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ArticleIV - Management of Owners' Association

Phase 1, Parcel 1 of Parcel Map No. 79-756
City of Orange, County of Orange
State of California

Article IV
Management of Owners' Association

Section 1. Creation of Board of Directors
The members of the Association shall hold an organizational meeting within forty-five (45) days after the close of sale of the first unit in the project which represents the fifty-first (51st) percentile interest authorized for sale under the first Public Report, but no later than six (6) months after the close of sale of the first unit in the project, at which time a Board of Directors shall be elected by vote of the Association members. Prior to the organizational meeting, the initial Board named by Declarant shall manage the affairs of the Association.

Section 2. Annual Meeting
Annual meetings of owners shall be held on the same day of the same month of each year after the organizational meeting. At the organizational meeting, the owners shall elect a Board of Directors consisting of five (5) members, all of whom shall be owners and which may include Declarant, or Declarant's representatives.

Section 3. Owner Voting Rights
The Association shall have two (2) classes of membership: Class A shall be all those owners, with the exception of Declarant, and shall be entitled to one vote for each unit in which they hold the required interest for membership. When more than one person holds such interests in any unit, all such persons shall be members. The one vote for each unit shall be exercised as they among themselves determine, but in no event, shall more than one vote be cast with respect to any unit.lass B member(s) shall be Declarant, and shall be entitled to three votes for each unit in which Declarant holds the interest required for membership; provided that the Class B membership shall cease and be converted to Class A membership on the happening of the following events, whichever shall occur sooner: (a) when the total votes outstanding in the Class A membership equal the total votes outstanding in the Class B membership. However, should this occur prior to annexation of the real property described in Exhibit "E" hereto, then annexation of said real property and upon commencement of monthly maintenance charges by Declarant, for each unsold unit owned by Declarant, in determining the total votes outstanding in the Class B membership, the unsold units owned by Declarant in the annexed property shall be included; (b) two (2) years after original issuance of the most recently issued Public Report for a phase in the project; or (c) on December 31, 1982. So long as the two classes of members exist in the Association, no action by the Association which must have the prior approval of the members, shall be deemed approved by the members unless approved by the appropriate percentage of both classes of members.

Section 4. Election and Removal of the Board
Every owners entitled to vote at any Board election, may cumulate his vote and give a candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which his unit is entitled or may distribute his vote on the same principle among as many candidates as he desires. The entire Board or any individual director may be removed from office by the affirmative vote of fifty-one (51%) percent of members entitled to vote at an election of the Board. However, unless the entire Board is removed, an individual director shall not be removed if the number of votes against the resolution for his removal exceeds the quotient arrived at when the total number of outstanding votes is divided by the authorized number of directors plus one. Cumulative voting in the election of the Board shall be prescribed for all elections in which more than two (2) positions on the Board are to be filled. If any or all of the directors are so removed, new directors may be elected at the same meeting.

Section 5. Special Procedure
To assure resident owners representation on the Board, at least one (1) member of the Board shall be elected solely by the vote of owners other than Declarant, at all elections where the owners, other then Declarant, do not have a sufficient percentage of voting power to elect at least one member of the Board through cumulative voting of all their votes. A director who has been elected to office solely by the votes of members of the Association, other than Declarant, may be removed from office prior to the expiration of his term only by the vote of at least a simple majority of the voting power residing in members other than Declarant.

Section 6. Voting Proxies
Voting may be carried on either in person or by proxy.

Section 7. Quorum Requirements for Association Meetings
At all meetings of owners, a quorum for the transaction of business through the presence in person or by proxy of such members, shall be established at fifty-one (51%) percent of the total voting power of the Association which shall be sufficient for the passage of any motion or adoption of any resolution, except in connection with amendment or repeal of this Declaration, as hereinafter set forth under Articles X or XVI. If the required quorum is not present, another meeting may be called subject to the written notice requirements sent to all members at least 10 (10) days in advance of such meeting, and the required quorum at the subsequent meeting shall be one-half (1/2) of the required quorum for the preceding meeting. In the absence of a quorum at a meeting of members, a majority of those present in person or by proxy may adjourn the meeting to another time, but may not transact any other business. An adjournment for lack of a quorum shall be to a date not less than five (5) nor more than thirty (30) days from the original meeting date.

Section 8. Written Notice of Meetings
Written notice of regular and special meetings shall be given to members by the Board at least ten (10) days in advance of any such meeting. The notice shall specify the date, time and place of meeting and in the case of a special meeting, the nature of business to be undertaken. A special meeting of members of the Association shall be promptly called by the Board upon: (a) the vote for such a meeting by a majority of the Board; or (b) receipt of written request thereof, signed by members representing twenty-five (25%) percent of the total voting power of the Association, or by members representing not less than fifteen (15%) percent of the voting power residing in members other than Declarant.

Section 9. Indemnification for Performance of Duties
Every director, officer and member of the Association shall be indemnified by the Association against all reasonable costs, expenses and liabilities, including attorney's fees, actually or necessarily incurred by or imposed upon him in connection with any claim, action, suit, proceeding, investigation or inquiry of whatever nature, in which he may be involved as a part or otherwise, by reason of his having been an officer or member of the Association, whether he continues in such capacity at the time of the incurring or imposition of such costs, expenses or liabilities, except in relation to matters as to which he shall be finally adjusted in such action, suit, proceeding, investigation or inquiry to be liable for willful misconduct or negligence toward the Association in the performance of his duties or, in the absence of such final adjudication, any determination of such liability by the opinion of legal counsel selected by the Association. The foregoing right of indemnification shall be in addition to and not in limitation of all rights to which such person may be entitled as a matter of law and shall inure to the benefit of the legal representatives of such person.




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