.03 below, and where Capital Needs Assessments are levied against Predominantly Benefitted Owner(s) as that term is used in Section 6.04 below. The Board shall establish a formula, which may be modified from time to time, for the calculation of an equitable apportionment of Assessments in accordance with operational and maintenance costs attributable to each respective Vacation Unit Type. Such proportional assessments based on Vacation Unit Type shall be levied against Owners of each respective Assigned Vacation Unit Type in the ratio that the number of Use Weeks of that particular Assigned Vacation Unit Type to which each Owner is entitled during any two (2) consecutive Use Years bears to the total number of Use Weeks of that particular Assigned Vacation Unit Type constituting such two (2) consecutive Use Years. In other words, the general rule is that all Owners of a respective Assigned Vacation Unit Type are to be proportionally assessed, so that each Owner of an Assigned Vacation Unit of that particular Assigned Vacation Unit Type shall be assessed the amount of one full assessment share for each Annual Ownership of that particular Assigned Vacation Unit Type owned by such Owner and one- half the amount of one full assessment share for each Biennial Ownership of that particular Assigned Vacation Unit Type owned by gra11-03\docs\ccrs.01 (August 31, 1998) 59 such Owner. Notwithstanding anything to the contrary contained in the foregoing, the general rule of proportionality of assessments shall not be applicable where there are special circumstances which would make it unfair for Owners to pay such proportional Assessment. These special circumstances are discussed under "Special Assessments" in Section 6.03 below. 6.02 Regular Annual Assessments. a. Purpose of Regular Annual Assessments. Regular Annual Assessments shall be assessed against either all Condominium Interest Owners, or only all Vacation Ownership Owners, as the case may be, in accordance with Section 6.01 c. above, to provide the Association with the moneys necessary to pay for the Basic Expenses of the Association projected in the Budget for said Fiscal Year. b. Preparation and Adoption of Final Budget and Determination of Aggregate Regular Annual Assessments Determina- tion. Not more than 60 days, nor less than 45 days, before the beginning of each Fiscal Year, the Board, in accordance with Section 5.02 o. 1. above, shall prepare and adopt the Budget for such forthcoming Fiscal Year. Subject to the limitations imposed in Section 6.02 g. below, the Board shall then levy Regular Annual Assessments for such forthcoming Fiscal Year against the respective Condominium Interest Owners in the aggregate amount of said adopted Budget. c. Allocation and Levy of Regular Annual Assessments among Owners. The Board shall levy and assess the aggregate Regular Annual Assessments as above determined, against either all Condominium Interest Owners, including Declarant as to Declarant Condominium Interest, or against only all Vacation Ownership Owners, including Declarant as to Declarant Vacation Ownerships, as the case may be, in accordance with Section 6.01 c. above. Notwithstanding anything to the contrary hereinabove contained, for any Fiscal Year in which there is in effect a subsidy agreement between Declarant and the Association whereby Declarant agrees to pay to the Association certain Basic Expenses in lieu of Regular Assessments for such Fiscal Year, Declarant's obligation to pay such Regular Assessments for Declarant Condominium Interests for such Fiscal Year shall be deemed discharged, for so long as there is no default under the terms of such subsidy agreement. d. Notice of Assessment. Due Datefs). Delinquency Datefs), and Method of Payment. Upon the Board's determining the amount of, and levying, the aggregate Regular Annual Assessments for a particular new Fiscal Year, the Board shall send to each Condominium Interest Owner or each Vacation Ownership Owner, as the case may be, a written notice of assessment with a date thereon, providing therein: (i) the total amount of each such Owner's respective portion of such aggregate Regular Annual Assessments; gra11-03\docs\ccrs.01 (August 31, 1998) 60 (ii) whether such Assessment may be paid in installments, and if so, the required amount of each such installment, and the months in which such installments are to be paid; (iii) that each such Assessment (or first installment thereof, if applicable) shall be due and payable within 10 days of the date of such written notice; and (iv) if such Assessment may be paid in installments, that each additional installment shall be due and payable in the month due within 10 days of that date of the month specified on such notice of assessment. Any Regular Annual Assessment (or installment thereof) not paid within 10 days after the due date specified in the notice shall bear interest from said due date until paid at the rate then established by the Board to be charged on delinquent Assessments and other delinquent charges (called the "Board Interest Rate"). Each such Regular Annual Assessment shall be payable in one (1) lump sum, unless the Board elects to receive installments payable not more frequently than once each month. e. Commencement of Accrual of Regular Annual Assess- ments . Regular Annual Assessments against the respective Condominium Interest Owners (including Vacation Ownership Owners) shall commence accruing and shall be payable in advance (whether the entire Annual Assessment or an installment thereof, as the Board decides) on the Commencement Date as defined below. The "Commencement" Date shall be the first day of the first month following the date of the initial close of an escrow of a sale by Declarant of a Vacation Ownership in the Project. Notwithstanding anything in the foregoing to the contrary, no Regular Annual Assessment shall be assessed against an Owner whose escrow for the purchase of a Vacation Ownership has just closed, where such Owner will not be entitled to occupy a Unit, by virtue of such Owner's deed, until the Fiscal Year following the year in which such escrow was closed. f. Excess Collections. Should the amount of Regular Annual Assessments levied and collected for a Fiscal Year be in excess of the amount required to meet the actual Basic Expenses which were incurred for such Fiscal Year, such excess shall be applied by the Association to reduce the amount of the Regular Annual Assessments levied for the subsequent Fiscal Year or Years, or, if the Board should determine, be applied to Association reserves. No Owner shall, by reason of such reduction, be entitled to a refund by the Association of all or any portion of any Regular Annual Assessment such Owner had previously paid; nor shall such Owner thereby be relieved from any obligation to pay any past due Regular Annual Assessment. g. Monetary Limitations on Regular Annual Assessments. For each new Fiscal Year, the Board may levy without requiring the vote or written consent of the applicable Condominium Interest Owners, aggregate Regular Annual Assessments which are as much as 20 percent greater than the aggregate Regular Annual Assessments gra11-03\docs\ccrs.01 (August 31, 1998) 61 for the immediately preceding Fiscal Year. Aggregate Regular Annual Assessments for a forthcoming Fiscal Year which are more than 20 percent greater than those for the immediately preceding Fiscal Year may not be levied without the vote or written consent of: 1. With Respect to Assessments Pertaining to Only the Project and/or Association Personal Property; (i) (a) the Declarant, (b) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (c) the Owner(s) of at least eight (8) Facilities/Amenities Condominium (where Class "C" Membership has not yet been converted to Class "A" or Class "B" Membership) ; or (ii) (a) Members holding at least a majority of the total votes in the Association, (b) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (c) the Owner(s) of at least eight (8) Facilities/Amenities Condominiums (where Class "C" Membership has been converted to Class "A" or Class "B" Membership); or 2. With Respect to Assessments Pertaining to Only the Vacation Ownership Operation; (i) (a) the Declarant, and (b) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships (where Class "C" Membership has not yet been converted to Class "A" or Class "B" Membership); or (ii) (a) Members holding at least a majority of the total votes in the Association, and (b) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships (where Class MC" Membership has been converted to Class "A" or Class "B" Membership). Regardless of anything above stated to the contrary, an increase in the aggregate Regular Annual Assessments for a Fiscal Year attributable to an increase in real property taxes against any portion of the Real Property shall be excluded in determining whether the aggregate Regular Annual Assessments are more than 20 percent greater than the aggregate Regular Annual Assessments for the preceding Fiscal Year. 6.03 Special Assessments. a. Purpose. Subject to obtaining any required vote of the Members provided for in Section 6.03 b. below, the Association is hereby given the right, power, and duty to levy Special Assessments against either all Condominium Interest Owners, including Declarant as to each Declarant Condominium Interest, or only all Vacation Ownership Owners, including Declarant Vacation Ownerships, as the case may be, for the purpose of paying Special gra11-03\docs\cers.01 (August 31, 1998) 62 Expenses of the Association. Such Special Expenses, by way of example and not by limitation, might include: (i) the incurring of actual Basic Expenses which are in excess of the Regular Annual Assessments collected in the Fiscal Year in question; (ii) the cost to repair, repaint, rebuild, restore and/or replace any of the Association Property or Common Furnishings, where there are insufficient reserves for such, or where due to damage or destruction thereof; (iii) the reimbursement to the Association of all costs (called "Compliance and Enforcement Costs") incurred by it in bringing, or attempting to bring, an Owner into compliance with, or otherwise in attempting to enforce against an Owner (called a "Non-Complying Owner") the provisions of this Declaration, the Bylaws, and/or the Rules and Regulations; and (iv) the reimbursement to the Association of all moneys (called "Lien Prevention and Removal Costs") paid out in defending against law suits and paying claims, charges, and liens pursuant to Article 3 hereof to prevent threatened liens, claims, or charges from being imposed against the Project or any portion thereof, and/or to remove said liens, claims, or charges once they had become attached thereto as a result of the acts or omissions to act by the Responsible Owners; provided. however, while the Association is not required to levy Special Assessments against all Owners for reimbursement of Lien Prevention and Removal Costs as provided in Section 3.04 hereof, the Association shall be required to levy a Special Assessment for such purpose directly against the Responsible Owners; and provided, further, the Association shall be required to levy Special Assessments directly against any Non- Complying Owners to obtain reimbursement of Compliance and Enforce- ment Costs in item (iii) above. b. How Special Assessments Imposed. Except as provided below, the imposition of Special Assessments against either all Condominium Interest Owners, or only all Vacation Ownership Owners, as the case may be, shall require the vote or written consent in favor of such imposition of the following Members: 1. With Respect to Assessments Pertaining to Only the Project and/or Association Personal Property: (i) (a) the Declarant, (b) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (c) the Owner(s) of at least eight (8) Facilities/Amenities Condominiums (where Class "C" Membership has not yet been converted to Class "A" or Class "B" Membership); or (ii) (a) Members holding at least a majority of the total votes in the Association, (b) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (c) the Owner (s) of at least eight (8) Facilities/Amenities Condominiums (where Class "C" Membership has been converted to Class "A" or Class "B" Membership); or gra11-03\docs\ccrs.01 (August 31, 1998) 63 2. With Respect to Assessments Pertaining to Only the Vacation Ownership Operation: (i) (a) the Declarant, and (b) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships (where Class "C" Membership has not yet been converted to Class "A" or Class "B" Membership); or (ii) (a) Members holding at least a majority of the total votes in the Association, and (b) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships (where Class "C" Membership has been converted to Class "A" or Class "B" Membership). 3. Exceptions. The Board, however, is hereby empowered to impose the following types of Special Assessments without such vote or written assent of the Members: (1) Special Assessments against either all Condominium Interest Owners, or only all Vacation Ownership Owners, as the case may be (other than Special Assessments to raise moneys for repairing, rebuilding, restoring, and/or replacing all or any portion of the Project, Association Personal Property, or the Common Furnishings because of damage or destruction thereto) , where the total of such Special Assessments levied against all Owners during any Fiscal Year, together with the total of any Capital Needs Assessments also levied against all Owners during said Fiscal Year, does not exceed, in the aggregate, five percent (5%) of the Basic Expenses in the Budget of the Association for the Fiscal Year in which such Assessments are levied; (2) Special Assessments against either all Condominium Interest Owners, or only Vacation Ownership Owners, as the case may be, to raise moneys for repairing, rebuilding, restoring and/or replacing all or any portion of the Project, Association Personal Property, and/or Common Furnishings, because of damage or destruction thereto, where the total of such Special Assessments levied against all such Owners during any Fiscal Year, together with the total of any Capital Needs Assessments also levied against all Owners during said Fiscal Year, does not exceed, in the aggregate, ten percent (10%) of the Basic Expenses in the Budget of the Association for the Fiscal Year in which such Assessments are levied; and (3) Special Assessments against all Condominium Interest Owners, and/or the Non-Complying Owner or Responsible Owners for the purpose of reimbursing the Association for all Compliance and Enforcement Costs or Lien Protection and Removal Costs, as referred to above. c. Method of Lew. gra11-03\docs\ccrs.01 (August 31, 1998) 64 1. Where Levy Is Against All Condomin.'' "in interest Owners or all Vacation Ownership Owners. Where the Special Assessments in question are to be levied against either all Condominium Interest Owners, or only all Vacation Ownership Owners, as the case may be, they shall be levied upon, allocated between, and paid by all such Owners, including Declarant as to Declarant Condominium Interests, or Declaration Vacation Ownerships, in the same manner as the levy of Regular Annual Assessments, in accordance with Section 6.02 c. above. Notwithstanding anything in the foregoing to the contrary, where the Members determine that the predominant benefit of levying any such Special Assessment will accrue for only a special group (or groups) of Owners (for example, certain Vacation Ownership Owners having the right to occupy Vacation Units of a particular Unit Type(s), or any Facilities/Amenities Condominium Owner, as to a particular Facilities/Amenities Condominium) (called here the "Predominantly Benefitted Owner(s)"), the Members may levy such Special Assessments therefor against only those Predominately Benefitted Owners. Further, notwithstanding anything to the contrary hereinabove contained, for any Fiscal Year in which there is in effect a subsidy agreement between Declarant and the Association whereby Declarant agrees to pay to the Association certain Special Expenses in lieu of Special Assessments for such Fiscal Year, Declarant's obligation to pay such Special Assessments for Declarant Condominium Interests for such Fiscal Year shall be deemed discharged, for so long as there is no default under the terms of such subsidy agreement. 2. Where Individual Special Assessment Is In- volved. A Special Assessment may be levied solely against a Non- Complying Owner (s) or Responsible Owners (s) as those terms are used in this Declaration. d. Notice of Assessment. Due Datefs). Delinquency Datefs). and Method of Payment. Subject to complying with the foregoing requirements, the Association may levy Special Assess- ments at any time. After the date of such levy, the Board shall send a written notice of assessment, with a date thereon: (a) with respect to Special Assessments being levied against either all Condominium Interest Owners or only all Vacation Ownership Owners, as the case may be, to each such Owner, or (b) with respect to a Special Assessment being levied against a particular Non-Complying Owner or Responsible Owner (where such Assessment (s) has been levied to obtain reimbursement of Compliance and Enforcement Costs or Lien Prevention or Removal costs from such an Owner (s)) , to such Owner. Each such notice shall provide therein: (i) the total amount of each such Owner's respective portion of such aggregate Special Assessments (if being levied against more than one Owner), or the gra!1-03\docs\ccrs.01 (August 31, 1998} 65 total amount of the full Special Assessment (if being levied only against one Owner); (ii) whether such Special Assessment may be paid in installments, and, if so, the required amount of each such installment, and the months in which such installments are to be paid; (iii) that such Special Assessment (or first installment thereof, if applicable) shall be due and payable within 10 days of the date of such notice of assessment; and (iv) if such Special Assessment may be paid in installments, that each additional installment shall be due and payable in the month due within 10 days of that date of the month specified on such notice of assessment. Any Special Assessment (or installment thereof, if applicable) not paid within 10 days after such due date shall be deemed delinquent and shall bear interest from said due date at the Board Interest Rate until paid. A Special Assessment shall be payable in one (1) lump sum, unless the Board elects to receive periodic installments payable not more frequently than once each month. 6.04 Capital Needs Assessments. a. Purpose. Subject to obtaining the required vote of the Members required by Section 6.04 b. below, the Association is hereby given the right, power, and duty to levy Capital Needs Assessments against either all Condominium Interest Owners, including Declarant, as to Declarant Condominium Interests, or only all Vacation Ownership Owners, as the case may be, for the purpose of paying, in whole or in part, Special Expenses representing the cost of purchasing, restoring, and/or replacing any Association Property and/or the Common Furnishings, to the extent that the same is not funded by Regular Annual Assessments or by Special Assess- ments . b. How Capital Needs Assessments Imposed. Capital Needs Assessments against Owners shall require the vote or written consent of the same number of Members required by Section 6.03 b. of this Declaration (relating to imposition of Special Assessments). c. Method of Lew. The total amount of the Capital Needs Assessments required shall be levied upon, allocated between, and paid by either all Owners of Condominium Interests, including Declarant as to Declarant Condominium Interests, or only all Vacation Ownership Owners, including Declarant as to Declarant Vacation Ownerships, as the case may be, in the same manner as the levy of Regular Annual Assessments in accordance with Section 6.02 c. above. Notwithstanding anything in the foregoing to the contrary, where the Members determine that the predominant benefit of levying any such Capital Needs Assessment will accrue for only a special group (or groups) of Owners (for example, Vacation Ownership Owners gra11-03\docs\ccrs.01 (August 31, 1998) 66 having the right to occupy Vacation Units of a particular Unit Type(s), or any Facilities/Amenities Condominium Owner, as to a particular Facilities/Amenities Condominium) (called here the "Predominantly Benefitted Owner(s)"), the Members may levy such Capital Needs Assessments therefor against only those Predominately Benefitted Owners. d. Notice of Assessment. Due Datefs). Delinquency Date(s). and Method of Payment. Subject to complying with the foregoing requirements, the Association may levy Capital Needs Assessments at any time. After the date of such levy, the Board shall send a written notice of assessment, with a date thereon, a written notice of assessment, with a date thereon: (a) with respect to Capital Needs Assessments levied against either all Condominium Interest Owners, or only all Vacation Ownership Owners, as the case may be, to each such Owner, or (b) with respect to a Capital Needs Assessment being levied against a predominantly Benefited Owner (s), to such Owner. Each such notice shall provide therein: (i) the total amount of each such Owner's respective portion of such aggregate Capital Needs Assessments; (ii) whether such Assessment may be paid in installments, and, if so, the required amount of each such installment, and the months in which such installments are to be paid; (iii) that such Assessment (or first installment thereof, if applicable) shall be due and payable within 10 days of the date of such notice of assessment; and (iv) if such Assessment may be paid in installments, that each additional installment shall be due and payable in the month due within 10 days of that date of the month specified on such written notice. Any Capital Needs Assessment (or installment thereof, if applicable) not paid within 10 days after such due date shall be deemed delinquent and shall bear interest from said due date at the Board Interest Rate until paid. A Capital Needs Assessment shall be payable in one (1) lump sum, unless the Board elects to receive periodic installments payable not more frequently than once each month. 6.05 Personal Charges. a. Purpose. Personal Charges ("Personal Charges") are expenses of the Condominium Owners Association (but which are outside the Budget and, therefore, are not recovered by Regular Annual Assessments) which are incurred as a direct result of occupancy of a Condominium Unit by a Condominium Interest Owner and/or such any such Owner's Permitted User. Such Personal Charges include any expense resulting from the act or omission to act of any such Owner or Permitted User, including, without limitation: (i) the cost of any additional cleaning service, and/or other special services or supplies attributable to such Owner's or such Owner's Permitted User's use and/or occupancy of a Condominium Unit; (ii) the cost to repair any damage to, or restore or replace, any Association Property or Common Furnishings on account of loss or damage thereto occurring during such Owner's or such Owner's gra11-03\docs\ccrs.01 (August 31, 1998) 67 Permitted User's use and/or occupancy thereof, and (iii) the cost to satisfy any expense paid or incurred by any other Condominium Interest Owner (s) or by the Association as a result of any intentional or negligent act or omission to act on the part of such Owner or such Owner's Permitted User arising during such use or occupancy of a Unit or resulting from the breach by such Owner or Permitted User of any provisions of this Declaration, the Bylaws, and/or the Rules and Regulations during such use or occupancy. For purposes of this Section 6.05 a., the act or negligence of a Permitted User shall be deemed to be the act of the Owner authorizing occupancy of the Condominium Unit in question. b. Payment and Delinquency. 1. Personal Charges shall be billed by a written statement and shall be due and payable within 10 days of the date of such statement, statement is to be so dated. 2. Any Personal Charges not paid within 10 days after said due date thereof shall be deemed delinquent and shall bear interest from said due date at the Board Interest Rate until paid. Personal Charges are payable in one lump sum. Each Personal Charge, together with interest thereon and all costs of collection including reasonable attorney's fees, shall be the personal obligation of the Condominium Interest Owner who incurs such Personal Charge. ARTICLE 7 ENFORCEMENT OF RESTRICTIONS 7.01 General Provisions. a. General Power and Right to Bring Actions. In the event of failure by a Condominium Interest Owner or such Owner's Permitted User(s) to comply with any of the provisions of this Declaration, the By-laws, and/or the Rules and Regulations, including, without limitation: (i) failure of a Vacation Ownership Owner or such Owner's Permitted User to vacate an Assigned Vacation Unit upon expiration of such Owner's Fixed Use Week, (ii) an Owner's or such Owner's Permitted User's causing damage to, or loss of, any portion of the Association Property or Common Furnishings, (iii) an Owner's causing or permitting such Owner's to be subject to a lien (other than the lien of nondelinquent real property taxes or other assessments), claim, or charge which could result in the sale of the Condominium Interests of other Owners, (iv) an Owner's, by such Owner's act or omission to act, causing a lien, claim or charge (other than the Lien against said Owner's own Condominium Interest referred to in Section 7.02 c. below) to be imposed against any portion of the Project, Association Personal Property and/or Common Furnishings, (v) an Owner's or such Owner's Permitted gra11-03\docs\ccrs.01 (August 31, 1998) Do User's causing a disturbance that interferes with the use and enjoyment of the Project by any other Owner(s), and/or (vi) the failure of an Owner to pay any Assessment, personal charge or other charge levied by the Association hereunder, then, in such event, the Association and/or any Condominium Interest Owner (s), including Declarant as to Declarant Condominium Interests, shall have the right, power, and authority to enforce the noncomplying Owner's and/or Permitted User's compliance with, or to seek damages for breach of, this Declaration, the Bylaws, and/or the Rules and Regulations in any manner provided for by law or equity, including, without limitation, as may be applicable, the right to enforce the Declaration, the Bylaws, and/or the Rules and Regulations by bringing suit to enjoin the violation or specifically enforce the violated provisions, and the right to bring legal action for damages. b. Rights and Remedies Cumulative. All rights and remedies of the Association and the Owners given under this Declaration and by law may be used cumulatively, and need not be used exclusively of each other; and the Association or Owner(s) shall have the right to pursue any one, or all, of such rights and remedies so long as any such right or remedy is not prohibited elsewhere by this Declaration or by law for use against the violation in question. c. Association May Delegate. The Association may delegate to the Managing Agent the power and authority to carry out all disciplinary actions imposed by the Association or Board under this Article 7. d. Limited Forfeiture Rights. Notwithstanding anything else which may be construed to the contrary in this Declaration, the Association shall not be empowered to cause the absolute forfeiture of an Owner's Condominium Interest on account of said Owner's failure to comply with the provisions of this Declaration or the Rules and Regulations except pursuant to: (i) the judgment of a court or the decision of an arbitrator, or (ii) a judicial or nonjudicial foreclosure of said Owner's Condominium Interest, because of failure to pay Assessments duly levied by the Association. 7.02 Certain Specific Enforcement Powers and Rights. In addition to the general powers and rights to bring actions provided for in Section 7.01 above, the Association shall have the following specific powers and rights with respect to the following specific types of violations of this Declaration, and/or the Rules and Regulations: a. Suspension of Rights and Privileges for Failure to Pay Assessments or Other Charges. If any Owner shall be delinquent in the payment of any Assessment, Personal Charge, or other charge gra11-03\docs\ccrs.01 (August 31, 1998) 69 duly levied by the Association, the Association may (but shall not be required to) suspend the rights and privileges of such Owner: (i) to use and occupy (both as to such Owner and/or such Owner's Permitted User) any Vacation Unit or any Facilities/Amenities Unit (whichever may be applicable) and/or any or all of the Association Property; (ii) to vote upon any Association matter; and (iii) to exercise any related rights and privileges appurtenant to being an Owner, including, without limitation, any exchange rights a Vacation Ownership Owner may otherwise have. Further, with respect to such a delinquent Vacation Ownership Owner, the Association shall give written notice to such Vacation Ownership Owner of any such suspension of such rights and privileges immediately after such decision to suspend has been made; the Association shall further direct that such suspended rights and privileges be immediately reinstated upon the defaulting Owner's paying to the Association, in cash or by cashier's or certified check, all such Assessments or other charges past due as of the date of such reinstatement; provided, however, that where an Owner whose rights and privileges have been so suspended due to the failure by such Owner to pay Assessments or other charges to the Association when due, does, in fact, pay the Association all such past due Assessments or other charges, but does not do so until within (1) 48 hours prior to the applicable Check-in Time for such Owner's contemplated occupancy, or (2) 20 days prior to the applicable Check-in Time for such Owner's contemplated occupancy/ where such Owner haying the rights and privileges reinstated had such rights and privileges suspended for a period of two (2) years or more, the reinstatement of such Owner's right and privileges shall not be deemed effective until the next Use Year. b. Imposition of Monetary Penalty. Suspension of Rights and Privileges, and/or Taking of Other Disciplinary Action for Violation of Provisions. 1- General. If any Condominium Interest Owner shall violate any provision of this Declaration, including, without limitation, those contained in Section 7.01 a. above, and/or any provision of the Rules and Regulations, the Association may (but shall not be required to): (i) impose a monetary penalty upon such Owner; (ii) suspend the rights and privileges of such Owner and any otherwise Permitted User to use such Owner's Condominium Unit, and/or any Common Furnishings; to vote upon any Association matter, and to exercise any related rights and privileges appurtenant to being an Owner; and/or (iii) take such other disciplinary action as the Association may deem appropriate, short of the forfeiture or sale under power of sale of such Owner's Condominium Interest (except through the foreclosure of the continuing Lien provided for in Section 7.02 c. below for failure of an Owner to pay Assessments levied by the Association); provided, however, that before any or all of the foregoing three (3) types of disciplinary action may be taken, the Association must follow the required procedures provided gra11-03\docs\ccrs.01 (August 31, 1998) 70 for in Section 7.02 b. 2. below. 2. Required Procedures. Except as provided in Section 7.02 b. 3. below pertaining to failure of an Owner to pay Assessments levied by the Association, none of the three (3) types of disciplinary action authorized by Section 7.02 b. 1. above may be taken until after a meeting of the Board, at which a quorum of the Board is present, is duly called and held for such purpose in accordance with the provisions contained in the Bylaws for th-a noticing, calling, and holding of a meeting of the Board. Written notice of such meeting shall be given to the alleged breaching Owner at least 15 days prior to the holding of such meeting. Such notice shall contain at least the following information: (i) the date, time, and place of the scheduled meeting; (ii) the alleged violation of the Owner; (iii) the type of disciplinary action sought to be imposed against such Owner; (iv) that said Owner has the right to be present at such Board meeting and present either a written and/or an oral defense (which type of defense shall be determined by the Board and specified in the notice) to the charge(s) made against him and argument as to why the disciplinary action sought by the Board should not be imposed against him; and (v) that said Owner may hire at his own expense and be represented at such meeting by an attorney of his own choice. The scheduled Board meeting will then be held, and the decision as to whether such disciplinary action should be taken shall be made by a majority of the members of the Board present at such meeting. If the Board determines that the Owner has so violated the provisions of this Declaration or the Rules and Regulations, the Board shall give written notice to such breaching Owner of the type or types of disciplinary action imposed upon such Owner (and if a monetary penalty, the amount thereof); and such disciplinary action shall become effective one (1) day after the date of such notice. The Board shall direct that the suspended rights of any such Owner, whose rights had been suspended because of the breach, shall be immediately reinstated upon the breaching Owner's cure of said breach. 3. Limited Exception When Violation Is for Failure to Pay Assessment or Other Charges. The disciplinary procedures set forth in Section 7.02 b. 2. above shall not be required when the only action sought to be imposed against an Owner is suspension of his or her rights and privileges as an Owner of a Condominium Interest (as set forth in Section 7.02 a. above) or the levying of a uniform late fee, or penalties as a result of said Owner's failure to pay, when due, any Assessment, or other charge duly levied by the Association; and the provisions of said Section 7.02 a. above shall apply in such instances. c. Continuing Lien to Secure Payment of Assessments. 1. Lien Creation. Irrespective and independent of gral1-03\docs\ccrs.01 (August 31, 1998) 71 any other rights and remedies given to the Association under Sections 7.02 a. and 7.02 b. above, there is: (i) hereby created in favor of such Association a continuing lien (called the "Lien"), with power of sale, on each and every Vacation Ownership to secure its Owner's or Owners' prompt payment to the Association of each and every Assessment levied against an Owner pursuant to this Declaration, together with interest thereon from the due date of such Assessment until paid at the Board Interest Rate, and all costs of collection which may have been incurred by the Association in connection therewith, including reasonable attorneys' fees; and (ii) hereby granted to the Association the right and power to enforce each said Lien, pursuant to the provisions set forth herein for such enforcement. The Lien herein referred to, while it is a continuing Lien, shall last only for so long as an Owner owns a Condominium Interest, and shall not be enforceable and shall not be foreclosed, until recordation of the Notice of Default and Lien referred to in Section 7.02 c. 2. (b) below. 2. Procedure for Enforcement of Lien. (a) Optional Demand Notice. At any time within 30 days after the due date of any Assessment duly levied by the Association but not paid by an Owner, the Association or its authorized representative may make and serve by mail upon the defaulting Owner (but shall not be required to so make and serve) a written demand (called the "Demand Notice") . Said Demand Notice, if made, shall be dated and shall contain all of the categories of information set forth in Section 7.02 c. 2. (b) below. Each default by an Owner shall constitute a separate basis for such a demand, but any number of defaults may, at the Association's election, be included within a single Demand Notice. (b) Recording of Notice of Default and Lien. If the Association is not paid (i) within 10 days after mailing any Demand Notice provided for in Section 7.02 c. 2. (a) above, or (ii) within 30 days after the due date of the Assessment in question (if no such Demand Notice has been made), the Association may at any time thereafter elect to file and record in its favor a Notice of Default and Lien (with a copy thereof to be delivered to the defaulting Owner and to the Mortgagee of such defaulting Owner, if such Mortgagee has requested a copy of same and furnished its name and address to the Association) against the Condominium Interest of the defaulting Owner in the Official Records of San Diego County, California. Such Notice of Default and Lien (or Demand Notice, as the case may be) shall be executed and acknowledged by any officer of the Association and shall contain substantially the following information: (1) The date of the Notice of Default and Lien (or Demand Notice, as the case may be); gra11-03\docs\ccrs.01 (August 31, 1998) 72 in default; (2) The name of the defaulting Owner; (3) The amount of the Assessment which is (4) The amount of interest which has accrued on such unpaid Assessment; (5) An itemization and amount of each collection cost including any attorney's fees; (6) The total of (3), (4) and (5) above (called the "Total Monetary Delinquency") which would be required to cure such default as of the date of such Notice of Default and Lien (or Demand Notice, as the case may be) , it being realized that interest shall continue to accrue upon the unpaid Assessment and that additional costs of enforcement and foreclosure may be incurred, until the date the unpaid Assessment is actually paid; (7) That such Notice of Default (or Demand Notice, as the case may be) and Lien is made by the Associa- tion pursuant to this Declaration; and (8) That, in the case of a Notice of Default and Lien, the Lien may be foreclosed, resulting in the forfeiture of said defaulting Owner's Vacation Ownership. (c) Lien Foreclosure. After recordation of a Notice of Default and Lien, and mailing a copy thereof to the defaulting Owner, the Lien referred to therein may thereafter be foreclosed (i) by appropriate foreclosure action in court, or (ii) in the manner provided by California law for the nonjudicial foreclosure of a deed of trust by exercise of a power of sale contained therein, and to that end, the Association is hereby given such power of sale and conferred with authority to utilize such power of sale in enforcement of all such Association Liens, or (iii) in the manner provided by California law for the enforcement of a judgment. The Association, through its duly authorized agents, shall have the power to bid in at any such foreclosure sale, trustee's sale, or judgment sale and to purchase, acquire, lease, hold, mortgage, and/or convey any Condominium Interest acquired at such sale, subject to the applicable provisions of this Declaration. The total amount of (i) the Total Monetary Delinquen- cy, plus (ii) all interest which has accrued since the date of the Notice of Default and Lien, plus (iii) all additional costs of enforcement and foreclosure including, without limitation, trus- tee's fees, court costs, and title search fees (collectively called "Subsequent Foreclosure Costs")> shall be secured by such Lien, and shall be paid to the Association by the defaulting Owner should he or she desire to cure such default before foreclosure of the Lien. gral1-03\docs\ccrs.01 (August 31, 1998) 73 (d) Proceeds from Lien Foreclosure. Should there be a completed foreclosure of under the Lien with a sale of the Condominium Interest(s) of the defaulting Owner to a third party with the result that the Association receives proceeds from such sale, the Association shall use or pay out these proceeds in the following order: (i) it shall reimburse itself for its payment of all Subsequent Foreclosure Costs incurred subsequent to the date of the Notice of Default and Lien; (ii) it shall pay itself the amount of the Total Monetary Delinquency stated in the Notice of Default and Lien; (iii) it shall pay itself all interest which has accrued on the unpaid Assessment or accruing since the date of the Notice of Default and Lien to date of foreclosure; (iv) it shall pay, to the extent proceeds are available, the junior lien hold- er (s) , if any (in order of their priority), whose lien(s) was eliminated by foreclosure of the Lien in question; and (v) it shall pay any balance of said proceeds to the defaulting Owner. (e) Title of Foreclosure Purchaser. The purchaser at any such foreclosure sale shall obtain title to the foreclosed-upon Condominium Interest free from: (i) the amount of the Total Monetary Delinquency, subsequently accrued interest, and all Subsequent Foreclosure Costs, and (ii) the effect of any prior suspension, and the present termination, of the defaulting Owner's use rights in the Project and his related rights and privileges appurtenant to having been such an Owner (including, without limitation, voting rights); and otherwise such purchaser shall be deemed to be, and shall be, a new Owner of such Condominium Interest having full use rights in the Project and all privileges appurtenant to being an Owner, whose title thereto shall be subject to all the provisions of this Declaration, the Articles, the Bylaws, and the Rules and Regulations; and in no event shall any such sale relieve such purchaser from liability for any Assessments, other payments, or performance thereafter becoming due under this Declaration, or from the new continuing Lien created upon such conveyance in favor of the Association. If, upon foreclosure of the Lien, the Association has still not recovered all moneys which were due it by the defaulting Owner, any moneys remaining so unpaid shall, to the extent permitted by law, remain the obligation of, and shall be payable by, the foreclosed-upon defaulting Owner; and if such sum should prove uncollectible, the Board may levy a Special Assessment against all Owners to collect such sum. (f) Release of Lien. Upon the defaulting Owner's paying to the Association the amount of the Total Monetary, Delinquency, subsequently accrued interest on the unpaid Assessment and all Subsequent Foreclosure Costs, the Board shall cause to be recorded a Rescission of the Notice of Default and Lien in question in the Official Records of San Diego County. 3. Lien Priority and First Mortgages. Any gral1-03\docs\ccrs.01 (August 31, 1998)74 continuing Lien referred to in Section 7.02 c. hereof shall be deemed prior and senior to all encumbrances voluntarily made by the Owner of a Condominium Interest securing such Lien or involuntarily imposed upon such Condominium Interest by operation of law except for taxes, bonds, governmental assessments, and any other governmental levies, which, by law, are deemed prior to such Lien, and whether or not a Notice of Default and Lien relating to such Lien has been recorded prior or subsequent to any such encumbran- ces; provided, however, that such Lien shall also be deemed subordinate and junior to the lien of any first (in recording priority) Mortgage created upon the Condominium Interest in question in good faith and for value and recorded in the office of the Recorder of San Diego County, California prior to the recordation of a Notice of Default and Lien thereunder (called here a "First Mortgage"). The sale or transfer of any Condominium Interest shall not defeat or affect the Lien provided for herein, except that a sale or transfer of any such Condominium Interest which is encumbered by a First Mortgage, which sale or transfer is made pursuant to a foreclosure or any proceeding in lieu of foreclosure of such First Mortgage, shall extinguish the Lien provided for herein as to payments which became due prior to such sale or transfer. No such sale or transfer, however, shall relieve the purchaser of such Condominium Interest from liability for any Assessments thereafter becoming due or from the new continuing Lien created upon such purchaser's Condominium Interest. ARTTGT.H a ASSOCIATION INSURANCE 8.01 Required Policies. The Association shall obtain, maintain at all times, and pay the cost of, the following insurance policies: a. Fire and Extended Coverage on All Condominium Owners Association Property and Common Furnishings. A policy or policies insuring all Association Property against loss or damage by fire and other hazards, including where the coverage is available, and not cost-prohibitive, earthquake and flood damage coverage, covered by insurance policies written with extended coverage in an amount of not less than the full replacement value thereof, which policy or policies shall name the Association as a coinsured, both for itself and as agent for each Owner. The Board is appointed attorney-in-fact by each Owner to negotiate and agree on the value and extent of any loss under this policy or policies and is granted full right and authority to compromise and settle any claim or enforce any claim by legal action or other use and to execute releases in favor of any insurer with respect to the policy. b. Liability Insurance. A policy of comprehensive public liability insurance having a single, combined liability gra!1-03\docs\ccrs.01 (August 31, 1998) 75 limit of at least $3,000,000, insuring against all liability and claims for death, personal injury, and property damage relating to the Condominium Ownership Operation and/or arising out of any and all ownership, use, rental, occupancy, maintenance, clean-up, servicing and/or other operation of: (i) the Vacation Condominiums and the Facilities/Amenities Condominiums, or any portion thereof, (ii) all Association Property, (iii) the Vacation Ownership Operation, and (iv) the Facilities/Amenities Condominium Operation. Said liability insurance shall be in the form of a policy issued to the Association, and said policy shall name all Condominium Interest Owners, as a class, and if necessary for coverage, all agents of the Association, including the Managing Agent, as additional insureds. Said liability insurance policy shall contain by the insurer(s) waivers of its right to subrogation under the policy against any Owner or member of such Owner's household, and shall further contain a provision that no act or omission by Owner, unless acting within the scope of his authority on behalf of the Association, will void the policy or operate as a condition to recovery by any other person under such policy. c. Fidelity Bond. A bond or bonds as will cover against losses to the Association due to dishonest acts on the part of directors, officers, employees, agents, or volunteers who have control of, or access to, the funds of the Association, including the Managing Agent (collectively referred to here as the "Principals") . Such fidelity bond or bonds shall name the Asso- ciation as obligee and shall be written with loss coverage not less than the maximum amount of funds of the Association over which said Principals under the bond or bonds may reasonably be expected to have control or access at any time, and shall contain waivers of any defense based on the exclusion of persons who serve without compensation or from any definition of "employee" or similar expression. An agent's rider must also be attached which includes the Managing Agent within the bond definition of "employee," although such Managing Agent may be an independent contractor. d. Association Officer and Director Insurance. A policy of insurance on behalf of each Association officer, Associa- tion director, and member of any Association committee (collectiv- ely called "Association Agents") protecting each said Association Agent to an amount which the Association deems is satisfactory, against any liability asserted against or incurred by him or her in the capacity of carrying out such Agent's duties, regardless of whether the Association would have the power to indemnify such Association Agent against such liability under applicable law. e. Workmen's Compensation Insurance. A policy of workmen's compensation insurance, to the extent same shall be required by law, for all employees of the Association. f. Loss of Income Insurance. A policy of insurance gral1-03\docs\cers.01 (August 31, 1998)76 covering the Association for losses of income from lack of Members' payment of Assessments, where such coverage is available and not cost-prohibitive. g. Any Other Insurance. Any other policy or policies of other insurance deemed necessary or desirable by the Associa- tion. 8.02 Insurance Procedures. a. General. All of the policies required to be obtained by the Association pursuant to Section 8.01 above shall cover such risks and be written by such insurers as the Association shall deem proper under the circumstances. b. Notice of Cancellation. All liability and property insurance carried by the Association shall require the insurer to notify any Mortgagee requesting any notice of cancellation of such a policy or policies at least 30 days in advance of the effective date of any reduction or cancellation of such policy or policies. c. Annual Review of Policies. All insurance policies shall be reviewed at least annually by the Board in order to ascertain whether the coverage contained in the policies is adequate. d. Payment of Premiums. Premiums on insurance main- tained by the Association shall be a Basic Expense funded by Regular Annual Assessments levied by the Association. 8.03 Fire and Extended Coverage on All Facilities/Amenities Condominium Owners' Personal Property. Each Owner of a Facilities/ Amenities Condominium shall also purchase and maintain at such Owner's own cost a policy or policies of insurance insuring such Owner's Facilities/Amenities Condominium Owner's Personal Property against loss or damage by fire and other hazards covered by fire insurance policies written with extended coverage in an amount of not less than the full replacement value thereof. ARTICLE 9 DAMAGE TO OR DESTRUCTION OF PROJECT 9.01 When Duty to Repair and Restore Project Is Mandatory. Upon damage to or destruction of the Project, the Association Personal Property, and/or the Common Furnishings, or any portion thereof, it shall be the duty of the Association to repair and restore the same to their former condition as soon after such damage or destruction as is reasonably possible, where the amount available from insurance proceeds for such repair and restoration is at least 80 percent of the estimated cost of such repair and gra11-03\docs\ccrs.01 (August 31, 1998) 77 restoration. The cost, in excess of such available insurance proceeds, of such repair and restoration shall be a Special Expense of the Association payable through the Association's levy of a Special Assessment against each Owner in accordance with Paragraph 6.03 hereof, except that the portion thereof relating to the repair and restoration of Common Furnishings shall be a Special Assessment only against each Vacation Ownership Owner. 9.02 When Duty to Repair and Restore Project Is to Be Determined by Owners. In the event of damage to or destruction of the Project, Association Personal Property, and the Common Furnishings, where the amount available from insurance proceeds for repair and restoration of such is less than 80 percent of the estimated cost of such repair and restoration, the Condominium Interest Owners and the Mortgagees of Condominium Interests shall have the right and power to determine whether or not to repair and restore the Project. Such issue shall be decided, if at all, within 60 days after the Association determines that the insurance proceeds are less than 80 percent of the estimated cost of restora- tion (called the "60-Day Period"), by the vote or written consent of: (a) (i) Declarant, (ii) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, (iii) the Owner(s) of at least eight (8) Facilities/Amenities Condominiums, and (iv) 75 percent of the Mortgagees holding beneficial interests in Condominium Interests (where Class "C" Membership has not yet been converted to Class "A" or Class "B" Membership); or (b) (i) Members holding at least a majority of the total votes in the Association, (ii) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, (iii) the Owners of at least eight (8) Facilities/Amenities Condominiums, and (iv) 75 percent of the Mortgagees holding beneficial interests in Condominium Interests (where Class "C" Membership has been converted to Class "A" or Class "B" Membership). Failure of the Owners and said Mortgagees to make such determination of whether or not to repair and restore the Project, Association Personal Property, and Common Furnishings within the 60-Day Period shall be deemed to be a determination by the Owners and said Mortgagees to repair and restore the same. A prevailing decision not to restore and repair the Project, Association Personal Property, and Common Furnishings shall also automatically be deemed (that is, without a further vote being required) to carry with it a decision by said Owners to sell the Real Property, all Association Personal Property, and all Common Furnishings. a. If Owners and Mortgagees Determine to Repair and Restore the Project. Association Personal Property, and Common Furnishings. If the Condominium Interest Owners and said Mortgagees determine to repair and restore the Project, Association Personal Property, and Common Furnishings in accordance with the gra11-03\docs\ccrs.01 (August 31, 1998) 78 foregoing, the cost of such repair and restoration in excess of the available insurance proceeds shall be a Special Expense of the Association payable through the Association's levy of a Special Assessment against each Owner in accordance with Paragraph 6.03 hereof, except that the portion thereof relating to the repair and restoration of the Common Furnishing shall be a Special Assessment only against each Vacation Ownership Owner. In the event the Owners and said Mortgagees fail to determine whether or not to repair and restore the Project, Association Personal Property, and Common Furnishings within the 60-Day Period pursuant to Paragraph 9.02 above, such repair and restoration shall be undertaken and completed by the Association, and the Condominium Interest Owners hereunder shall pay their respective shares thereof in accordance with the preceding sentence. b. If Owners and Mortgagees Determine Not to Repair and Restore the Project. Association Personal Property, and the rmrnno^ Furnishings. If the Owners and said Mortgagees determine not to repair and restore the Project, the Association Personal Property, and the Common Furnishings, All of the rights, powers, and duties specified in Section 11.02 below ("Procedures Relating to Sale of All Association Property and All Common Furnishings") shall immediately belong to, and be vested in, the Association acting through its Board. 9.03 Damage or Destruction of Association Personal Property Only. In any case where there is damage to or destruction of only Association Personal Property, the Association shall immediately cause same to be repaired, restored, and/or replaced, as may be applicable, and the cost thereof shall be a Special Expense of the Association payable through the Association's levy of a Special Assessment against each Condominium Interest Owner. 9.04 Damage or Destruction of Common Furnishings Only. In any case where there is damage to or destruction of only Common Furnishings in any Vacation Unit and/or Association Personal Property, the Association shall immediately cause same to be repaired, restored, and/or replaced, as may be applicable, and the cost thereof shall be a Special Expense of the Association payable through the Association's levy of a Special Assessment against each Vacation Ownership Owner. 9.05 Distribution of Distributable Net Proceeds from Insurance Proceeds. Any Distributable Net Proceeds resulting from the Association's receipt of insurance proceeds, either in excess of the cost of restoration and repair of the Project and/or the Association Personal Property or in the event the Project and such Association Personal Property is not repaired and restored as provided above, shall be distributed by the Association to each Condominium Interest Owner in accordance with Section 2.08. Likewise, any Distributable Net Proceeds resulting from the gra11-03\docs\ccrs.01 (August 31, 1998) 79 Association's receipt of insurance proceeds in excess of the cost of restoration and repair of the Common Furnishings or in the event the Project is not required to be repaired and restored as provided above shall be distributed to each Vacation Ownership Owner in accordance with Section 2.08. ARTICLE 10 CONDEMNATION 10.01 Definitions. The term "Taking," as used in this article, shall mean condemnation by exercise of the power of eminent domain or by sale under threat of the exercise of the power of eminent domain of all or any portion of the Real Property. A "Total Taking" shall be deemed to occur if there is a permanent Taking by condemnation of an interest in all or any portion of the Real Property to the extent that the operation, use, and occupancy of the Real Property as a timeshare resort is substantially and adversely affected. A "Partial Taking" is any taking other than a Total Taking. 10.02 Determination of Total Taking to Be Made bv Owners. In the event of a Taking, the Condominium Interest Owners shall have the right and power to determine whether or not the Taking is a Total Taking. Such issue shall be decided, if at all, within 60 days after the effective date of the Taking (called the "60-Day Period") by the vote or written consent of at least: (a) (i) Declarant, (ii) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (iii) the Owner(s) of at least eight (8) Facilities/Amenities Condominiums (where Class "C" Membership has not yet been converted to Class "A" or Class "B" Membership); or (b) (i) Members holding at least a majority of the total votes in the Association, (ii) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Vacation Ownerships, and (iii) the Owner(s) of at least eight (8) Facilities/Amenities Condominiums (where Class "C" Membership has been converted to Class "A" or Class "B" Membership) . Failure of the Owners to determine whether the Taking is or is not a Total Taking within the 60-Day Period shall be deemed to be a determination by the Owners that the Taking is a Partial Taking. A determination that the Taking is a Total Taking shall also automatically be deemed (that is, without a further vote being required) to carry with it a determination by the Owners to sell the Real Property, all Association Personal Property, and all Common Furnishings. If the Owners determine that the Taking in question is a Total Taking, all of those rights, powers, and duties specified in Section 11.02 below ("Procedures Relating to Sale of All Association Property and All Common Furnishings") shall immediately belong to, and be vested in, the Association, acting through its Board. gra11-03\docs\ccrs.01 (August 31, 1998) 80 10.03 Board to Represent Owners in Proceedings. Upon any Taking of the Property, the Board shall represent all of the Condominium Interest Owners in any action to recover a condemnation award, subject to the right of each Mortgagee of record, upon request, to join in the proceedings. The Board, in its discretion, may at any time decide to settle such legal action, keeping as its standard in making any such decision, the doing of what is best for a majority of the Owners. No Owner shall challenge the good faith exercise of the discretion of the Board in fulfilling its duties under this Article 10. The Board is further empowered, subject to the limitations herein, to act as the sole representative of all Condominium Interest Owners with respect to all aspects of any condemnation proceedings not specifically covered in this Article 10. The Board, immediately upon receiving knowledge of any Taking, or any threat thereof, shall promptly notify all Owners, and those Mortgagees who have filed with the Association a written request for such notice. 10.04 Repair on Partial Taking. Upon there being a determination of a Partial Taking, or failure of the Owners to make such determination within the 60-Day Period as provided for in Section 10.02 above, the Association shall immediately undertake, and complete within a reasonable period of time, any and all repairs to, and restoration of, the Project, Association Personal Property, and Common Furnishings which may be required as a result of such Partial Taking. The cost of such repair and restoration shall be a Special Expense of the Association payable through the Association's levy of a Special Assessment against each Condominium Interest Owner in accordance with Paragraph 6.03 hereof, except that the portion thereof relating to the repair and restoration of Common Furnishings shall be a Special Assessment levied only against each Vacation Ownership Owner. 10.05 Distribution of Distributable Net Proceeds from Condem- nation Award. Any Distributable Net Proceeds resulting from the Association's receipt of condemnation award proceeds shall be paid by the Association to each Condominium Interest Owner in accordance with Section 2.08, except that any portion thereof attributable to only the Common Furnishings shall be paid only to each Vacation Ownership Owner. Notwithstanding anything in the foregoing to the contrary, upon any Partial Taking, the Board shall determine if any particular Owners have suffered more than other Owners as a result of the Taking. If such a determination is made, each Owner who has suffered more shall be entitled to a portion of the condemnation award which is greater than the less-suffering Owners to the extent that it reasonably compensates such Owner for such Owner's suffering. In addition, or in lieu of the foregoing, the Association shall take other appropriate, equitable action designed to insure that no particular Owner suffers more than any other Owner as a result of a Partial Taking. Such appropriate, equitable action might include, but by no means be limited to, shortening the gral1-03\docs\ccrs.01 (August 31, 1998) 81 length of what otherwise would be Use Weeks of all Vacation Ownership Owners so that all such Owners could continue to enjoy the Project. ARTICLE 11 SALE OF ALL ASSOCIATION PROPERTY AMD ALL COMMON FURNISHINGS 11.01 When Condominium Interest Owners Shall Have Been Deemed to Have Determined to Sell All Association Property and All Common Furnishings. a. On Destruction or Condemnation of Project. The Condominium Interest Owners shall be deemed automatically to have determined to sell all Association Property (Association Real Property and Association Personal Property) and all Common Furnishings upon the occurrence of either of the following events: (i) said Owners having made the determination, pursuant to Section 9.02 above, not to repair and restore the Project upon its being damaged or destroyed; or (ii) said Owners having made the determination, pursuant to Section 10.02 above, that there had been a Total Taking of the Real Property by condemnation. b. By Vote After December 31. 2068. In addition to the occurrence of the sale-triggering events referred to in Paragraph a. above, at any time after December 31, 2068, the Condominium Interest Owners shall have the right and power to offer to sell and sell all Association Property and all Common Furnishings upon the vote or written consent to so do of: (a) (i) the Declarant, (ii) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (iii) the Owner(s) of at least eight (8) Facilities/Amenities Condominiums (where Class "C" Membership has not yet been converted to Class "A11 or Class "B" Membership); or (b) (i) Members holding at least a majority of the total votes in the Association, (ii) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (iii) the Owner(s) of at least eight (8) Facilities/Amenities Condominiums (where Class "C" Membership has been converted to Class "A" or Class "B" Membership) . If the Owners determine by the foregoing vote to sell the Association Property and all Common Furnishings, all of the rights, powers, and duties specified in Section 11.02 below ("Procedures Relating to Sale of All Association Property and All Common Furnishings") shall immediately belong to, and be vested in, the Association, acting through its Board. 11.02 Procedures Relating to Sale of All Association Property All Common Furnishings. gral1-03\docs\ccrs.01 (August 31, 1998) 82 a. General Power and Authority Granted to Association. Upon the Condominium Interest Owners having determined to sell all Association Property and all Common Furnishings in accordance with either: (i) Section 9.02 above (upon damage to or destruction of the Project), or (ii) Section 10.02 above (upon there being a Total Taking of the Real Property by condemnation) , or (iii) Section 11.01 b. above (by vote after December 31, 2068), each Condominium Interest Owner, by virtue of such Owner's having accepted a deed to such Condominium Interest or otherwise owning such an Interest, shall be deemed to have conferred upon the Association, acting through its Board, any and all of each such Owner's right, power, and authority, to sell and convey all Association Property and all Common Furnishings in accordance with this Article 11. b. Grant of Special Power of Attorney. To carry out the intent and purposes of Section 11.02 a. above, each Condominium Interest Owner, by virtue of its having accepted a deed to such Condominium Interest or otherwise owning such an Interest, hereby constitutes and appoints the Association, acting through its Board, whether as Trustee or otherwise, as said Owner's attorney-in-fact in said Owner's name, place, and stead, and for said Owner's use and benefit, to execute, acknowledge, and deliver on behalf of such Owner any instrument or document which may be required in order to effect the sale and conveyance of all Association Property and all Common Furnishings, including but not limited to: (i) any purchase contract, (ii) any escrow instructions, (iii) any deed or other instrument of conveyance, (iv) any trust agreement pursuant to which the Association, as trustee, may acquire title to all of such property, for the purpose of disposing of the same, and pursuant to which trust agreement all Owners shall be the beneficiaries; and (v) any document(s) of conveyance as may be reasonably required to convey title of the Condominium Interest(s) of each such Owner to the Association, as trustee. Each Condominium Interest Owner does further give and grant to the Association, as trustee or otherwise, acting through its Board, as said Owner's attorney-in-fact, full power and authority to do and perform any act necessary and proper to be done in the exercise of the foregoing powers, including, without limitation, the power and authority to petition for sale in lieu of partition, if necessary to effect such conveyance, as fully as each such Owner might or could do. Each foregoing power of attorney: (i) shall be irrevocable and be deemed coupled with an interest; and (ii) shall be binding upon each Condominium Interest Owner. c. Property to Be Offered for Sale. Immediately upon the Association's having determined to sell all Association Property and all Common Furnishings pursuant to: (i) either Section 9.02 above (upon damage to or destruction of the Project), or (ii) Section 10.02 above (upon there being a Total Taking of the Real Property by condemnation), or (iii) Section 11.01 b. above (by gral1-03\docs\ecrs.01 (August 31, 1998) 83 vote after December 31, 2068), the Association, acting through its Board, shall offer for sale all Association Property and all Common Furnishings in accordance with Paragraph d. below. d. Property to Be Appraised. Immediately upon the Association's having determined to sell all Association Property and all Common Furnishings upon any of those events set forth in Paragraph c. above, the Association, acting through its Board, shall hire a real estate appraiser who is a Member Appraisal Institute (MAI) of the American Institute of Real Estate Appraisers to make an appraisal of all of such property. Immediately after receiving such appraisal, the Association, acting through its Board, shall establish the selling price for the Association Real Property, the Association Personal Property, and the Common Furnishings and shall offer such property for sale to the public, using a real estate broker or brokers, and such other broker(s) , if it chooses. The Association, acting through its Board, shall thereafter use its best efforts to sell all of such property. e. Sale Price Factors. The Owners realize that the sale price of the Association Property may be affected by local laws and policies then in effect at the time such Property is offered for sale, such as, without limitation, ordinances of the City of Carlsbad related to land use and zoning and various restrictions of the California Coastal Commission. f. Petition for Sale. In the event that no consumma- tion of a sale and conveyance of all Association Property and all Common Furnishings shall have been effected by the Association within 18 months after the Association has made the determination to sell such property, any Condominium Interest Owner shall have the right to petition a court of competent jurisdiction to order the sale of such property. g. Distribution of Net Proceeds from Sale. Upon consummation of any sale of the Association Property and Common Furnishings, any Distributable Net Proceeds therefrom shall be distributed by the Association to each Condominium Interest Owner in accordance with Section 2.08, except that any portion thereof attributable to only the Common Furnishings shall be paid to only each Vacation Ownership Owner. h. Arbitration of Disputes. In the event of any irreconcilable dispute between or among any of the following: the Declarant, any Condominium Interest Owner(s), and/or the Associa- tion relating to their respective rights under, or otherwise concerning the subject matter of, Article 9 (Damage to or Destruction of Project), Article 10 (Condemnation), this Article 11 (Sale of All Association Property and All Common Furnishings), Section 2.18 hereof (Limitations on Partition of Common Area), or Section 2.05 (Allocation of Distributable Net Proceeds Among gra11-03\docs\ccrs.01 (August 31, 1998) 84 Owners) , any such party may cause the same to be referred to binding arbitration in accordance with the provision of Section 16.09 below. ARTICLE 12 SPECIAL PROVISIONS FOR ENFORCEMENT OF DECLARANT'8 OBLIGATIONS 12.01 General. The procedures set forth in this Article 13 are hereby established for the enforcement of the following obligations of the Declarant to the Association and to the Members thereof: a. Completion of construction of the Needs, and conveyance to the Association of the Real Property and the Common Furnishings, in Phase I of the Project included in the offering for which the Declarant has given a bond or other type of security to the Association for the commitment of the Declarant to complete construction of said Improvements. b. Payment to the Association of Regular Annual Assessments, Special Assessments, and Capital Needs Assessments owed by the Declarant, as to Declarant Condominium Interests. c. Any subsidy agreement between Declarant and Association by which Declarant has agreed to subsidize any portion of the costs of administering, managing, and operating the Project and the Vacation Ownership Operation. 12.02 Periodic Statements Required from Declarant. The Declarant shall, within 30 days after the end of each quarter of each Fiscal Year of the Association, furnish to each director on the Board at his or her residence address a statement containing the following information, as may be applicable: a. A status report covering each Improvement in Phase I in the offering which was scheduled for completion or installation during the quarter in question according to the Planned Construction Statement for the Project, and each still- uncompleted Improvement that was scheduled for completion or installation during an earlier quarter. b. Where there is no subsidy agreement between Declarant and Association which is in effect (because of its termination for any reason) as of the time Declarant is to make the periodic statement required under this Section 12.02, the Declarant shall report the following: 1. The number of Declarant Condominium Interests (Facilities/Amenities Condominiums and Vacation Ownerships), gral1-03\docs\ccrs.01 (August 31, 1998) 85 respectively, as of the first and last day of the reporting quarter in question. 2. The total Regular Annual Assessments and Special Assessments which the Declarant became obligated to pay during such reporting quarter as an Owner of Declarant Condominium Interests. 3. The total Regular Annual Assessments and Special Assessments paid by the Declarant during such reporting quarter. 4. The amount of any delinquency of the Declarant in the payment of Regular Annual Assessments and Special Assessments that has not been cured as of the date of Declarant's report. c. An itemized report of funds, goods and/or services furnished, or caused to be furnished, to the Association under a subsidization program of Declarant, including monetary contribu- tions to the reserves of the Association for replacement of, or for major repairs to, any portion of the Improvements, and an itemized monetary valuation of any such goods and services furnished. 12.03 Required Board Discussion and Vote. If the statement of the Declarant referred to in Section 12.02 above is not received by the Board within 45 days after the end of a quarter, or if the statement as received evidences a failure by the Declarant to fulfill an obligation to the Association, the Board shall meet specially, together, or by conference telephone call, to discuss and to vote on the question of initiating action against the Declarant and/or the Declarant's surety to enforce the Declarant's unfulfilled obligations. 12.04 Board Action to Enforce Declarant's Obligations. At any time after the Board discusses and votes on the question of initiating action against the Declarant and/or the Declarant's surety to enforce any unfilled obligations of Declarant, as provided for in Section 12.03 above, the Board may initiate such action. 12.05 Sole Director Action to Enforce Declarant's Obliga- tions. If (i) within 75 days after the end of a particular Fiscal Year quarter, the Board fails to discuss and vote (in accordance with Section 12.03 above) on the question of requiring the Declarant's failure to fulfill one or more of its obligations hereunder to the Association, or (ii) if at any time after the Board has discussed the Declarant's failure to fulfill any such obligation, but either has voted not to initiate enforcement action, or has failed to take such vote, then in such event, the director on the Board of the Association elected solely by the gra11-03\docs\ccrs.01 (August 31, 1998) 86 votes of the Members other than Declarant (pursuant to the Bylaws) may thereafter initiate such an action in the name of the Associa- tion and at the Association's expense to enforce Declarant's unfulfilled obligation(s). If said Director determines that it is in the best interest of the Members of the Association to initiate such an action under the foregoing special authority, he, or she shall do so in the name of the Association within 90 days after the end of the quarter in question, and the Board shall thereafter take such steps as are necessary and appropriate in furtherance of the purpose of such action. 12.06 Arbitration with Respect to Question of Declarant's Fulfillment of Obligation(s). In the event of any irreconcilable dispute between the Declarant and the Association with respect to the question of the fulfillment of the Declarant's obligations referred to in Section 12.01 above, either such party may cause the same to be referred to binder arbitration, in accordance with the provisions of Section 15.09 below. ARTICLE 13 PROJECT PHASING AND ANNEXATION PROCEDURE 13.01 Declarant's Right to Phase. Vary Phasing, or Refrain from Phasing. As provided in Recital Paragraph B. above, Declarant intends to construct the Project in three (3) Phases (or Modules): Phase I shall consist of the construction of 71 Vacation Condominiums and 14 Facilities/Amenities Condominiums. Phase II shall consist of the construction of 72 Vacation Condominiums. Phase III shall consist of the construction of 18 Vacation Condominiums. The location upon the Land of each such Phase is as delineated on the Condominium Plan. However, notwithstanding the foregoing, Declarant may decide to construct what would otherwise be separate Phases II and III, at the same time. Notwithstanding anything in the above to the contrary, Declarant, in its own absolute discretion (without requiring any approval of the other Condominium Interest Owners, the Association, or the Board, may subsequently decide: (i) to change the number of presently contemplated Units for Phase II and/or for Phase III; (ii) to eliminate Phase II and/or Phase III, and the Annexable Properties, entirely from the contemplated Development, and/or (iii) to develop either Phase II, Phase III, or both of them, with hotel units and/or any other type of real property improvements which Declarant views as suitable for the Annexable Properties, including, without limitation, the possibility of developing either such Phase, or both of them, with a combination of timeshare units and hotel units and/or other types of real property improvements. It is thus the overall intent of Declarant to retain and maintain the utmost flexibility with respect to the development of Annexable Property #1 and Annexable Property #2. gra11-03\docs\ccrs.01 (August 31, 1998) 8/ 13.02 Annexation in Connection with Phasing. a. Declarant's Right to Annex. Declarant shall have, and continue to have, the absolute right, but not the obligation, as provided above, to: (i) annex to the Phase I Property, (ii) impose this Declaration and the Vacation Ownership Declaration on, (iii) construct vacation resort and related Improvements on, (iv) thereafter convey such developed Real Property to the Association, and (v) offer for sale and sell Vacation Ownerships in, that certain real property which adjoins the Land, called here Annexable Property #1, legally described on Exhibit "C" attached hereto and made a part hereof. Declarant may, but shall not be obligated to, repeat the same process, as part of Phase III of the Development, as to Annexable Property #2, legally described on Exhibit "D" attached hereto and made a part hereof. Notwithstanding anything in the foregoing to the contrary, Declarant may reverse the order of the phasing, by first annexing the Phase III Property to the Phase I Property. When either such Annexation is accomplished, such Annexed Property shall henceforth be bound by each of the covenants, conditions and restrictions of this Declaration. b. How Annexation Accomplished. Such annexation shall be accomplished (without requiring any approval of the other Condominium Interest Owners, the Association, or the Board), if at all, by the Declarant's filing for record in the Official Records of San Diego County, California, of (i) a Declaration of Annexation (in a form similar to that set forth in Exhibit "E" attached hereto and made a part hereof) , and (ii) a suitable amendment to the Condominium Plan or an amended Condominium Plan which delineates the Units in the Phase being added to the Project, with respect to each Annexable Property being so annexed. 13.03 Possible Impact and Effects of Subsequent Development. Each Condominium Interest Owner acknowledges and accepts the fact that development of the Project in Phases, or development of Annexable Property #1 and Annexable Property #2 without phasing (as opposed to one-time construction) will likely cause some disruption upon the Project, due to the inherent nature of the construction process, including such things as dust from grading and noise from use of equipment and tools. Further, as a likely consequence of any construction being done upon the Annexable Properties, the Owners realize and accept the fact that some views from the then existing Vacation Units will likely be impaired by the new construction. 13.04 Possible Discontinuation of Construction. a. General. Should Declarant choose not to proceed with the development of Phase II and/or Phase III, as contemplated in Section 13.01, Declarant shall give the Board notice in writing of gra11-03\docs\ccrs.01 (August 31, 1998) 88 such a determination. Thereafter, the existing legal descriptions set forth in each outstanding deed to each Vacation Ownership, to each Facilities/Amenities Condominium, and in each deed of trust encumbering a Vacation Ownership or a Facilities/Amenities Condominium shall be modified (corrected) by changing the undivided I/175th interest in the Common Area (which was based upon a full 3- Phase development) to a fraction in which the denominator is the actual total number of Condominiums then in the Project. b. Special Power of Attorney Granted to Association to Change Legal Description. Should the existing legal description need to be corrected pursuant to Paragraph a. above: (i) each Vacation Ownership Owner, including Declarant as to Declarant Vacation Ownerships, by virtue of such Owner's having accepted a deed to a Vacation Ownership or otherwise owning such a Vacation Ownership, and (ii) each Facilities/Amenities Condominium Owner, including Declarant, by virtue of such Owners having accepted a deed to such Owner's Facilities/Amenities Condominium or otherwise owning such a Condominium, and (iii) each Mortgagee by virtue of its having accepted a Mortgage on a Vacation Ownership, the lien of which is junior in recording priority to this Declaration, and (iii) any other mortgagee or trust deed holder holding a mortgage or deed of trust on all or any portion of the Land, by virtue of its having accepted a mortgage or deed of trust on all or any portion of the Land, the lien of which is junior in recording priority to this Declaration, because it either subordinated its mortgage or deed of trust to this Declaration, or, where, otherwise, its mortgage or deed of trust was junior in recording priority to this Declaration (any such Vacation Ownership Owner, Facilities/Amenities Condominium Owner, Mortgagee, or other mortgagee or holder of a deed of trust being called here a "Principal"), hereby irrevocably appoints and constitutes the Association, acting through its Board, as each such Principal's Attorney-in-Fact, with full and exclusive right, power and authority, in each such Principal's name, place and stead, for each said Principal's benefit, to: (a) execute, acknowledge, and deliver on behalf of each such Principal, a deed, mortgage, deed of trust, escrow instruction(s) and/or any other instrument, including without limitation, consent to any necessary or advisable amendment of this Declaration, the Bylaws or the Articles, which may be required to make, or which may be related to making such a corrective change of legal description, and (b) do any and all other acts related thereto in order to accomplish the foregoing (each such foregoing grant being called a "Special Power of Attorney"). Each such Special Power of Attorney is and shall be irrevocable, is coupled with an interest, and is binding upon, and inures to the benefit of all successors and assigns of each Principal and all successors and assigns of the Association. gra11-03\docs\ccrs.01 (August 31. 1998) c. Amendment. Notwithstanding Section 15.01 below, this Article 12 may not be amended or revoked without the prior written consent of the Declarant first being obtained. d. Time Limitfs) for Annexationfs). Notwithstanding Declarant's right to annex to the existing Real Property the Annexable Property set forth in this Article 13, any such Annexation shall be accomplished, if at all, within the following time limits: 1. Annexation of Annexable Property #1. Annexable Property #1 (or Annexable Property #2, if Declarant determines to annex it first) must be annexed, if at all, by Declarant (or by a successor or assign) within ten (10) years after the issuance by the California Department of Real Estate ("ORE") of its first Final Time Share Project Public Report authorizing the offering for sale and sale of Vacation Ownerships in Phase I of the Project. Nothing in this paragraph, however, shall preclude Declarant (or a successor or assign) from annexing both Annexable Property # 1 and Annexable Property # 2 within said ten (10)-year period, if it so desires. 2. Annexation of Annexable Property #2. Following Annexation of Annexable Property # 1 (or Annexable Property #2, if Declarant should decide to reverse the order of annexation) within the then (10)-year period required by Paragraph 1. above, Annexable Property #2 (or Annexable Property #1) must be annexed, if at all, by Declarant or by a successor or assign within five (5) years after the issuance by the ORE of its first Final Time Share Project Public Report authorizing the offering for sale and sale of Vacation Ownerships in the combined Phase I and Phase II Property. If Annexation of the Annexable Property is not accomplished within the time frames set forth in Paragraphs 1. and 2. above, any subsequent Annexation shall require the vote or written consent authorizing such Annexation of: (i) Members holding at least 15 percent of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (ii) Owner(s) of least eight (8) Facilities/Amenities Condominiums. ARTICLE 14 DESIGNATION OF VACATION UNITS TO USE PROGRAM 14.01 Designated Vacation Units. As defined in Section 1.55 hereof, Designated Vacation Units are those particular Units which Declarant, pursuant to the terms of this Article 14, has from time to time designated and made subject to the Vacation Ownership Use Program hereunder. With the exception of Declarant Vacation Ownerships, Vacation Ownerships are created and exist only in Designated Units, upon such Units having been designated to such gra11-03\docs\ccrs.01 (August 31, 1998) 90 Use Program. Declarant may offer for sale and/or sell Vacation Ownerships only in Designated Units and then only when given authority to do so by the California Department of Real Estate. 14.02 Nondesiqnated Units. As defined in Section 1.87 hereof, Nondesignated Vacation Units are those particular Units, if any, which Declarant has not, pursuant to the terms of this Article 14, designated and made subject to the Use Program hereunder. 14.03 Initially Designated Units. Concurrently with the recordation of this Declaration, Declarant hereby designates and makes subject to the Vacation Ownership Use Program hereunder the following 36 Vacation Units: (Calledthe"InitiallyDesignatedUnits"),asdelineatedand referred to on the Project Diagram attached hereto as Exhibit "B". 14.04 Subsequent Designation of Nondesianated Units. Declarant, without requiring any consent from other Condominium Interest Owners or from the Association, shall from time to time (such time to be at Declarant's election) designate and make subject to the Vacation Ownership Use Program hereunder any number of the remaining (at the time of the recordation of this Declaration) Nondesignated Units in Phase I and II until all of said Nondesignated Units therein have been so designated, in accordance with the procedure set forth in Section 14.05. 14.05 Procedure for Designating Nondesignated Units. Designation to the Vacation Ownership Use Program of each Nondesignated Unit in which Declarant wishes to offer for sale and sell a Vacation Ownership shall be made and shall be deemed to have taken effect, upon occurrence of all of the following: a. Declarant's preparation, and recordation in the Official Records of San Diego County, California, of a document entitled Certificate of Designation of Heretofore Nondesignated Vacation Units (called the "Certificate"), which Certificate shall contain the following information: 1. The Unit number of each Nondesignated Vacation Unit thereby being designated; 2. A statement designating said Nondesignated Vacation Unit or Units and making it or them subject to the Use Program in the Project; and 3. A statement signed by the Managing Agent to the effect that, based upon the Managing Agent's inspection, each item of Common Furnishings scheduled by Declarant to be placed in the Nondesignated Vacation Unit or Units upon its or their designation is, in fact, in place in such Unit or Units and is in new or like- gra11-03\docs\ccrs.01 (August 31, 1998) 91 new condition. b. Declarant's submission of the following to the California Department of Real Estate: (i) a copy of said Certifi- cate, certified by Declarant's title insurance company to be a true copy of the Certificate which was actually recorded, (ii) a bill of sale from the Declarant to the Association indicating that the Association is the legal owner of all Common Furnishings located or placed in the newly designated Vacation Unit or Units; (iii) an application requesting the issuance by the California Department of Real Estate of the appropriate amendment of its Time Share Project Public Report for the Project authorizing Declarant to offer for sale and to sell Vacation Ownerships in the Vacation Unit or Units designated in the Certificate; and (iv) any other documents as may be required by the California Department of Real Estate in connection with the Declarant's application in (iii) above. c. The issuance by the California Department of Real Estate of its appropriate amendment of the Final Time Share Public Report for the Project authorizing Declarant to offer for sale and to sell Vacation Ownerships in the Vacation Unit or Units listed in the Certificate. 14.06 Reservation Safeguards for Owners of Annual and Biennial Floating Week/Floating Unit Vacation Ownerships. In order to ensure and safeguard that each Owner of either an Annual or a Biennial Floating Week/Floating Unit Vacation Ownership is given the opportunity to reserve for use and occupancy (on a "first- reserved, first-served" basis) a Vacation Unit of such Owner's Assigned Vacation Unit Type for any Use Week of such Owner's choice occurring during such Owner's assigned Season (Prime Summer Season or High Season, whichever be the case) for a particular Use Year, Declarant agrees, for itself, and for its successors and assigns, if any, that for each Designated Vacation Unit of a Vacation Unit Type in which Declarant has sold or intends to sell an Annual or Biennial Floating Week/Floating Unit Vacation Ownership, Declarant will not offer for sale and/or sell any Annual or Biennial Floating Week/Fixed Unit Vacation Ownerships in the Season in which any such Floating Week/Floating Unit Vacation Ownerships have been sold or will be sold. Here is how the foregoing rule will be applied: If, for example, at any point in time four (4) "A" Vacation Unit Type Units had been designated to the Vacation Ownership Use Program, and Declarant thereafter sold one (1) Annual Fixed Week/Floating Unit Vacation Ownership for Fixed Week No. 27 in each Use Year, Declarant will not be able to offer for sale and sell any Annual or Biennial Floating Week/Floating Unit Vacation Ownerships for Prime Summer Season in one (1) of these four (4) Designated "A" Unit Type Units, but could sell Annual and/or Biennial Fixed Week/Floating Unit Vacation Ownerships in three (3) of these four (4) Designated gra11-03\docs\ccrs.01 (August 31, 1998) 92 "A" Vacation Unit Type Units, so long as no additional Annual Fixed Week/Floating Unit Vacation Ownerships for Fixed Week No. 27 had been, or will be, sold. Thus, adding to the above example, where Declarant had sold one additional Annual Fixed Week/Floating Unit Vacation Ownership for Fixed Week No. 27 in an "A" Unit Type Unit, Declarant will not be able to offer for sale and sell any Annual or Biennial Floating Week/Floating Unit Vacation Ownerships for Prime Summer Season in two (2) of these four (4) Designated "A" Vacation Unit Type Units, but could sell Annual and/or Biennial Fixed Week/Floating Unit Vacation Ownerships in two (2) of these four (4) Designated "A" Vacation Unit Type Units during Prime Summer Season. ARTICLE 15 SPECIAL PROVISIONS REQUIRED BY CITY OF CARLSBAD 15.01 General Enforcement by the City. Notwithstanding anything in this Declaration to the contrary, the City of Carlsbad (the "City") shall have the right, but not the obligation, to enforce any of the covenants, conditions and/or restrictions imposed by this Declaration in favor of the City, or in which the City has an interest. 15.02 Failure of Association to Maintain Common Area Lots and Easements. Notwithstanding anything in this Declaration to the contrary, in the event that the Association fails to maintain the Association Real Property as required by Section 5.02 f., the City shall have the right, but not the duty, to perform the necessary maintenance. If the City elects to perform such maintenance, the City shall give written notice to the Association, with a copy thereof to the Condominium Interest Owners, setting forth with particularity the maintenance which the City finds to be required and requesting that same be carried out by the Association within a period of thirty (30) days from the giving of such notice. In the event that the Association fails to carry out such maintenance of the Association Real Property within the period specified by the City's notice, the City shall be entitled to cause such work to be completed and shall be entitled to reimbursement with respect thereto from the Owners as provided herein. 15.03 Special Assessments Levied by the City. Notwithstanding anything in this Declaration to the contrary, in the event the City has performed necessary maintenance to the Association Real Property pursuant to Section 15.02 above, the City shall submit a written invoice to the Association for all costs incurred by the City to perform such maintenance. The City shall also provide a copy of such invoice to each Condominium Interest Owner, together with a statement that, if the Association falls to pay such invoice in full within the time specified, the City will pursue collection gra11-03\docs\ccrs.01 (August 31, 1998) 93 against the Condominium Interest Owners, pursuant to the provisions of this Section 15.03. Said invoice shall be due and payable by the Association within twenty (20) days of receipt by the Association. If the Association shall fail to pay such invoice in full within the period specified, payment shall be deemed delinquent and shall be subject to a late charge in an amount equal to six percent (6%) of the amount of the invoice. Thereafter the City may pursue collection from the Association by means of any remedies available at law or in equity. Without limiting the generality of the foregoing, in addition to all other rights and remedies available to the City, the City may levy a special assessment against the Owners of each Condominium Interest in the Project for an equal pro rata share of the invoice, plus the late charge. Such special assessment shall constitute a charge on the Real Property and shall be a continuing lien upon each Condominium Interest against which the special assessment is levied. Each Condominium Interest Owner hereby vests the City with the right and power, to levy such special assessment, to impose a lien upon such Owners respective Condominium Interest and to bring all legal actions and/or to pursue lien foreclosure procedures against any Owner and such Owner's respective Condominium Interest for purposes of collecting such special assessment in accordance with the applicable procedures for same set forth in this Declaration. 15.04 Notices of Public Hearing from City. From time to time the City may be required under law to send notices of a forthcoming public hearing on a matter related to City zoning or land use requirements to property owners in the vicinity of the Project, including the Condominium Interest Owners hereunder. Since to have to mail such notices to each Owner would impose a burden upon the City and since the content of such notices would similarly affect all Owners, each Condominium Interest Owner hereby automatically assigns to the Association his, her,or its right to otherwise receive from the City individual notices of forthcoming public hearings pertaining to matters related to City zoning or land use requirements, with the result that the City may send to the Association only one such notice, for each such forthcoming hearing, regardless of the actual number of Owners in the Project. The Association shall have the responsibility of examining each such notice of public hearing and taking such action thereon as is determined by the Association to be in the best interests of a majority of Owners, including, without limitation, participating in such hearing. Notwithstanding anything to the contrary above, any such Owner may require the City to mail individual notices to him, her, or it, if such Owner gives the City a written request that he, she, or it be placed on a list to receive such forthcoming notices. gra11-03\docs\ccrs.01 (August 31, 1998) 94 ARTICLE 16 MISCELLANEOUS PROVISIONS 16.01 Amendment of Declaration a. Where Class "C" Membership Has Not Yet Been Converted to Class "A" and/or Class "B" Membership. Where Class "C" Membership has not been converted to Class "A" and/or Class "B" Membership, any amendment to this Declaration shall require the vote or written assent of: (i) the Declarant, (ii) Members holding at least a majority of the total votes in the Association, excluding votes held by Declarant with respect to Declarant Vacation Ownerships, and (iii) Owner(s) of at least eight (8) Facilities/Amenities Condominiums. b. Where Class "C" Membership Has Been Converted to Class "A" and/or Class "B" Membership. Where Class "C" Membership has been converted to Class "A" and/or Class "B" Membership, and the Declarant has become a Class "A" or Class "B" Member (pursuant to Section 4.04 c. above), any amendment to this Declaration shall require the vote or written assent of: (i) Members holding at least a majority of the total votes in the Association, (ii) Members holding at least a majority of the total votes in the Association, excluding votes held by the Declarant with respect to Declarant Vacation Ownerships, and (iii) the Owner(s) of at least eight (8) Facilities/Amenities Condominiums. c. Other Conditions and Terms. Notwithstanding the voting requirements in Sections 16.01 a. and 16.01 b. above, if any specific provision in this Declaration requires a greater voting percentage than that required for amendment under these Sections 16.01 a. and 16.01 b., amendment of such provision shall require the same voting percentage of Members as voting on the action itself. Each amendment shall be binding upon every Owner. Any amendment authorized hereby shall be evidenced by an instrument in writing, signed and acknowledged by any two (2) officers of the Association, which amendment shall be effective upon the recordation thereof in the Official Records of San Diego County, California. d. Protection of Beneficiaries of First Deeds of Trust. Notwithstanding any other provisions in this Declaration, no material amendment may be made to this Declaration without the prior written consent of Mortgagees (called here "First Mortgagees") holding first (recording priority) Mortgages (called here "First Mortgages") encumbering Condominium Interests in the Proj ect. gral1-03\docs\ccrs.01 (August 31, 1998) 95 For purposes of this Section 16.01 d., a "material amendment" shall mean any amendment to the provisions of this Declaration which would do any of the following: 1. Reduce the priority of the liens of such First Mortgages; 2. Change the priority of Assessment Liens, and/or the enforcement of such Liens with respect to First Mortgages; 3. Eliminate reserves for the maintenance, repair, restoration, and/or replacement of the Association Real Property; 4. Remove the responsibility of the Condominium Ownership Owners Association for the maintenance, repair, restoration, and/or replacement of the Association Real Property; 5. Authorize any conversion of Vacation Units or Facilities/Amenities Units into Association Real Property or Common Area ; 6. Reduce any fire and extended coverage insurance and liability coverage insurance from the minimum coverage mandated by this Declaration; 7. Authorize termination of the Project as a time- share project except as provided for under this Declaration; 8. Authorize any sale of the Project except as provided for under this Declaration; and or 9. Make any changes in the provisions of this Section 16.01 d. Notwithstanding anything in the foregoing which could be construed to the contrary, this Declaration may be amended without requiring any consent of First Mortgagees in order to reflect any change in a legal description of a Condominium Interest which conceivably could be necessitated by the discontinuation of construction of, or other changes to, Phases II and/or III as provided in Section 13.04 above. An addition or amendment to this Declaration shall not be considered "material" if it is made solely for the purpose of correcting technical errors or for clarification. Any First Mortgagee who receives a written request to give its approval to a proposed amendment to this Declaration, but fails to deliver to the requesting party a written disapproval to such proposed amendment within 30 days after such receipt, shall be deemed to have consented to such amendment, provided that such request was delivered by certified or registered mail, with a "return receipt" requested. gra11-03\docs\ccrs.01 (August 31, 1998) 96 e. Protection of Declarant. Notwithstanding any other provision in this Declaration, until the closing of the first escrow for the sale of a Vacation Ownership, Declarant shall have the absolute and unilateral right to terminate or amend this Declaration by recordation of an appropriate termination or amendment document, so long as such act is in compliance with the requirements of the California Department of Real Estate. 16.02 Term and Earlier Termination of Declaration. a. Term of Declaration. Unless terminated sooner in accordance with Section 16.02 b. below, the covenants, conditions, and restrictions herein shall run with the land and shall be binding upon, and shall inure to the benefit of all Condominium Interest Owners until December 31, 2068, upon which date they shall be deemed terminated, unless earlier extended by the same vote or written consent of that number of Members required by Section 16.01 above (Amendment of Declaration) to amend this Declaration. b. Earlier Termination of Declaration. This Declaration shall be deemed terminated prior to December 31, 2068 upon the occurrence of both of the following events: (i) the sale of the Real Property, and (ii) the recordation in the Official Records of San Diego County, California, of a Declaration of Termination of Covenants, Conditions, and Restrictions, stating therein that this Declaration is terminated, and signed by any two (2) officers of the Association. c. Survival of Certain Provisions and Association. Notwithstanding any termination of this Declaration, the provisions of this Declaration which are related to: (i) the winding-up of the Association's affairs and/or the maintenance and disposition of all of the Association Property and Common Furnishings, and (ii) the Association and the Board, and their rights, powers, and duties, shall survive the termination of this Declaration for so long as necessary. 16.03 Notices. Notices provided for in this Declaration shall be in writing and shall be deemed sufficiently given either: (i) when delivered personally to the party being noticed at the appropriate address set forth below (in which event such notice shall be deemed effective upon such delivery) , or (ii) 48 hours after deposit of same in any United States Post Office box in the state to which the notice is addressed, or (iii) 72 hours after deposit of same in any such post office box other than in the state to which the notice is addressed, postage prepaid, addressed as set forth below. Any notice to an Owner required under this Declaration shall be addressed to such Owner at the last address for such Owner appearing in the records of the Association. Notices to the Association shall be addressed to: 5805 Armada Drive, Carlsbad, California 92008; notices to the Managing Agent gra11-03\docs\ccrs.01 (August 31, 1998) 97 shall be addressed to: P.O. Box 4068, Carlsbad, California 92008; and notices to the Declarant shall be addressed to: 5900 Pasteur Court, Ste. 200, Carlsbad, California 92008. 16.04 Notification of Sale of Owner's Vacation Ownership. Prior to any sale or other voluntary transfer of an Owner's Vacation Ownership, the transferor or transferee shall notify the Association or the Managing Agent in writing and in whatever form then required by the Association of such pending sale or transfer. Such notice shall set forth the name and address of the transferee and transferor, and the date on which such sale or transfer is to be consummated. Unless and until such notice is given and any amounts owed to the Association by the transferor are fully paid, any transfer made in violation of the above shall be void and shall not be recognized by the Association for any purpose. 16.05 Indemnification of Directors. Officers. Employees, and Other Agents. Procedures pertaining to the indemnification of directors, officers, employees, and other agents of the Association are established and set forth in Article VIII of the Bylaws. 16.06 Severabilitv and the Rule Against Perpetuities. If any provision of this Declaration, or any section, sentence, clause, phrase, or word, or the application thereof, in any circumstances, shall be held invalid, the validity of the remainder of this Declaration and/or of the application of such provision, sentence, clause, phrase, or word under any other circumstances shall not be affected thereby, and the provisions hereof are deemed independent and severable. If any provision of this Declaration would violate the Rule Against Perpetuities or any other limitation on the duration of the provisions contained herein imposed by law, then such provisions shall be deemed to remain in effect only for the maximum permissible period permitted by law or until 21 years after the death of the last survivor of the now living descendants of President Bill Clinton and former President George C. Bush. 16.07 Interpretation. The captions of the articles, paragraphs, and subparagraphs hereof are for convenience only and shall not be considered in resolving questions of interpretation or construction or meaning of this Declaration. Whenever the context of this Declaration requires same, the singular shall include the plural, and the masculine shall include the feminine and the neuter. 16.08 No Waiver. The failure of the Association, the Declarant, the Board, any Owner, or any of their agents to enforce any provision of this Declaration shall not constitute a waiver thereof nor of the right to enforce such provision thereafter. 16.09 Personal Covenant. To the extent that the acceptance of a conveyance or other ownership of a Condominium Interest by a gral1-03\docs\ccrs.01 (August 31, 1998) 98 Condominium Interest Owner creates a personal covenant between such Owner, the Declarant, the Association, and the other Condominium Interest Owners, such personal covenant shall terminate and be of no further force or effect from and after the date when such Owner ceases to be such a Condominium Interest Owner (including Declarant) except with respect to the payment of money or other obligation owing to the Association by such Owner. 16.10 Arbitration of Disputes. In the event of any irreconcilable dispute, or a question of interpretation, between or among any of the following: the Declarant, any Condominium Interest Owner or Owners, and/or the Association arising out of, or relating to, the provisions or subject matter of this Declaration, and/or the Bylaws, Articles, and/or the Rules and Regulations, including, without limitation, any and all issues relating to the quality of Declarant's construction of any of the Improvements, any of the foregoing parties may cause the same to be referred to binding arbitration in San Diego County, California, to be administered by, and to be in accordance with the then prevailing commercial rules of, the American Arbitration Association. The decision of such arbitrator in this matter shall be final and conclusive upon the issue or issues in question. 16.11 Attorneys' Fees And Costs. In the event arbitration or any other legal action is instituted to enforce or interpret any of the provisions contained in, or to resolve any dispute relating to, this Declaration, the Articles, the Bylaws, and/or the Rules and Regulations, the party prevailing in such action shall be entitled to recover from the losing party thereto such party's reasonable attorneys' fees and costs of such arbitration or other legal action (if the arbitrator or judge determines that there is such a "losing" party). 16.12 Successors. The covenants, conditions, and restrictions of this Declaration shall run with and bind the Real Property and any interest therein, and shall inure to the benefit of, be binding upon, and be enforceable by, the Association, and/or any Condominium Interest Owner, and/or the Declarant, and each of their respective legal representatives, heirs, successors, and assigns. gra11-03\docs\ccrs.01 (August 31, 1998) 99 IN WITNESS WHEREOF, the Declarant has hereunto caused this Declaration to be executed on the day and year above first written. GRAND PACIFIC PALISADES LLC, a California limited liability company By: Timothy J. Stripe, Co-President By: David S. Brown, Co-President and Secretary "Declarant" STATE OF CALIFORNIA ) ) SS. COUNTY OF SAN DIEGO ) On , before me, , Notary Public, personally appeared Timothy J. Stripe and David S. Brown, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signature on the instrument, the persons, or the entity upon behalf of which the persons acted, executed the instrument. WITNESS my hand and official seal. (Seal) Signature gra11-03\docs\ccrs.01 (August 31, 1998) 100 "A" (TO BE INSERTED) EXHIBIT "A" gral1-03\docs\ccrs.01 (August 31, 1998)101 BXHTBTT MB" PROJECT DIAGRAM FOR THE GRAND PACIFIC PALISADES RESORT (TO BE INSERTED) Exhibit "B" gra11-03\docs\ccrs.01 (August 31, 1998) 102 "C" LEGAL DESCRIPTION OF ANNBXABLE PROPERTY *1 (TO BE INSERTED) EXHIBIT "C" gra11-03\docs\ccrs.01 (August 31, 1998) 103 EXHIBIT "D" LEGAL DESCRIPTION OF ANNEXABLE PROPERTY *2 (TO BE INSERTED) EXHIBIT "D" gra11-03\docs\ccrs.01 (August 31, 1998) 104 EXHIBIT "E" DECLARATION OF ANNEXATION (TO BE INSERTED) EXHIBIT "E" gra11-03\docs\ccrs.01 (August 31, 1998) 105