first amended class action complaint (00442475-2)[1]

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DEPAR

MICHAEL E. VINDING (SBN 178359) BRADY & VINDING 400 Capitol Mall, Suite 2640 Sacramento, CA 95814 Telephone: (916) 446-3400 Facsimile: (916)446-7159

DAVID A. DIEPENBROCK (SBN 215679) DIEPENBROCK ELKIN LLP 500 Capitol Mall, Suite 2200 Sacramento, CA 95814-4413 Telephone: (916) 492-5073 5048 Facsimile: (916) 446-2640

Attorneys for Plaintiffs

FiLEP SuperSof Court Of CaBifoiriniSjjD,

SUPERIOR COURT OF THE STATE OF CALIFORNI A

IN AND FOR THE COUNTY OF SACRAIVIENTO

RONALD F. COLEY, an individual; and KAREN B. LORINI, an individual; individually and on behalf of all others similarly situated,

Plaintiffs,

vs.

ESKATON, a California non-profit public benefit corporation; ESKATON VILLAGE-GRASS VALLEY, a California non-profit public benefit corporation; ESKATON PROPERTIES, INCORPORATED, a California non-profit public benefit corporation; ESKATON VILLAGE, GRASS VALLEY HOMEOWNERS ASSOCIATION, a California non-profit public benefit corporation; MARK T. CULLEN, an individual; ELIZABETH L. DONOVAN, an individual; TREVOR HAMMOND, an individual; TODD MURCH; and DOES 1 through 10 inclusive.

Defendants.

Case No.:

CLASS ACTION COMPLAINT FOR:

(1) BREACH OF FIDUCIARY DUTY; (2) BREACH OF FIDUCIARY DUTY; (3) VOIDABLE TRANSATION - CORP

CODE § 7233; (4) VOIDABLE TRANSATION - CORP

CODE § 7233; (5) FINANCIAL ELDER ABUSE - WEI.

INST. CODE § 15610.30 ET SEQ.; (6) ACCOUNTING; (7) UNFAIR BUSINESS PRACTICES -

BUS. & PROF. CODE § 17200; (8) BREACH OF FIDUCIARY DUTY; AND (9) NEGLIGENCE

&

DIEPENBROCK

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{00437391;?}

CLASS ACTION COIVIPLAINT

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This action concerns a senior-only common interest community Icnown as Eskaton Village

Grass Valley ("Village"), which includes 267 housing units, of which 130 are owned separately by

individual homeowners. These 130 individually owned condominium units are sometimes referred to

below as the "Patio Homes." The remaining 137 units are located on a parcel that is owned

separately by Eskaton Village Grass Valley, a California non-profit public benefit corporation. The

structure that contains the 137 apartment units, also includes dining rooms, community rooms, and

other congregate living facilities, all of which are collectively referred to as the "Lodge." The parcel

that contains the Lodge is identified as "Lot 1" in the First Amended and Restated Declaration of

Covenants, Conditions and Restrictions for Eskaton Village-Grass Valley Homeowners Association

("CC&R's), a true and correct copy of which is attached as Exhibit A. Lot 1 also includes parking

spaces, landscaping, and other improvements. The Lodge's 137 housing units comprise a mixture of

assisted living and independent living apartments. The Eskaton Village-Grass Valley Homeowners

Association is responsible for managing the Village's common areas, as defined under the CC&R's.

A map showing the areas owned by EVGV, the HOA, and the individual homeowners is attached as

Exhibit B.

PARTIES

1. Plaintiff Ronald F. Coley, an individual, has held a beneficial ownership interest in

one of the Village's 130 Patio Homes from 2004 through the present. As such, Plaintiff is a member

of the HOA, and is subject to all HOA assessments imposed on Patio Home owners.

2. Plaintiff Karen B. Lorini, an individual, has held a beneficial ownership interest in

one of the Village's 130 Patio Homes from 2005 through the present. As such, Plaintiff is a member

of the HOA, and is subject to all HOA assessments imposed on Patio Home owners.

3. Plaintiffs are informed and believe and thereon allege that Defendant Eskaton is a

California non-profit public benefit corporation, and that its principal place of business is located in

Sacramento County, California.

4. Plaintiffs are informed and believe and thereon allege that Defendant Eskaton

Properties, Incorporated ("EPI") is a California non-profit public benefit corporation, and that its

principal place of business is located in Sacramento County, California.

{00437391; 7}

CLASS ACTION COMPLAINT

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5. Plaintiffs are informed and believe and thereon allege that Eskaton Village-Grass

Valley ("EVGV") is a California non-profit public benefit corporation, and that its principal place of

business is located in Sacramento County, California.

6. Plaintiffs are informed and believe and thereon allege that Defendant Eskaton Village,

Grass Valley Homeowners Association ("HOA") is a California non-profit corporation, public

benefit corporation, and that its principal place of business is located in Sacramento County,

Califomia.

7. Defendant Mark T. Cullen, an individual, served as Eskaton's Director of Operations

and was a member of the HOA's Board of Directors from 2003 through 2012. Plaintiffs are informed

and believe and thereon allege that Mr. Donovan resides in El Dorado County.

8. Defendant Elizabeth ("Betsy") L. Donovan, an individual, is an Eskaton Senior Vice

President and serves as its Chief Operating Officer. She currently serves on the HOA's Board of

Directors. Plaintiffs are informed and believe and thereon allege that Ms. Donovan resides in Placer

County.

9. Defendant Trevor Hammond, an individual, is a former Chief Operating Officer of

Eskaton. served as President of the HOA's Board of Directors from 2003 through the middle of

2011. Plaintiffs are informed and believe and thereon allege that Mr. Hammond resides in Placer

County.

10. Defendant Todd Murch, an individual, is the President and CEO of Eskaton, and

currently serves on the HOA's Board of Directors. Plaintiffs are informed and believe and thereon

allege that Mr. Murch resides in Placer County.

11. Defendants Cullen, Donovan, Hammond, and Murch are sometimes collectively

referred to herein as the "Individual Defendants" or the "Eskaton Directors."

12. Plaintiffs are further informed and believe, and thereon allege that Eskaton is the

"parent" corporation of EVGV and EPI, and that Eskaton, EVGV, EPI, and the HOA have been

controlled by Eskaton's officers and directors, including but not limited to Trevor Hammond, Todd

Murch, and Betsy Donovan.

13. Plaintiffs are informed and believed, and thereon allege, that Eskaton has disregarded

{00437391;?}


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the separate corporate existence of EVGV, EPI, and the HOA. Among other things, Eskaton has:

treated HOA property as its own; merged and/or combined job functions across affiliates; allowed

Eskaton employees to sign contracts on behalf of the HOA even though, on information and belief,

those Eskaton employees were not authorized to sign on behalf of the HOA. Plaintiffs thus allege

that adherence to the existence of EVGV and EPI as distinct corporate entities would lead to an

inequitable and unjust result, and therefore pray that the separate corporate existence of EVGV and

EPI should be disregarded, that Eskaton should be considered the alter ego of EVGV and/or EPI, and

therefore be held liable for all of the unlawful conduct alleged below.

14. Plaintiffs are informed and believe and thereon allege that at all times relevant herein

Defendants, and each of them, were the agents, servants and employees of their co-Defendants, and

in doing the things hereinafter mentioned, each was acting in the scope ofhis, her, or its authority as

such agent, servant and employee and with the permission and consent of each other co-Defendant.

Plaintiffs further allege on information and belief that at all times material herein, Cullen, Donovan,

Hammond, Murch, and each of them, together with each other agent, servant, or employee of

Eskaton, EPI, or EVGV, was acting in the scope of their authority as the agent, servant or employee

and with the permission and consent of each Defendant.

15. Plaintiffs further allege that the true names, identities and capacities of Defendants

sued herein as DOES 1 through 25 inclusive, are currently unknown to Plaintiffs; Plaintiffs are

informed and believe and on such information and belief allege that said fictitiously named

defendants are in some manner responsible for and liable for the damages complained of herein;

Plaintiffs pray leave to amend this complaint to allege the true names, identities and capacities of

said fictitiously named defendants when such names, identities and capacities become known.

JURISDICTION AND VENUE

16. This Court has jurisdiction over all causes of action asserted in this Complaint. The

amount in controversy exceeds the jurisdictional minimum of this Court, and the Complaint seeks

injunctive relief

17. Venue is proper in Sacramento County under sections 395.5 and 395(a) of the Code

of Civil Procedure because some of the Defendants reside in Sacramento County.

{00437391; 7} -_3_^


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CLASS ACTION ALLEGATIONS

18. Plaintiffs bring this action under section 382 ofthe Code of Civil Procedure on behalf

of a class that includes all individuals who, like Plaintiffs, have held and still hold a beneficial

ownership interest in one of the Village's 130 Patio Homes between 2002 and the present.

19. The class is ascertainable from the business records of the HOA, as well as Nevada

County land records. Class members also can identify themselves based on the definition set forth

immediately above.

20. Membership in the class is so numerous that joinder of all members of the Class is

impracticable. Because the class is defined as all persons who hold a beneficial ownership interest in

any of the 130 Village Patio Homes, and some Patio Homes are owned by more than one person, the

number of class members likely exceeds 130.

21. Each owner of the 130 Patio Homes is subject to the same HOA assessments

discussed more ftilly below. Those assessments are all determined by the HOA Board, which is

dominated and controlled by the Eskaton. Because Plaintiffs' claims concern the propriety of the

assessments, common questions substantially predominate over any questions that may affect

individual Class members. Thus, Plaintiffs share a community of interest with the class members.

22. Plaintiffs' claims are typical of the claims of the members ofthe Class they represent

Because the Plaintiffs have paid the same assessments as every other class member, their claims are

necessarily typical of every other class member concerning those assessments.

23. Plaintiffs will fairly and adequately protect and represent the interests of each class

member. Plaintiffs are both year-round residents of the Village. Additionally, Coley is very active in

the affairs of the owners' association, having served on the HOA Board from August 2005 through

the present.

24. A class action is superior to other available means for the fair and efficient

adjudication of this controversy. As alleged above, questions of law and fact common to the Classes

predominate over any questions that affect only individual Class members. Plaintiffs are informed

and believe that because the damage to each individual Class member is relatively small, it is

economically infeasible for individuals to pursue the claims alleged herein individually. Separate

{00437391;?}


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actions could also establish inconsistent standards of conduct for Defendants. Thus, class action

treatment will permit a large number of similarly-situated persons to prosecute their common claims

in a single forum simultaneously, efficiently and without the unnecessaiy duplication of effort and

expense that numerous individual actions would engender, thereby providing a means for relief that

is most efficient and economical for the parties and the judicial system.

FIRST CAUSE OF ACTION

(Aiding And Abetting Breach Of Fiduciary Duty)

(Against Eskaton, EVGV & Individual Defendants)

25. Plaintiffs re-allege and incorporate by reference each of the allegations set forth in

paragraphs 1 through 24 above, as though fully set forth in this place.

26. Under Article V of the CC&Rs, EVGV holds a permanent majority position on the

five-member HOA Board. EVGV is the Eskaton subsidiary that developed the Village, is a

"Declarant" under the CC&Rs, and owns and operates the Lodge. As alleged above, the Individual

Defendants have served on the HOA Board, nominally on behalf of EVGV. Additional Eskaton

employees have also served with the Individual Defendants on the HOA Board. The Individual

Defendants and all other Eskaton employees who have served with them on the HOA Board are

collectively referred to herein as the "Eskaton Directors." Ronald F. Coley and Robert Brennan

currently hold the two positions available to representatives of the 130 homeowners; the two of

them, and all other individuals who have represented the Patio Home owners on the HOA Board, are

referred to below as the "Minority Directors."

27. The Eskaton Directors have fiduciary responsibilities toward the Minority Directors

and to the Patio Home owners the Minority Directors represent. By virtue of the permanent majority

position they hold on the HOA Board, the Eskaton Majority board members either singly or acting in

concert to accomplish a joint purpose, have a fiduciary responsibility to the minority and to the HOA

to use their ability to control the HOA in a fair, just, and equitable manner. Put differently, where a

developer or sponsor (such as Eskaton/EVGV) dominates an HOA, those exercising actual control

over the HOA's affairs are under a duty not to use their power in such a way as to harm a dominated

faction, like the Patio Flome owners.

{00437391;?} ^Az CLASS ACTION COMPLAINT

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28. The CC&Rs require the HOA to retain EPI (an Eskaton affiliate) to provide

management of the Village, "including but not limited to operation, maintenance and replacement of

(a) the Common Area; (b) the exterior of the dwellings located on the Lots; and (c) the landscaping

located on the Lots; and (d) to provide those services and programs more particularly described on

Exhibit C." Exhibit C ofthe CC&Rs lists the "Eskaton Services" EVGV is required to provide to the

HOA "as part of the Homeowners' Association fee." Those "Eskaton Services" include

Security/Emergency Response, On-site Shuttle Service, and the Fitness/Wellness Program. EPI

provides these services under a "Management Services Agreement" that authorizes EPI to arrange

for contracts between the HOA and third parties for maintenance and landscaping services.

29. The HOA is responsible for collecting from the Patio Home owners their allocated

share of the Eskaton Services. The allocated share of the Eskaton Services was disclosed to

prospective buyers of the Patio Homes in Form 623 (which was part of the public report Eskaton

filed in 2001 with the Bureau of Real Estate (formerly DRE)), along with other seller disclosure

documents, by the Village's co-developer "Treasure Homes." Plaintiffs are informed and believe and

thereon allege that Treasure Homes was the successor to Grass Valley Builders, LLC, which was

listed, along with EVGV, as a "Declarant" in the CC&Rs. The Homeowner Expense Allocation on

this Form 623 listed the "Share Basis Allocated to Patio Homes" as follows: 50% of the annual cost

for Security/Emergency Response & On-site Shuttle Service; 50% of the cost of the Fitness/Wellness

Program Director; 10% of the annual cost of the Recreation Coordinator; and 100% of the cost for

Dining Room Access. A true and correct copy of the Form 623 included in the disclosure package

Mr. Coley received and relied upon before purchasing his Patio Home in 2004 is attached hereto as

Exhibit C.

30. Unlike the Patio Home owners, residents ofthe Lodge do not own the housing units

they occupy. Those units are still owned by EVGV, which rents them to individuals. Plaintiffs are

informed and believe and thereon allege that EVGV does not inform Lodge unit residents of the

amount they are being charged for the Eskaton Services they receive; rather, those services are

incorporated into the monthly rent EVGV charges for occupancy of the Lodge's housing units

without itemization.

{00437391;?} -_6j


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31. Plaintiffs are informed and believe and thereon allege that Eskaton has controlled and

dictated the policies of EVGV and the HOA policies since the Village was created in such a way as

to benefit its own interests at the expense of the HOA and the Patio Home owners. Eskaton has done

this by, among other things, approving, renewing, and overseeing the Management Services

Agreement so as to impose excessive, unjust, and unfair financial burdens on the Patio Home

owners.

32. The Eskaton Directors, acting pursuant to Eskaton's direction and control, have

breached fiduciary duties they owed and/or still owe to the Patio Home owners by diverting

substantial functions of the HOA to affiliates of Eskaton and EVGV in a way that Plaintiffs are

informed and believe and thereon allege has operated to deprive the Patio Home owners of

substantial benefits. More particularly, the Eskaton Directors have breached these fiduciary duties

by, among other things:

a. Voting repeatedly to impose three (3) percent annual increases on the Patio Home

owners for all of the Eskaton Services listed on Exhibit C of the CC&Rs, on the

grounds that such increases were supposedly needed to pay for increased

personnel costs. Plaintiffs learned for the first time in 2014, however, that EVGV

employees have received no raises since 2010. Thus, the increases were

unjustified and improper for nonexistent wage increases. Prior to 2014, Plaintiffs

had no reason doubt EVGV had not been providing raises to its employees.

b. Voting repeatedly to assess the Patio Home owners a disproportionate amount for

the services of the Fitness/Wellness Program Director. As reflected in Form 623

it was intended and expected that the services of the Fitness/Wellness Program

Director would be devoted evenly based on the number of Village Housing Units

and that as a result Patio Home owners would pay 50 percent of the cost of that

position. Plaintiffs are informed and believe and thereon allege that the

Fitness/Wellness Program Director, however, has devoted substantially less than

50 percent of her time serving the homeowners. The Fitness/Wellness Program

Director has performed many tasks that benefit only the Lodge, and not the HOA

{00437391;?} -_J_2


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{00437391;?}

The Interested Majority Directors rebuffed the Minority Directors' request that the

Fitness/Wellness Program Director provide written documentation (such as time

cards) that would reveal the percentage of work performed for the sole benefit of

the Lodge.

c. Voting repeatedly as a block to impose assessments on the homeowners for an

"Environmental Services" staff person during the years from 2005 tlirough 2013,

even though the position is not listed in Exhibit C of the CC&Rs as a service that

would be compensated from fees collected from the Patio Home owners

Furthermore, the services Eskaton stated that the Director of Environmental

Services provided for the HOA are among the functions customarily provided by a

management services company. Because the HOA pays separately for both

property management services and routine maintenance of the HOA property,

paying for the Director of Environmental Services was equivalent to paying twice

for the same services. Plaintiffs are informed and believe and thereon allege that

the services of the Director of Environmental Services were actually duplicative

of management services paid for by other HOA assessments. The total amount of

the assessments that the Patio Home owners paid for the Director of

Environmental Services total $308,141. The amount paid from 2011-2013 totals

approximately $97,310.

d. Voting as a block to raise the Homeowner Expense Allocation from 50 to 83.3

percent of the 4.2 PTEs budgeted for Security/Emergency Response & On-site

Shuttle Service, effective January 2013. This 67 percent increase represented a

material change from the 50 percent listed on Form 623. Increasing the Patio

Home owner allocation above 50 percent is wholly unjustified because

homeowner demands are no greater than their approximately 49 percent share of

the Village's housing units. Indeed, Plaintiffs have recently learned that Campus

Patrol employees (who are primarily responsible for furnishing the

Security/Emergency Response & On-site Shuttle Service services) have devoted

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no more than 25 percent oftheir time serving the Patio Home owners.

e. Voting as a block to defeat a motion the Minority Directors introduced at an

October 25, 2013 HOA Board meeting, proposing that the HOA Board adhere to

Section 7233 ofthe Corporations Code for any transaction that involved the HOA

compensating "Eskaton" for services provided to the HOA, which include: the

Security Emergency Shuttle; the Director of Resident Services (formerly the

Fitness/Wellness Program); the Recreation Coordinator; and Lodge Access. As

alleged more fully below, Section 7233 of the Corporations Code protects against

self-dealing where conflicts of interest exist.

f Voting as a block to defeat a second motion the Minority Directors introduced at

the October 25, 2013 HOA Board meeting, proposing that the "Homeowner

Expense Allocation" for Eskaton Services be limited to the allocations listed in

the Form 623 Eskaton submitted to the Department of Real Estate in 2001, i.e.:

50% of the annual cost for Security/Emergency Response & On-site Shuttle

Service; 50% of the cost of the Fitness/Wellness Program Director; 10% of the

annual cost ofthe Recreation Coordinator; and 100% of the cost for Dining Room

Access.

33. Among other things, the foregoing breaches of fiduciary duty have resulted in unjust

and unfair HOA assessments being imposed on the Patio Home owners, which have forced a

curtailment of services that would otherwise have been available to the Patio Homes owners, and

have resulted in the Patio Home owners subsidizing the maintenance and operation of the Lodge and

other property owned separately by EVGV.

34. California law provides that liability may be imposed on one who aids and abets the

breach of a fiduciary duty if the person either (a) knows the other's conduct constitutes a breach of

duty and gives substantial assistance or encouragement to so act, or (b) gives substantial assistance to

the other in accomplishing a tortious result and the person's own conduct, separately considered

constitutes a breach of duty to the third person. A defendant may be liable for aiding and abetting a

breach of fiduciary duty in the absence of an independent duty owed to the plaintiff,

{00437391;?} -_9^ CLASS ACTION COMPLAINT

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35. Eskaton is presumed to know what its officers and directors know. And, it is

vicariously liable for the actions taken by its officers, directors and/or employees while acting within

the course and scope of their employment. Plaintiffs are informed and believe and thereon allege that

all of the actions that the Eskaton Directors have taken while serving on the HOA Board were within

the course and scope of their employment as officers, directors, and/or employees of Eskaton

Plaintiffs are informed and believed and thereon allege that Todd Murch, among other Eskaton

Directors, knew or should have known that he and the other Eskaton Directors owed a fiduciary duty

to the HOA as well as to the Patio Home owners who have been relegated under the CC&R's to a

permanent minority position on the HOA Board. Eskaton provided substantial assistance to each

breach of fiduciary duty alleged herein by, among other things, allowing its officers, directors and/or

employees to serve as the Eskaton Directors. Thus, Eskaton is liable for aiding and abetting the

Majority Directors in breaching the fiduciary duty they owe to the Minority Directors and to the

homeowners the Minority Directors represent.

36. As a direct and proximate result of each breach of fiduciary duty, as herein alleged

Plaintiffs have been damaged in an amount to be determined at trial.

37. The assistance Eskaton provided to each breach of fiduciary duty alleged herein was a

substantial factor in causing the harm Plaintiffs have suffered.

38. Defendants' wrongful conduct, as described above, was done willfully, oppressively

maliciously, with conscious disregard of the Patio Home owners' rights, and with the intent to annoy,

harass, and injure the Patio Home owners such that Plaintiffs are entitled to recover punitive

damages in an amount to be determined at trial.

WHEREFORE, Plaintiffs pray for judgment as set forth below.

SECOND CAUSE OF ACTION

(Aiding & Abetting Breach of Fiduciary Duty)

(Against Eskaton, EVGV, EPI & All Individual Defendants Except Donovan)



40. By virtue of the permanent majority position they have held on the HOA Board, the

{00437391;?} - 10 -

CLASS ACTION COMPLAlTvlT

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Eskaton Directors, either singly or acting in concert to accomplish a joint purpose, have a fiduciary

responsibility to the Patio Home owners and the Minority Directors to use their ability to control the

HOA in a fair, just, and equitable manner. Put differently, where a developer or sponsor (such as

Eskaton/EVGV) dominates an HOA, those exercising actual control over the HOA's affairs are

under a duty not to use their power in such a way as to harm a dominated faction, like the Patio

Home owners. The Eskaton Directors thus have fiduciary responsibilities toward the Minority

Directors and to the Patio Home owners the Minority Directors represent.

41. Under the CC&Rs, the HOA was required to retain EPI under a Management Services

Agreement to provide, among other things, maintenance and replacement of (a) the Common Area;

(b) the exterior of the dwellings located on the Lots; and (c) the landscaping located on the Lots

Plaintiffs are informed and believe and thereon allege that under the Management Services

Agreement, EPI arranged for third parties to perform street, lighting and grounds maintenance; and

to perform exterior maintenance of patio homes, apartment and community buildings.

42. EPI and the Eskaton Directors breached their fiduciary duty by failing to administer

two landscape maintenance contracts in a just, fair, and equitable manner. The Landscape

Maintenance Contracts at issue state that they were entered into with "Mile High Gardening and

Landscape." Plaintiffs are informed and believe and thereon allege that the first of these two

contracts is dated May 27, 2003, and that the second was entered into effective January 10, 2006

Plaintiffs are informed and believe and thereon allege that Mile High Gardening and Landscape

performed under the January 2006 contract through the end of 2011. Mark Cullen, an Eskaton

Director, purported to sign the 2003 contract on behalf of the HOA. Plaintiffs are informed and

believe that the HOA did not authorize Mr. Cullen to sign that contract on its behalf The January

2006 contract is signed by an "Administrator" of EVGV. Plaintiffs are informed and believe that the

HOA did not authorize this "Administrator" to sign the contract on its behalf

43. As a result of Defendants failure to administer the Landscape Maintenance Contracts

in a just, fair, and equitable manner, the Patio Home owners paid 100 percent of the cost for

"Hardscape Maintenance;" i.e., blowing and sweeping all parking areas and sidewalks. Plaintiffs are

informed and believe and thereon allege that the Hardscape Maintenance should have been allocated

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as follows: 72.25 percent to the Patio Homes, and 27.75 percent to the HOA, instead of 100 percent

to the Patio Homes.

44. As a direct and proximate result of the breach of the duty of care, alleged herein, the

Patio Home owners were overcharged for Hardscape Maintenance performed under the Landscape

Maintenance Contracts a total of $214,227; for the last two years of the contract (2010 and 2011)

Plaintiffs estimate the overcharge at $47,606.

45. Assistance Eskaton provided for the breach of fiduciary duty alleged herein was a



THIRD CAUSE OF ACTION

(VOIDABLE TRANSACTION - CORP. CODE § 7233)

(Against Eskaton, EVGV, EPI & HOA)



47. Section 7233 ofthe Corporations Code provides in pertinent part as follows:

(a) No contract or other transaction between a corporation and one or more of its directors, or between a corporation and any domestic or foreign corporation, firm or association in which one or more of its directors has a material financial interest, is either void or voidable because such director or directors or such other corporation, business corporation, firm or association are parties or because such director or directors are present at the meeting of the board or a committee thereof which authorizes, approves or ratifies the contract or transaction, if:

(1) The material facts as to the transaction and as to such director's interest are fully disclosed or known to the members and such contract or transaction is approved by the members (Section 5034) in good faith, with any membership owned by any interested director not being entitled to vote thereon;

(2) The material facts as to the transaction and as to such director's interest are fully disclosed or known to the board or committee, and the board or committee authorizes, approves or ratifies the contract or transaction in good faith by a vote sufficient without counting the vote of the interested director or directors and the contract or transaction is just and reasonable as to the corporation at the time it is authorized, approved or ratified; or

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(3) As to contracts or transactions not approved as provided in paragraph (1) or (2) of this subdivision, the person asserting the validity of the contract or transaction sustains the burden of proving that the contract or transaction was just and reasonable as to the corporation at the time it was authorized, approved or ratified.

48. Taken together, the foregoing provisions express a legislative preference that board

members with a conflict of interest abstain from voting on matters in which they have a material

financial interest, or that their votes not be counted; it therefore provides that if such individuals vote

on such transactions, they have the burden of proving that the transaction is just and reasonable. The

challenged transaction may be voided if the interested directors fail to carry their burden of proving

the transaction is just and reasonable.

49. When an interested director dominates or controls the other directors, it precludes a

finding of disinterested director approval. Plaintiffs are informed and believe and thereon allege that

the Hammond and/or Murch has directed and/or influenced the other Eskaton Directors who have

served within them on the HOA Board to vote as a block.

50. The Eskaton Directors' votes to impose these three (3) percent annual increases for all

of the Eskaton Services listed on Exhibit C of the CC&Rs was subject to Section 7233 of the

Corporations Code because it concerned a contract between two Eskaton-controlled entities (the

HOA and EPI). Plaintiffs are informed and believe and thereon allege that the Eskaton Directors

possessed a material financial interest in maximizing revenue earned by Eskaton affiliate EPI, and

minimizing costs incurred by EVGV. Plaintiffs are informed and believe and thereon allege that the

Eskaton Directors therefore have a material financial interest in seeking to maximize HOA

assessments imposed on the Patio Home owners, and using that revenue to subsidize EVGV's

operations.

51. The Eskaton Directors violated Section 7233 of the Corporations Code each time they

voted to approve annual HOA budgets that imposed three (3) percent annual increases for the

Eskaton Services listed on E.xhibit C of the CC&Rs.

52. Because, as alleged more fully herein, only the Patio Home owners are assessed by

the HOA for the Eskaton Services listed on Exhibit C of the CC&Rs, the three (3) percent increases

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applied only to the Patio Home owners. Plaintiffs thus bring this claim directly, rather than

derivatively.

53. Each vote by the Eskaton Directors to impose three (3) percent annual increases for

all of the Eskaton Services listed on Exhibit C of the CC&Rs was unjust and unreasonable, and

therefore voidable because the Eskaton Directors' justification for the increases (to pay for both

increased employee wages, and for increased overhead and employee benefits) was false. Plaintiffs

are informed and believe and thereon allege that Eskaton employees received no raises between 2010

and 2014.

54. Plaintiffs did not know, and had no reason to know, that the justification the Eskaton

Directors provided was false before they leamed for the first time in 2014 that Eskaton employees

had receive no raises between 2010 and 2014. Plaintiffs allege that the falsity of the justification for

the three (3) percent raises provides circumstantial evidence that the Interested Eskaton Directors had

a material financial interest in the transaction.

55. The increased assessments imposed on the homeowners for these nonexistent wage

increases are thus voidable and invalid.

56. Plaintiffs seek on behalf of themselves, and others similarly situated, a refund and/or

credit for the amount they were unjustly and unreasonably forced to pay for purported increased

employee wages, increased overhead and employee benefits to the greatest extent allowable by law,

according to proof at trial.


FOURTH CAUSE OF ACTION

(VOIDABLE TRANSACTION - CORP. CODE § 7233)



paragraphs 1 through 56 above, as though ftilly set forth in this place.

58. As alleged above. Section 7233 of the Corporations Code expresses a preference for

board members with a conflict of interest to abstain from voting on matters in which they have a

material financial interest, or that their votes not be counted; it therefore provides that if such

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individuals vote on such transactions, they have the burden of proving that the transaction is just and

reasonable. The transaction may be voided if the interested directors fail to carry their burden of

proving the transaction is just and reasonable.

59. The Eskaton Directors' votes to increase the Homeowner Expense Allocation (i.e., the

percentage payable by the Patio Home Owners) from 50 to 83.3 percent of the 4.2 PTEs budgeted for

Security/Emergency Response & On-site Shuttle Service, was subject to Section 7233 because it

concerned the "Eskaton Services" furnished by Eskaton affiliate EPI. Plaintiffs are informed and

believe and thereon allege that the Eskaton Directors possessed a material financial interest in using

HOA assessments collected from the Patio Home owners to subsidize EVGV operations.

60. The Eskaton Directors violated Section 7233 of the Corporations Code by voting to

increase the Homeowner Expense Allocation from 50 to 83.3 percent of the 4.2 PTEs budgeted for

Security/Emergency Response & On-site Shuttle Service, effective January 2013.

61. The vote was unjust, unreasonable, and therefore voidable under Section 7233 of the

Corporation's Code for the following reasons, among others:

a. The 67 percent increase represented a material change from the 50 percent listed

on Form 623.

b. The 130 Patio Homes have at all times relevant herein comprised approximately

49 percent of the Village's 267 residences.

c. The individual homeowners' demands on the Campus Patrol (which is primarily

responsible for furnishing the Security/Emergency Response & On-site Shuttle

Service services referenced in the Form 623) is less than their 49 percentage

ownership of Village residential units. Indeed, Plaintiffs are informed and believe

and thereon allege that Campus Patrol employees have devoted no more than 25

percent of their time providing Security/Emergency Response & On-site Shuttle

Service services to the Patio Homes.

d. As alleged above, the Patio Home owners were overcharged a total of $214,227

between 2003 and 2011 for services provided under the Landscape Maintenance

Contracts.

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e. As alleged above, the Patio Home owners have been overcharged for services of

the Fitness/Wellness Program Director, and were for several years forced to pay

part of the cost of the Environmental Services Director who was primarily

responsible for managing EVGV's separate property.

62. Since January 2013, Plaintiffs and the other Patio Homes owners have been forced to

pay an additional 33.3 percent of the cost for Security/Emergency Response & On-site Shuttle

Service services than they were rightftiUy required to pay.

63. Plaintiffs bring this claim directly, rather than derivatively, because the vote at issue

in this claim harmed only the Patio Home owners.

64. Plaintiffs are entitled to a return of the additional monies they have been unjustly and

unreasonably forced to pay for Security/Emergency Response & On-site Shuttle Service since

January 2013 through the date of trial herein.


FIFTH CAUSE OF ACTION

(Financial Elder Abuse - Welf. & Inst. Code § 15610.30 et seq.)

(Against Eskaton, EVGV & EPI)



66. Based on the facts discussed above. Plaintiffs allege on information and belief that

Esktaon, EVGV, and EPI have, acting through their authorized agents, the Eskaton Directors,

"taken," "appropriated" and/or "obtained" personal property from elders by means of "undue

influence" for a wrongful use within the meaning of the Elder Abuse and Dependent Adult Civi

Protection Act ("Act"). Cal. Wei. & Inst. Code §§ 15610.30, 15610.30, 15610.70.

67. Plaintiffs are elders as within the meaning of the Act. Plaintiffs and the other Class

members are vulnerable by virtue of their age, and because they are relegated to a permanent

minority position on the HOA Board.

68. The Eskaton Directors hold actual authority on the HOA Board, and by virtue of their

majority position hold the status of a fiduciary vis a vis each Patio Home owner.

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69. As also shown above, the Eskaton Directors have abused their majority position to the

substantial detriment ofthe Patio Home owners.

70; Those actions by the Eskaton Majority initiated changes in the personal property

rights of the Patio Home owners.

71. The result has been grossly inequitable to the Patio Home owners, and the actions

alleged herein constitute multiple violations of the Act.

72. Defendants' wrongful conduct, as described above, was done willfully, oppressively

maliciously, with conscious disregard of the Patio Home owners' rights, and with the intent to annoy

harass, and injure the Patio Home owners such that Plaintiffs are entitled to recover punitive

damages in an amount to be determined at trial.


SIXTH CAUSE OF ACTION

(Accounting)


73. Plainfiffs re-allege and incorporate by reference each of the allegations set forth in


74. Exhibit C to the CC&R's provides that as part of the HOA fee, Eskaton will furnish

"Eskaton Services," which include the following: "Security/emergency response 24 hours per day,"

"On-site shuttle service among homes, fitness center and Eskaton Village Grass Valley Lodge," and

"Fitness/wellness program." In the Homeowner Expense Allocation for Eskaton Services that EVGV

provided to the Department of Real Estate, which was included in the seller disclosure package

provided to prospective buyers of Patio Homes, EVGV represented that 50 percent of the cost of

"Security/Emergency Response & On-site Shuttle Service" and the "Fitness/Wellness Program

Director" would be allocated to the Patio Home owners.

75. By letter, dated September 28, 2006, Eskaton's Director of Operations, Mark T

Cullen, confirmed that Eskaton had agreed to honor the percentage allocations included in the seller

disclosure packets provided to prospective buyers of Patio Homes. Among other things, the letter

states with regard to Security/Emergency Response & On-site Shuttle Service, that "the Home

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Owners are only billed for one half of the cost, Eskaton pays the other half" With respect to the

Fitness/Wellness Program, Cullen likewise stated: "Once again, this amount is split in half wherein

the Homes owners [sic] pay one half and Eskaton pays the other half"

76. These disclosed percentage allocations could have been just and reasonable if the

Patio Home owners had received 50 percent of these Eskaton Services. However, as alleged above,

the Patio Home owners have received substantially less than 50 percent of these Eskaton Services

Plaintiffs are informed and believe and thereon allege that the Fitness/Wellness Program Director

devotes substantially less than 50 percent of work time serving the Patio Home owners, and performs

many tasks that benefit only EVGV. Plaintiffs are further informed and believe that the Campus

Patrol (the individuals who provide most of the "Security/Emergency Response & On-site Shuttle

Service" services) devote no more than 25 percent of their time providing such services to the

homeowners. The Eskaton Directors made what was already an unjust and unreasonable situation

substantially worse by increasing the cost allocation for Security/Emergency Response & On-site

Shuttle Service from 50 percent to 83.3 percent, effective January 2013.

77. Plaintiff Coley has made requests at HOA Board meetings for an accounting for these

services. Specifically, he has asked for time cards or other documentation regarding the work

performed by the Fitness/Wellness Program Director in order to determine whether the Patio Home

owners are subsidizing the operation of the Lodge. Mr. Coley has made the same request for

"Security/Emergency Response & On-site Shuttle Service" services. The Eskaton Directors,

however, have refused those requests in an apparent attempt to keep this information from the

Minority Directors and the other Patio Home owners.

78. Plaintiffs, lacking an adequate remedy at law, therefore seek a full and complete

accounting regarding the Security/Emergency Response & On-site Shuttle Service services provided

to Patio Home owners under the Management Services Agreement as well as the services provided

to Patio Home owners by the Fitness/Wellness Program Director.


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SEVENTH CAUSE OF ACTION

(Unfair Business Practices - Bus. & Prof. Code § 17200 et seq.)




80. The above-alleged acfions of Defendants, and each of them, constitute:

a. Unlawful business practices within the meaning of secfion 17200 of the Business

and Professions Code et seq. ("Unfair Competition Law") because, as alleged

above, and among other things. Defendants violated the Act. Cal. Wei. & Inst

Code §§ 15610.30, 15610.30, 15610.70.

b. Fraudulent within the meaning ofthe Unfair Competition Law in that members of

the public, including but not limited to Plaintiffs, were likely to be deceived and

actually were deceived by the Homeowner Expense Allocation included in the

seller disclosure package provided to prospective buyers of the Patio Homes;

c. Unfair business practices within the meaning of the Unfair Competition Law

because they caused substantial injury to consumers which were not outweighed

by any countervailing benefits, and the consumers could not have reasonably

avoided the injuries; and/or

d. Unfair, Deceptive, Untrue, or Misleading Advertising within the meaning of the

Unfair Competition Law because members of the public, including Plaintiffs,

were actually deceived by the Homeowner Expense Allocation included in the

seller disclosure package provided to prospective buyers of the Patio Homes.

81. As a proximate result of the foregoing unlawful and otherwise wrongful acts,

Eskaton, EVGV, and/or EPI received monies from Plaintiffs and other Patio Home owners based on

unjust and unreasonable HOA assessments imposed by Eskaton, acting through EVGV or EPI, and

the Eskaton Directors.

82. Plaintiffs have suffered and will continue to suffer loss of monies in an amount to be

determined at trial, and have suffered a reduction in services they would have been able to fund, were

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it not for the unjust and unfair assessments imposed on them by the Eskaton Directors. Plaintiffs

seek to restore to themselves from Defendants the funds wrongfully received by EVGV and EPI.


EIGHTH CAUSE OF ACTION

(Derivative Breach of Fiduciary Claim on Behalf of HOA)

(Against All Defendants)

83. Plaintiffs re-allege and incorporate by reference each of the allegafions set forth in


84. Plaintiffs were members of the HOA at the time of transactions alleged herein.

85. The Eskaton Directors have fiduciary responsibilities toward the Minority Directors

and to the homeowners the Minority Directors represent. The Eskaton Directors have a fiduciary

responsibility to the HOA to exercise their powers in good faith, with undivided loyalty to the

interests of the association.

86. Plaintiffs are informed and believe and thereon allege that the Eskaton Directors

breached their fiduciary duty to the HOA, and harmed the HOA, as follows:

a. They failed to exercise their powers with undivided loyalty to the HOA, and

instead placed the interests of EVGV, EPI, and Eskaton above those of the HOA

b. They allowed the HOA to be overcharged for services provided by the Campus

Patrol. More parficularly, the Campus Patrol has been spending approximately 75

percent of its time providing services to the Lodge, which is EVGV's separate

interest. EVGV has not paid for the services provided directly to it by the Campus

Patrol. As a result of such failure, the HOA has been improperly subsidizing the

Lodge's operafions.

c. From approximately August 2004 through August 2014, the Eskaton Directors

allowed EVGV to use and occupy the HOA's maintenance building and parking

lot, without paying rent. As a result, the HOA has been deprived of the reasonable

rental value of the HOA maintenance building in an amount to be proven at trial.

87. As a result of the Eskaton Director's breach of their fiduciary duty to the HOA, the

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HOA has incurred attorney's fees responding to a demand letter Plainfiffs issued to it relating to the

claims alleged herein. The HOA will incur additional attorney's fees, and costs, defending against

this action. Because the HOA has incurted costs and will incur additional costs as a result of the

unlawful actions taken by the Eskaton Majority, the HOA should be indemnified by Eskaton and/or

EVGV for all costs of responding to Plaintiffs' demand letter, any and all costs of defense, including

attorney's fees in this action, as well as any monies paid in settlement or in satisfaction of judgment

obtained herein.

88. By letter, dated August 29, 2014, Plaintiffs made a demand on the FlOA board of

directors, through its counsel of record, to pursue the claims alleged immediately above. The letter

set forth the ultimate facts of each cause of action herein alleged, and demanded that the HOA take

such action as is necessary for the HOA to prosecute the cause of action against Eskaton and EVGV

The letter urged the HOA Board to take action within 30 days.

89. As of this date, the HOA Board has failed to provide a substanfive response to

Plaintiffs' August 29, 2014 demand letter. Plaintiffs are informed and believe and thereon allege that

the HOA Board will fail and reftise to prosecute the claims alleged herein because the HOA Board

failed to form a disinterested committee to evaluate and respond to Plaintiffs' August 29, 2014

demand letter. Rather, the litigation committee the HOA Board purported to form is comprised of

Robert Brennan and the Eskaton Directors. Accordingly, Plaintiffs are informed and believe and

thereon allege that waiting for a formal response from the HOA Board would be futile. Moreover

the Eskaton Director's control of the litigation committee means that any response by the HOA

Board would be invalid and non-binding on the HOA, and would simply constitute another breach of

fiduciary duty by the Eskaton Directors.

90. Assistance Eskaton provided for the breach of fiduciary duty alleged herein was a


91. If Plainfiffs are successful in this action, a substantial benefit will result to the HOA

on whose behalf this claim is prosecuted, and Plaintiffs are entitled to recover the reasonable attorney

fees they incur prosecuting this claim on behalf of the HOA.


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NINTH CAUSE OF ACTION

(Derivative Negligence Claim on Behalf of HOA)

(Against All Defendants)



93. A director of a common interest community must perform his or her duties to the

HOA in good faith, in a manner the director believes to be in the best interests of the HOA, and

exercising the same level of due care as an ordinarily prudent person would use in similar

circumstances.

94. The Eskaton Directors have breached their duty of care to the HOA as follows:

a. They approved and renewed a Management Services Agreement that fails to

properly distinguish between services provided to HOA property on one hand, and

services provided to non-HOA property', on the other.

b. They failed to require appropriate record keeping that would ensure that Patio

Home owners were not overcharged, which failure resulted in the HOA incurring

legal fees and costs.

c. They failed to investigate numerous matters of concern raised by the Minority

Directors, and failed to correct many of these problems after they were brought to

their attention by Minority Directors.

d. They allowed HOA property to be used by EVGV without compensation.

e. Likewise, the October 2013 vote regarding the Homeowner Expense Allocation

constituted a breach of the duty of care because Director Donovan stated that she

did not believe Section 7233 was applicable, and that she did not believe DRE

Form 623 "constituted a legal obligafion to allocation formulas going forward.'

Plaintiffs allege on information and belief that Ms. Donovan is not an attorney,

and that she made the statement without first obtaining a written opinion from an

attomey, as required under the standard of care applicable to such situations. And,

because the percentages listed under "Share Basis Allocated To Patio Homes" in

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the Form 623 are properly construed as a forward looking representation to

purchasers of those homes, Donvan's contention to the contrary was manifestly

unreasonable.

95. By letter, dated August 29, 2014, Plaintiffs made a demand on the HOA board of

directors to pursue the claims alleged immediately above. The letter set forth the ultimate facts of

each cause of action herein alleged, and demanded that the HOA take such action as is necessary for

the HOA to prosecute the cause of action against Eskaton and EVGV. The letter urged the HOA

Board to take action within 30 days.

96. As of this date, the HOA Board has failed and refused to provide a substantive

response to Plaintiffs' August 29, 2014 demand letter. Plaintiffs are informed and believe and

thereon allege that the HOA Board will fail and refuse to prosecute the claims alleged herein because

the HOA Board failed to form a disinterested committee to evaluate and respond to Plaintiffs'

August 29, 2014 demand letter. Rather, the litigation committee the HOA Board purported to form is

comprised of Robert Brennan and the Eskaton Directors. Accordingly, Plaintiffs are informed and

believed and thereon allege that v/aiting for a formal response from the HOA Board would be futile

Moreover, the Eskaton Director's control of the litigation committee means that any response by the

HOA Board would be invalid and non-binding on the HOA, and would simply constitute a further

example of bad faith and a breach of fiduciary duty by the Eskaton Directors, aided and abetted by

Eskaton and EVGV.

97. If Plainfiffs are successfial in this action, a substantial benefit will result to the HOA

on whose behalf this claim is prosecuted, and Plaintiffs are entitled to recover the reasonable attorney

fees they incur prosecuting this claim on behalf of the HOA.

98. As a direct and proximate result of the negligence, as herein alleged. Plaintiffs have

been damaged in an amount to be determined at trial.

WHEREFORE, Plainfiffs pray for judgment as set forth below.

/ / /

/ / /

/ / /

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PRAYER FOR R E L I E F

Plaintiffs pray for judgment against Defendants as follows:

IE FIRST CAUSE OF ACTION (Breach of Fiduciary Duty)

For general and special damages in an amount to be proven prior to judgment, plus

prejudgment interest at the maximum legal rate;

For punitive damages in an amount to be proven prior to judgment, plus interest at the

maximum legal rate and as otherwise provided by law;

For a finding that Eskaton is liable for aiding and abetting breach of fiduciary duty;

For a finding that Eskaton is the alter ego of EVGV, and that the separate corporate existence

of Eskaton and EVGV should be disregarded;

An order making Eskaton and EVGV jointly and severally liable for all damages awarded;

For attorney's fees and costs of suit incurred herein pursuant to section 1021.5 of the Code of

Civil Procedure;

For such other and further relief as the Court deems just and proper.

IE SECOND CAUSE OF ACTION (Breach of Fiduciary Duty)



For a finding that Eskaton is liable for aiding and abetting breach of fiduciary duty;

For a finding that Eskaton is the alter ego of EVGV and EPI, and that the separate corporate

existence of Eskaton, EVGV and EPI should be disregarded;

An order making Eskaton, EVGV, and EPI jointly and severally liable for all damages

awarded;

For attorneys' fees and costs of suit incurred herein pursuant to section 1021.5 of the Code of

Civil Procedure;


For an order finding the challenged transaction was unjust and unreasonable are therefore

void based on the Eskaton Directors' failure to comply with Section 7233 of the Corporations

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Code;





An order making Eskaton, EVGV, and EPI joinfiy and severally liable for all damages

awarded;

For attorneys' fees and costs of suit incurred herein pursuant to section 1021.5 ofthe Code of

Civil Procedure;


ON THE FOURTH CAUSE OF ACTION (Voidable Transaction)

For an order finding the challenged transaction was unjust and unreasonable are therefore

void based on the Eskaton Directors' failure to comply with Section 7233 of the Corporations

Code;





An order making Eskaton, EVGV, and EPI jointly and severally liable for all damages

awarded;

For attorneys' fees and costs of suit incurred herein pursuant to section 1021.5 of the Code of

Civil Procedure;


[E FIFTH CAUSE OF ACTION (Financial Elder Abuse)



For punitive damages in an amount to be proven prior to judgment, plus interest at the

maximum legal rate and as otherwise provided by law;

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3. For a finding that Eskaton is the alter ego of EVGV and EPI, and that the separate corporate


4. An order making Eskaton, EVGV, and EPI jointly and severally liable for all damages

awarded;

5. For attorneys' fees and costs of suit herein pursuant to secfion 1021.5 of the Code of Civil

Procedure and under section 15657.5 of the Welfare and Institutions Code; and

6. For such other and further relief as the Court deems just and proper.

ON THE SIXTH CAUSE OF ACTION (Accounting)

1. A finding that Plaintiffs lack an adequate remedy at law to accurately determine the full

extent to which they have improperly charged for Security/Emergency Response & On-site

Shuttle Service and for the Fitness/Wellness Program Director;

2. An order requiring Defendants to restore to the Patio Home owners the assessment monies

that were improperly obtained from them for "Security/Emergency Response & On-site

Shuttle Service" and for the Fitness/Wellness Program services;

3. An order requiring Defendants to create, maintain, and distribute to the Minority Directors

adequate records (such as through time cards or time entry billing) that will allow Patio

Home owners to ensure that they are provided services for Security/Emergency Response &

On-site Shuttle Service" and for the Fitness/Wellness Program that are commensurate vvith

the 50 percent allocation for such services and programs in the Form 623.

4. For attorneys' fees and costs of suit herein pursuant to section 1021.5 of the Code of Civil

Procedure; and


ON THE SEVENTH CAUSE OF ACTION (Unfair Business Practices)

1. Pursuant to Business and Professions Code section 17204 and 17535, and pursuant to the

equitable powers of this Court, for an order enjoining Defendants, and each of them, causing

the Patio Home owners to be assessed for services provided on or for the benefit of EVGV

property;

2. Pursuant to Business and Professions Code section 17204 and 17535, and pursuant to the

DIEPENBROCK

ELKIN LLP

{00437391; 7} -26-CLASS ACTION COMPLAINT

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equitable powers of this Court, for an order directing Eskaton, EVGV, and the HOA, and

each of them, to take all steps necessary for the HOA to adopt: (i) a rigorous conflict of

interest policy under which the Eskaton Directors must recuse themselves from votes on any

transactions and/or contracts with Eskaton or any Eskaton affiliate; and (ii) a policy requiring

the HOA to adhere to the Homeowner Expense Allocation for Eskaton Services included in

the seller disclosure package distributed to purchasers of the Patio Homes;

3. Pursuant to Business and Professions Code secfion 17204 and 17535, and pursuant to the

equitable powers of this Court, for an order directing Eskaton, EVGV, and the HOA, and

each of them, to ensure, that when the HOA governing documents are amended (a process

that is now underway), those documents must clearly provide: (i) that the HOA has

responsibilities only for common area property, and for the 130 homeowner lots, and that

EVGV has sole responsibility for maintaining the separate interests it owns; and (ii) the HOA

is not obligated to contract with EVGV, or any Eskaton affiliate for property management

services, for the maintenance of common area property, for the maintenance of the

homeowner lots, for the maintenance of the exteriors of those 130 homes, or for all ofthe

services listed in Exhibit C of the currently operafive CC&Rs.

4. Restitution of all assessments that were unfairly and unjustly imposed on and collected from

the Patio Home owners, according to proof at trial;

5. For attorneys' fees and costs of suit herein pursuant to section 1021.5 of the Code of Civil

Procedure and under secfion 15657.5 of the Welfare and Insfitutions Code; and


ON THE EIGHTH CAUSE OF ACTION (Derivative Breach of Fiduciary Duty)

1. For damages the HOA has sustained by reason of the unlawful conduct alleged in this claim,

plus prejudgment interest at the maximum legal rate;

2. For a finding that Eskaton is liable for aiding and abetting breach of fiduciary duty;




DIEPENBROCK

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{00437391; 7} .27.


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awarded;

5. For attorneys' fees and costs of suit incurred herein pursuant to section 1021.5 of the Code of

Civil Procedure;


ON THE NINTH CAUSE OF ACTION (Derivative Negligence Claim)

1. For damages the HOA has sustained by reason of the unlawful conduct alleged in this claim,

plus prejudgment interest at the maximum legal rate;




awarded;

4. For attorneys' fees and costs of suit incurred herein pursuant to section 1021.5 of the Code of

Civil Procedure;


Respectfully submitted,

Dated: November 19,2014 BRADY & VINDING DIEPENBROCK ELKIN LLP

By: Michael E. Vinding David A. Diepenbrock Attorneys for Plaintiffs RONALD F. COLEY and KAREN B. LORINI

DIEPENBROCK

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{00437391;7} - 2 8 -


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VERTFICATION

I , Ronald F. Coley, declare:

1. 1 am a party to the above-captioned lawsuit. 1 have held a beneficial ownership

interest in one ofthe 130 Patio Homes in the Eskaton Village Grass Valley ("Village") development

from 2004 through the present. As such, I am a member of the Home Owners Association ("HOA")

for the Village. I have served on the HOA's Board of Directors since August 2005.

2. T have read the foregoing CLASS ACTION COMPLAINT FOR: (I) BREACH OF

FIDUCIARY DUTY; (2) BREACH OF FIDUCIARY DUTY; (3) VOIDABLE TRANSATION -

CORP. CODE § 7233; (4) VOIDABLE TRANSATION - CORP. CODE § 7233; (5) FINANCIAL

ELDER ABUSE - WELF. & INST. CODE § 15610.30 ET SEQ.; (6) ACCOUNTING; (7) UNFAIR

BUSINESS PRACTICES - BUS. & PROF. CODE § 17200; (8) BREACH OF FIDUCIARY

DUTY; AND (9) NEGLIGENCE and know the contents thereof 1 certify that the allegations

contained in the Complaint are true of my own knowledge, e.\cept as to those matters which are

therein alleged on information and belief, and, as to those matters, 1 believe them to be true.

3. 1 declare linder penalty of perjury under the laws of the State of California that the

foregoing is true and correct.

Executed on this i day of November, 2014, at Gra.ss Valley, Califomia.

Ronald F. Coley

DIEPENBROCK

ELKIN LLP

{00437391; 7} 1

VERIFICATION

Exhibit A

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DOCUMENT TITLE

THIS PAGE ADDED TO PROVIDE ADEQUATE SPACE POR RECORDING INFORMATION (Govt. Code 27361.6)

Addit ional Recording Fee Applies

001297

• • • • •

Partner- Q Limited • General Attorney-in-Fact Trustee Guardian or Conservator Other:

Signer is Representing:

RECORDING RECORDED, RETURN TO;

Hefner, Stark & Marois, LLP 2150 River Plaza Drive, Suite 450 Sacramento, California 95833-3883 Attn: Timothy M. Cronan, Esq.

(SPACE ABOVE THIS LINE RESE. VED FOR RECORDER'S USE)

FIRST AMENDED AND RESTATED

DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS

OF

ESKATON VILLAGE-GRASS VALLEY HOMEOWNERS ASSOCIATION

1 1297

T A B L E OF CONTENTS

Page

RECITALS 1

DECLARATION 1

ARTICLE I DEFINITIONS 2

ARTICLE II PROPERTY RIGHTS, RIGHTS OF ENJOYMENT AND EASEMENTS 3

1. Ownership 3 2. Conveyance of Common Area 3 3. Encroachments 4 4. Easements Held by Association 4 5. Easements Granted by Association 5 6. Easements 5 7. Easements Upon Adjacent Lots 5 8. Common Wall, Etc 5 9. Retention Basin Easement 6

10. Other Easements 6

ARTICLE III USE RESTRICTIONS 6

1. Residential Use 6 2. Senior-Only Community 6 3. Commercial Use 6 4. Offensive Conduct, Nuisances 7 5. Parking Restrictions 7 6. Signs 7 7. Awnings, Etc 7 8. Animals 7 9. Trash Disposal 8 10. Outside Drying and Laundering 8 11. Exterior Alterations 8 12. Compliance with Laws, Etc 8 13. Indemnification 8 14. Owner's Obligation for Taxes 8 15. Oil Drilling 8 16. Basketball Hoops; Antennas 9 17. Wood Burning Stoves 9 18. Fencing 9 19. Nevada Union Joint High School 9 20. Enforcement 9

ARTICLE IV THE ASSOCIATION 9

1. Formation '. 9 2. Association Action; Board of Directors and Officers 9

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Page

3. Powers and Duties of Association ; 9 (a) Powers 9 (b) Duties of the Association 13 (c) Limitations on Authority of Board 15

4. Personal Liability 16 5. Financial Statements of the Association 16 6. Review of Financial Statements 19 7. Withdrawal of Funds 19 8. Reserve Funds 20 9. Inspection of Association Books and Records 21

10. Transfer of Lots 23

ARTICLE V MEMBERSHIP AND VOTING RIGHTS 23

1. Membership 23 (a) Qualifications 23 (b) Members' Rights and Duties 23 (c) Transfer of Membership 24

2. Voting 24 (a) Number of Votes 24 (b) Joint Owner Votes 24

3. Limitations on Declarant's Voting Power 24 ARTICLE VI ASSESSMENTS 24

1. Agreement to Pay 24 2. Personal Obligations 24 3. Purpose of Assessments 25 4. Assessments 25

(a) Regular Assessments 25 (b) Special Assessments 25 (c) Cost Center Assessment Component 25 (d) Notice of Increase in Assessments 26 (e) Annual and Special Assessment Increases 26 (f) Quorum Requirements 27 (g) Declarant's Assessment 27

5. Rate of Assessment 28 6. Assessment Period 28 7. Notice and Assessment Installment Due Dates 28 8. Estoppel Certificate 29

ARTICLE VII COLLECTION OF ASSESSMENTS: LIENS 29

1. Right to Enforce 29 2. Creation of Lien 29 3. Notice of Default; Foreclosure 30 4. Waiver of Exemptions 30 5. Transfer of Lot by Sale or Foreclosure 30 6. Right of Association to Bid al Foreclosure Sale 31

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ff 1297

Pags.

ARTICLE VIII INSURANCE 31

1. Liability Insurance 31 2. Fire and Extended Coverage Insurance 31 3. Trustee 32 4. Other Insurance 32 5. Owner's Insurance 32 6. Mortgage Clause, Etc 32 7. Insurance Carrier Rating, Etc 32 8. Review of Policies 32

ARTICLE IX DESTRUCTION OF IMPROVEMENTS 32

1. Destruction; Proceeds Exceed 85% of Reconstruction Costs 32 2. Destruction; Proceeds Less than 85% of Reconstruction Costs 33 3. Rebuilding Procedures 33 4. Rebuilding Contract 33 5. Rebuilding Not Authorized 33 6. Minor Repair and Reconstruction 34 7. Arbitration 34

8. Negligentiy or Willfully Caused Damage 34

ARTICLE X CONDEMNATION 34

1. Common Area Awards 34 2. Distribution of Proceeds of Sale 34

3. Distribution of Condemnation Award 34

ARTICLE XI NON-SEVERABILITY OF COMPONENT INTERESTS IN COMMON AREA . . . 35

1. Prohibition Against Severance 35

2. Conveyances 35

ARTICLE Xll TERM OF DECLARATION 35

1. Term of Declaration 35

ARTICLE XIII PROTECTION OF MORTGAGEES 35

1. Effect of Breach 35 2. Notices to First Mortgagees of Record 35 3. Inapplicability of Right of First Refusal 36 4. Foreclosure 36 5. Action after Condemnation or Destruction 36 6. Inspection of Documents, Books and Records 36 7. Reserve for Replacement 37 8. Taxes and Liens on Individual Lots/Units 37

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9. Subordination 37 10. Distribution of Insurance and Condemnation Proceeds 37

11. Common Area 38 12. Payments by Mortgagees 38 13. Non-Curable Breach 38 14. Loan to Facilitate 38 15. Appearance al Meetings 38

16. Right to Furnish Information 38

ARTICLE XIV AMENDMENT 38

1. Amendment Prior to Close of First Sale 38 2. Amendment After Close of First Sale 38 3. Business and Professions Code Section 11018.7 39

4. Reliance on Amendments 39

ARTICLE XV ARCHITECTURAL CONTROL 39

1. Architectural Control 39 2. Architectural Control Committee 39 3. Architectural Control Committee Rules 40 4. Waiver 40 5. Liability 40

ARTICLE XVI ANNEXATION OF ADDITIONAL PROPERTY 40

1. Annexation 40 (a) GVB's Annexation Rights 40 (b) Rights and Obligations of Owners 41 (c) Other Annexation of Property 41

(d) Approval of the Department of Real Estate 41

ARTICLE XVII GENERAL PROVISIONS 41

1. Headings 41

2. Severability 41 3. Cumulative Remedies 41 4. Violations as Nuisance 42 5. Discrimination 42 6. Access to Books 42 7. Liberal Construction 42 8. Notification of Sale of Lot 42 9. Number; Gender 42 10. Exhibits 42 11. Easements Reserved and Granted 42 12. Binding Effect 42 13. Unsegregated Real Estate Taxes 42 14. Attorney's Fees 43

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001297

FIRST AMENDED AND R E S T A T E D DECLARATION O F COVENANTS, CONDITIONS AND RESTRICTIONS FOR

ESKATON V I L L A G E - G R A S S V A L L E Y HOMEOWNERS ASSOCIATION

THIS DECLARATION ("Declaration") ismadethis_jL(i^ayof January.2003, by ESKATON VILLAGE-GRASS VALLEY, a California non-profit, public benefit corporation ("Eskaton"), and by GRASS VALLEY BUILDERS, LLC, a Califomia limited liability company ("GVB") (hereinafter collectively referred to as "Declarant").

RECITALS

On or about November 30, 2001, Eskaton executed that certain Declaration of Covenants, Conditions and Restrictions of Eskaton Village-Grass Valley Homeowners Association which was recorded December 14, 2001 as Document No. 2001-0045443-00, in the Official Records of Nevada County ("Original CC&R's"). Declarant desires to amend and restate the provisions of the Original CC&R's by this First Amended and Restated Declaration of Covenants, Conditions and Restrictions for Eskaton Village-Grass Valley Homeowners Association (hereafter referred to as the "Declaration").

Eskaton is the owner of Lot 1 and GVB is the owner of Lots 7 through 18, and 120 through 131, and eight (8) Common Area Lots located in the County of Nevada, State of California, described in Exhibit "A" attached hereto and made a part hereof (the "Real Property"). Declarant intends to improve the Development as a fully integrated senior-only, residential development in which GVB will construct senior-only, single-family homes designed for independent living, and Eskaton intends to develop a multi-residential structure containing one hundred thirty-seven (137) residential units designed for senior-only, assisted living, congregate housing, and other supportive residential services for seniors. GVB will construct single-family homes and sell the homes and Lots. Eskaton intends to develop, own and manage the Units.

Eskaton and GVB have improved or intend to improve the Real Property by constructing improvements thereon, and by creating a planned development thereon, which Development may be increased in size, at the sole option of Declarant, its successor and assigns, and provided herein, by the addition (subject to the provisions of Section 2792.27 of the regulations of the Real Estate Commissioner) of one or more additional phases consisting of Lots, Units, and Common Area to be constructed thereon, and more particularly described on Exhibit "B," which is attached hereto and made a part hereof. By adoption of this Declaration, Declarant is not committing itself to the annexation of any additional property. An Owner who acquires a Lot in the Development shall not have any legal right to insist that there be any such annexation other than as specifically provided in this Declaration and in instruments which hereafter may be filed subjecting other property to this Declaration.

pECL,ARATION

Declarant declares that the Real Property is, and shall be, held, conveyed, hypothecated, encumbered, leased, rented, used and occupied, sold and improved subject to the following limitations, restrictions, easements, covenants, conditions, liens and charges, all of which are declared and agreed to be enforceable equitable servitudes and in furtherance of a plan for the individual ownership of the Lots and the Units located within the Development, and for the common ownership and maintenance ofthe Common Area lots, and all of which are declared and agreed to

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001297

be for the purpose of enhancing, maintaining and protecting the value and attractiveness of the Real Property. All ofthe limitations, restrictions, easements, covenants, conditions, liens and charges shall run with the land, shall be binding on and inure to the benefit of all parties having or acquiring any right, title or interest in the Real Property, and shall be binding on and inure to the benefit ofthe successors in interest of such parties.

ARTICLE I

DEFINITIONS

1. "Annexed Property" shall mean and refer to any and all real property which is annexed to the Development pursuant to a Declaration of Annexation.

2. "Articles" shall mean the Articles of Incorporation of the Association, and as said Articles may be amended from time to time.

3. "Association" shall mean and refer to the ESKATON VILLAGE-GRASS VALLEY HOMEOWNERS ASSOCIATION, a California nonprofit mutual benefit corporation created for the purpose of managing the Development, and its successors and assigns.

4. "Board" shall mean the Board of Directors of the Association.

5. "Bylaws" shall mean the Bylaws of the Association, and as such Bylaws may be amended from time to time.

6. "City" shall mean the City of Grass Valley, California.

7. "Common Area" shall mean all real property (including the improvements thereto) and any mutual or reciprocal easement rights hereafter described appurtenant to each Lot) owned by the Association for the common use and enjoyment of the Owners and the residents of the Units. The Common Area to be owned by the Association at the time of the conveyance of the first Lot shall mean and refer to Lots A, C, D, I, K, N, O and X, as shown on the Map.

8. "Cost Center" shall be a designation assigned by the Association to a discrete portion of the Development (and to the Owners of Lots located herein) for the purpose of expense accounting and assessments, all as more particularly provided in Article VI, below. A Cost Center is to be created when the Association is maintaining Common Area or facilities located within the designated Cost Center area which are fully or partially restricted to Owners of the Lots within the Cost Center. The Cost Center Assessments is, and shall continue to be, specifically identified in the operating budgets ofthe Association.

9. "County" shall mean the County of Nevada, State of California.

10. "Declarant" shall mean ESKATON and GVB, and their successors and assigns. At such time as GVB sells all of its Lots, GVB's status as a Declarant under this Declaration shall cease.

11. "Development" means all of the real property described in Exhibit "A", and any additional real property annexed to this Declaration under Article XVI pursuant to any recorded Declaration of Annexation.

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0(297

12. "Lot" shall mean and refer to Lots 7 through 18, and 120 through 131 as described on Exhibit "A," and Lots 2 through 6, and 19 through 119, as described on Exhibit "B, " upon which it is intended there will be constructed a single-family home designed for senior-only, independent living. A "Lot" shall not include Lot 1, as described on Exhibit "A," nor shall it include any Common Area lots.

13. "Map" shall mean and refer to that certain parcel map filed for record on December 14, 2001, in Book 8 of Maps at page 92, Nevada County Official Records.

14. "Member" shall mean every person or entity who holds a membership in the Association by virtue of being an Owner of a Lot or a Unit in the Development.

15. "Mortgage" shall mean a Mortgage, Deed of Trust, bond indenture, or similar financing encumbering a Lot, a Unit, or other portion of the Development. A "Mortgagee" shall include the beneficiary under a Deed of Trust, a mortgage or the Veteran Affairs or the State of California under an installment land contract. An "institutional" Mortgagee is a Mortgagee that is a bank or savings and loan association, or established mortgage company or other entity chartered or licensed under federal or state laws, any corporation or insurance company, or any federal or state agency.

16. "Owner" means each person or entity holding a record ownership interest in a Lot or a Unit, including Eskaton and GVB. Owner shall also include a contract purchaser pursuant to a contract of sale recorded in the Office of the County Recorder, provided that the vendor under such contract of sale has assigned all of his rights, title and interest to participate in the Association to the contract purchaser thereunder, and such assignment is either contained in said contract of sale or is otherwise recorded in the Office of the County Recorder. "Owner" shall not include persons or entities who hold an interest in a Lot or Unit merely as security for the performance of an obligation or as a contract purchaser under a contract of sale which does not satisfy the conditions set forth in the preceding sentence.

17. "Phase" means any Lot or Unit of real property which becomes a part of the Development pursuant to the annexation provisions of this Declaration.

18. "Unit" as used in this Declaration refers to the one hundred thirty-seven (137) units constructed by Eskaton on Lot 1, as more particularly described in Exhibit "A," which is designed for senior-only, assisted living, congregate housing, or other supportive residential services for seniors.

ARTICLE II

PROPERTY RIGHTS. RIGHTS OF ENJOYMENT AND EASEMENTS

1. Ownership. Ownership of each Lot and each Unit within the Development shall include membership in the Association.

2. Conveyance of Common Area. Upon conveyance of the first Lot in a phase from GVB to an Owner, Eskaton shall convey to the Association in fee the Common Area in thai phase. The Association shall use the Common Area for the benefit and enjoyment of the Members of the Association and the residents of the Units. Each Owner shall have a non-exclusive easement for ingress, egress and support over and through the Common Area. Each such right to said

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1297

non-exclusive easement shall be appurtenant to and pass with the title to every Lot, subject to the following rights and restrictions:

(a) The right of the Association to limit the number of guests, and to adopt Association rules and regulations regulating the use and enjoyment of the Common Area.

(b) The right of the Association to borrow money to improve, repair or maintain the Common Area.

(c) The right of the Declarant, its contractors, subcontractors, or designees to enter over and upon the Development for the purposes of:

(1) Completing improvements of the Development;

(2) Making repairs and remedying construction defects;

(3) Erecting, constructing, and maintaining on any part or parts of the Development, such structures as may be reasonable and necessary for the conduct of Declarant's business of completing said work and establishing said Development as a residential community and disposing ofthe same in parcels by sale, lease or othenwise;

(4) Conducting on any part of the Development Declarant's business or completing said work and of disposing of the Development by sale, lease or othenA/ise; and

(5) Erecting and maintaining such sign or signs on any portion of the Development as may be necessary for the improvement, development, sale, lease or disposition thereof.

3. Encroachments. Each Lot is hereby declared to have an easement over all adjoining Lots, and the Common Area, and the Association, as the owner of the Common Area, is hereby declared to have an easement over all adjoining Lots, forthe purpose of accommodating any encroachment due to engineering errors, errors in original construction, settlement or shifting of a building, fences or other structures, or any other cause. There shall be valid easements for the maintenance of said encroachments as long as they shall exist, and the rights and obligations of Owners and the Association shall not be altered in any way by said encroachment, settlement or shifting; provided, however, that in no event shall a valid easement for encroachment be created in favor of an Owner or the Association if said encroachment occurred due to the willful misconduct of said Owner or the Association. In the event a structure is partially or totally destroyed, and then repaired or rebuilt, the Owners and the Association of each Lot agree that minor encroachments over adjoining Lots or Common Area shall be permitted and that there shall be a valid easement for the maintenance of said encroachments so long as they shall exist

4. Easements Held by Association. The Association, or its agents, shall have the right after giving the Owner of a Lot twenty-four (24) hours prior notice, to enter any Lot to perform its obligations under this Declaration, including (i) obligations with respect to construction, maintenance or repair for the benefit ofthe Common Area; (ii) construction, maintenance or repair of the exteriors of dwellings and landscaping as described in Article IV, Section 3(b)(1) herein; or (iii) to make necessary repairs or maintenance that an Owner has failed to perform. The right shall be immediate in case of an emergency originating in or threatening such Lot, and the obligation can be performed whether or not the Owner is present. The right shall also be immediate where the

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Association has the primary obligation to perform such construction, maintenance or repair lo the exteriors of dwellings and landscaping as provided in Article IV, Seciion 3(b)(1) herein.

5. Easements Granted bv Association. The Association shall have the power to grant and convey to any third party permits, licenses, easements and rights of way, in, on, over or under the Common Area and the Lots for the purpose of constructing, erecting, operating or maintaining thereon, therein or thereunder overhead or underground lines, cables, wires, conduits, or other devices for electricity, cable television, power, telephone and other communication systems that may now or hereafter exist, public sewers, storm water drains and pipes, water syslems, sprinkling systems, water, healing and gas lines or pipes, and any similar public or quasi-public improvements or facilities, and each purchaser, in accepting a deed to a Lol, expressly consents hereto.

6. Easements. There are hereby specifically reserved for the benefit of the Lot Owners, in common and for each Owner severally, as their respective inlerest shall obtain, the easements, reciprocal negative easements, secondary easements, and rights-of-way as particularly identified in this Declaration:

(a) There is reserved for the benefit of each Lot as dominant tenement, an easement for utility sen/ices over, under and Ihrough the Common Area and the olher Lots as the servient tenements.

(b) The Association shall have an easement appurtenant lo the Common Area Ihrough each Lol for Ihe maintenance and repair ofthe Common Area, including maintaining the irrigation syslem and landscaping located in the Common Area.

(c) The Association and Owners of adjoining Lots shall have an easement for entry upon and access to slopes and drainage ways located upon a Lot when such access is essential for the maintenance or stabilization of slopes or drainage, or both, on such adjoining Lots, provided requests for entry are made in advance and that entry is al all times convenient to the Owner whose Lot is being entered upon. In case of emergency, the right of entry shall be immediate.

7. Easements Upon Adjacent Lots. Every Owner shall have a right and easement of ingress and egress in, over, across and upon the Lol which is adjacent to the Lol of such Owner, for the purpose of improvement, maintenance and repair of the Lol of such Owner and the dwelling located upon such Lol. In no event shall such easement extend lo or encroach upon the dwelling located upon such adjacent Lot. In utilizing such easement, the Owner shall take all precautions lo avoid doing any damage to said adjacent Lot or any of Ihe improvements located thereon, and each Owner in utilizing such easement agrees lo indemnify, defend and hold harmless the Owner of such adjacent Lot of and from all damage which arises from his entry upon and use of said Lol.

8. Common Wall. Etc. Each Lot that shares improvements, including but not limited lo a common wall, common roof, walkway, fence, retaining wall, or party wall with an adjoining Lot and its Owner is declared to have an easement appurtenant, and the same is granted by Declarant, on, over, and upon such adjoining Lol for such common wall, common roof, or party wall, including Ihe right to enter upon such adjoining Lol lo service and maintain such easement and to service, maintain, repair or replace improvements constituting such common wall, common roof, or party wall. Such entry shall be al reasonable times after prior nolice, except and in case of emergency the right of entry shall be immediate. No Owner shall alter the shape, size, constmction or use, or use any materials different from those included in the initial construction of any such common wall, common roof, or party wall without the written consent ofthe Association.

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9. Retention Basin Easement. The Association shall have and is granted an exclusive easement in, on, over, and under each Lol for the purpose of constructing, improving, maintaining and repairing retention basins.

10. Other Easements. Each Lot and ils Owner and the Association, as the case may be, is declared to be subject lo all easements, dedications and rights-of-way granted or reserved in, on, over, and under the Real Property as shown on the Map.

ARTICLE lit

USE RESTRICTIONS

1. Residential Use. The Lots shall be used for senior-only, single-family, independent living residential purposes, and the Units shall be used for senior-only, assisted living, congregate housing, and other supportive residential services for senior purposes only. Provided, however, that any lease or rental agreement for any Lot shall be in writing and any lessee thereof shall abide by and be subject lo all terms and provisions of this Declaration, the Articles, Bylaws, and the Association njles, and any such lease agreement shall specify lhat failure to abide by such provisions shall be a default under said lease; and provided further thai except for a mortgagee in possession of a Lot following a default in a first mortgage, a foreclosure proceeding or acceptance of a deed or other arrangement in lieu of foreclosure, no Owner shall rent, lease or lel his Lot for an inilial term of less than thirty (30) days.

2. Senior-Only Community. This Development shall be a senior citizen project. At least one resident in each Lot or Unit must be fifty-five (55) years orolder (the "Senior Citizen"), and every olher resident must be al least forty-five (45) years or older except for the spouse or cohabitant of the Senior Citizen or a person who resides with and provides the primary physical or financial support for the Senior Citizen (a "Qualified Permanent Resident"). A person is a "cohabitant" of the Senior Citizen if the person and Ihe Senior Citizen live together as husband and wife. Ifthe Senior Citizen dies, is hospitalized, or is absent from the Development for a prolonged period, or if the marriage between the Senior Citizen and his or her spouse is dissolved, any Qualified Permanent Resident may continue to reside in the Lot or Unit previously occupied by the Senior Citizen withoul regard lo the age restriction that applied to lhal person, provided that the person otherwise has the legal right to continue lo reside in the Lol or Unit and provided that at least eighty percent (80%) of all of the Lots and Units in the Development are occupied by at least one Senior Citizen. The Association is and shall be empowered to and shall lake the necessary steps to enforce this provision.

3. Commercial Use. Except for Eskaton's operation of the Units as senior-only, assisted living, congregate housing, and olher supportive residential services forseniors, and further except as otherwise provided in this Declaration, no part of the Development shall be used or caused, allowed, or authorized to be used in any way, directly or indirectly, for any business, commercial, manufacturing, mercantile, storing, or other such non-residenlial purpose, except lhat an Owner or other resident of a Lot or Unit may conduct a business activity wiihin a Lot or Unit so long as: (i) the existence or operation of the business activity is not apparent or detectable by sight, sound or smell from outside the Lol or Unit; (ii) the business activity conforms to all applicable zoning ordinances or requirements for the Lot or Unit; (iii) the business activity does not involve persons coming onto the Lol or Unit or the door-to-door solicitation of Owners or other residents in the Development; and (iv) the business activity does nol conslilule a nuisance or a hazardous or offensive use or threaten security or safely of olher residents in the Development, as may be determined from time to lime in the sole discretion ofthe Board. The terms "business" and "trade"

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as used in this section shall be construed to have ordinary, generally accepted meanings, and shall include, without limitation, any occupation, work or activity undertaken on an ongoing basis which involves the provision of goods or services to persons other than the provider's family and for which the provider receives a fee, compensation or other form of consideration, regardless of whether: (a) such activity is engaged in full or part time; (b) such activity is intended or does generate a profit; or (c) a license is required for such activity.

4. Offensive Conduct. Nuisances. No noxious or offensive aclivilies, including but nol limited to, repair of automobiles orolher motorized vehicles outside of an Owner's dwelling, shall be carried on, upon, or within the Development, nor shall anything be done Ihereon which may be or become an annoyance or nuisance lo the residents of the Development, or which shall in any way interfere wilh the quiet enjoyment of olher Owners.

5. Parking Restrictions. No boat, trailer, recreational vehicle, camper, truck or commercial vehicle shall be parked or left on any part of a Lot, unless the same are fully enclosed within the garage located on such Lot or in a location specifically designated by the Architectural Review Committee; provided, however, parking by commercial vehicles forthe purpose of making deliveries, and commercial vehicles used by Declarant and the Association in connection wilh the operation of any services or activities provided forthe Owners shall be permitted in accordance with the Association rules.

6. Signs. No signs of any kind shall be displayed lo the public view on or from any Lot or Unit or on or from the Common Area without the approval of the Board, excepting such signs as may be used by the Declarant or its designees for a period of three (3) years from and after ihe date of recordation of the deed of the first Lot sold in the last phase in the Development for Ihe purpose of developing, selling and improving Lots and Units within Ihe Development. Notwithstanding the foregoing, one sign of customary and reasonable dimensions, advertising a Lot for rent or for sale, may be placed within a Lol by the Owner thereof, the location and design thereof to be subject to approval by the Architectural Committee.

7. Awnings. Etc. No detached buildings, fences, awnings, ornamental screens, trellises, screen doors, sunshades or walls of any nature shall be erected or maintained on or around any portion of or elsewhere within the Development, except such as are inslalled in accordance wilh the original construction of the Development, and any replacement thereof, or as are authorized and approved by the Architectural Control Committee.

8. Animals. No animals, dogs, reptiles, rodents, birds, fish, livestock or poultry shall be kept on any Lol or elsewhere wiihin the Development, except lhal two usual and ordinary household pels such as a dog or cal, may be kept as a household pel wiihin any Lot, provided such animals are not kept, bred or raised therein for commercial purposes and they are kept under reasonable control al all times. The Association shall have the right lo prohibit maintenance of any animal which constitutes, in the sole and exclusive opinion ofthe Board after notice and a hearing held pursuant to Article IV, Section 3(a)(2) hereof, a nuisance to any other Owner. Each person bringing or keeping a pel upon the Development shall be absolutely liable to each and all olher Owners, their family members, guests, invitees, and conlract purchasers, and their respective family members, guests, invitees for any damage lo persons or property caused by any pel brought upon or kept upon the Development by such person or by members of his family, his guests or invitees. No pet shall be allowed on the Common Area, except while on a leash which is held by a person capable of controlling it. Owners shall prevent their pets from soiling any portion of the Common Area.

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9. Trash Disposal. Trash, garbage or olher waste shall be kepi only in sanitary containers. No Owner of a Lot shall pennit or cause any trash or refuse to be kept on any portion of the Development subject to this Declaration other than in the receptacles customarily used therefor located in places specifically designated for such purpose. Such containers shall be exposed to the view of other Lots only when set oul for a reasonable period of time (not lo exceed twenty-four (24) hours) before and after scheduled trash colleclion hours. No Owner of a Lot shall permit or cause any household trash or refuse lo be placed in any litter containers located in the Common Area.

10. Outside Drying and Laundering. No exterior clothesline shall be erected or maintained and there shall be no exterior drying or laundering of clothes in the Development which is visible from any street wiihin the Development.

11. Extenor Alterations. No Owner shall, al his expense or otherwise, make any alterations or modifications to the exterior of his dwelling located on his Lot wilhout the prior wrillen consent of the Architectural Control Committee.

12. Compliance with Laws. Etc. Nolhing shall be done or kept on any Lot. Unit or in the Common Area which might increase the rate of, or cause the cancellation of, insurance on the Development, or any portion thereof, without the prior written consent of the Association. No Owner shall permit anything to be done or kept on his Lot or Unit which is in violation of any law, ordinance, statute, rule or regulation of any local, county, slale or federal body. No Owner shall allow furniture of such Owner to remain within any portion of the Common Area.

13. Indemnif ication. Each Owner shall be liable to the remaining Owners for any damage to the Common Area which may be sustained by reason of the negligence of said Owner, members of the Owner's family, the Owner's residents, contract purchasers, lessees, guests or invitees, to the extent lhat any such damage shall nol be covered by insurance. Each Owner does further, by acceptance of their Deed, agree for themselves and for the members of their family, their residents contract purchasers, lessees, guests or invitees, lo indemnify each and every olher Owner, and to hold him or her harmless from, and to defend him or her against, any claim of any person or persons for personal injury or property damage occurring within the Lol of that particular Owner from any cause, including, but not limited lo those arising out of the concurrent act or negligence or fault of any remaining Owner or Owners. Only such injury or harm as may be caused solely and exclusively by the fault or negligence of any remaining Owner or Owners shall be excepted from the provisions of this seciion.

14. Owner's Obligation for Taxes. To the extent allowed by local law, all Lots, Units, the Common Area, and the membership of an Owner in fhe Association, shall be separately assessed and taxed so that all taxes, assessments and charges which may become liens prior to first mortgages under local law shall relate only lo Ihe individual Lots and Unils, and nol to the Development as a whole. Each Owner shall be obligated lo pay any taxes or assessments assessed by the County Assessor of said Counly against his Lol or Unit, and against his personal property.

15. Oil Drilling. No oil drilling, oil development operations, oil refining, quarrying, or mining operations of any kind shall be permitted on or in the Development, and no oil wells, tanks, tunnels or mineral excavations or shafts shall be permitted on the surface of the Development or wiihin five hundred (500) feet below the surface of the Development. No derrick or olher structure designed for use in boring for water, oil or natural gas shall be erected, mainlained or permitted on the Development.

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16. Basketball Hoops: Antennas. Fixed-in-place basketball goals and backboards, whether free standing or attached lo the dwelling located on a Lot, are prohibited. No masts, towers, poles, video, television or radio antennas, including satellite reception dishes, shall be placed or constructed on any Lol withoul the prior approval of the Architectural Control Committee. The Architectural Control Committee shall implement rules and regulations consistent wilh California Civil Code Section 1376 in dealing with applications for approval of videos or television antennas, including satellite dishes.

17. Wood Burning Stoves. Wilh the exception of the main lodge and the Recreation Facility, no wood burning stoves or like heating appliances shall be allowed within the Development.

18. Fencing. Any fencing shall be constructed in a manner so thatthe fencing does nol impede the existing drainage patterns within the Development.

19. Nevada Union Joint High School. The Nevada Union Joint Unified School recreational field abuts the west property line of the Development. Outdoor recreational activities occur on this field on a regular basis. These activities produce noise, light and other impacts commonly associaied with sporting and olher events. These events will continue and may intensify, and Owners and residents of the Development acknowledge these activities.

20. Enforcement. The failure of any Owner to comply wilh the provisions of this Article III, or wilh any other provision of this Declaration or the Articles or Bylaws shall give rise to a cause of action in the Association and any aggrieved Owner for the recovery of damages, or for injunctive relief, or bolh.

ARTICLE IV

THE ASSOCIATION

1. Formation. The Association shall be incorporated as a nonprofit mutual benefit corporation under the laws of the Slate of California and, upon Ihe close and recordation of the first Lot sale lo an Owner, shall be and become charged wilh the duties and invested wilh the powers set forth in the Articles, the Bylaws and this Declaration, including, but nol limited to, control and maintenance of the Common Area and any Common Area facilities.

2. Association Action: Board of Directors and Officerg. Except as to matters expressly requiring the approval of Members as set forth in this Declaration, the Articles or the Bylaws, the affairs of the Association shall in all instances be conducted by the Board and such officers as the Board may elect or appoint, such election or appointment to be in accordance wilh the Bylaws, as the same may be amended from time lo lime. Except as otherwise expressly provided in this Declaration, the Articles or the Bylaws, all matters requiring the approval of Members shall be deemed approved if Members holding a majority of the lotal voting rights assent thereto by written consent or othenwise as provided herein or in the Bylaws, or if approved by a majority vote of a quorum of Members al any regular or special meeting called or otherwise as provided herein or in the Bylaws.

3. Powers and Duties of Association.

(a) Powers. The Association shall have all the powers of a nonprofit mutual benefit corporation organized under the Nonprofit Mutual Benefit Corporalion Law of California, subject only to such limitations upon the exercise of such powers as are expressly set forth in the

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Articles, the Bylaws and this Declaration. II shall have the power to do any and all lawftjl things which maybe authorized, required or permitted to be done by the Association under this Declaration, the Articles and the Bylaws, and lo do and perform any and all acts which may be necessary or proper for or incidental to the exercise of any of the express powers of the /Association, including, without limilalion the following;

(1) Assessments. The Association shall have the power to establish, fix and levy assessments against the Owners of Lots, Unils and to enforce payment of such assessments, all in accordance wilh the provisions of this Declaration; provided, however, the approval of Members shall be required as to the amounts of all regular and special assessments except as otherwise hereinafter specifically provided.

(2) Enforcement of Rules. The Association in its own name and on its own behalf, or on behalf of any Owner who consents, or any aggrieved Owner, can commence and maintain actions for damages or to restrain and enjoin any actual or threatened breach of any provisions of this Declaration or of the Articles or Bylaws, or of the Association rules or any resolutions of the Board, and to enforce by mandalory injunction, or othenwise, all of these provisions. In addition, the Association can suspend the voting rights, can suspend use privileges of the Common Area or can assess monetary penalties against any Owner or other person entilled to exercise such rights or privileges for any violation of this Declaration or the Articles, Bylaws, Association rules, or Board resolutions. However, any such suspension of use privileges cannot exceed a period of thirty (30) days for any one violalion and any monetary penally must be reasonable in light of the violation, but in no event shall the penalty exceed Five Hundred Dollars ($500.00). Any action imposing fine or suspension shall be ineffective unless:

(i) The fine or suspension shall be approved by a majority of all Board Members al a regular or special meeting of the Board.

(ii) A notice shall be sent by mail by prepaid, first-class, or registered mail to the most recent address ofthe Member as shown on the Association's records, setting forth the suspension or fine and the reasons therefor. Such notice shall be sent at least fifteen (15) days before the proposed effective date of the expulsion.

(iii) The Member being suspended or fined shall be given an opportunity to be heard, either orally or in writing, at a hearing to be held not fewer than five (5) days before the effective date ofthe proposed suspension or fine. The hearing will be held by a special member judicial committee composed of not fewer than three Members appointed by the president. The nolice to the Member of his proposed suspension or fine shall slale the dale, time, and place of the hearing on his proposed suspension or fine.

(iv) Following the hearing, the judicial committee shall decide whether or not the Member should in fact be suspended or fined. The decision of the committee shall be final.

(v) In the event lhat a Member shall correct an alleged violation prior to the hearing date, the Board shall discontinue the proceedings.

Except as provided in this section, the Association does not have the power or authority to cause a forfeiture or abridgement of an Owner's right lo the full use and enjoyment of such Owner's Lol if the Owner does not comply with provisions of this Declaration or of the Articles or Bylaws or the Association rules, except when the loss or forfeiture is the resull of a court judgment or arbitration

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decision or a foreclosure or sale under a power of sale based on failure of the Owner to pay assessments levied by the Association.

(3) Alternative Dispute Resolution. The Board is authorized, but not required, to perform any act reasonably necessary lo resolve any civil claim or action Ihrough alternative dispute resolution proceedings such as mediation, binding arbitration, or non-binding arbitration proceedings. The Board is authorized, but not required, to perform the following acts:

(i) Providing, or in good faith attempting to provide, one hundred twenty (120) days advance notice of the Board's intent lo initiate the prosecution of any civil action and of the nature and basis of the claim to every Member and every enlily or person who is a prospective party to the civil action, provided thai nolice can be given (A) more than one hundred twenty (120) days prior to the expiration of any pertinent statute of limitations, and (B) withoul prejudice to the Association's right lo enforce this Declaration, and further provided that no such nolice need be given prior lo the filing of an action in small claims court or an action solely lo enforce assessment obligations.

(ii) Prior to initiating the prosecution of a civil action solely for declaratory relief or injunctive relief to enforce this Declaration, or for declaratory relief or injunctive relief to enforce this Declaration in conjunction with a claim for monetary damages not in excess of Five Thousand Dollars ($5,000.00), lo endeavor lo submit the matter lo alternative dispute resolution in compliance wilh the provisions of Section 1354(b) of the Civil Code.

(iii) Immediately after initiating the prosecution or defense of any civil action, making a reasonable effort, in good faith, to meet and confer with every person who is a party concerning appropriate processes for resolving the civil action, including available alternative dispute resolution proceedings; concerning appropriale processes for avoiding or reducing costs or losses by the parties associated wilh the action; providing an opportunity lo cure any alleged defect in Common Areas which is the basis for the action; and providing for the scope of discovery, if any, lo be conducted prior lo the inception of any alternative dispute resolution procedure.

(iv) Considering diversion ofthe prosecution or defense of any civil action to alternative dispute resolution proceedings such as mediation, non-binding arbitration, or binding arbitration.

(v) Agreeing to participate and participating fully and in good faith in the resolution of any civil action Ihrough any alternative dispute resolution proceedings, including but not limited lo mediation, non-binding arbitration, and binding arbitration, and paying costs reasonably incurred by the Association on account of those alternative dispute resolution proceedings.

(4) Initiation of Actions. The Board shall not ordinarily be required to do any of the following:

(i) As a prerequisite lo initiating any civil action, to conduct inspections, maintain inspection records, exhaust applicable casually insurance coverage mainlained by the Association, provide an opportunity lo cure, meet wilh Members, or obtain the consent of the Members.

(ii) Except in compliance with the provisions of Seciion 1354(b) of the Civil Code, to submit civil claims of any kind lo binding or non-binding alternative dispute resolution procedures.

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(5) Notice of Action Against Declarant. Not later than thirty (30) days prior to the filing of any civil action by the Association against Declarant, GVB, or any olher developer of the Development for alleged damage lo the Common Areas, alleged damage to the separate interests lhal the Association is obligated to maintain or repair, or alleged damage to the separate interests lhat arises oul of, or is integrally related to, damage lo the Common Areas or separate interests that the Association is obligated to mainlain or repair, the Board shall provide written nolice to each Member who appears on the records of the Association when the notice is provided. This nolice shall specify all of the following:

(i) That a meeting will take place to discuss problems that may lead lo the filing of a civil action.

address the problems. (ii) The options, including civil actions, that are available to

(iii) The lime and place of this meeting.

(iv) Notwithstanding the preceding paragraph, if the Association has reason to believe that the applicable statute of limitations will expire before the Association files the civil action, the Association may give the notice, as described above, within thirty (30) days after the filing of the action.

(6) Compliance With Civil Code Section 1375. Before the Association commences an action against Eskaton, GVB or any other developer or builder of the Development based on a claim for defects in the design or constmction ofthe Common Area, the requirements of California Civil Code Section 1375 shall be met.

(7) Delegation of Powers. The Association acting by and through the Board shall have the authority to delegate its powers, duties and responsibilities to committees, officers or employees, including a professional managing agent. The Association shall initially retain Eskaton Properties, Incorporated, a California non-profit public benefit corporation ("EPI") by a separale wriiten agreement to provide managemenl of the Development ("Management Agreement"), including but not limited to the operation, maintenance and replacement of: (a) the Common Area; (b) the exterior of the dwellings located on the Lois; and (c) the landscaping located on the Lots; and (d) to provide those services and programs more particularty described on Exhibit "C," attached hereto and incorporated herein by reference. The inilial tenn of the Management Agreement shall be for a period of five (5) years, and the Management Agreement shall provide for automatic extensions of three (3) years each. Provided however, at least six (6) months prior to the expiration of either the initial term or any extended term of the Managemenl Agreemeni, the Members other than Declarant may prevent the automatic extension of the Management Agreement, withoul cause, by a vole of two-thirds (2/3) of such Members. Notwithstanding the foregoing, if al any lime during the term of the Managemenl Agreemeni, EPI is deemed to be in malerial default of ils obligations under the Management Agreemeni, the Management Agreemeni shall terminate.

Any action lo terminate the Managemenl Agreemeni shall be ineffective unless:

(i) The termination of the Management Agreement shall be approved by two-thirds (2/3) of all Members other than Eskaton at a regular or special meeting of the Association, and by the head of the Subdivision Department of the California Department of Real Estate.

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(ii) A notice shall be sent by mail by prepaid, first-class, or registered mail to the most recent address of Eskaton setting forth the facts constituting the malerial default of the Management Agreement. Such nolice shall be sent al least sixty (60) days before the proposed effective date of the termination.

(iii) Eskaton shall be given an opportunity lo be heard, either orally or in writing, at a hearing to be held nol fewer than thirty (30) days before the effective date of the proposed termination. The hearing will be held by a special Member judicial committee composed of not fewer than three Members appointed by Members ofthe Board who are not representatives of Eskaton. The notice to Eskaton shall stale the date, time, and place of the hearing on the proposed termination ofthe Management Agreement.

(iv) Following the hearing, the judicial committee shall decide whether or not Eskaton is in malerial breach of the Managemenl Agreemeni and if the Managemenl Agreemeni should be terminated.

(v) In the event that Eskaton shall correct an alleged breach ofthe Management Agreemeni prior to the hearing date, or if such correction can not be completed by the hearing date but Eskaton has commenced and is diligently pursuing correction of such breach, the Board shall discontinue the proceedings.

(8) Association Rules. The Association shall have the power to adopt, amend and repeal such rules and regulations as il deems reasonable (hereinafter sometimes referred to as the "Association Rules"). The Association Rules shall govern the use ofthe Common Area by an Owner, the family members of an Owner, or by any guest, invitee, tenant, lessee, or contract purchaser, or their respective family members, guests or invitees; provided, however, lhat the Association Rules shall nol be inconsistent wilh or materially alter any other provisions of this Declaration, the Articles or Bylaws. A copy of the Associalion Rules as the same may from lime lo time be adopied, amended or repealed, shall be mailed or otherwise delivered to each Owner and a copy shall be posted in a conspicuous place within the Development. In the event of any conflict beiween any such Associalion Rules and any olher provisions ofthis Declaration, the Articles or Bylaws, the provisions of this Declaration shall prevail; thereafter, priority shall be given lo the aforementioned documents in the following order: Articles; Bylaws; and the Association Rules.

(b) Duties of the Association. In addition to the powers delegated to it by the Articles or in the Bylaws, and withoul limiting the generality thereof, the Association acting by and Ihrough the Board, or by and through persons or entities described in Paragraph (a)(3) above, if applicable, shall have the obligation lo conduct all business affairs of common interesl to all Owners, and to perform each of the following duties:

(1) Operation and Maintenance of Common Area and Lots. Operate, repair, replace, maintain and otherwise manage or provide for the operation, repair, replacement, maintenance and managemenl of the Common Area, including but nol limited lo the streets, storm drainage syslem, facilities, improvements, landscaping and in-igation systems thereof, and all other property acquired by the Association, including personal property.

Water, plant, cut, remove, and otherwise care for the landscaping, including caring for the native trees located on each of the Lots, and paint, repair, replace, or otherwise mainlain good condition and repair each roof, gutter, downspout, and exterior building surface (other than a glass surface). The siandards of landscaping and exierior maintenance shall be determined by the Association. The cost of general landscaping and exterior maintenance for all Lots shall be included

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in the annual budget and levied as a general assessment against all Lois. The cost of any additional landscaping and exterior maintenance thatthe Association determines is necessary for a particular Lot or Lois shall be charged to that or those Lol or Lots in the month in which performed. Unless it is otherwise specified by the Association, the charge shall be paid by the Owner to the Association thirty (30) calendar days after the charge is made. If an Owner fails to pay the charge, the Association may take any action it considers appropriate to enforce colleclion, and shall be entitled to recover any costs incurred in connection with such action, including reasonable attorneys' fees, and interesl al the rate of ten percent (10%) per annum on the unpaid charge from the due dale through the dale of payment.

(2) Services and Programs. Provide those services and programs more particularty described in Exhibit "C," which shall ultimately include an emergency response syslem for each Lol and Unit, shuttle services, special events and an event coordinator to plan such events, a fitness director and a healthcare advice nurse. The Board shall have the authority lo determine when such services and programs will be implemented and the level that such serv/ices and programs will be provided.

(3) Taxes and Assessments. Pay all real and personal property taxes and assessments and all other taxes levied againsi the Common Area, or personal property owned by the Associalion, or against the Association, if any. Such taxes and assessments may be contested or compromised by the Association; provided, however, that they are paid or a bond insuring payment is posted prior lo the sale or the disposition of any property lo satisfy the payment of such taxes.

(4) Water and Other Utilities. Acquire, provide and/or pay for waler, sewer, garbage disposal, refuse and rubbish colleclion, electrical, and gas and olher necessary utility services for the Common Area and for Lots when the Lots are not separately billed therefor. The term of any contract to supply any of the listed services shall not exceed one (1) year or, if the supplier is a regulated public utility, the shortest term for which the supplier will contract al the applicable regulated rate.

(5) Insurance. Oblain from reputable insurance companies, and maintain in effect, the insurance described in Article VIII hereof.

(6) Enforcement of Restrictions ^nd Rules. Perform such other acts, whether or not expressly authorized by this Declaration, as may be reasonably necessary lo enforce any ofthe provisions of this Declaration, the Articles and Bylaws, and the Association Rules and Board resolutions.

(7) Enforcement of Bonded Obligations. When the California Real Estate Commissioner issues a final subdivision public report ("Public Report") for the Development, if any of the Common Area improvements in the Development have nol been completed, and if the Association is the obligee under a bond or other arrangement ("Bond") to secure performance of a commitment of the Declarant or its successors or assigns lo complete such Common Area improvements, then the Board shall consider and vote on the question of action by the Association to enforce the obligations under the Bond with respect to any improvement for which a nolice of completion has not been filed within sixty (60) days after the completion dale specified for lhal improvement in the "planned conslruclion slatemeni" appended to the Bond. However, if the Association has given an extension in writing for the completion of any Common Area improvement, the Board shall consider and vote on fhe action to enforce the obligations under the Bond only if a nolice of completion has nol been flied within thirty (30) days after the expiration of the extension. If the Board fails to consider and vote on the action to enforce the obligations under the Bond, or if

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the Board decides not to initiate action lo enforce the obligations under the Bond, after request therefor by those representing not less than five percent (5%) of the total voting power of the Association, the Board shall call a special meeting of Members for the purpose of voting to override the decision ofthe Board nol to initiate action or lo compel the Board to lake action to enforce the obligations under the Bond. The meeting shall be called by the Board by fixing a dale not less than thirty-five (35) days or more than forty-flve (45) days after receipt by the Board of said petition and by giving wrillen notice to all Owners entilled to vole in the manner provided in this Declaration or in the Bylaws for notices of special meetings of Members of the Association. Al the meeting, the vote in person or by proxy of a majority of the Owners entitled to vote, in favor of taking action to enforce the obligations under the Bond shall be deemed lo be the decision of the Association and Board shall then implement this decision by initiating and pursuing appropriate action in the name of the Association.

(8) Acguisition of Property. Acquire (by gift, purchase or othenwise), own, hold, improve, build upon, operate, maintain, convey, sell, lease, transfer, dedicate for public use or otherwise dispose of real or personal property in connection wilh the affairs of the Association.

(9) Loans. Borrow money, and only with the assent (by vole or wrillen consent) of three-fourths (3/4) of the Members, lo mortgage, pledge, deed in trust, or hypothecate any or all of its real or personal property as security for money borrowed or debl incurred.

(10) Dedication. Dedicate, sell or transfer all or any portion of the Common Area to any public agency, authority, or utility for such purposes and subject to such conditions as may be agreed to by the Members. No such dedication or transfer shall be effective unless an instrument has been signed by three-fourths (3/4) of the Members, agreeing lo such dedication, sale or transfer.

(11) Easements. To grant easements pursuant to Article II, Section 6 of this Declaration.

(c) Limitations on Authority of Board. Except with the assent by vote at a meeting of the Association or by written ballot wilhoul a meeting pursuant lo Corporations Code Section 7513 of a simple majority of the Members constituting a quorum consisting of more than fifty percent (50%) of the voting power of the Association, the Board shall not take any of the following actions:

(1) Incur aggregate expenditures for capital improvements to the Common Area in any fiscal year in excess of five percent (5%) of the budgeted gross expenses of the Association for that fiscal year; or

(2) Sell during any fiscal year property of the Associalion having an aggregate fair market value greater than five percent (5%) of the budgeted gross expenses of the Association for that fiscal year; or

(3) Enter inlo a contract wilh a third person where-in the third person will furnish goods or services for the Common Area or the Association for a lerm longer than one year wilh the following exceptions:

(i) The Managemenl Agreement described in Article IV, Section 3(a)(7).

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(ii) Acontracl with a public utility company if the rates charged for the materials or services are regulated by the Public Uliiilies Commission provided, however, that the lerm of the contract shall not exceed the shortest lerm for which the supplier will conlract al the regulated rate.

(iii) Prepaid casually and/or liability insurance policies of not to exceed three (3) years duration provided that the policy permits for short rate cancellation by the insured.

(iv) Lease agreements for laundry room fixlures and equipment of nol to exceed five years duration; provided lhat the lessor under the agreemeni is not an entity in which the Declarant has a direct or indirect ownership interest often percent (10%) or more.

(v) Agreements for cable television services and equipment or satellite dish television services and equipmenl of a term nol lo exceed five (5) years duration provided that the supplier is not an entity in which Declarant has a direct or indirect ownership interest of ten percent (10%) or more.

(vi) A contract for a lerm nol lo exceed three (3) years lhat is terminable by the Association after no longer than one (1) year without cause, penalty or other obligation upon ninety (90) days' written nolice of termination to the other party.

(4) Pay compensation lo Members of the Board or to officers of the Association for sen/ices performed in the conduct of the Association's business. However, the Board may cause a Member of the Board or an officer to be reimbursed for reasonable expenses incurred in carrying on the business of the Association.

(5) Fill a vacancy on the Board created by the removal of a Member of the Board.

4. Personal Liability. No Member of the Board, or any committee of the Associalion, or any officer of the Associalion, or the manager, or Declarant, or any agent of Declarant, shall be personally liable to any Owner, or to any other party, including the Association, for any damage, loss or prejudice suffered or claimed on account of any act, omission, error or negligence of any such person or entity, provided that such person or enlily has, upon the basis of such information as may be possessed by him or il, acted in good faith without willful or intentional misconduct.

5. Financial Statements of the Association. The following financial and related information shall be regularly prepared and distributed by the Board to all Members of the Association:

(a) A pro fonna operating budget for the immediately ensuing fiscal year consisting of at least the following infonnation shall be distributed nol less than forty-five (45) days nor more than sixty (60) days prior lo the beginning of the fiscal year:

(1) Estimated revenue and expenses on an accrual basis.

(2) A summary of the Association's reserves based upon the most recent review or study conducted pursuant to Section 1355.5 of the Civil Code which shall be printed in bold type and include all of the following:

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(i) The current estimated replacement cost, estimated remaining life and estimated useful life of each major component.

(ii) As of the end ofthe fiscal year for which the study is prepared:

(A) The current estimate of the amount of cash reserves necessary to repair, replace, restore or maintain major components.

(B) The current amounl of accumulated cash reserves actually set aside to repair, replace, restore or maintain major componenls.

(iii) The percentage that accumulated cash reserves actually set aside is of the current estimate of cash reserves necessary.

(3) A statement as to whether the Board has determined or anticipates that the levy of one or more special assessments will be required to repair, replace or restore any major componeni or lo provide adequate reserves therefor.

(4) 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 major components of the Common Areas and facilities for which the Associalion is responsible.

(b) A balance sheet as of the accounting date which is the last day of the month closest in time to six months from the date of closing of the firsl sale of an inlerest in the Development, and an operating statement for the period from the date of the firsl closing lo the said accounting date, shall be distributed within sixty (60) days after the accounting date. This operating statement shall include a schedule of assessments received and receivable identified by the number of the subdivision interest and the name of the entity assessed.

(c) A report consisting of the following shall be distributed within one hundred twenty (120) days after the close of the fiscal year:

(1) A balance sheet as of the end of the fiscal year.

(2) An operating (income) stalemeni for the fiscal year.

(3) A statement of changes in financial position for the fiscal year.

(4) For any fiscal year in which the gross income lo the Association exceeds $75,000.00, a copy ofthe review of the annual report prepared in accordance with generally accepted accounting principles by a licensee ofthe California Slale Board of Accountancy.

(d) If the report referred to in Article IV, Seciion 5(c)(4) is not prepared by an independent accountant, il shall be accompanied by the certificate of an authorized officer of the Association that the statement was prepared from the books and records of the Association without independent audit or review. In lieu ofthe distribution of the pro forma operating budget required by Article IV, Section 5(a), the Board may elect to distribute a summary of the statements lo all Members of the Association with a written notice lhat the budget is available at the business office of the Association or at another suitable location within the boundaries of the Development and lhal copies will be provided upon request and at the expense of the Associalion. If any Member requests copies of the pro forma operating budget to be mailed to the Member, the Association shall provide

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the copy to the Member by first-class United Stales mail al the expense of the Associafion and delivered within five (5) days. The written notice that is distributed to each of the Members shall be in at least 10-point boldface type on the front page of the summary of the statements.

(e) In addition lo financial statements, the Board shall annually distribute within sixty (60) days prior lo the beginning of the fiscal year, a statement ofthe Association's policies and practices in enforcing its remedies against Members for defaults in the paymenl of regular and special assessments including the recording and foreclosing of liens againsi Members' subdivision interests.

(f) A summary of the Association's general liability policy that stales all of the

following:

(1) The name of the insurer.

(2) The policy limits of the insurance.

(3) If an insurance agent, as defined in Seciion 1621 of the California Insurance Code, an insurance broker, as defined in Section 1623 ofthe California Insurance Code, or an agent of an insurance agent or insurance broker has assisted the Associalion in the development ofthe general liability policy limits and ifthe recommendations ofthe insurance agent or insurance broker were followed.

(4) The insurance deductibles.

(5) The person or entity that is responsible for paying the insurance deductible in the event of loss.

(6) Whether or not the insurance coverage extends to the real property improvements lo the separale interests.

(g) A summary ofthe Association's earthquake and flood insurance policy, if one has been issued, that states all of the following:


(2) The policy limits of the insurance.

(3) The insurance deductibles.

(4) The person or entity that is responsible for paying the insurance deductible in the event of loss,

(h) A summary of the liability coverage policy for the director and officers ofthe Association lhal lists all ofthe following:


(2) The limits of the insurance.

(i) Notwithstanding subdivisions (f), (g) and (h), the Association shall, as soon as reasonably practical, notify the Members by first-class mail if any of the policies have been

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canceled and not immediately replaced. If the Association renews any of the policies or a new policy is issued to replace an insurance policy of the Association, and where there is no lapse in coverage, the Associalion shall notify its Members of that fact in the next available mailing to all Members pursuant to Section 5016 of the California Corporations Code.

(j) To the extent that the informalion to be disclosed pursuant lo subdivisions (f), (g) and (h) is specified in the insurance policy declaration page, the Association may meet the requirements of those subdivisions by making copies of lhat page and distributing il to all its Members.

Copies of such balance sheet, operating statement, pro forma operating statement, and audited annual report, if such report is audited, for the Associalion shall be mailed, upon written request, within a reasonable lime to FHA, FNMA, FHLMC, VA or to any mortgagee which has an interesl or prospective inlerest in the Development.

6. Review of Financial Statements. The governing body shall do the following nol less frequentty than quarterly:

(a) Cause a current reconciliation ofthe Association's operafing accounts lo be made and review the same.

(b) Cause a curreni reconciliation of the Association's reserve accounts to be made and review the same.

(c) Review the curreni year's actual reserve revenues and expenses compared to the current year's budget.

(d) Review the most current account statements prepared by the financial institution where the Association has ils operating and reserve accounts.

(e) Review an income and expense stalemeni forthe Association's operating and reserve accounts.

7. Withdrawal of Funds. Withdrawal offunds from the Association's reserve accouni shall require the signatures of either:

(a) Two Members of the Board; or

(b) One Member of the Board and an officer of the Association who is not also a Member of the Board.

8. Reserve Funds.

(a) The Board shall not expend funds designated as reserve funds for any purpose olher than the repair, restoration, replacement, or maintenance of, or litigation involving the repair, restoration, replacement, or maintenance of, major components ofthe Common Area which the Association is obligated to repair, restore, replace, or maintain and for which the reserve fund was established. However, the Board may authorize the temporary transfer of money from a reserve fund to the Association's general operating fund lo meet short-term cash-flow requirements or other expenses, provided the Board has made a written finding, recorded in the Board's minutes,

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explaining the reasons that the transfer is needed, and describing when and how the money will be repaid to the reserve fund. The transferred funds shall be restored to the reserve fund within one (1) year of the date of the initial transfer, except that the Board may, upon making a finding supported by documentation, lhat a delay would be in the best interests of the Development, temporarily delay the restoration until the time which the Board reasonably determines to be necessary. The Board shall exercise prudent fiscal managemenl in delaying reslorafion of these funds and in restoring the expended funds to the reserve account, and shall, if necessary, levy a special assessment lo recover the full amount ofthe expended funds wiihin the fime limits required by this section. Such a special assessment shall be subject to the limilalion imposed by California Civil Code Secfion 1366. The Board may, al ils discretion, extend the dale the payment on the special assessment is due. Any extension shall nol prevent the Board from pursuing any legal remedy lo enforce the collection of an unpaid special assessment. When the decision is made to use reserve funds or to temporarily transfer money from the reserve fund to pay for litigation, the Associafion shall notify the Membersof the Associalion of lhat decision in the next available mailing lo all Members pursuant lo Section 5016 of the California Corporations Code, and ofthe availability of an accounting of those expenses. The Associafion shall make an accounfing of expenses related lo the liligafion on at least a quarterly basis. The accounting shall be made available for inspecfion by Members of the Association at the Association's office.

(b) At least once every three (3) years the Board shall cause a study of the reserve accouni requirements ofthe Development to be conducted if the curreni replacemeni value of the major components of Common Area which the Association is obligated lo repair, replace, restore, or maintain is equal lo or greater than one-half (YT) of the gross budget of the Associalion for any fiscal year. The Board shall review this study annually and shall consider and implement necessary adjustments to the Board's analysis ofthe reserve accouni requirements as a result of lhat review.

(c) The study required by this Section shall at minimum include:

(1) Identification of the major componenls of Common Area which the Association is obligated to repair, replace, restore, or maintain which, as ofthe date of the study, have a remaining useful life of less than thirty (30) years.

(2) Identification of the probable remaining useful life of the componenls idenfified in Article IV, Secfion 8(c)(1) as of the date ofthe study.

(3) An estimate of the cost of repair, replacement, restoration, or maintenance of each major component identified in Article IV, Secfion 8(c)(1) during and atthe end of ils useful life.

(4) An estimate of the total annual contribufion necessary to defray the cost to repair, replace, restore, or maintain each major component during and atthe end of its useful life, after subtracting lolal reserve funds as of the date of the study.

(d) As used in this seciion, "reserve accounts" means moneys that the Board has identified for use to defray the future repair or replacement of, or additions to, those major components of Common Area which the Associafion is obligated to maintain.

(e) As used in this seciion. "reserve account requirements" means the estimated funds which the Board has determined are required to be available at a specified point in lime lo repair, replace, or restore those major componenls of Common Area which the Associafion is obligated to maintain.

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9. Inspection of Association Books and Records.

(a) Commencing nol later than ninety (90) days after the close of escrow ofthe first inlerest in the Development, copies of the documents listed below, as soon as readily obtainable, shall be delivered by Declarant to the Board at the office of the Association, or at such other place as the Board shall prescribe. The obligation to deliver the documents listed below shall apply to any documents oblained by Declarant no matter when oblained, provided, however, such obligafion shall terminate upon the earlier of (i) the conveyance of the last subdivision interesl covered by a subdivision public report or (ii) three (3) years after the expirafion of the most recent public report, on the Development:

(1) The recorded subdivision map or maps for the Development.

(2) The deeds and easements executed by Declarant conveying the Common Area or other interest lo the Association, lo the extent applicable.

(3) The recorded covenants, conditions and restrictions for the Development, including all amendments and annexations thereto.

(4) The Association's filed Articles of Incorporation, if any, and all amendments thereto.

(5) The Association's Bylaws and all amendments thereto.

(6) All architectural guidelines and all other rules regulating the use of an Owner's inlerest in the Development or use ofthe Common Area which have been promulgated by the Associafion.

(7) The plans approved by the local agency or counly where the Development is located for the construction or improvement of facilities lhal the Associalion is obligated to maintain or repair; provided, however, thatthe plans need not be as-built plans and that the plans may bear appropriate restrictions on their commercial exploitation or use and may contain appropriate disclaimers regarding their accuracy.

(8) All nofice of complefion certificates issued for Common Area improvements (olher than residential structures).

(9) Any bond or other security device in which the Associalion is the beneficiary.

(10) Any written warranty being transferred to the Associalion for Common Area equipment, fixtures or improvements.

(11) Any insurance policy procured for the benefit of the Association, ils governing board or the Common Area.

(12) Any lease or contract to which the Association is a party.

(13) The membership register, including mailing addresses and telephone numbers, books of account and minutes of meefings of the Members, of the Board and of committees of the Board.

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(14) Any instrument referred lo in Business and Professions Code Secfion 11018.6(d) but not described above which establishes or defines the common, mutual or reciprocal righls or responsibilities of Members.

(b) Commencing not lalerlhan ninety (90) days after the annexation of additional phases to the Development, copies of those documenls listed under subdivision (a) which are applicable to that phase, shall, as soon as readily obtainable, be delivered by Declarant lo the Board at the office ofthe Association, or at such other place as the Board shall prescribe. The obligation to deliver the documents listed in subsection (a) shall apply to all documents obtained by Declarant no matter when obtained, provided, however, such obligation shall terminate upon the earlier of (i) the conveyance of the last subdivision interest covered by a subdivision public report or (ii) three (3) years after the expiration ofthe most recent public report, on the subdivision.

(c) Any membership register, including mailing addresses and telephone numbers, books of account and minutes of meefings ofthe Members, the Board and committees of the Board of the Associafion shall be made available for inspecfion and copying by any Member ofthe Association, or their duly appointed representative, or any Mortgagee, at any reasonable lime and for a purpose reasonably related lo his inlerest as a Member, at the office of the Associafion or al such other place wiihin the Development as the Board prescribes.

(d) The minutes, minutes proposed for adoption lhat are marked to indicate draft status, or a summary of the minutes, of any meefing of the Board olher than an executive session, shall be available to Members within thirty (30) days of the meefing. The minutes, proposed minutes, or summary of the minutes shall be distributed to any Member upon request and upon reimbursement of the Association's costs in making that distribution.

(e) Members shall be notified in writing at the time thai the pro forma budget described in Article IV, Section 5(a) of the Declaration, and required by California Civil Code Section 1365 is distributed or at the fime of any general mailing to the entire membership of the Associafion of their right to have copies of the minutes of meetings of the Board and how and where those minutes may be oblained.

(f) The Board shall establish by resolution reasonable rules with respect lo:

(1) Notice to be given lo the custodian of the records of the Association by the Member, representafive or Mortgagee desiring to make an inspecfion.

(2) Hours and days of the week when an inspecfion may be made.

(3) Payment of the cost of reproducing copies of documents requested by a Member or by a representative or Mortgagee.

(g) Every director of the Board shall have the absolute right at any reasonable time to inspect all books, records and documenls of the Associalion and the physical properties owned or controlled by the Associafion. The right of inspecfion by a director of the Board includes the right to make extracts and copies of documents.

10. Transfer of Lots.

(a) Upon written request, the Associafion shall, within ten (10) days of the mailing or delivery of the request, provide an Owner with a copy of:

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(i) the Declaration, Bylaws and Articles of Incorporation;

(ii) the most recent financial statement;

(iii) a true statement in writing from an authorized representative of the Association as to the amounl of the Associafion's curreni regular and special assessments and fees, as well as any assessments levied upon the Owner's Lol which are unpaid on the date of the statement. Such statement shall also include true information on late charges, interesl and costs of collecfion which, as of the date of the statement, are or may be made a lien upon the Owner's Lol;

(iv) Any change in the Associafion's curreni regular and special assessments and fees which have been approved by Ihe Board, but have nol become due and payable as of the date disclosure is provided pursuant to this subdivision.

(b) The Association shall nol impose or collect any assessment, penalty or fee in connection with a transfer of fitle or any olher interest in a Lot, except that the Associafion may charge a fee for the Association's actual costs to change its records, and the Association may charge a fee forthe Association's reasonable cost to prepare and reproduce those requested items listed in Article IV(9)(a)(1)-(14).

ARTICLE V

MEMBERSHIP AND VOTING RIGHTS

1. Membership.

(a) Qualifications. Each Owner of a Lot, and Eskaton, as the Owner of the Unils. shall be a Member of the Associalion. If a Lol is owned by more than one person, each such person shall be a Member of the Associafion. Each Owner, including Declarant, shall hold one membership in the Association for each Lol and each Unit owned. Ownership of a Lol or Unit shall be the sole qualificafion for and entitlement to membership in the Association. Each Owner shall remain a Member of the Associalion unlil such lime as his ownership or ownership interest in all Lots and Units in the Development ceases for any reason, al which fime his membership in the Associafion shall automatically cease. A Member is not intended to include (i) persons or entifies who hold an interest in a Lot or Unit merely as security for performance of an obligation, (ii) contract purchasers nol qualifying as Owners under the definition conlained in Article I hereof, or (iii) trustees under any instrument securing performance of an obligation.

(b) Members' Rights and Duties. Each Member shall have the rights, dufies and obligations set forth in this Declaration, the Articles, the Bylaws and the Associalion Rules, as the same may from fime to fime be amended.

(c) Transfer of Membershio. The Associafion membership of each person or entity who owns, or owns an interesl in, one or more Lots or Unils shall be appurtenant to each such Lot or Unit, and shall nol be assigned, transferred, pledged, hypothecated, conveyed or alienated in any way except upon a transfer of tifie to each such Lot or Unit and then only lo the transferee thereof. Any attempt to make a prohibited transfer shall be void. Any transfer of title to a Lot or Unit shall operate automatically lo transfer the membership righls in the Association appurtenant thereto to the new Owner thereof except that the transferee thereof may be obligated to pay a reasonable

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fee lo the Associafion for transfer of a certificate evidencing membership in the Associafion as sel forth in the Bylaws.

2. Voting.

(a) Number of Votes. Each Member shall be entified lo one (1) vote for each Lot or Unit in which such Member owns an interest. However, when more than one Member owns an interest in a Lot or Unit, the vote for such Lol or Unit shall be exercised as they themselves determine, but in no case shall more than one (I) vote be cast with respect to any one Lot or Unit.

(b) Joint Owner Votes. The voting righls for each Lol or Unit may not be cast on a fracfional basis. In the event that only one joint Owner of a Lot or Unit votes on a particular matter, such act shall bind all joint Owners with respect to such matter. If more than one joint Owner votes on a particular matter, the act of the majority of such joint Owners shall bind all as to such matier. In the event that a majority of the joint owners of a Lot or Unit are unable lo agree among themselves as to how their voting rights shall be cast, they shall forfeit same as to the matter in question. If any Owner or Owners cast the voting rights of a particular Lot or Unit as hereinabove set forth, it will thereafter be conclusively presumed for all purposes that they were acfing wilh the authority and consent of all other Owners of the same Lot or Unit.

3. Limitations on Declarant's Voting Power. Except for the section enfitled "Enforcement of Bonded Obligafions", as provided for in this Declarafion, the Bylaws, and the Articles of Incorporation, no seciion which requires the approval of a prescribed majority ofthe vofing power of Members of the Associafion olher than the Declarant for acfion to be taken by the Associafion is intended to preclude the Declarant from casting votes attribulable lo Lots or Units which the Declarant owns.

ARTICLE VI

ASSESSMENTS

1. Agreement to Pay. The Declarant, for each Lol or Unit owned by it in the Development which is expressly made subject lo assessment as sel forth in this Declaration, hereby covenants and agrees, and each Owner of a Lol or Unit by his acceptance of a deed or upon the recordation of a conlract of sale therefor, whether or nol it is so expressed in such deed or conlract of sale, is deemed to covenant and agree, for each Lot or Unit owned, to pay to the Association regular assessments and special assessments, such assessments lo be established, made and collected as provided in this Declarafion.

2. Personal Obligations. Each such assessment or installment thereof, together with any late charge, inlerest Ihereon, colleclion costs and reasonable attorneys fees, shall also be the personal obligation of the person or enlily who was an Owner al the fime such assessment, or installment thereof, became due and payable. In the event more than one person or entity was the Owner of a Lot or Unit, the personal obligafion to pay such assessment, or installment thereof, respecfing such Lot or Unit shall be both joint and several. The personal obligation for delinquent assessments, or delinquent installments thereof, and such olher sums, shall not pass to an Owner's successors in interest unless expressly assumed by Ihem. No Owner of a Lol or Unit may exempt themselves from paymenl of assessments, or inslallmenls thereof, by waiver of the use or enjoyment of all or any portion of the Common Area or by waiver of the use or enjoyment of, or by abandonment of, their Lot or Unit.

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3. Purpose of Assessments. The assessments levied by the Association shall be used exclusively to promole the recreafion, health, safety and welfare of the Members of the Association, the improvement, replacemeni, repair, operafion and maintenance of the Common Area, and the performance of the duties of the Associalion and the Members as set forth in this Declarafion. Annual Assessments shall include an adequate reserve fund for maintenance, repairs and replacemeni ofthe Common Area as provided in Section 8 of Article IV.

4. Assessments.

(a) Regular Assessments. Unfil January 1 of the year immediately following the close of escrow on the sale of the first Lot in the Development, the maximum regular annual assessment per Lot shall be such amount as is set forth in the Development budget approved by the Department of Real Estate, which amounl shall be prorated based on the number of months remaining before January 1 of such year. Thereafter, the Board shall determine and fix the amounl ofthe maximum annual assessment against each Lot or Unit at least forty-five (45) days in advance of each annual assessment.

(b) Special Assessments. If the Board determines lhal the estimated total amount of funds necessary lo defray the common expenses of the Association for a given fiscal year is, or will become, inadequate to meet expenses for any reason (including, but not limited to, unanficipaled delinquencies, costs of services and programs described in Exhibit "C," costs of maintenance, new construction, reconstruction to the extent the same is nol covered by the provisions for reconstruction assessments herein), or unexpected maintenance or repairs the Board shall determine the approximate amount necessary lo defray such expenses, and ifthe amount is approved by a majority vote ofthe Board it shall become a special assessment. Provided however, that any portion of a special assessment which would pay for any item of expense normally covered by that year's regular assessments, when combined with the increase of lhal year's regular annual assessments shall nol exceed more than twenty percent (20%) ofthe regular annual assessments for the immediately preceding fiscal year. The Board may, in its discrefion, prorate such special assessment over the remaining months of the fiscal year or levy the assessment immediately againsi each Lot and Unit. Unless exempt from federal or slale income taxation, all proceeds from any special assessment shall be segregated and deposited into a special accouni and shall be used solely for the purpose or purposes for which it was levied, or it shall be otherwise handled and used in a manner authorized by law or regulations of the Internal Revenue Service or the California Franchise Tax Board in order to avoid, if possible, its taxation as income of the Associafion.

(c) Cost Center Assessment Component. Whenever it is determined by the Declarant thai a Cost Center should be designated to fairty allocate the expenses incurred or to be incurred by the Association lo operate, mainlain, repair and replace a particular Common Area Improvemenl(s) or maintenance areas (the "Cost Center AssessmenlComponenl"). each Lot within a designated Cost Center shall be allocated an equal share of the Cost Center Assessment Componeni of the Associafion's Common Expenses chargeable to the Cost Center. Reserves attributable to the Cost Center Budget must be separately identified and may nol be commingled with the reserve elements of the General Assessment Componeni. Separale accounting methods shall be used for the funds that are collected and expensed on behalf of a Cost Center, and for annual review and disclosure of Cost Center Resen/es and its reserve study. The use of Cost Center Budget monies is restricted and documenlation shall be required lo disclose such use for any purpose olher than as intended by this Declaration. The Associalion shall have the power and authority lo designate Lots and Common Areas within the Development as Cost Centers for purposes of expense accounfing and the equitable allocation of regular assessments. A Cost Center is likely to be designated when one of the following occurs: (i) the maintenance or use of a particular improvement or maintenance area wiihin the designated Cost Center is fully or partially

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restricted to Owners of Lots located within the area designated a "Cost Center", or (ii) when certain Owners of Lots within a designated Cost Center are receiving services from the Associalion lhat are in addifion to, or significantly greater than the services provided to olher Owners or residents. Ordinarily, a Cost Center shall be established whenever it is reasonable lo anficipale lhat any Owner or group of Owners yvill derive as much as 10 percent more than Owners in general in the value of a common service(s) supplied by the Association. II is contemplated lhal the Lots will comprise Cost Center No. 1 of the Associafion. Cost Center No. 1 shall provide for the maintenance and repair of the exierior of the Lots and the landscaping for the Lots including, but not limited to roof and painting of the residenfial structures constructed on the Lots. The Assessments applicable to Cost Center No. 1 shall be allocated equally among the Lots.

(d) Notice of Increase in Assessments. The Associalion shall provide nofice by first-class mail to the Owners of any increase in the regular or special assessments of the Associafion, not less than thirty (30) nor more than sixty (60) days prior to the increased assessment becoming due.

(e) Anpual and Special Assessment Increases.

(1) Prior to imposing any increase in either general or special assessments, the Board must do one ofthe following:

(A) Prepare and distribute to all Members a copy of the operating budget not less than forty-five (45) days nor more than sixty (60) days prior lo the beginning of the Association's fiscal year, which operating budget shall incluiie:

(i) The esfimaled revenue and expenses on an accrual basis.

(ii) Asummary of the Associafion's resen/es based upon the most recent review or study conducted pursuant to Section 1365.5 of the Civil Code, which shall be printed in bold type and include all of the following: (a) the current esfimaled replacemeni cost, estimated remaining life, and esfimaled useful life of each major component; (b) the curreni estimate of the amount of cash reserves necessary, and the current amount of accumulated cash reserves actually set aside, to repair, replace, restore, or maintain major components, as ofthe end of the fiscal year; and (c) the percentage that such actual reserves bear to such necessary reserves.

(iii) A stalemeni as to whether the Board has determined or anficipates that the levy of one or more special assessments will be required to repair, replace, or restore any major component or to provide adequate reserves therefor.

(iv) Ageneral siatement addressing the procedures used for the calculafion and establishment of those reserves lo defray the future repair, replacemeni, or addifions to those major components lhat the Association is obligated to mainlain;

(B) Oblain the approval of Owners constituting a quorum, casting a majority of the votes at a meeting or elecfion of the Associalion conducted in accordance wilh subsection (e) below.

(2) Notwithstanding Section 4(d)(1) above, the Board may nol impose a regular annual assessment which is more than twenty percent (20%) greater than the regular annual assessment for the immediately preceding fiscal year (except for the first fiscal year of the

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Association if it should be less than twelve months) without the approval by vote or written consent of Members, consfituting a quorum, casfing a majority ofthe votes at a meeting or elecfion of the Association, nor may the Board impose any special assessments which in the aggregate exceed five percent (5%) of the budgeted gross expense of the Associafion for the fiscal year in which a special assessment is levied wilhoul approval by vote or the wriiten assent of Members, constituting a quorum, casfing a majority of the votes al a meefing or election of the Associalion.

(3) The restricfions imposed upon the Board pursuant to Article VI, Sections 4(d)(1) and 4(d)(2) concerning maximum percentage increase of annual and special assessments shall nol apply lo assessments for the following purposes:

(A) Addressing emergency situafions. An emergency situation is any one ofthe following:

court. (i) /\n extraordinary expense required by an order of a

(ii) /Vl extraordinary expense necessary lo repair or mainlain the Development or any part of it for which the Associafion is responsible where a threat lo personal safety on the property is discovered.

(iii) An extraordinary expense necessary to repair or mainlain the Development or any part of il for which the Associafion is responsible that could nol have been reasonably foreseen by the Board in preparing and distribufing the pro forma operating budget. However, prior to the imposition or collecfion of an assessment under this subdivision, the Board shall pass a resolution containing wrillen findings as to the necessity of the extraordinary expense involved and why the expense was nol or could not have been reasonably foreseen in the budgefing process, and the resolution shall be distributed to the Members wilh the nofice of assessment.

(f) Quorum Requirements. For the purposes of Article Vl(4)(e), a quorum means more than fifty percent (50%) ofthe Members ofthe Associafion, and any meefing or election of the Associalion for purposes of complying with said subsections shall be conducted in accordance wilh Chapter 5 (commencing with Section 7510) of Part 3, Division 2 of Tifie 1 of the Corporation's Code and Seciion 7613 of the Corporafion's Code.

(g) Declarant's Assessment. Notwithstanding any olher provision of this Declaration or the Bylaws which may be or appear to be contrary. Declarant shall be temporarily exempted from the payment of thai portion of regular and special assessments assessed againsi Lots which do not include a slructural improvement completed for human occupancy ("Vacant Lots"), for the purpose of defraying expenses attributable to the existence and the use of structural improvements including, wilhoul limitation, expenses attribulable lo roof replacement, landscape and exterior maintenance, walkway and exterior lighting, refuse disposal, insurance, cable television, irrigation and domestic water. Such exemption shall confinue for each such Lol unfil the eariiesl of the following events:

(1) A nolice of completion of the structural improvements has been recorded;

(2) Occupation or use of the dwellings; or

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(3) Completion of all elemenls of the residential structures which the Association is obliged to maintain.

Such temporary partial exemption shall not deprive Declarant of any vofing righls wilh respect to the Lots lo which the exempfion applies. Except for the provisions in this Article VI, Section 4(g) permitfing Declarant a temporary exemption from a portion ofthe regular and special assessments assessed against Vacant Lots, Declarant shall be fully responsible lo pay to the Association each and every other portion ofthe regular and special assessments assessed againsi said Vacant Lots.

Declarant and any other Owner of a Lot is exempt from the paymenl of lhal portion of any assessment which is for the purpose of defraying expenses and reserves direcfiy attributable to the existence and use of a common facility that is not complete at the fime assessments commence. This exemption from the payment of assessments shall be in effect until the eariiesl of the following events:

(i) A nolice of completion of the common facility has been recorded; or

(ii) The common facility has been placed into use.

Declarant and any other Owner of a Lot is exempt from the paymenl of lhat portion of any assessment which is for the purpose of defraying expenses directly attributable to those services and programs described in Exhibit "C," until such time as said services and programs are offered to the Owners of the Lots and residents of the Units.

5. Rate of Assessment. Regular and special assessments shall be fixed al a rale for all Lots and Units as set forth in the Budget inifially approved by the Department of Real Estate.

6. Assessment Period. The regularassessment period shall commenceon January 1 of each year and shall terminate on December 31 of such year. However, the inifial regular assessment period for each phase of Lots shall commence on the first day ofthe month following the first conveyance of a Lot in lhat phase (the "initiation dale") and shall terminate on December 31 of the year in which the initial conveyance is made. The inilial regular assessment period for each Unit shall commence on the first day ofthe month following the first conveyance of a Lol in the first phase and shall terminate on December 31 of the year in which such assessment commenced. The first regular assessment and all special assessments shall be adjusted according lo the number of months remaining in the fiscal year and shall be payable in equal monthly installments unless the Board adopts some other basis for collection.

7. Notice and Assessment Installment Due Dates. Asingleten(10)daypriorwritten nolice of each annual regular assessment and each special assessment shall be given to any Owner of every Lot and Unit subject to assessment in which the due dates for the payments of installments shall be specified. As provided herein the due dates for the payment of installments shall be the first day of each month unless some other due date is established by the Board. Each installment of regular assessments and special assessments shall become delinquent if not paid wiihin fifteen (15) days after its due date. Any delinquent assessment shall be subject to a lale charge equal lo an amounl which shall nol exceed ten percent (10%) ofthe delinquent assessment or Ten Dollars ($10.00), whichever is greater.

8. Estoppel Certificate. The Board or manager, on not less than twenty (20) days prior written request, shall execute, acknowledge and deliver to the party making such request a statement in writing slafing whether or not, to the knowledge ofthe Association, a particular Owner is in default in paying assessments as to their Lot under the provisions of this Declaration and

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further stafing the dates to which installments of assessments, regular or special, have been paid as to such Lot. Any such certificate may be relied on by any prospective purchaser or Mortgagee of the Lot, but reliance on such certificate may nol extend to any default nol involving the payment of assessments of which the signer had no actual knowledge.

ARTICLE VII

COLLECTION OF ASSESSMENTS: LIENS

1. Right to Enforce. The right to collect and enforce assessments is hereby vested in the Board acfing by and on behalf of the Associafion. The Board or its authorized representative, including the manager, if any, may enforce the obligafions of the Owners to pay assessments provided for in this Declaration by commencement and maintenance of a suit at law or in equity or the Board may foreclose by judicial proceedings or through the exercise of the power of sale pursuant to Article VII, Secfion 2 hereof to enforce the lien rights created hereby. A suit lo recover a moneyjudgment for unpaid assessments together wilh all other amounts described in Sections 2 and 7 of Article VI hereof may be maintained wilhout foreclosing or waiving said lien rights.

2. Creation of Lien.

(a) In the event of a delinquency in the paymenl of any assessment, or installment thereof, respecting a Lot or Unit, as described in Seciion 7 of Article VI hereof, such amounts as may be delinquent, together with the late charge described in said Section 7, all costs which may be incurred by the Board or ils authorized representative in the colleclion of said amounls including reasonable attorneys' fees, and interesl Ihereon al the rale of twelve percent (12%) per annum commencing thirty (30) days after the assessment becomes due shall be and become a lien againsi such Lot or Unit from and after the recordafion in the Office of the County Recorder of said County of a Nofice of Delinquent Assessment as provided in Secfion 1367 of the Califomia Civil Code. The Nofice of Delinquent Assessment shall not be recorded unless and unfil the Board or ils authorized representative has delivered to the delinquent Owner or Owners of such Lol or Unit, not less than fifteen (15) days prior to the recordation of said Nofice of Delinquent Assessment, a written nofice of default and demand for paymenl, and such delinquency has not been cured within fifteen (15) days after delivery thereof. Said lien shall expire and be null and void unless, within one (1) year after recordafion of said Nolice of Delinquent Assessment, the Board or its authorized representafive records a nofice of default as hereinafter provided or insfitutes judicial foreclosure proceedings.

(b) Notwithstanding paragraph (a) of this Article Vll, Secfion 2, a monetary penalty imposed by the Associalion as a disciplinary measure against an Owner pursuant to Article IV. Section 3(a)(2) may nol become a lien againsi the Owner's Lot or Unit enforceable by a sale of the Lol or Unit. The provisions ofthis paragraph (b) do not apply to charges imposed againsi an Owner consisfing of reasonable late payment penalfies for delinquent assessments and/or charges to reimburse the Associafion for the loss of interest and for costs reasonably incurred, including attorneys' fees, in ils efforts to collect delinquent assessments.

3. Notice of Default: Foreclosure. Nol less than fifteen (15) days nor more than one (1) year after the recording of said Nofice of Assessment, the Board or its authorized representative may record a nolice of default and thereafter may cause such Lot or the legal parcel upon which the Unit is located lo be sold in the same manner as a sale is conducted as provided • by Secfions 2924, 2924b and 2924c, inclusive, of the California Civil Code, or through judicial foreclosure; provided, however, that as a condition precedent lo the holding of any such sale under said Secfion 2924c appropriate publicafion shall be made; and provided, further lhal in connecfion

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with any sale pursuant thereto the Board is hereby authorized to appoint its attorney, any officer or director, or any tifie insurance company authorized to do business in California as Trustee for purposes of conducfing such sale. If any such delinquency is cured prior to sale, or prior lo complefing a judicial foreclosure, the Board or ils authorized representative shall cause to be recorded in the Office of the County Recorder of said County a certificate setting forth the satisfacfion of such claim and release of such lien upon payment of actual expenses incurred, including reasonable attorneys' fees by such delinquent Owner.

4. Waiver of Exemptions. Each Owner, to the extent permitted by law, does hereby waive, lo the extent of any liens created pursuant to this Article Vll, the benefit of any homestead or exemption laws of the Stale of California in effect al the lime any assessment, or installment thereof, becomes delinquent or any lien is imposed pursuant to the terms hereof

5. Transfer of Lot by Sale or Foreclosure. Sale or transfer of any Lot or the legal parcel upon which a Unit is located shall nol affect the assessment lien. However, the sale or transfer of any Lot or the legal parcel upon which a Unit is located pursuant to the foreclosure of a First Mortgage shall exfinguish the lien of such assessments as to payments which become due prior to such sale or transfer (except for assessment liens recorded prior to the Mortgage). No sale or transfer shall relieve such Lot or the legal parcel upon which a Unit is located from liability for any assessments thereafter becoming due or from the lien thereof.

Where the Mortgagee of a First Mortgage of record or other purchaser of a Lot or the legal parcel upon which a Unit is located obtains title to the same as a result of foreclosure of any such First Mortgage, such acquired of title, his successor and assigns, shall not be liable for the share of the common expenses or assessments by the Association chargeable to such Lol or the legal parcel upon which a Unit is located which became due prior to the acquisition of tifie to such Lot or the legal parcel upon which a Unit is located by such acquirer. No sale or transfer shall relieve such Lol or the legal parcel upon which a Unit is located from liability for any assessments thereafter becoming due or from the lien thereof. Such unpaid share of common expenses or assessments shall be deemed to be common expenses collecfible from all ofthe Lois and Units including such acquirer, his successors and assigns.

In a voluntary conveyance of a Lot or the legal parcel upon which a Unit is located, the grantee of the same shall be jointly and severally liable with the grantor for all unpaid assessments by the Associafion against the latter for his share of the common expenses up lo the lime of the grant or conveyance, wilhoul prejudice to the grantee's right lo recover from the grantor the amounls paid by the grantee therefor. However, any such grantee shall be entilled lo a statement from the Associafion, setting forth the amount of the unpaid assessments againsi the grantor due the Association and such grantee shall not be liable for, nor shall the Lot or the legal parcel upon which a Unit is located conveyed be subject lo a lien for, any unpaid assessments made by the Association against the grantor in excess of the amount set forth in the statement provided, however, the grantee shall be liable for any such assessment becoming due after the dale of any such assessment.

6. Riqht of Association to Bid at Foreclosure Sale. The Association, acting on behalf ofthe Owners, shall have the power lo bid for the Lol or the legal parcel upon which a Unit is located at a foreclosure sale, and to acquire and hold, lease, mortgage and convey the same. During the period a Lol or the legal parcel upon which a Unit is located is owned by the Associalion, following foreclosure:

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(a) No right to vote shall be exercised on behalf of the Lot or Unit;

(b) No assessment shall be assessed or levied on the Lol or Unit; and

(c) Each other Lot and Unit shall be charged, in addition to its usual assessments its proportionate share ofthe assessment lhat would have been charged to such Lot or Unit had it not been acquired by the Association as a result of foreclosure.

After acquiring title to the Lot or the legal parcel upon which a Unit is located at foreclosure sale following nofice and publicafion, the Association may execute, acknowledge and record a deed conveying tifie to the Lot which deed shall be binding upon the Owners, successors, and all olher parties.

ARTICLE VIII

INSURANCE

1. Liability Insurance. The Associafion shall obtain and mainlain in force comprehensive public liability insurance insuring the Associalion, any manager, the Declarant and the Owners and occupants of Lots and Units, and their respective family members, guests and invitees, and the agents and employees of each, against any liability incident to the ownership or use ofthe Common Area, any commercial spaces, and any public ways and including if obtainable, a cross-liability or severability of interest indorsement insuring each insured against liability to each olher insured. The limits of such insurance shall nol be less than One Million Dollars ($1,000,000.00) covering all claims for death, personal injury and property damage arising out of a single occurrence. Such insurance shall include coverage against water damage liability, liability for nonowned and hired automobiles, liability for property of others and any other liability or risk customarily required to be covered by inslilulional Firsl Mortgagees wilh respect lo projects similar in construcfion, locafion. and use.

2. Fire and Extended Coverage Insurance. The Associafion shall nol be obligated lo oblain or to maintain any fire and/or extended coverage insurance on individual Lots or Units, or any improvements Ihereon, and any such fire and/or extended coverage insurance shall be procured and maintained by the Owner of any Lot or Unit, or the improvements thereon. The Associafion shall obtain and mainlain a master or blanket policy of fire insurance for the full replacement value of all ofthe improvements wiihin the Common Area. The form, content, and lerm of the policy and its endorsements and issuing company must be safisfactory to all holders, insurers or guarantors of any Firsl Mortgages. If more than one institufional Firsl Mortgagee has a loan of record against a Lot or Unit in the Development, the policy and endorsement shall meet the maximum standards of the various institufional First Mortgagees represented in the Development. The policy shall contain an agreed amount indorsement or ils equivalent, an increased cost of construction indorsement or a confingenl liability from operation of building laws indorsement or their equivalent, and extended coverage indorsement, vandalism, malicious mischief coverage, and a special form indorsement. The policy shall name as insured the Associafion, the Owners, and Declarant, as long as Declarant is the Owner of any Lol or Unit, and all Mortgagees as their respective interests may appear, and may contain a loss payable indorsement in favor of the Irustee described hereinafter.

3. Trustee. All insurance proceeds payable under Secfion 2 above shall be paid lo a trustee, to be held and expended for the benefit of the Owners, Mortgagees and others, as their respective interests shall appear. Said trustee shall be a commercial bank, or branch thereof, located in the Counly in which the Development is located lhat has agreed in wrifing to accept such

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trust. In the event repair or reconstruction is authorized, the Board shall have the duly lo contract for such work as provided for herein.

4. Other Insurance. The Board may and, if required by any Mortgagee, shall purchase and mainlain in force demolifion insurance in adequate amounls lo cover demolition ofthe Common Area in the event of total or partial destruction and a decision not to rebuild, and a blanket policy of flood insurance. The Board shall also purchase and maintain workmen's compensation insurance, to the extent that the same shall be required by law, for all employees or uninsured contractors of the Development. The Board shall also purchase and mainlain fidelity bonds or insurance (which shall be in an amounl not less than 150% of each year's estimated annual operating expenses and reserves and shall contain an indorsement of coverage of any person who may serve without compensation) sufficient lo meet the requirements of any Mortgagee and shall purchase such insurance on personal property owned by the Associafion, and such other insurance, as il deems necessary or as is required by any Mortgagee.

5. Owner's Insurance. An Owner may carry such personal liability insurance respecfing his Lol or Unit as he may desire; provided, however, any such policy shall include a waiver of subrogation clause.

6. Mortgage Clause. Etc. All policies of hazard insurance obtained pursuant to this Declaration shall contain or have attached the standard Mortgage clause commonly accepted by insfilutional Firsl Mortgagee investors in this counly. Said clause shall be properiy endorsed and shall provide lhat the insurance carrier shall notify the named firsl Mortgagee at least ten (10) days in advance of any reduction, material modification, or cancellation of the policy. Said policies shall also include agreed amount and inflation guard indorsements if available.

7. Insurance Carrier Rating. Etc. Each hazard insurance policy obtained pursuant lo this Declaration shall be written by a hazard insurance carrier which has a current rafing by Best's Insurance Reports of B/VI or better; or a hazard insurance carrier which has a current rating of Class V, provided the insurance carrier has a general policy holder's rating of at least "A". Each insurance carrier must be specifically licensed or authorized by law to transact business wiihin the Slate of California.

8. Reviewof Policies. The Board shall review annually the various insurance policies required by this Declaration, and shall verify the adequacy ofthe monetary limits required herein.

ARTICLE IX

DESTRUCTION OF IMPROVEMENTS

1. Destruction: Proceeds Exceed 85% of Reconstruction Costs. In the event of a total or partial destrucfion ofthe improvements in the Common Area, and ifthe available proceeds of the insurance carried pursuant to Article VIII are sufficient to cover not less than eighty-five percent (85%) ofthe costs of repair and reconstnjction thereof, the same shall be promptly rebuilt unless, within ninety (90) days from the date of such destrucfion, Members then holding al least seventy-five percent (75%) of the total vofing power present and entilled lo vote, in person or by proxy, at a duly constituted meefing, determine lhat such repair and reconstruction shall not take place. If repair and reconstruction is lo lake place, the Board shall be required to execute, acknowledge and record in the office of the County Recorder, nol later than one hundred twenty (120) days from the date of such destruction, a certificate declaring the intention of the Members lo rebuild.

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2. Destruction: Proceeds Lessthan 85% of Reconstruction Costs. Ifthe proceeds of such insurance are less than eighty-five percent (85%) of the costs of repair and reconslrucfion, such repair and reconslrucfion may nevertheless take place if, within ninety (90) days from the dale of said destruction. Members then holding at least a majority of total vofing power of Members present and entified lo vole, in person or by proxy, al a duly constituted meeting, determine lhat such repair and reconstruction shall take place. If repair and reconstruction are lo take place, the Board shall be required to execute, acknowledge and record in the office of the County Recorder, not later than one hundred twenty (120) days from the dale of such destruction, a certificate declaring the intention of the Members to rebuild.

3. Rebuilding Procedures. If the Members determine to rebuild, pursuant lo Sections 1 or 2, above, the Owner or Owners of each Lot or Unit shall be obligated to contribute such funds as shall be necessary to pay their proportionate share ofthe cost of reconstruction, over and above the available insurance proceeds, and the proportionate share of each such Owner or Owners shall be equal lo the proportionate share such Owner pays in regular assessments relative to all other Owners. In the event of the failure or refusal of such Owner of Owners to pay their proportionate share, the Board may levy a special assessment againsi each Lol and Unit of such Owner or Owners which may be enforced under the lien provisions contained in Article Vll hereof or in any other manner provided in this Declaration. If any Owner disputes the amount of his proportionate liability unider the Section, such Owner may contesl the amount of his liability by submitting lo the Board within thirty (30) days after notice to the Owner of his share of the liability written objecfions supported by cost esfimates or other informafion that the Owner deems lo be material and may request a hearing before the Board at which they may be represented by counsel. Following such hearing, the Board shall give written nolice of ils decision to all Owners, including any recommendation that adjustments be made with respect to the liability of any Owners. If such adjustments are recommended the notice shall schedule a special meefing of Members for the purposeof acfing on the Board's recommendation, including making further adjustments, if deemed by the Members lo be necessary or appropriale. All adjustments shall be affirmed or modified by a majority of the total vofing power of the Members of the Associafion. If no adjustments are recommended by the Board, the decision of the Board shall be final and binding on all Owners, including any Owner filing objections.

4. Rebuilding Contract. If the Members determine to rebuild, the Board or ils authorized representafive shall oblain bids from al least two reputable contractors and shall award the repair and reconstruction work to the lowest bidder. The Board shall have the authority lo enter into a written contract wilh the contractor for such repair and reconstruction, and the insurance proceeds held by the trustee shall be disbursed to the contractor according lo the terms of the agreement. It shall be the obligafion of the Board lo take all steps necessary lo assure the commencement and complefion of authorized repair and reconstruction al the eariiesl possible date.

5. Rebuilding Not Authorized. Ifthe Members determine nol lo rebuild, then, subject to the rights of Mortgagees therein, any insurance proceeds then available for such rebuilding shall be spent firsl to remove the destroyed improvements, wilh any remaining funds distributed lo the Owner or Owners of each Lot and Unit proportionately in accordance wilh the fair market value of each such Lot and Unit as determined by an independent appraisal conducted by a qualified real estate appraiser, such appraisal to be at the expense of the Associalion. The Board shall have the duty, wiihin one hundred twenty (120) days ofthe dale of such destruction, lo execute, acknowledge and record in the office of the Counly Recorder a certificate declaring the intention ofthe Members nol to rebuild.

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6. MinorRepairand Reconstruction. The foregoing notwithstanding, in all instances of partial destruction where the estimated cost of repair and reconstruction does not exceed Two Thousand Five Hundred Dollars ($2,500), the Board shall have the duty lo repair and reconstruct improvements without the consent of Members, providing the amount of available insurance proceeds is adequate to cover the cost of such repair or reconstruction. In the event the insurance proceeds are not adequate lo cover the cost of such repair or reconslrucfion, the Board is expressly empowered to levy a special assessment available therefor, such assessment to be levied as described in the manner provided in Article VI hereof.

7. Arbitration. In the event of a dispute among the Owners or Mortgagees with respect to the provisions of this Article IX, any Owner may cause the same lo be referred to arbitration in accordance wilh the then prevailing mles of the American Arbitration Associafion. In the event of arbitration, nofice thereof shall be given to the Members of the Board and to all other Owners and their respective Mortgagees as promptly thereafter as possible, giving all Board Members, Owners and Mortgagees an opportunity to appear in such arbitrafion proceedings. The decision of such arbitrator in the matter shall be final and conclusive upon all parties. The arbitrator may include in his decision an award for costs and/or attorneys fees against any one or more parties to the arbitrafion. The award or decision may be confirmed and enforced by any court of competent jurisdiction.

8. Negligently or Willfully Caused Damage. Any Owner or other person negligently or willfully causing damage to the Development shall be liable therefor, and shall be subject to an enforcement assessment forthe costs of repairing such damage.

ARTICLE X

CONDEMNATION

1. Common Area Awards. In the event lhat any action for condemnation of all or a portion of the Common Area brought by any governmental agency having the right of eminent domain, the award for such taking shall be payable as hereinafter set forth.

2. Distributionof Proceeds of Sale. Upon a sale occurring as described in Section 1 hereof, the proceeds resulting therefrom shall be distributed to the Owner or Owners and their Mortgagees of each Lot and Unit as their respective interests may appear proportionately in accordance with the fair market value of each such Lot and Unit at the time of taking as determined by an independent appraisal by a qualified real estate appraiser, such appraisal to be at the expense of the Association. In the event of a disagreement regarding the distribution as determined by the appraiser, within ninety (90) days after the proceeds of sale become available for distribution, the matter shall be submitted lo arbitration under the rules ofthe American Arbitration Associafion.

3. Distribution of Condemnation Award. In the event the Common Area, or such portion thereof, is not sold but is instead taken, the judgment of condemnation shall by its lerms apportion the award among the Owners and their respective Mortgagees, as their interests may appear. In the event of the occun-ence of a disagreement within ninety (90) days after the proceeds of the sale become available for distribution, the matter shall be submitted to arbitrafion under the rules of the American ArtDitration Associalion.

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ARTICLE XI

NON.SEVERABILITY OF COMPONENT INTERESTS IN COMMON AREA

1. Prohibition Against Severance. An Owner shall nol be entilled lo sever his Lot or Unit from his membership in the Association, and shall not be entitled lo sever his Lot or Unit and his membership from his undivided interesl in the Common Area. None of the component interests can be severally sold, conveyed, encumbered, hypothecated or otherwise dealt with, and any attempt so to do shall be null and void and of no effect.

2. Conveyances. After the initial sales of the Lots, any conveyance of a Lot or Unit, or of the component inlerest in the Common Area, by the Owner of the Lot or Unit, shall be presumed to convey the enfire Lot or Unit and component interest in the Common Area. However, nothing contained in this seciion shall preclude the Owner of any Lol or Unit from creafing a co-tenancy or joint tenancy in the ownership of the Lot or Unit wilh any other person or persons.

ARTICLE Xll

TERM OF DECLARATION

1. Term of Declaration. This Declarafion shall run wilh the land, and shall confinue in full force and effect for a period of fifty (50) years from and after the date on which this Declaration is executed. Thereafter, this Declaration and all covenants, conditions, restrictions and olher provisions herein conlained shall be in full force and effect for successive ten (10) year intervals unless terminated by an instrument executed by the then Owners of nol less than two-thirds (2/3) ofthe total number of Lots and Units in the Development, which instrument shall be recorded in the office of the County Recorder. The "then Owners" referred to in the preceding sentence shall be those purchasers who are Owners of Lots and Units at the beginning of each successive ten (10) year interval.

ARTICLE XIII

PROTECTION OF MORTGAGEES

1. Effect of Breach. No breach of any provisions of these covenants, conditions and restrictions shall invalidate the lien of any Firsl Mortgage made in good faith and for value, but all of the covenants, conditions and restrictions shall be binding on any Owner whose lille is derived through foreclosure sale, trustee's sale, or otherwise.

2. Noticesto First Mortgagees of Record. A holder, insurer or guarantor of any First Mortgage, upon written request to the Associalion, identifying ils name and address and the Lot number or address shall be enfified to fimely written nofice of:

(a) Any condemnation loss or any casualty loss which affects a material portion of the Development or any Lot in which there is a First Mortgage held, insured, or guaranteed by such eligible mortgage holder or eligible insurer or guarantor, as applicable;

(b) Any delinquency in the payment of assessments or charges owed by an Owner of a Lot subject to a Firsl Mortgage held, insured or guaranteed by such eligible holder or

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eligible insurer or guarantor, or a default by an Owner of a Lot of any other obligafion required by this Declaration, which remains uncured for a period of sixty (60) days;

(c) Any lapse, cancellafion or material modificafion of any insurance policy or fidelity bond maintained by the Associafion; and

(d) Any proposed action which would require the consent of a specified percentage of eligible mortgage holders as specified in this Declaration.

3. Inapplicability of Right of First Refusal. The Declaration, Articles, and the Bylaws contain no provisions creating a "right of firsl refusal" or similar restricfions, and an Owner may transfer his Lol free of any such right or restriction, but should any such righls or restricfions be created in the future, any First Mortgagee who obtains lille lo a Lol pursuant to the remedies provided in the Mortgage, or foreclosure of Mortgage, or deed (or assignment) in lieu of foreclosure, or sells, or leases a Lot acquired by the Mortgage, will be exempt from "the right of first refusal" or similar righls or restrictions conlained in this Declaration or Articles or Bylaws of the Association, or any amendments thereto.

4. Foreclosure. If any Lol or any legal parcel upon which a Unit is located is encumbered by a Firsl Mortgage made in good faith and for value, the foreclosure of any lien created by any provision sel forth in this Declaration for assessments, or inslallmenls of assessments, shall not operate to affect or impair the lien of such First Mortgage. On foreclosure ofthe First Mortgage, the lien for assessments, or installments thai has accrued up lo the fime of foreclosure shall be subordinate to the lien ofthe Mortgage, with the foreclosure-purchaser taking title to the Lol or Unit free of the lien for assessments or inslallmenls, lhal has accrued up to the lime of foreclosure sale. On taking tifie to the Lot or Unit, the foreclosure-purchaser shall only be obligated lo pay assessments for their charges levied or assessed by the Associafion after the foreclosure-purchaser acquired tifie to the Lot or Unit. The subsequenfiy levied assessments or olher charges may include previously unpaid assessments, provi(jed all Owners, including the foreclosure-purchaser, and his successors and assigns are required to pay their proportionate share as provided hereinabove. However, the holder of a Firsl Mortgage encumbering any Lol or Unit who obtains fille lo a Lot or Unit pursuant lo a deed in lieu of foreclosure shall remain fully liable for any unpaid dues, assessments or charges againsi such Lol or Unit which accrue prior to the acquisition of such fifie.

5. Action after Condemnation or Destruction.

(a) Any restoration or repair of the Development after a partial condemnafion or damage due lo an insurable hazard shall be substantially in accordance wilh this Declaration and the original plans and specifications, unless the approval ofthe holders, insurers or guarantors, of the First Mortgages on Lots or the legal parcels upon which the Units are located to which at least fifty-one percent (51%) of the votes of Lots and Units subject to Mortgages held by such holders, insurers, or guarantors are allocated, is obtained.

(b) Any elecfion to lemninale the Development after substantial destruction or a substantial taking in condemnafion ofthe Development must require the approval of the holders, insurers, or guarantors of the Firsl Mortgages on Lots and Units lo which at least fifty-one percent (51%) ofthe votes of Lots and Unils subject to Mortgages held by such holders, insurers, or guarantors, are allocated, is obtained.

6. Inspection of Documents. Books and Records. The Association shall be required to make available for inspection and copying by any Owners and lenders, and by holders, insurers

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or guarantors of any First Mortgages, current copies of this Declaration, the Bylaws, other rules concerning the Development, the books, records and the annual report (as provided in Article IV, Seciion 5) of the Associalion; and any membership register, books of accouni, and minutes of the Members, the Board and committees of the Board, at any reasonable time and for a purpose reasonably related to his interest in the Development, at the office ofthe Association or such olher place wiihin the Development as the Board prescribes.

(a) The Board shall establish by resolution reasonable rules wilh respect to:

(1) Nofice lo be given lo the custodian ofthe records of the Association by the Owner, lender, holder, insurer or guarantor of any Firsl Mortgage desiring lo make an inspecfion.

(2) Hours and days of the week when an inspection may be made.

(3) Payments ofthe cost of reproducing copies of documents requested by the Owner, lender, holder, insurer or guarantor, except as hereinafter provided.

(b) Every director of the Association shall have the absolute right al any reasonable fime to inspecl all books, records and documents of the Association and the physical properties owned or controlled by the Associafion. The right of inspection by a director includes the right lo make extracts and copies of documenls.

(c) If the Development contains fifty (50) or more Lots and Units, any holder, insurer or guarantor of a First Mortgage shall be entified upon writlen request, to an audited annual report for the immediately preceding fiscal year, free of charge to the parly so requesting.

(d) If Ihe Development contains less than fifty (50) Lots and Units, the holders of fifty-one percent (51 %) or more of Firsl Mortgages shall be, upon wriiten request, entified lo have such an audited annual report for the preceding fiscal year prepared al their expense if one is nol othen/vise available.

7. Reserve for Replacement. Association assessments, dues or charges shall include an adequate reserve fund for maintenance, repairs, and replacement of those elements of the Common Area that must be replaced on a periodic basis, and shall be payable in regular installments rather than by special assessments.

8. Taxes and Liens on Individual Lots/Units. All taxes, assessments and charges which become liens prior lo the Firsl Mortgage under local law shall relate only lo the individual Lots and the parcels upon which the Units are located and nol lo the Development as a whole.

9. Subordination. Any lien created or claimed underlhe provisions ofthis Declarafion is expressly made subject and subordinate to the rights of any First Mortgage that encumbers all or a portion of the Development or any Lot or the legal parcel upon which a Unit is located, made in good faith and for value, and no such lien shall in any way defeat, invalidate, or impair the obligafions or priority of such First Mortgage unless the mortgagee expressly subordinates his interest, in wrifing, lo such lien.

10. Distribution of Insurance and Condemnation Proceeds. No Owner, or any other party shall have priority over any right of institutional First Mortgagees of Lots or Unils pursuant to their mortgages in case of a distribufion lo Owners of insurance proceeds or condemnation awards for losses lo or a taking of Lots, Units or Common Area. Any provisions to the contrary in this

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Declaration or in the Bylaws or olher documenls relating lo the Development is to such extent void. All applicable fire and all physical loss or extended coverage insurance policies shall contain loss payable clauses acceptable to the affected insfilutional Firsl Mortgagees naming the Mortgagees, as their interests may appear.

11. Common Area. All Common Area shall be available for use by Owners. All such Common Area shall be owned in fee by the Associafion free of encumbrances except for any easements granted for public utilities or for other public purposes consistent with the intended use of such property by the Owners or by the Association.

12. Payments by Mortgagees. Mortgageesof Lots and Units may, jointly or singularly, pay taxes or other charges which are in default and which may or have become a charge against the Common Area and may pay overdue premiums on hazard insurance policies, or secure new hazard insurance coverage on the lapse of a policy, for Common Area improvements or olher insured property ofthe Associafion and, upon making any such payments, such Mortgagees shall be owed immediate reimbursement therefor from the associalion. This provision shall constitute an agreement by the Association for the express benefit of all Mortgagees and upon request of any Mortgagee the Associafion shall execute and deliver to such Mortgagee separate wriiten agreemeni embodying the provision ofthis Article XIII, Seciion 13.

13. Non-Curable Breach. Any Mortgagee who acquires fille lo a Lot or Unit by foreclosure shall nol be obligated lo cure any breach ofthis Declarafion that is non-curable or of a type that is not pracfical or feasible to cure.

14. Loan to Facilitate. Any First Mortgage given lo secure a loan to facilitate the resale of a Lot or Unit after acquisition by foreclosure or by a deed-in-lieu of foreclosure or by an assignmenl-in-lieu of foreclosure shall be deemed lo be a loan made in good faith and for value and enfitled to all of the rights and prolecfions of this Article XIII.

15. Appearance at Meetings. Because of its financial interest in the Development, any Mortgagee may appear (but cannot vote) at meefings of the Members and the Board to draw attention to violations of this Declarafion that have not been corrected or made the subject of a remedial proceedings or assessments.

16. Right to Furnish Information. Any Mortgagee can ftjrnish informafion lo the Board concerning the status of any Mortgage.

ARTICLE XIV

AMENDMENT

1. Amendment Prior to Close of First Sale. Prior lo the recordation of the first sale of a Lot in the Development lo a purchaser olher than Declarant, the Declaration and any amendments thereto may (subject to the approval of the California Department of Real Estate) be amended or revoked in any respect by the execution by Declarant of an instrument amending or revoking same, which instrument shall make appropriate reference lo this Declaration and any amendment thereto and which instnjment shall be acknowledged and recorded in the office of the County Recorder.

2. Amendment After Close of First Sale. After the recordation of the first sale of a Lot in the Development to a purchaser other than Declarant, this Declaration can be amended or

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revoked only wilh the vole or written assent of the holders of not less than fifty-one percent (51 %) ofthe vofing rights ofthe Members ofthe Association. However, if any provision ofthis Declaration requires a greater or lesser percentage of the voting rights of the Associalion in order to take affirmative or negative acfion under such provision, the same percentage of Members shall be required to amend or revoke such provision. Ifthe consent or approval of Mortgagees or any other person, firm, agency or entity is required under this Declarafion wilh respect to any amendment or revocafion of any provision of this Declarafion, no such amendment or revocafion shall become effective unless such consent or approval is oblained. Any amendment or revocation subsequent lo the recordation of such first sale shall be evidenced by an instrument certified by the secretary or other duly authorized officer of the Associalion and shall make appropriate reference to this Declarafion and its amendments and shall be acknowledged and recorded in the office of the Counly Recorder. Notwithstanding the foregoing, any amendment lo Article III, Sections 17, 18 or 19 shall also require the written consent ofthe City

3. Business and Professions Code Section 11018.7. All amendments or revocafions ofthis Declaration shall comply with the provisions of Seciion 11018.7 ofthe California Business and Professions Code to the extent such secfion is applicable thereto.

4. Reliance on Amendments. Any amendments made in accordance wilh the lerms of this Declarafion shall be presumed valid as lo anyone relying Ihereon in good faith.

ARTICLE XV

ARCHITECTURAL CONTROL

1. Architectural Control. No building, fence, mailbox, wall, obstruction, balcony, screen, pafio, patio cover, tent awning, carport, carport cover, pool, spa, improvement, or structure of any kind shall be commenced, erected, painted or mainlained upon any Lot, nor shall any alteration or improvement of any kind be made thereto unless and until the same has been approved in writing by the Architectural Control Committee (sometimes hereafter referred to as the "Committee"). Plans and specifications showing the nature, kind, shape, color, size, materials and locafion of such improvements, alterations, etc., shall be submitted to the Committee for approval as to quality of workmanship and design and harmony of external design with exisling structures, and as to locafion in relafion to surrounding structures, topography, and finish grade elevafion. No permission or approval shall be required to repair in accordance wilh Declarant's original plans and specificafions. No permission or approval shall be required lo repaint in accordance wilh a color scheme previously approved by the Committee, or to rebuild in accordance with plans and specificafions previously approved by the Committee. No permission or approval shall be required forthe improvements Eskaton constructs, repairs or replaces on Lot 1 ofthe Development, as more particularty described in Exhibit "A."

No new landscaping or substantial relandscaping of yards visible from the street or from the Common Area shall be undertaken by any Owner unless and unfil the plans and specificafions showing the nature, kind, shape, and location of the materials shall have been submitted to and approved in writing by the Committee.

2. Architectural Control Committer. The Architectural Control Committee shall consist of not less than three (3) nor more than five (5) Members. Eskaton may appoint all of the original Members of the Committee and all replacements unlil the firsl (1 ') anniversary of the issuance of a final public report forthe project. Thereafter, Eskaton reserves lo itself the power to appoint a majority of the Members to the Committee. Members appointed to the Committee by the

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Eskaton need not be Members of the Associalion. A majority of the Committee may designate a representafive to act for il. In the event of death or resignafion of any Member of the Committee, the successor shall be appointed by remaining Members of the Committee which shall have full authority to designate such a successor. Neither the Members of the Committee nor ils designated representatives shall be entitled lo any compensation for services performed pursuant thereto.

3. Architectural Control Committee Rules. The Committee may, from fime lo fime, adopt amend and repeal by majority vote, rules and regulations, lo be known as "Architectural Control Committee Rules" which interpret or implement the provisions of Article XV hereof, which rules and regulafions shall be subject to the approval ofthe Board. Such rules and regulations may be amended or repealed at any fime by the vote of a majority of the voting power of the Association.

4. Waiver. The approval by the Committee of any plans, drawings, or specifications for any work done or proposed, or in connection wilh any other matter requiring the approval ofthe Committee under this Declaration shall nol be deemed lo consfitute a waiver of any right lo withhold approval as to any similar plan, drawing, specification or matter whenever subsequently or addifionally submitted for approval.

5. Liability. Neither the Committee nor any Member thereof shall be liable to the Associafion, or to any Member, Owner or other person or body for any damage, loss or prejudice suffered or claimed on account of (a) the approval of any plans, drawings and specifications, whether or nol defective, (b) the construction or performance of any work, whether or not pursuant to approved plans, drawings and specificafions or (c) the development of any property within the Development provided, however, that such Committee Member has, with the actual knowledge possessed by him acted in good faith. Without in any way limifing the generality of the foregoing, the Committee, or any Member thereof, shall consult with the Board ofthe Associafion, if requested, wilh respect lo any plans, drawings or specificafions. of any olher proposal submitted lo the Committee.

ARTICLE XVI

ANNEXATION OF ADDITIONAL PROPERTY

1. Annexation. Additional property may be annexed to the Development only as specified in the following subparagraphs:

(a) GVB's Annexation Rights. GVB may, but shall not be required to, annex all or any portion of the property described in Exhibit " B " to the Development at any fime wilhoul the vote or approval of any olher Owners or the Associalion; provided, however, that if such annexation is not effected prior lo the third anniversary of the original issuance of the most recenfiy issued Public Report of the Stale of California Department of Real Estate for a phase of the Development, such annexation shall require the vole or wriiten assent of two-thirds (2/3) of the Members of the Associalion. The annexation of any such property by GVB shall be effected by the fulfillment of the following procedures:

(1) GVB shall have recorded a Declaration of Annexation reviewed and reasonably approved by Eskaton describing the property to be annexed and providing for such additional covenants, condilions and restrictions on such annexed property as may be necessary to include such property in the Development and specifying lhat all ofthe covenants, condifions anij restrictions of the Declaration shall apply to such annexed property in the same manner as if il were originally covered by the Declaration as part of the Development. No Declarafion of Annexation shall

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^001297

in any event revoke, modify or add lo the limitations, restrictions and covenants established by this Declaration nor shall it discriminate between some Owners of such property and olher Owners of any other property within the Development, except as othenwise provided herein. No such amendment, addition, change or deletion shall alter or change the general common plan or scheme created by this Declarafion, nor affect the provisions hereof or thereof as covenants running with the land or equitable servitudes, il being the express desire and intention of Declarant lo establish a cohesive plan or such covenants and servitudes lo be uniformly applicable to all portions of the Development, including those portions added thereto by annexation.

(2) GVB shall be obligated lo pay lo the Association an appropriate amounl for certain reserves which may arise out of the use and occupancy of the residences located on Lots wiihin such annexed property which are under a rental program in effect for a period of al least one year from the date of the close of escrow of the firsl sale of a Lol in the annexed property.

(b) Rights and Obligations of Owners. After the required annexafion procedures are fulfilled, all Owners in the Development shall be enfitled to use of all the Common Area, in the Development, including the Common Area, in such annexed property, subject to the provisions of the Declaration, and Owners of such annexed property shall Ihereupon be subject to the Declaration and be enfitled lo membership in the Association. After each annexafion, the assessments shall be reassessed with the annexed property being assessed for a proportionate share of the lotal expenses of the Development on the same basis as the other property in the Development.

(c) Other Annexation of Property. Additional property adjacent lo the Development which does nol qualify for annexation pursuant to the lerms of subparagraph (1) above may be annexed to the Development upon the written vote or consent of not less than two-thirds (2/3) of the lotal votes of the Association, along wilh the written consent of the Owner of such property and upon fulfillment of procedures by the Owner of such property substantially similar to those sel forth in subparagraph (a) above.

(d) Approval of the Department of Real Estate. The annexafion and development of annexed property shall be in accordance wilh a plan of development approved by the Department of Real Estate of the Slale of California. Unless approved by the Department of Real Estate, no annexation may, withoul the approval of a majority of the Members of the Association, cause a substantial increase in the Common Area cost and expense then being borne by the Owners which are not disclosed in the final subdivision public report for the phase of the Development in which the Owner purchased his LoL

ARTICLE XVII

GENERAL PROVISIONS

1. Headings. The headings used in this Declaration are for convenience only and are nol to be used in inlerprefing the meaning of any of the provisions ofthis Declarafion, or othenwise.

2. Severability. The provisions of this Declarafion shall be deemed independent and severable, and the invalidity or partial invalidity or unenforceability of any provisions or provisions hereof shall not invalidate any other provisions hereof

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3. Cumulative Remedies. Each remedy provided for in this Declaration shall be cumulafive and not exclusive. Failure to exercise any remedy provided for in this Declaration shall not, under any circumstances, be construed as a waiver thereof.

4. Violations as Nuisance. Every act or omission in violalion of the provisions of this Declaration shall constitute a nuisance and, in addition to all other remedies herein set forth, may be abated or enjoined by any Owner, any Member of the Board or the Associafion.

5. Discrimination. No Owner shall execute or cause to be recorded any instrument which imposes a restriction upon the sale, leasing or occupancy oftheir Lol on the basis of race, sex, color, creed, religion, marital status, national origin, or ancestry.

6. Access to Books. Any Owner may, al any reasonable fime and upon reasonable nolice lo the Board, al his own expense, cause an audit or inspection lo be made of the books and financial records ofthe Association.

7. Liberal Construction. The provisions of this Declaration shall be liberally construed to effectuate ils purpose as set forth in the Declarafion herein. Failure to enforce any provision hereof shall nol consfitute a waiver of the right to enforce said provision thereafter.

8. Notification of Sale of Lot. Concurrently with the consummation of the sale of any Lot or of any parcel containing Units under circumstances whereby the transferee becomes an Owner thereof, or within five (5) business days thereafter, the transferee shall notify the Board in writing of such sale. Such nolificafion shall sel forth the name ofthe transferee and their Mortgagee and transferor, the street address of the Lot or parcel purchased by the transferee, the transferee's and the Mortgagee's mailing address, and the dale of sale. Prior lo the receipt of such nofificafion, any and all communications required or permitted to be given by the Associalion, the Board shall be deemed lo be duly made and given to the transferee if duly and timely made and given lo said transferee's transferor. Mailing addresses may be changed al any lime upon wrillen nolificafion to the Board. Notices shall be deemed received twenty-four (24) hours after mailing if mailed to the transferee, or lo his transferor ifthe Board has received no notice of transfer as above provided, by certified mail, return receipt requested, at the mailing address above specified. Notices shall also be deemed received twenty-four (24) hours after being sent by telegram.

9. Number: Gender. The singular shall include the plural and the plural the singular unless the context requires the contrary, and the masculine, feminine and neuter shall each include the masculine, feminine or neuter, as the context requires.

10. Exhibits. Any and all exhibits attached hereto shall be deemed made a part hereof and incorporated by reference herein.

11. Easements Reserved and Granted. Any and all easements referred lo herein shall be deemed reserved or granted by reference to this Declaration in a deed to any Lot or any parcel containing Unils.

12. Binding Effect. This Declarafion shall inure to the benefit of and be binding upon the successors and assigns of the Declarant, and the heirs, personal representatives, grantees, lessees, successors and assigns ofthe Owners.

13. Unsegregated Real Estate Taxes. Unlil such time as real estate taxes have been segregated by the County Assessor, such taxes shall be paid by the respective Owners of Lots.

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001297

14. Attorney's Fees. In any action by the Association or any Owner to enforce, by any proceeding at law or in equity, any or all ofthe restrictions, conditions, covenants, reservations, liens and charges now or hereafter imposed by the provisions of this Declarafion, the prevailing party shall be entitled to recover reasonable costs and attorney's fees as determined by the court.

IN WITNESS WHEREOF, Declarant has executed this instrument as ofthis day of January, 2003.

ESKATON VILLAGE-GRASS VALLEY, a California non-profit, public benefit corporation

By: --^Constance T. Batterson Its: Secretary

GRASS VALLEY BUILDERS, LLC, a Calipcrtia lirruted liability company

K:iE5t.atonlGrass Valley ORE Public Report (Otto) (0222-0061 Hajml first amecdetf A restaed decl of iA3 (ver 41.OT1 I/9/OJ 2:46 PM

001297 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT

Stale of California ) ss.

County of "Sd^ramoi-h}

On Id.nuarU 9 rÔQ^ before me, <^'g^/ A- ^CJO^, iJcMry PtJibjiC., I ' ' Name and Tide of Officer (e.g-, "Jane Doe. Nota Notary Public")

personally appeared Name of Signer

CAiK3LA.SCOn Commtelon* 1271754

Notoy PObHc -CoBonda Sacramenio Counfy

I^CtamnriBgtaAuBaUBM

121 personally known lo me • proved to me on Ihe basis of satisfactory evidence

lo be the person whose name is subscribed lo the wiihin instrument and acknowledged to me that-he/she executed the same in •his/her authorized capacity, and lhat by-hta/her signature on Ihe instalment the person, or the enfily upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

Place Notary Seal Above 1 Signature ol Notary Public

OPTIONAL Though the information below is nol required by law, it may prove valuable to persons relying on Ihe document

and could prevent fraudulent removal and reattachment of this form to another document.

Description Of Attached Docujnent^^ ^.ÔXKxiicn of Cc^tnonU, Ccn'

Title or Type of Document: dl-fioAi, nr\ci f^st-rt'cHom^ fshihnî/laff^mSiVaJli^ ^li)n7C6u)n€/^ A&sn •

Document Date: tindnftsl ChrufJi j Number of Pages:

Signer Other Than Named Above: ^-/IVTI/ a/ yig-forif/iJôy^

Capacity Claimed by Signer

Signer's MQ^^- îJii TT SoMerôr)

• Individual 0 Corporate Officer- Title(s): '^W^^'^ • Partner - • Limited • General ' • Attorney-in-Fact • Trustee • Guardian or Conservator • Other:

RIGHT THUMBPRINT OF SIGNER

Top of thumb here

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001297

CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT

i

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State of California

Counly of c/l^câMA,A/;d> )

ss.

On j4^4^/7y/^ l6 TUd^. before me, 'TYj.gifCL' /L//êi, Tlofa/Ijif Pid(?l(^.) ( J atHf ' ' Name anO Tide afpllicer (e.g.. "Jan»C6e, Nolory PuDlic")

personally appeared yYljl/t^ (2 "UJf^JpJ N,ime(^ ol SigneiCs}

Ik;' personally known lo me i... proved lo me on the basis of satisfactory evidence

to be the person(s^ whose name(^) is/afe subscribed lo the wiihin instrument and acknowledged to me lhal he/she/they executed the same in his/>iei7llnjir authorized capacilyfi«s), and lhal by his/her/lhek slgnature(e)-on the instrument the person(jBO, or the enfily upon behalf of which the person(a1 acted, executed the instrument.

MAYl£ DUONG Commission # 1216524

Notary Public - California | Saaamento Counfy

My Ccmm. Expires Apr22.2003 V W W W IJI»

j nfy r 2Z2Q03i

i

\

Place Notary Seal Above

WITNESS my hand and official seal.

OPTIONAL Though the information below is not required by law. it may prove valuable to persons relying on the document

and could prevent fraudulent removal and reattachment of this form to another document

Description of Attache Title or Type of Document .

Document Date: I t K i ^ H ^ C ' • ^ ^ ^ ' ^ ^ ^ J l^ 'JO^) Number of Pages;

Signer(s) Ottier Than Named Above: Gr/lshtytrC^., y^J/a^^-Ay^

Capacity(les) Claimed by Signer Signer's Name; 1^/2Â /2. lUiCê.. IJ Individual L. Corporate Officer — Tltle(s): '•'2 Partner — IJ Limited i i General ...I Attorney in Fact l l Trustee • Guardian or Conservator • Other; nYjXJUf^.rfQ. -TYI^^hJiA^

Signer Is Representing;

RIGHT THUfiUBPRlNT OF SIGNER

Too ol inumb fiere

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I

S tD97 National Notarv Associalion • 9353 De Solo Ave . P.O. B M 2402 • Chotswonil, CA 9131.1-2402 Prod No 5907 Rooroer: Coll ToD-Froo 1.800.876-6627

001297 -GUSlvVS-

Exhibit "A"

Legal Description

That certain real property situated in the City of Grass Valley, County of Nevada, State of California, described as follovys;

Residential Lots 1, 7 through 18,120 through 1.31 and Common Area Parcels A (Recreation Facility), Parcel N, O, and X (Roads), and Parcel C, D, I, and K (Open Space) as shown on Grass Valley Final Map No. 00-02 entitled "Eskaton Village", filed in the office of the County Recorder of Nevada County. California, on the J d ^ ot ogr f=r ( \aor . 2001 in Book of Subdivisions, at P a g ^ ^ .

C;WVINDOWS\TEMP\CC&R Legal Desaiptions.doc

001297 ^ ,,.5.,,.,

Exhibit "B"

Legal Description

That certain real property situated in the City of Grass Valley, County of Nevada, State of California, described as follows:

Residential Lots 2 through 6. 19 through 119, and Common Area Parcels B (Maintenance Facility), Parcel P, Q, R, S, T, U, V, W. Y, Z, AA. BB. and CC (Roads), and Parcel E, F, G, H, J, L, and DD (Open Space) as shown on Grass Valley Final Map No. 00-02 entitled "Eskaton Village", filed in the office ofthe County Recorder of Nevada County, California, on the /(Jf*^f Qie.<$ P fCxbcH" 2001 in Book _sL of Subdivisions, at Page99-.

C.\WINDOWS\TEMP\CC&R Legal Descriptions.doc

001297

EXHIBIT C

ESKATON VILLAGE GRASS VALLEY HOMEOWNERS' ASSOCIATION

ESKATON SERVICES

Eskaton will provide the following services to the Eskaton Village Grass Valley Homeowners' Associalion as pari of the Homeowners' Associafion fee:

• Security/emergency response 24 hours per day

• On-site shuttle service among homes, fitness center and Eskaton Village Grass Valley Lodge

• Fitness/wellness program

• Recreafion coordinator

• Access lo Eskaton Village Grass Valley Lodge dining room

• Use of community rooms in the Eskaton Village Grass Valley Lodge (e.g. library, game rooms, technology center, gifl shop, etc.)

These addifional Eskaton services will be available to homeowners on a fee-for-service basis:

Meals in the Eskaton Village Grass Valley Lodge dining room

Home-delivered meals

Housekeeping services

Bed and/or bath linen services

Scheduled off-site transportafion

Inlerior home maintenance services

On-site beauty shop

Advice nurse

Nutrifion consultant

END OF DOCUMENT

Exhibit B

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COLOR CODE:

owned by:

ESKATON (a corporafion)

2 owned by:

ESKATON VILLAGE Gf^SS VALLEY HOiVIEOWNERS ASSOCIATION (a corporation)

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PRIVATE HOMEOWNERS

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Exhibit C

RE 623 (Rev. 2/00) IDff623G0200B009 Esteton Village Phase 3 Cost Center Page 1 of 15

_,r.'\TEOFC.UIFORMA BUDGET WORKSr-rEET

R£ 623 (Rev. I'OO) ID i¥62300200B009

DEPAJITMENT OF R£AL ESTATE BUDGET REVIEW

GE^fERAL INFORMATION

This budget is a good faith estimate from plans prior to constniction and/or completion (for new projects) or from a combination of plans and/or site inspections (for existing projects). For existing projects, there may have been historical data as support for some line items, but changes to the project may make historical data not applicable or reliable. This budget was prepared for the purposes of obtaining a public report.

The Association must adopt a budget in accordance with the California Civil Code. If that budget is less tlun 10%

or greater than 20% from this budget, you should contact the Department of Real Estate. The Association may

increase or decrease its budgeL It is typical for costs to increase as the project ages. The Association should

conduct a reser 'e snidy after its first year of operation to adjust the reserve fiinding plan for any changes which may have taken place during construction. ORE FILE NVMBER (IF ICSOAV) . .lASl'ER DS£ RLE* OEPUTY ASSICatED HL£ (IF KNOM'N)

SUBDIVISION DDENTIFICATION .A ND LOCATION

Eskaton Village ' IT.V-X'MBEHS

,jts 2-6. 43-62, 78-119 : ' —— .

STREET ADDRESS (If .<.N"*T OTTf COUWTY

Grass Valley Nevada R<.IN ACCESS ftOADfSI MEARESTTO'VuaTY (•CLESmrRECnON FROMTOW»raTY

Via Colina Drive and Esicaton Circle TYPE OF SUBDIVISION

Condominium

Condominium Conversion Stock Cooperative Stock Cooperative Conversion Liinited Equity Housing Corporation P lanned Development ••

Planned Development Land Project Planned Development Mobile Home Community Apartment Out-of-State Undivided Interest Undivided Interest Land Project

NU).<BER OF W T t W r i S

67 Phase 3; 130 Total PHASF./r

3 TOTAL IN fBD/ECr

3 PR£VI(XISM£nLE< • OFAOUiS

BUDGET PREPARER

VierraMoore, Inc. ATTENTiOH

Rita Williams TELH'HONE NUMBER

(916)925-9000 A30RESS

P. 0. Box 348600 OTY

Sacramento ZIP CODE

95834-8600 CERTIFICATION

I declare under penally ofperjury that the representations and answers to questions in this document and all

' -cuments submined as part of the homeowners budget are tnte and complete to tlie best of my knowledge

-t.-rirf heliej. Tlie undersigned certifies lhat this electronic recreation of Department of Real Instate fonn RE

623 coniains.ai least the same infonnation as the DRE approved form ID ^RE62300200D009.

j;c.v.< ruRf. Of BLCcrr . i. R£s DATE

l/QI ; Revised 5/01; 12/01

RE 623 (Rev. 2/00) ID#62300200B005 Eskaton Village Phase 3 Cost Center

Pagc2ofI5

IMPROVEMENTS Y/ORJKSHEET

*If this phase will have any line items shown on pagt s 3,4 and 5 hereof exempted from payment of assessments under Regulation 2792.16(c), asterisk those items on pages 3,4, and 5 and list any partially deferred costs on a separate sheet showing calculations andatfacL All exempted improvements mi stbc covered by reasonable arrangemenls for completion. Include Planned Construction Statement (RE 611 A) for review.

1. Number of buildings containing residential units

2. Estimated completion date for the residential units included

in this phase

3. Estimated completion date for the common area and

facilities included in this phase

" 4rTypeof TesidentliirBtiiHings'for ffiTs project (I.e., highrise

cluster, garden, etc.)

5. Type of constmction for these buildings (i.e., steel, concrete, wood frame, etc.)

6! Typeofroof(i.e., shake, etc.)

7. Type of paving used in the project

8. Type of exterior wall for residenllal biiildtngs

9. Number of residential units per building

10. Number of floors per building

11. Number of bedrooms pcr unit

12. Square footage of units (list number and size of each unit

type)

13. Type of parking facilities and number of spaces (Le., detached garage, tuck-under, subterranean, carport, open, etc.)

Complete Hand 15 for Phased CondomMum projects only

14. Have you submined budgets for all phases to be completed within the next tlirce calendar years and a built-out budget? •

15. If this condominium project involves phasing with a smgle . lol, submit z budget for each phase plus a budget which will be used (/ fcture phases are not completed.

24

12/03

12/03

Cluster

Wood Frame

Comp Shingles

Asphalt

Wood Siding

Attached garage

YES NO

RE 623 (Rev. 2/00) 1D«€2300200B009 Eskaton Village Phase 3 Cost Center

BUDGET SUMMARY

Page 3 of 15

VkSEKUMIlER

3 DATEOFOUDCET

I/Ol; Revised 5/01; 12/01 ORE R U NUMDER

KUwaEROFLOTSrWrrS

130 TRACT NUMBElWWMn OF PRO/ECT

Eskaton Village

fERLOT/Wtr

PERMOKTH

TOTAL

MONTHLY

TOTAL

AIJNUAL

100 FDCED COSTS 101 Property Taxes 102 Corporation Franchise Taxes C 103 Insurance (attach proposal) 31.51 4096.67 4916C 104 Local License & Inspection Fees 105 Estimated Income Taxes

100-Sub Total 31.51 4096.67 4916C 200 OPERATING COSTS

201 Elecfricity (attach work sheet) C Lighting: Leased

202 Gas (attach work sheet) •. 203 Water (attach work sheet) 2.80 364.14 437C 204 Sewer/Septic Tanks (mclude if not in 203) 205 Cable TV/Master Antenna

• 207 Custodial Area • Number of Restrocms:

208 Landscape Area (see page 15) 30.79 4002.92 4803: 209 Refuse Dispo.'=;al

Vender Name; Telephone Number

13.45 1748.50 20982

210 Elevators Number Type:

211 Private Streets, Driveways, Parking Areas Area:

212 Heating & Air Conditioning Maintenance Area:

213 Swimming Pool Number: Size: Mths. Heated: Spa Number: Size:

214 Tennis Coun Number:

215 Access Control Guard Hours per Day: No. of Motorized Gates: Type: No. of Intercoms/Telephone Eniry:

RE 623 (Rev. 2/00) ©#623002003009 Eskaton Village Pliase 3 Cost Center Page 4 of IS

PHI MONTH

TOTAL

MOKTHtr

TOTAL

ANNUAL

216 Reserve Study* 0-51 66.67 800 217 Miscellaneous

Minor Repairs 3.00 390.00 4680 Eskaton Services 80.65 10485.00 125820 Dining Room Access - Eskaton Services 14.08 1830.42 21965

,

200-Sub Total 145.29 18887.64 226652 300 RESERVES 301-313 (attach reserve work sheet) 45.67 5936.71 71240

3Q0 - Sub Total 45.67 5936.71 71240 400 ADMINISTRATION

401 Management ** - 0 402 Legal Services 0 403 Accounting 0 404 Education 0 405 Miscellaneous, office expense

400.- Sub Total TOTAL (100-400) 222.47 28921.01 347052

500 CONTINGENCY 501 New Construction 3% 6.68 867,.92 10415 502 Conversions 5% 503 Revenue Ofifscts (attach docuinentatioa)

TOTAL BUDGET 229.15 29788.93 357467

construction and may vary slightly from actual field conditions. The calculated budget is a good faith estimate ofthe projected costs and should be deemed reliable forno more than one year. The Board of Directors should conduct an annual review of the Association's actual costs and revise the budget accordingly.

DRE regulations allow the use of variable assessments against units only if one unit will derive as much as 10% more than another unit in the. value of common goods and services supplied by the AssociatiorL After determining the percent of benefit derived &om services provided (page 14) by the Association, an easy chart to follow would, be:

Less dian 10%...: equal assessments from 10% to 20% variable or equal ON'er 20% variable a-ssessments

The budget and management documents indicate (check appropriate box):

X equal assessments variable assessments

Reserve Study to be conducted every thjree years for an estimated loul cost of 52400. The above figxirc represents 1/3 the total cosi.

' Depending upon the level of service selected by the ^ssociarion, ibc amount shown may be iosufficicnt to cover the cost and

£:i3y be higher.

RE 623 (Rev. 2/00) ID#62300200B009 Eskaton Village Phase 3 Cost Center Pace 5 of 15

RESERVES WORKSHEET ORE FILE NUMBER TRACT NUMBER

( ! ) • • (2)' (4)* Cost

Item Sq. Ft. or Unit Cost Replacement Remaining Co(uxnns \i2or Pcr LotAJtiit Number HOA Manual Cost Life Per Momh

Wood Siding (paint/stain) 245800 0.15 36870.00 23.63 Roof - Type: Composition Shingles 309934 0.09 17 27894.06 17.88 Unallocated Reserves 6476.41 4.15

TOTAL RESERVES 71240.47 45.67 Use either Columns 1 and 2 or 3 and 4, but not both for a paaicular item

tSSICATON VILLAGE, GRASS YAJLLEY Homeowner r.-vpcnsc Allocntloa for Eskaton Services

Service Component ij^Xplnitnlion Annunl Cost Share Basis AUocnted to Patio Homes

Monthly Fee For Patio

Homes

Monthy F-for Iiuiivicl Homes (v i ;

S ecuri ty/Emergency Response

On-site Shuttle Service

24 hrs/7 days + 4.2 PTEs 4.2 FTEs at S9.00/ hr ^ 37..8/hr X 2080 = $78,624/yr plusbcncnts of 32%= $103,784

7:00 nni lo 9:00 pm, 7 days per week

$103,784 50% = $51,892

$ 4,324 $33.26

OO-silc scheduled Iransporliilion

Availahlo option Nomiiuil cos! biisis fee 0 0 0

Fitness/Wclhiess Program Director

\ FTE@$lO.J25/lir = 521,060 plus benefits = COST IS DELAYIi:D UNTIL FITNESS CENTER

IS COMPLETED

$ 27,799 50% $13,899.50 510,00

Recreation Coordinator 1 I'TE @ $12.32/hr = S25.626 phis benefits = $36,000 10% S3,600

S300,00 S2.50

Advice Nurse Scheduled consultations iwailable Nominal cost basis fee 0 0 0

Nutrition Consultant Scheduled consultations available Nominal cost basis fee 0 0 0 .

Dining room access -Homeowners

Additional 1 FTE to ensure homeowners service available, $8.00/lir = SI6,640 plus bciicnts = $21,965 100% S 1,830.40 $14.25

Totnl.s $187,374,00 $12,315.40 $60.00

first amended class action complaint (00442475-2)[1]

Documents

individual homeowners

individual elizabeth

housing units

individual trevor hammond

individual todd murch

owned condominium units

breach of fiduciary

diepenbrock sbn