Legacy at Brittany Lakes
Bylaws

LEGACY AT BRITTANY LAKES

BY-LAWS COVER SHEET

This is a typed copy of the By-Laws. The original rests with the Association President and the Attorneys of Record. This should be used for on-line reference only. Consult with the Association President to view the Legal Formatted Original.

BY-LAWS

OF

COSTAL CAROLINA OWNERS ASSOCIATION

ARTICLE I.

General Provisions

SECTION 1. – IDENTITY: These are the By-Laws of COASTAL CAROLINA OWNERS ASSOCIATION, a nonprofit corporation organized pursuant to the laws of the State of North Carolina the Articles of Incorporation for which have been recorded in book 1391, at Page 1690, of the Office of the Register of Deeds of New Hanover County, North Carolina.

SECTION 2. – INCORPORATION: The provisions of these By-Laws supplement and are enacted pursuant to the provisions of the above referenced Articles of Incorporation and are applicable to certain developments of real property, taken or developed from the property described on Exhibit “A” hereto attached, made a part thereof, and incorporated herein by reference. Provided no owner of any such lot of lots shall be affected by or subject to these By-Laws or the Articles of Incorporation hereinabove referred to unless and until the Developer of the property described on Exhibit “A” has placed upon the public records of New Hanover County, North Carolina, a set of Restrictive Covenants providing specifically that said lot of lots are subject hereto and that the owners of lots therein are specifically subject to these By-Laws and the Articles of Incorporation referred to herein. For the purpose hereof, the Developer of the property described on Exhibit “A” is COASTAL CAROLINA DEVELOPERS, INC., its successors and assigns.

SECTION 3. – APPLICATION: These By-Laws shall, in conjunction with the above referenced Articles of Incorporation govern the affairs, rights, privileges, duties and obligations of the association, all owners, the Developer, all mortgagees, beneficiaries under Deeds of Trust, Lessees and occupants of all lots subject hereto, their employees and all others who may use or enjoy any of the property subjected hereto, and the acceptance of a Deed for or conveyance of, or the succeeding to title to, or the entering into a lease for, or the actual occupancy of, or use of a lot, the entrance areas, conservation areas, drainage areas and ways, parks, recreation areas, and amenities, if any, or any of the improvements thereon by any of the above shall constitute an acceptance by the same of the provisions of these By-Laws, the Rules and Regulations enacted pursuant hereto and the provisions of the herein above referenced Articles, and an agreement to comply and abide by the same.

SECTION 4. – PRINCIPAL OFFICE: The principal office of the Association and of the Board of Directors shall be located at 2905 Market Street, Wilmington, New Hanover County, North Carolina, 28403.

ARTICLE II.

Membership

SECTION 1. – IDENTIFICATION: The Association shall have only one class of members. Each Membership shall be appurtenant to and shall not be severed from the fee simple ownership of a lot subject hereto. The rights, duties, obligations, powers and privileges appurtenant to each membership shall be exercised by fee simple owner of the lot to which such membership is appurtenant. Any devise, contract for the sale of, Deed, or other means of conveyance of any such lot shall be deemed to include the appurtenant membership in the Association. No portion of the rights, privileges, powers, duties or obligations appurtenant to each membership in the Association may be sold, transferred or otherwise disposed of, except as part of a sale, is appurtenant.

SECTION 2. – RECORDS: The secretary of the Association shall maintain at the principal office of the Association a register of all of the current owners of memberships in the Association and the mailing address of each owner and of all mortgagees or beneficiaries under Deeds of Trust of all such lots.

SECTION 3. – VOTING RIGHTS: Each membership shall be entitled to one (1) vote for each lot owned, in all matters of the Association requiring a vote of the membership. If a membership is owned by one (1) person his right shall be established by the record title to his lot. If a membership is owned by more than one (1) person, or is under lease, the person entitled to cast the vote for such membership shall be designated by a certificate signed by all of the record owners of such membership and filed with the Secretary of the Association. If a membership is owned by a corporation, the person entitled to post the vote for that membership shall be designated by a certificate signed by the President or Vice President and attested by the Secretary or the Assistant Secretary of such corporation and filed with the Secretary of the Association. If a membership is owned by a partnership, whether general or limited, or a joint venture, the partners or joint venturers, as the case may be. Such certificates shall be valid until revoked by a subsequent certificate or until a change occurs in the ownership of the membership concerned. A certificate designating the person entitled to case the vote of a membership may be revoked by any owner of such membership. If such a certificate is not on file, the vote of such membership shall not be considered in determining the requirements for a quorum nor for any other purpose under these By-Laws.

SECTION 4. – MORTGAGEES AND TRUSTEES UNDER DEEDS OF TRUST: In the event that any such lot is conveyed by mortgage or by Deed of Trust, then the rights, duties, obligations, powers and privileges appurtenant to the membership appurtenant to such lot shall be exercised by the owner of the equity in the lot, and not by the mortgagee under any mortgage of the trustee or beneficiary under any Deed of Trust against such lot.

SECTION 5. – ANNUAL MEETINGS: Subject to the provisions Article VI of these By-Laws, the annual meetings of the Association shall be held on the last Saturday in July of each year, unless such date shall occur on a legal holiday, in which the meeting shall be held on the next succeeding business day. The purpose of the annual meeting shall be for the election of the Directors of the Association for the succeeding year and the transaction of any and all business of the Association as properly come before the meeting.

SECTION 6. – SPECIAL MEETINGS: It shall be the duty of the President to call a special meeting of the membership if so directed by resolution of the Board of Directors or upon a petition calling for a special meeting presented to the Secretary of the Association and signed by at least twenty-five percent (25%) of the owners of memberships in the Association. The notice of any special meeting shall state the time, place and purpose of the meeting. No business shall be transacted at a special meeting except as stated in the notice.

SECTION 7. – NOTICE OF MEETINGS: The Secretary shall mail to each owner of a membership in the Association notice of each annual or special meeting of the membership at least ten (10) days but not more than sixty (60) days prior to such meeting, stating the purposes thereof as well as the time and place where it is to be held. Said notice shall be mailed to the address which the owner of each membership has designated to the Secretary and maintained by the Secretary on his current register of owners. The mailing of a notice of a meeting in the manner provided in this section shall be considered service of notice.

SECTION 8. – ADJOURNMENT OF MEETINGS: If any meeting of the membership cannot be held because of a quorum has not been attended, a majority of the membership who are present at such meeting, either in person or by proxy, may adjourn the meeting to a time not more than forty-eight (48) hours from the time the original meeting was cancelled.

SECTION 9. – QUORUM: A quorum at all membership meetings shall consist of persons representing and entitled to case the vote appurtenant to at least fifty-one percent (51%) of the membership in the Association. The acts approved by a majority of the votes at a meeting at which a quorum is present shall constitute the acts of a membership, except when approval by a greater number of members is required by the Declaration, these By-Laws or by law but those present at any meeting, though less than a quorum, may adjourn said meeting to a future time.

SECTION 10. – PROXIES: The votes appurtenant to each membership may be cast by the person designated as entitled to cast such vote by proxy. The designation of any such proxy shall be made in writing to the Secretary, and shall be revocable at any time by written notice to the Secretary by the owner of the membership to which said vote is appurtenant. Such proxy shall be valid only for the particular meeting designated in the proxy and must be filed with the Secretary before the appointed time of the meeting or any adjournment of such meeting.

SECTION 11. – PLACE OF MEETINGS: Meetings of the Association membership shall be held at the principal office of the Association or at such other suitable place convenient to the membership as may be designated by the Board of Directors.

SECTION 12. – ORDER OF BUSINESS: The order of business at all meetings of the Association shall be as follows: (a) roll call (b) proof of notice of meeting (c) reading of minutes of preceding meeting (d) reports of officers (e) reports of Board of Directors (f) reports of committees (g) election of members of the Board of Directors, if necessary (h) unfinished business and (i) new business.

ARTICLE III.

Board of Directors

The property, affairs and business of the Association shall be managed by the Board of Directors provided, however, that the provisions of this Article are subject to the provisions of Article VI of these By-Laws.

SECTION 1. – NUMBER, TERM OF OFFICE AND QUALIFICATIONS: Until such time as control of the Association has been turned over to the membership as provided in Article VII hereof, the number constituting the Board of Directors shall be three (3). After such control has been turned over to the membership, the number constituting the Board of Directors shall be seven (7). Each Director shall continue in office until the annual meeting of the membership held next after his election and until his successor shall have been elected and qualified or until his death or until he shall resign or shall have become disqualified or removed from office. Directors need not be residents of the state of North Carolina, nor year-round residents of any development subject hereto provided, however, that each Director shall be an owner or spouse of an owner in one of the developments subject hereto and in the case of partnership owners, shall be a corporate owners shall be an officer, shareholder, or employee of such corporation, and in the case of fiduciary owners, shall be the fiduciary, or an officer or employee of such fiduciary.

SECTION 2. – ELECTION OF DIRECTORS: Except for the first Board of Directors, which is appointed in the Articles of Incorporation, and subject to the provisions of Article VII hereof, the election of the Board of Directors shall be conducted in the following manner: (a) election of Directors shall be held at the annual meeting of the membership (b) nominations for Directorships shall be made from the floor by the membership or by the Board of Directors (c) the election shall be by written ballot (unless dispensed with by unanimous consent) and by a plurality of the votes cast, each person representing a membership entitled to vote being entitled to case one (1) vote for each of as many nominees as there are Directorships to be filled. There shall be no cumulative voting.

SECTION 3. – REMOVAL OF DIRECTORS: Except for the first Board of Directors, which is appointed in the Articles of Incorporation, and subject to the provisions of Article VII hereof, any Director may be removed by concurrence of two-thirds (2/3rds) of the votes of the membership of the Association present at a special meeting of the membership called for the consideration of such removal. The vacancy in the Board of Directors so created shall be filled by the members of the Association at the same meeting.

SECTION 4. – ORGANIZATIONAL MEETING: The organizational meeting of a newly elected Board of Directors shall be held within ten (10) days of their election at such place and time as shall be fixed by the Directors at the meeting at which they were elected, and no further notice of the organizational meeting shall be necessary.

SECTION 5. – REGULAR MEETINGS: Regular meetings of the Board of Directors may be held at such time and place as shall be determined from time to time by a majority of the members of the Board of Directors, but at least two (2) such meetings shall be held during each fiscal year. Notice of the regular meetings of the Board of Directors shall be given to each member of the Board of Directors by personal delivery, mail or telegraph, at least five (5) business days prior to the day name for such meetings.

SECTION 6. – SPECIAL MEETINGS: Special meetings of the Board of Directors may be called by the President of the Association on five (5) business days notice to each member of the Board of Directors, given by mail or telegraph, which notice shall state the time, place and purpose of the meeting. Special meetings of the Board of Directors shall be called by the President or Secretary in like manner and on lime notices on the written request of any member of the Board of Directors.

SECTION 7. – WAIVER OF NOTICE: Any member of the Board of Directors may at any time waive notice of any meeting of the Board of Directors, in writing, and such waiver shall be deemed equivalent to the given of such notice. Attendance by a member of the Board of Directors at any meeting of the Board shall constitute a waiver of notice by him of the time and place thereof. If all of the members of the Board of Directors are present at any meeting of the Board, no notice shall be required and any business may be transacted at such meeting.

SECTION 8. – QUORUM: At all meetings of the Board of Directors a majority of the members thereof shall constitute a quorum for the transaction of business, and the votes of a majority of the members of the Board of Directors present at such a meeting at which a quorum is present shall constitute the decision of the Board of Directors. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time. At any such adjourned meeting at which a quorum is present any business which might have been transacted at the meeting originally called, may be transacted without further notice.

SECTION 9. – COMPENSATION: No member of the Board of Directors shall receive any compensation from the Association for acting as such.

SECTION 10. – JOINDER IN MEETING BY APPROVAL OF MINUTES: The joinder of a Director in the action of a meeting by signing and concurring with the minutes of that meeting shall constitute the presence of such Director at such meeting for the purpose of determining a quorum.

SECTION 11. – PRESIDING OFFICER AT DIRECTORS’ MEETINGS: The presiding officer of a Directors’ meeting shall be the President of the Association. In the absence of the presiding officer the Directors present shall designate one (1) of their number to preside. SECTION 12. – ORDER OF BUSINESS AT DIRECTORS’ MEETINGS: The order of business at Directors’ meetings shall be (a) the calling of the roll (b) the proof of due notice of the meeting (c) reading and disposal of any unapproved minutes (d) the reports of officers and committees (e) the election of officers (f) unfinished business (g) new business and (h) adjournment.

SECTION 12. – POWERS AND DUTIES: The Board of Directors shall have the powers and duties necessary for the administration of the affairs of the Association except such powers and duties as by law or by these By-Laws may not be delegated to the Board of Directors by the membership of the Association of the Association. The powers and duties to be exercised and performed by the Board of Directors shall include, but shall not be limited to, the following:

a. the operation, care, upkeep and maintenance of the entrance areas, conservation areas, drainage areas and ways, parks and other recreational areas, and amenities, if any, and the improvements thereon determination of the amounts required for the operation, maintenance, care and upkeep of said areas and amenities, if any, and the improvements thereto, and the amounts required for the general operation of the Association the levying and collection of the assessments from the membership owners the employment and dismissal of personnel as necessary for the efficient maintenance of the development and operation of the Association. the adoption and the amendment of rules and regulations governing the operation of the Association and the use and enjoyment of the amenities, if any the opening and maintaining of bank accounts on behalf of the Association and designating the signatories required thereof the purchasing, leasing or otherwise acquiring in the name of the Association or its designees, corporate or otherwise, on behalf of all members of the Association, lots offered for sale or lease. the purchasing of lots at foreclosure or other judicial sales in the name of the Association, or its designee, corporate or otherwise, on behalf of the membership the selling, conveying, leasing, mortgaging of, voting the votes appurtenant to (other than for the election of members of the Board of Directors), or otherwise dealing with the lots acquired by, and subleasing lots by the Board of Directors on behalf of the membership of the Association the organization of the corporation to act as designee of the Board of Directors in acquiring title to or leasing lots by the Board of Directors on behalf of the membership of the Association the purchasing and maintain of insurance for the lots, the areas and amenities, if any, subject hereto, and the improvements thereto pursuant to the provisions of these By-Laws the making of repairs, additions and improvements to, or alterations of, the property, and repairs to and restoration of any property belonging to the Association, in accordance with the other provisions of these By-Laws, after damage or destruction by fore or other casualty, or as a result of condemnation or eminent domain proceedings the appointing of committees to be composed of members of the Association to aid in governance of the Association in such numbers and for such specific purposes as the Board may determine necessary and proper the adoption of a seal for the Association the enforcing of the obligations of the members of the Association, allocating income and expenses of the Association and doing anything and everything else necessary and proper for the sound management of the Association the levying of fines or expenses against the members of the Association, allocating income and expenses of the Association adjusting and settling claims under insurance policies obtained pursuant to the By-Laws and executing and delivering releases on settlements of such claims on behalf of all lot owners, all holders of mortgages, Deeds of Trust or other property employ or engage a manager, an independent contractor, attorney or accountant or such other employees and agents as they deem necessary, and to prescribe their duties, Provided, however, any such person so hired shall serve only at the pleasure of the Board of Directors hiring him, and no Board of Directors shall have the authority to bind any succeeding Board of Directors to any such contract.

SECTION 14. – LIABILITY OF THE BOARD OF DIRECTORS: The members of the Board of Directors shall not be liable to the Association or any of its members for any mistake of judgment, negligence, or otherwise, except for their own individual willful misconduct or bad faith. The members of the Association shall indemnify and hold harmless each member of the Board of Directors against all contractual liability to others arising out of contracts made by the Board of Directors on behalf of the Association unless any such contract shall have been made in bad faith or contrary to the provisions of the Articles of Incorporation, of these By-Laws. It is intended that the members of the Board of Directors shall have no personal liability with respect to any contract made by them on behalf of the Association. It is also intended that the liability of any member of the Association arising out of any contract made by the Board of Directors or out of the indemnity in favor of the members of the Board of Directors shall be limited to such proportions of the total liability thereunder as his interest in the Association bears to the interest of all members of the Association in the Association. Every agreement made by the Board of Directors on behalf of the Association shall provide that the members of the Board of Directors are acting only as agents for the Association and shall have no personal liability thereunder (except as members of the Association), and that each member of the Association’s liability thereunder shall be limited to such proportion of the total liability thereunder as his interest in the Association bears to the interest of all members in the Association.

SECTION 15. – FIDELITY BONDS: The Board of Directors shall contain adequate fidelity bonds for all officers and employees of the Association. The premiums on such bonds shall constitute an expense of operating the affairs of the Association.

ARTICLE IV.

Officers

SECTION 1. – DESIGNATION: The principal officers of the Association shall be the President, the Vice President, the Secretary and the Treasurer, all of whom shall be elected by the Board of Directors. The Board of Directors may appoint an Assistant Treasurer and Assistant Secretaries, and such other officers as in its judgment may be necessary. The President and Vice President must be members of the Board of Directors. All other officers need not be members of the Board of Directors or of the Association.

SECTION 2. – ELECTION OF OFFICERS: Offices shall be elected annually by the Board of Directors at the organizational meeting of each new Board of Directors and shall hold office at the pleasure of the Board of Directors and until their successors are elected.

SECTION 3. – REMOVAL OF OFFICERS: Upon the affirmative vote of a majority of the members of the Association or members of the Board of Directors, any officer may be removed, either with or without cause and his successor may be elected at any regular meeting of the Board of Directors or at any special meeting of the Board of Directors called for such purpose.

SECTION 4. – PRESIDENT: The President shall be the chief executive officer of the Association. He shall preside at all meetings or the membership of the Board of Directors. He shall have all of the general powers and duties which are incident to the office of President of a corporation organized under the Business Corporation Laws of the State of North Carolina, including, but not limited to, the power to appoint from among the membership any committee which he deems appropriate to assist in the conduct of the affairs of the Association.

SECTION 5. – VICE PRESIDENT: The Vice President shall take the place of the President and performs his duties whenever the President shall be absent or unable to act. If neither the President or Vice President is able to act, the Board of Directors shall appoint some other member of the Board of Directors to act in the place of the President on an interim basis. The Vice President shall also perform such other duties as shall from time to time be imposed upon him by the Board of Directors or by the President.

SECTION 6. – SECRETARY: The Secretary shall keep the minutes of all meetings of the membership and the Board of Directors, he shall have charge of all books, papers, accounts and records of the Board of Directors as the Board of Directors may direct and he shall, in general, perform all of the duties incident to the office of secretary of a corporation organized under the Business Corporation laws of the State of North Carolina.

SECTION 7. – TREASURER: The Treasurer shall have the responsibility for Association funds and securities and shall be responsible for keeping full and accurate financial records and books of accounts showing all receipts and disbursements, and for the preparation of all required financial statements. He shall be responsible for the deposit of all monies and other valuable effects in the name of the Board of Directors, in such depositories as may from time to time be designated by the Board of Directors, and he shall, in general, perform all of the duties incident to the office of the Treasurer of a corporation organized under the Business Corporation laws of the State of North Carolina.

SECTION 8. – COMPENSATION: No officer shall receive any compensation from the Association for acting as such. However, the Board of Directors may appoint a manager to handle the day to day affairs of the Association, and may establish a rate of compensation and salary for said manager.

SECTION 9. – EXECUTION OF INSTRUMENTS: All instruments, including, but not limited to, agreements, contracts, Deeds or lease of the Association shall be executed in the name of the Association by the President, Vice President or Assistant Vice-President and attested to by the Secretary or Assistant Secretary of the Association. All checks of the Association are to be executed by such person or persons as may be designated by the Board of Directors.

ARTICLE V.

Operation of the Association

SECTION 1. – RULE MAKING: The Board of Directors shall promulgate and establish, pursuant to the provisions set out hereinbelow, reasonable rules and regulations governing the use, enjoyment, maintenance, repair of and addition or alterations to the lots, areas and amenities, if any, subject hereto, and the improvements thereon.

Subsection 1.1. – PROCEDURES: The Board of Directors, or a rule making committee specifically appointed by the President, shall formulate reasonable rules and regulations, or amendments or modifications thereto, to be proposed to the membership of the Association. Such proposals may be considered by the membership of the Association for adoption either at the annual meeting of the membership or at a special meeting of the membership called by the President specifically for the consideration of the adoption of such proposals. All such proposals shall be stated in writing and sent to the owners of the memberships in the Association in any notice of the special meeting called for the consideration thereof, or at least fifteen (15) days prior to the annual meeting of the membership of the Association at which they will be considered. At such meeting such proposed rules and regulations shall be considered new business of the Association. In order to be adopted as rules and regulations, amendments or modifications thereof, of the Association such proposed rules and regulations must receive assent from two-thirds (2/3) of the votes of the entire membership of the Association present in person or by proxy at such meeting.

Subsection 1.2. – AMENDMENT, MODIFICATION, ADDITIONS OR REPEAL: In addition to the above, any member of the Association may propose a modification, amendment, addition to or repeal of any and all rules and regulations of the Association by stating the same in writing to the Board of Directors. If any such member shall have obtained to such proposal the signatures of at least twenty-five (25%) of the membership owners in the Association, then the Board of Directors shall submit such proposal to the Association at the next annual meeting of the Association for consideration or at a special meeting of the Association called pursuant to a request therefor made in such proposal when submitted to the Board of Directors. Adoption of any such proposal shall be stated in Subsection 1.1. hereinabove.

Subsection 1.3. – PROHIBITIONS: No rule or regulation, nor amendment, modification, addition to or repeal of any or all of the rules and regulations of the Association shall discriminate against any lot owner or against any lot or group of lots unless the owners thereof so affected shall consent in writing nor shall any of the above change any lot nor the areas and the amenities, if any, subject hereto, not shall any of the above increase any owner’s share in the common expense of the Association nor change the voting rights of any member unless the owner of the membership appurtenant to the lot so affected and all record owners of liens thereon shall join in the execution of such rule, regulation, amendment, modification, addition to or repeal of the same.

Subsection 1.4. – RECORDING: A copy of all rules and regulations or amendments, additions, modifications to or repeal of rules and regulations of the Association shall be certified by the President and Secretary of the Association as having been duly adopted by the Association and shall be effective from the date the same is recorded in the Office of the Register of Deeds of New Hanover County, North Carolina.

SECTION 2. – INSURANCE: The Board of Directors shall be required to obtain and maintain, to the extent possible, the following insurance:

Subsection 2.1. – FIRE INSURANCE: with extended coverage, vandalism and malicious mischief endorsements, insuring all improvements upon the areas and the amenities, if any, subject hereto, and covering the interests of the Association, the Board of Directors, and all owners and their mortgages or beneficiaries under Deeds of Trust, as their respective interests may appear, in an amount at least equal to the full replacement value of the structures insured, without deduction for depreciation each of said policies shall contain a North Carolina standard mortgage clause in favor of each mortgage or beneficiary under a Deed of Trust of a lot which shall provide that the loss, if any, thereunder shall be payable to such mortgages or beneficiary under the Deed of Trust as its interest may appear subject, however, to the loss payment provisions in favor of the Board of Directors hereinafter set forth.

Subsection 2.2. – Flood Insurance: covering all of the lots when required or deemed necessary.

Subsection 2.3. – PUBLIC LIABILITY INSURANCE: in such limits as the Board of Directors may, from time to time, determine covering each member of the Board of Directors, each officer of the Association, the Association and each owner of a lot such public liability coverage shall also cover cross-liability claims of one insured against another.

Subsection 2.4 Such other insurance as the Board of Directors may determine is necessary for the protection of the development, the Association, its Directors, officers and members.

Subsection 2.5 – PREMIUMS: The premiums for all such insurance shall be an annual expense of the Association, and as such, shall constitute a portion of the assessment to be levied against each member of the Association pursuant to the provisions of these By-Laws.

Subsection 2.6. – ADJUSTMENT FOR LOSS: All such insurance policies shall provide that adjustment of loss shall be made by the Board of Directors and that the net proceeds thereof shall be payable to the Board of Directors.

Subsection 2.7 – WAIVERS, CANCELLATION, MODIFICATIONS, RENEWALS: All policies of physical damage insurance shall contain waivers of subrogation and waivers of any defenses based on coinsurance or other insurance or of invalidity arising from any acts of the insured and of prorate reduction of liability, and shall provide that such policies may not be cancelled or substantially modified without at least (10) days prior written notice to all insureds, including all mortgagees and beneficiaries under Deeds of Trust. Duplicate originals of all policies of physical damage insurance and all renewals thereof, together with proof of payment of premiums, shall be delivered to all mortgagees or beneficiaries under Deeds of Trust at least ten (10) days prior to expiration of the then current policies. Prior to obtaining any policy of fire insurance or any renewal thereof, the Board of Directors shall obtain an appraisal from a fire insurance company or otherwise of the full replacement value of the areas, the amenities, if any, subject hereto, and all improvements thereon, without deduction for depreciation, for the purpose of determining the amount of fire insurance to be affected pursuant hereto.

Subsection 2.8 – OWNERS’ INSURANCE: The owners of lots shall not be prohibited from carrying other insurance for their own benefit provided that such policies shall contain waivers of subrogation and further provided that the liability of the carriers issuing insurance obtained by the Board of Directors shall not be affected or diminished by reason of any such additional insurance carried by any lot owner.

Subsection 2.9. – INITIAL MINIMUM AMOUNTS: Until the first regular meeting of the Board of Directors following the first annual meeting of the membership of the Association, the Board of Directors shall obtain and maintain all such insurance in the following amounts: a. Fire insurance in the amount of not less than $100,000.00 for the areas, and amenities, if any, subject hereto, and the improvements thereon b. Public liability insurance in an amount of not less than Five Hundred Thousand Dollars ($500,000.00) covering all claims for personal injury arising out of one occurrence and not less than One Hundred Thousand Dollars ($100,000.00) covering all claims for property damage arising out of one occurrence. Subsection

2.10. - REPAIR OR RECONSTUCTION AFTER CASUALTY: In the event of Damage to or destruction of any or all of the areas and amenities, if any, subject Hereto, and/or improvements to the common elements as a result of fire or other casualty, the Board of Directors shall arrange for the prompt repair and restoration of all damaged improvements. The Board of Directors shall disburse the proceeds of all insurance policies to the contractors engaged in such repair and restoration in appropriate progress payments. Any cost of such repair and restoration in excess of the net insurance proceeds received by or payable to the Board of Directors shall constitute a common expense of the Association. In the event of a repair or restoration of the improvement to the property and in the event that the net proceeds of insurance received by or payable to the Board of Directors shall exceed the cost of such repair or restoration then such excess shall be held by the Association in its Capital Improvement account. Whenever in this Subsection the words “promptly repair” or “prompt repair” are used, it shall mean repairs are to begin not more than sixty (60) days from the date of receipt of the Board of Directors of proceeds of insurance on account of such damage or destruction, whether or not sufficient to pay the estimated costs of such work. Wherever the words “promptly receive” are used hereinabove, it shall mean not more than sixty (60) days from the date the Board of Directors notifies the interested members of the Association that it holds proceeds of insurance on account of such damage or destruction and that such proceeds are not sufficient to pay the estimated costs of such work, as the case may be.

Subsection 3. – MAINTENANCE: The Board of Directors shall provide for the upkeep, care, preservation, protection and maintenance of the areas, and amenities, if any, subject hereto, and the improvements thereon, as follows: a. repair and repave , when necessary, all pavements existing upon the common elements b. upkeep, maintain and preserve all grasses, lawns, trees, shrubs, gardens and vegetation maintained upon the common elements. c. repair, reconstruct, repaint, and maintain any and all other improvements, of whatever nature, made to the common elements.

Subsection 3.1. – RIGHT OF ACCESS: For the purpose solely of performing all of the above described maintenance, etc, the Association, through its duly authorized agents or employees, shall have the right, after reasonable notice to any and all owners concerned to enter upon any lot, at any reasonable hour of the day.

Subsection 3.2. – OWNERS’ REPAIRS: Any maintenance, repair, replacement, etc., to any of the common elements, the areas and amenities, if any, subject hereto, or any of the improvements therein, caused by the negligence, misuse, neglect or willful act of any owner, his family, tenants, guests or invitees shall be performed by the Association at the sole cost and expense of the said owner, said cost and expense therefor to be added to said owner’s annual assessment.

Subsection 3.3. – EXPENSE: all maintenance , repair, reconstruction, replacement, etc., as outlined hereinabove, is to be performed by or through the Board of Directors and the cost and expense thereof shall, except as provided in Subsection 3.2. hereinabove, be an annual expense of the Association.

Subsection 4.0 - FISCAL MANAGEMENT : The Board of Directors shall, from time to time, and at least annually, prepare a budget for the Association, determining the projected annual costs to the Association pf performing all of the duties of and fulfilling all of the obligations of the Association. These costs shall include all of costs incurred by the Association in the performance of those duties and obligations outlined in the Articles of Incorporation, applicable to the development, and Article III., Section 13., and Article V. of these By-Laws, as well as the costs necessary for the efficient management of the Association (including amounts for an operations reserve and a capital investments reserve, if deemed necessary by the Board of Directors). The budget, so prepared, shall be submitted to the membership of the Association for approval at the annual meeting of the membership. The proposed budget must be approved by a vote of at least fifty-one percent (51%) of the votes of the entire membership of the Association, represented in person or by proxy at such meeting.

Subsection 4.1. – ANNUAL ASSESSMENT: After approval of the proposed budget of the Association, the Board of Directors shall assess each lot within the developments subject hereto an equal amount of the projected annual costs to the Association as described hereinabove. The Board of Directors shall cause the Secretary of the Association a statement of the annual assessment against his lot in writing, stating the date payment thereof is due at least thirty (30) days prior to the due date. All assessments shall be due and payable on the date and in such installments, if allowed, as the Board of Directors may determine.

Subsection 4.2. – NATURE AND ENFORCEMENT OF ASSESSMENTS: The nature and Enforcement of the collection of assessment is set forth in Article VI of these By-Laws.

Subsection 4.3. – SUBORDINATION: The lien for unpaid assessments provided for Hereinabove shall be subordinate to the lien of any first mortgage or first Deed of Trust against any lot.

SECTION 5. – RECORDS AND AUDITS: The Board of Directors shall keep detailed records of the action of the Board of Directors, minutes of the meetings of the Board of Directors, minutes of the meetings of membership of the Association and financial records and books of account of the Association, including a chronological listing of receipts and expenditures, as well as a separate account for each lot which, among other things, shall contain the amount of each annual assessment, and other assessments, against each lot, the date when due, the amount paid thereon, and the balance remaining unpaid. A written report summarizing all receipts and expenses of the Association shall be rendered by the Board of Directors to all members of the Association annually after the end of each fiscal year. Each member of the Association shall Be permitted to examine all of the books and accounts of the Association at reasonable times on business days, but not more than one a month.

SECTION 6. – CONDEMNATION: In the event of a taking in condemnation or by eminent domain of part or all of the property, the award made for such taking shall be payable to the Board of Directors, and the Board of Directors shall disburse the net proceeds of such award in the same manner as they are required to distribute insurance proceeds where there is no repair or restoration of the damage, as provided in these By-Laws.

ARTICLE VI.

Liens and Assessments.

The Association has heretofore been given the authority to administer the operation and management of the areas and the amenities, if any, subject hereto, of the property, it being recognized that the delegation of such duties to one entity is in the best interests of the owners of all lots subject hereto to properly administer the operation and management of the areas and amenities, if any, subject hereto, the Association will incur, for the mutual benefit of all the owners of such lots, costs, and expenses sometimes herein referred to as “common expenses” . To provide the funds necessary for such proper operation, management and capital improvement, the Association has heretofore been granted to make, levy and collect assessments against the members of the Association and their lots. In furtherance of this grant of authority to the Association to make, levy and collect assessments to pay the costs and expenses for the operation of, the management of, and for capital improvements to areas and amenities. If any, subject hereto, and all other improvements, the following shall be operative and binding upon the owners of the lots:

(1) The owner of any lot subject hereto, with the exception of the Developer, COASTAL CAROLINA DEVELOPERS, INC., by acceptance of a Deed therefor, whether Or not it shall be so expressed in such deed, is deemed to covenant and agree to pay to the Association: (A annual assessments or charges, and special assessments for capital improvements or special Assessments as established by the Board of Directors of the Association, such assessments to be established and collected as hereinafter provided. The annual and special assessments, together with the interest, costs, and reasonable attorney’s Fees, if any, shall be a charge on the lots and shall be a continual lien upon each lot against which they are levied. Each such assessment, together with interest, costs and reasonable attorney’s fees, shall also be the personal obligation of the person or entity who is the owner of such lot at the time when the assessment falls due. The personal obligation for delinquent assessments shall not pass to any successor in title unless expressly assumed by him.

(2) The assessments levied by the Association shall be used exclusively to promote the recreation, health, safety and welfare of the residents of the property and in particular for the maintenance, repair and replacement of the areas and amenities, if any, subject hereto. ) The annual assessments for each calendar year shall be established by the Board of Directories, and may be increased by the Board of Directors for any calendar year without approval by the membership by an amount not to exceed ten percent (10%) of the maximum annual assessment of the previous year. The maximum annual assessment for any calendar year may be increased without limit by a vote of two-thirds (2/3) of the members who are voting in person or by proxy at a meeting called for this purpose.

(4) In addition to the annual assessments authorized above, the Association may levy, in any calendar year, a special assessment for the purpose of defraying in whole or in part, the costs of any construction, reconstruction, repair or replacement of a capital improvement to the areas and amenities, if any, subject hereto, provided that any such assessment shall have the assent of two-thirds (2/3) of the vote of the members who are voting in person or by proxy at a meeting duly called for this purpose. All special assessments shall be fixed to the uniform rate for all lots and may be collected on a monthly basis.

(5) Written notice of any meeting called for the purpose of taking any action authorized under (4) shall be sent to all members not less than ten (10) days nor more than sixty (60) days in advance of the meeting. At the first such meeting called, the presence of members or of proxies entitled to cast sixty percent (60%) of all votes of the membership shall constitute a quorum. If the required quorum is not present, another meeting may be called subject to the same notice requirement, and the required quorum at the subsequent meeting shall be one-half (1/2) of the required quorum of the preceding meeting. No such subsequent meeting shall be held more than sixty (60) days following the preceding meeting.

(6) The annual assessments provided for herein shall be collected on a yearly basis and shall commence as to all lots on the first day of January, 1968, and thereafter as to all other owners on the first day of the month following the conveyance of a lot to any such owner. The first annual assessment shall be adjusted according to the number of months remaining in the calendar year.

(7) Any assessment not paid within thirty (30) days after the due date shall bear interest from the due date at the highest rate allowed by North Carolina law. The Association may bring an action at law against the owner personally obligated to pay the same or foreclosure the lien against the lot and interest, costs, and reasonable attorney’s fees of such action or foreclosure shall be added to the amount of such assessment.

(8) The lien herein granted unto the Association shall be enforceable from and after the time of recording a claim of lien in the public records of New Hanover County. North Carolina, which claim shall state the description of the lot encumbered thereby, the name of the record owner, the amount due and the date when due. The claim of lien shall be recordable any time after default and the lien shall continue in effect until all sums secured by said lien as herein provided shall have been fully paid. Such claims of lien shall include only assessments which are due and payable when the claim of lien is recorded, plus interest, costs, attorney’s fees, advances to pay taxes and prior encumbrances and interest thereon, all as above provided. Such claims of lien shall be signed and verified by an officer or agent of the Association. Upon full payment of all dues secured by such claim of lien, the same shall be satisfied of record. The lien provided for herein shall be subordinated to the lien of any first mortgage or Deed of Trust and any person, firm, corporation or other entity acquiring title to any lot by virtue of any foreclosure, deed in lieu of foreclosure or judicial sale, shall be liable and obligated only for assessments as shall accrue and become due and payable subsequent to the date of acquisition of such title, and it shall not be liable for the payment of any assessments which were in default and delinquent at the time it acquired such title. In the event of the acquisition of title to a lot by foreclosure, deed in lieu of foreclosure or judicial sale, any assessment or assessments as to which party so acquiring title shall not be liable shall be absorbed and paid by all owners of all lots as a part of the common expense, although nothing herein contained shall be construed as releasing the party liable for such delinquent assessment from the payment thereof or the enforcement of collection of such payment by means other than foreclosure.

(9) Upon default by the Association in the payment to any governmental Authority entitled thereto of any ad valoram taxes levied against the areas and amenities, if any, subject hereto, owned by the Association which default shall continue for a period of six (6) months, each owner of a lot in the Development shall become personally obligated to pay to the taxing or assessing governmental authority a portion of such unpaid taxes or assessments in an amount determined by dividing the total taxes and/or assessments due the governmental authority by the total number of lots subject hereto. If such sum is not paid by the owner thirty (30) days following the receipt of notice of the amount due, then said sum shall become a continuing lien on the lot of the then owner, his heirs, devisees, personal representatives and assigns, and the taxing or assessing governmental authority may bring either an action at law or may elect to foreclose the lien against the lot of the owner.

(10) Upon the sale of seventy-five percent (75%) of the lots in COASTAL CAROLINA, all sanctions and phases that are subject to the Owners Association, COASTAL CAROLINA DEVELOPERS, INC., will turn over control of the Owners Association to the Board of Directors to be elected by the membership in accordance with the By-Laws of the Association. Until such time, however, COASTAL CAROLINA DEVELOPERS, INC. shall elect the Board of Directors of the Association. ARTICLE VII. Developer Control Other provisions hereof to the contrary notwithstanding, until seventy-five (75%) of the lots subject hereto have been sold by the developer, COASTAL CAROLINA DEVELOPERS, INC, and paid for, or until December 31, 2002, whichever date first occurs, and so long as developer maintains the drainage areas and ways at its own expense, the Board of Directors of the Association shall consist of such Directors, Officers or Employees of the developer as shall have been designated by the developer and all the affairs of the Association shall be governed and controlled by such individuals, without hinderance from any of the members of the Association. Once the above referenced date occurs, the President of the Association shall immediately call a special meeting of the membership of the Association for the purpose of the resignation of the Directors and Officers of the Association who are either Directors, Officers or Employees of the Developer and the election of a new board of Directors and Offices of the Association, who shall promptly assume all of the powers, privileges, rights and duties of the Association as set forth in these By-Laws. Thereafter, the first annual meeting of the membership of the Association shall be held as provided in Article II., Section 5., of these By-Laws. Until the above referenced date occurs, no action taken by any or all of the members of the Association shall hinder or control any action taken by the developer in developing the property, selling lots, or governing and managing the Association, and, further, any and all action taken by the membership of the Association pursuant to these By-Laws shall be subject to the prior written approval of the developer.

ARTICLE VII.

Parliamentary Rules

Robert’s Rules of Order (latest edition) shall govern the conduct of all Association meetings, not in conflict with the Articles of Incorporation, the Declaration of Articles of Covenants, Conditions and Restrictions, and these By-Laws. ARTICLE IX. Amendments These By-Laws may be amended in the following manner:

(a) any member of the Association may propose any amendment or modification to these By-Laws by submitting the same in writing to the President of the Association,

(b) in order to qualify for consideration by the Association, any such amendment or modification must be signed by at least twenty-five percent (25%) of the owners of the memberships in the Association

(c) upon receipt of such proposed amendment or modifications, the President at the Association shall immediately follow the procedures outlined hereinabove under Article II., Section 6., entitled in order to become a part of these By-Laws must be approved by seventy-five (75%) of the votes of the entire membership of the Association present in person or by proxy at such meeting provided, however, that no amendment or modification shall discriminate against any owner, any lot class or group of owners, or lots unless all of the owners so affected so consent and further, no amendment shall change any lot, the common elements, nor increase any owner’s assessment, not change the voting rights of any members unless the owner or owners of the memberships or lots so affected and all holders of liens against such owner’s or owners’ lots shall approve in writing such amendment or modification. No amendment or modification shall change or alter any of the provisions of Article VII hereinabove unless signed and approved by the authorized officers of the Developer. Provided, so long, as the Developer controls the Board of Directors of the Association, the Federal Housing Administration, the Veterans Administration, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation shall have the right to veto amendments to these By-Laws.

ARTICLE X.

Miscellaneous

SECTION 1. – NOTICES: All notices to the Board of Directors shall be sent by registered mail, return receipt requested to the principal office of the Board of Directors. All notice to owners shall be sent by registered mail, return receipt requested, to such addresses as may have been designated by such owners in writing to the Secretary of the Association. All notices to mortgagees of or beneficiaries under Deed of Trust against lots shall be sent by registered mail, return receipt requested, to their respective addresses designated by them in writing to the Secretary of the Association. All notices, if received, as proven by the return receipt, shall be deemed to have been given when mailed, except notices of change of address which shall be deemed to have been given when received.

SECTION 1. – WAIVER OF NOTICE: Whenever any notice which is required to be given to any member, Director or Officer of the Association by the provisions of the North Carolina Nonprofit Corporation Act, the provisions of the Article of Incorporation or these By-Laws, is waived in writing, signed by the person or entities entitled to such notice, whether before or after the time stated therein, such shall be equivalent to the giving of such notice.

SECTION 3. – INVALIDITY: The invalidation of any provision of these By-Laws by any court, agency, or legislature shall in no way affect the validity of any other provision of these By-Laws, and the same shall remain in full force and effect.

SECTION 4. – CAPTIONS: The captions herein used are inserted only as a matter of convenience and for references and in no way define, limit or describe the scope of these By-Laws, or the intent of any provision thereof.

SECTION 5. – GENDER: The use of the masculine gender in these By-Laws shall be deemed to include the feminine gender and the neuter gender and the use of the singular shall be deemed to include the plural, whenever the context so requires.

SECTION 6. – WAIVER: No restriction, condition, obligation or provision contained in these By-Laws shall be deemed to have been abrogated or waived by reason of any failure to enforce the same, irrespective of the number of violations or breeches thereof which may occur.

SECTION 7. – FISCAL YEAR: The fiscal year of the Association shall be the calendar year.

SECTION 8. – SEAL: The seal of the Association shall be in such form as shall be approved from time to time by the Board of Directors of the Association. IN WITNESS THEREOF, the President of the Association and the Secretary thereof, do hereby certify that this is a true copy of the duly enacted By-Laws of COASTAL CAROLINA OWNERS ASSOCATION, this 24th day of December, 1987. COASTAL CAROLINA OWNERS ASSOCIATION BY: \S\ W. THOMAS WILSON, Director BY: \S\ W. H. GRATHWOL, Director BY: \S\ B. LEON SKINNER, Director