THIS DECLARATlON is made on the date hereinafter set forth, by THE KNOLLS, hereinafter referred to as "Declaration, and is made with reference to the following facts:

1. Declarant is the owner of certain real property located in the County of La Plata, State of Colorado, commonly known as The Knolls, and described more particularly on Exhibit "A" attached hereto, made a part hereof and incorporated herein by reference, hereinafter referred to as "Property."

2. The Knolls Subdivision shall be referred to as the "Project as defined in Section 1.24."

Each lot within the project shall have appurtenant to it a membership in The Knolls Homeowners Association, Inc., a not-for-profit corporation formed under the laws of the State of Colorado, which shall own the common area within the project.

3. Declarant intends by this document to impose upon the property mutually beneficial restrictions under a general plan of improvement for the benefit of all owners of all lots within the Project.

NOW, THEREFORE, Declarant hereby declares that all of the property described above shall be held, sold, leased, mortgaged, encumbered, rented, used, occupied, improved and conveyed subject to the following declarations, limitations, easements, restrictions, covenants and conditions which are imposed as equitable servitude pursuant to a general plan for the development of the property for the purpose of enhancing and protecting the value and desirability of the project and every part thereof, and which shall run with the real property and be binding on the Declarant and its successors and assigns, and all parties having or acquiring any right, title or interest in or to the described property or any part thereof, their heirs, successors and assigns and shall inure to the benefit of each owner thereof. This Declaration shall be construed to be consistent with the requirements of the Colorado Common Interest Ownership Act, C.R.S. 3833.3101, et seq.

DEFlNlTlONS

1. Act. Act shall mean the Colorado Common Interest Ownership Act as provided in C.R.S. 38-33.3-101, et seq., as the same may be amended from time to time.
2. Additional Annexable Property. Additional Annexable Property means the real property described in Exhibit A, all or a portion of which may be annexed to. And made a part of, the Common Interest Community or Association in the manor provided for herein. References to Additional Annexable Property are for the sole purpose of allowing Declarant annex additional property to the Common Interest Community or Association the event Declarant or its successor or assigns acquires title to the Additional Annexable Property, or part thereof in the future and elects to annex the same. Declarant is not claiming any present right, title or interest in or to the Additional Annexable Property by virtue of this Declaration, and in no event shall the terms and provisions of this Declaration be deemed to be a restriction, reservation of right, encumbrance or cloud upon the title to the Additional Annexable Property or any part thereof unless and until, Declarant acquires title, Supplemental Declaration and a Supplemental Plat are recorded.
3. Articles. Articles shall mean and refer to the Articles of Incorporation of the Association, as amended from time to time.
4. Assessment. Assessment shall mean that portion of the cost of maintaining, improving, repairing, operating and managing the property which is to be paid by each lot owner as determined by the Association.
5. Association. Association means The Knolls Homeowners Association, Inc., a not-for-profit Colorado corporation, its successors and assigns, the Articles of Incorporation and Bylaws of which shall govern the administration of the project and the members of which shall be all of the owners of lots within the project.
6. Board of Directors or Board. Board of Directors or Board shall mean and refer to the governing body of the Association which is also the Association's executive board.
7. Bylaws. Bylaws shall mean and refer to the Bylaws of the Association as amended from time to time.
8. Common Area. Common area shall mean and refer to the portions of the property and all improvements thereon owned by the Association for the common use and enjoyment of the owners.
9. Common Expenses. Common expenses means and includes the actual and estimated expenses of operating the common area and any reasonable reserve for such purposes as found and determined by the Board and all sums designated common expenses by or pursuant to the Declaration, Articles or Bylaws.
10. Declarant. Declarant shall mean and refer to The Knolls its successors and assigns.
11. Declaration. Declaration shall mean and refer to this Declaration of Covenants, Conditions and Restrictions, as amended or supplemented from time to time.
12. Eligible Holder Mortgages. Eligible holder mortgages shall mean mortgages held by "eligible mortgage holders".
13. Eligible Mortgage Holder. Eligible mortgage holder shall mean a first lender who has requested notice of certain matters from the Association.
14. Eligible Insurer or Guarantor. Eligible insurer or guarantor shall mean an Insurer or governmental guarantor of a first mortgage who has requested notice of certain matters from the Association.
15. First Lender. First lender shall mean any bank, savings and loan association, insurance company, or other financial institution holdinq a recorded first mortgage on any lot.
16. Lot. Lot shall mean and refer to any plot of land, together with any improvements thereon, shown upon any recorded Subdivision Map of the property with the exception of the common area, private roads and utility easements shown on the Map. Lot shall also include the definition of "unit" pursuant to the Colorado Common interest Ownership Act, C.R.S. Section 3833.31O1 et seq.
17. Map. Map shall mean and refer to the final plat map of The Knolls Subdivision as recorded and as amendments thereto are recorded from time to time.
18. Member. Member shall mean and refer to a person entitled to membership in the Association as provided herein.
19. Mortgage. Mortgage shall mean any mortgage or deed of trust or other security instrument recorded in the records of the office of the Clerk and Recorder of La Plata County, Colorado and by which the lot or any part thereof is encumbered.
20. Mortgagee. Mortgagee means any person named as a mortgagee or beneficiary under any mortgage under which any owner of any lot within the project is encumbered, or any successor to the interest to any such person under such mortgage.
21. Mortgagor. Mortgagor shall include the mortgagor or grantor under any deed of trust under which the interest of any owner is encumbered, or any successor to the interest of any such person under such mortgage.
22. Owner. Owner means any record owner (including a contract purchaser but excluding a contract seller), whether a natural person or entity, with a fee simple title interest in any lot; but excluding, however, any such record owner having such an interest therein merely as a mortgage unless such mortgage has acquired fee simple title interest therein pursuant to foreclosure or any proceeding in lieu thereof. When a person as a owner convey or otherwise assigns of record his fee simple title interest to a lot, then retroactive to the date of such conveyance or assignment, such person shall thereafter cease to be an owner; provided, however, that the foregoing shall not in any way extinguish or otherwise void any unsatisfied obligation of such person which existed or arose at the time of such conveyance or assignment, specifically including, without limiting the generality of the foregoing, any unsatisfied obligation to pay association assessments.
23. Person. Person means a natural person, a corporation, a partnership, a trustee, or other legal entity.
24. Project. Project shall mean and refer to the entire real property described above including all improvements and structures erected or to be erected thereon.
25. Project Documents. Project documents shall mean and refer to this Declaration, together with the other basic documents used to create and govern the project, including the Map, the Articles of Incorporation, and the Bylaws, but excluded unrecorded rules and regulations adopted by the Board or Association or Committees thereof.
26. Property. Property means and refers to the real property described on Exhibit "A* attached hereto, and all improvements erected or to be erected thereon, and such additions thereto as may hereafter be brought within the jurisdiction of the Association, and all real and personal property intended for use in conjunction with the project.
27. Residential Development Standards. The Residential Development Standards of The Knolls as incorporated by reference herein as if set forth in their entirety in paragraph 6.1 hereof.

2.1 Description of the Project. The project is a planned residential development which consists of thirty-two (32) single family residential lots, common areas and roadways.

2.2 Resubdivision. No lot within the project shall be resubdivided. However, such restriction and resubdivision shall not prevent the incidental relocation of boundaries of lots within the subdivision that does not result in the increase in total number of lots, so long as such boundary adjustments are accomplished in accordance with the requirements of the County of La Plata. Notwithstanding the foregoing, maintaining the setbacks as set forth in these Covenants, Conditions and Restrictions is critical to maintain the quality tone of The Knolls as a subdivision and, therefore, any boundary relocation that is sought merely to eliminate the clear setback requirements as set forth herein shall not be allowed without the affirmative written consent of the owners of seventy-five percent (75%) of the total lots within the project. Declarant specifically reserves the right to resubdivide Lots 19-23 into not more than 15 Lots, parcels or units.

2.3 Easement/Dedication of Common Area. All of the lots shown on the Map shall have appurtenant to them, as the dominant tenement, an easement over the common areas, as the servient tenement, now or hereafter owned by the Association, for ingress and egress, and for use, occupancy and enjoyment, and where applicable as designated by the Board of Directors, for the construction and operation of utilities, parking, and common use for mail receptacles and other designated uses. However, such easements, shall be expressly subject to each and every one of the following:

a) The right of the Association to discipline members and to suspend the voting rights of a member for any period during which any assessment against the members lot remains unpaid, and for any infraction of the rules contained in the Declaration, Bylaws, Articles or written rules and regulations in accordance with the provisions hereof:

1. The right of the Association to grant easements under, in, upon, across, over, above or through any portion of the common area for purposes, including, by way of example and not by way of the development of the properties in accordance with the general plan established by this Declaration:
1. To avoid the necessity of a separate television antenna for each lot, a cable television system has been installed and may be hooked up to each dwelling on each lot. Said system, shall be maintained by the cable television franchise. To the extent required to effectuate the foregoing plan, there shall be an easement in favor of each lot for the purpose of connecting the same with the master cable television terminal or line. Each lot shall be subject to an easement in favor of all other lots, to provide for the passage through the lot and any structure thereon of television connections from any other lot to the cable system, and shall be subject to a further easement for the placement and maintenance of such connections;

2.5 School Bus Pick Up and Mail Delivery. Based upon the private nature of the streets within the Project, initially, school bus pick up and drop off, will be on CR 220 and not within the Project. Mail delivery will be provided at the entrance of The Knolls.

2.6 Easements to Accompany Conveyance of Lot. Easements that benefit or burden any lot shall be appurtenant to that lot and shall automatically accompany the conveyance of the lot, even though the description in the instrument of conveyance may refer only to the fee title to the lot.

2.7 Delegation of Use. Any owner may delegate, in accordance with the Bylaws, his right of enjoyment to the common area and facilities to the members of his family, his tenants, or contract purchasers, who reside on the property.

2.8 Conveyance of Common Area to the Association/Reservation of Declarant Rights Regarding Certain Common Areas. The Declarant hereby conveys all of its right, title and interest in and to the common area as displayed on that amended plat of The Knolls regarded at reception no. ___________. on.____________, 1997 of the records of the La Plata County Clerk and Recorder's office.

2.9 OWNER'S RIGHTS AND EASEMENTS FOR UTILITIES. Each lot within the Project shall have appurtenant to it as the dominant estate and be subject to, as the servient estate, a 10’ easement as measured from each property line as well as those utility easements shown on the recorded Project map. The rights and duties of the owners of lots within the project with respect to sanitary sewer, drainage, water, electric, gas, television, telephone equipment, security system lines, cables and lines, (hereinafter referred to, collectively, as "utility facilities") shall be as follows:

1. Whenever utility facilities are installed within the project, which utility facilities or any portion thereof lie in or upon a lot or lots owned by other than the owner of a lot served by said utility facilities, the owners of any lot served by said utility facilities shall have the right or reasonable access for themselves or for utility companies or the County of La Plata to repair, to replace and generally maintain said utility facilities as and when the same may be necessary;
2. Whenever utility facilities are installed within the project, which utility facilities serve more than one1 lot, the owner of each lot served by the utility facilities shall be entitled to the full use and enjoyment of such portions of the utility facilities as service his lot; and
3. In the event of a dispute between owners with respect to the repair or rebuilding of the utility facilities, or with respect to the sharing of the cost thereof, then, upon written request of one (1) of such owners addressed to the Association, the matter shall be submitted to arbitration within sixty (60) days pursuant to the rules of the American Arbitration Association, and the decision of the Arbitrator shall be final and conclusive on the parties.

2.10 Maintenance Easement. An easement over each lot as the servient tenement is reserved by Declarant, and is hereby granted to the Association, for the purpose of entering on the property to perform such maintenance, if any, as the Association elects to do in accordance with the provision of section 5.1.1 of this Declaration.

2. 11 Provision for Municipal Services. Since the Loma Linda Sanitation District will supply sanitary sewer services, and the Animas Fire Protection District will provide fire protection and the County of La Plata will provide law enforcement service, the Association shall at all times keep all access ways, roadways and appurtenances thereto on the subdivided property, in a state of good condition and repair, consistent with the standard of quality of said roadways and appurtenances upon original installation, All such repairs shall be made at the expense of the Association.

2.12 Drainage Easements. An easement over and under each lot is reserved by Declarant, and is hereby granted to the Association, for the maintenance of storm drainage system. Reciprocal appurtenance easements between each lot and the common area and between adjoining lots are hereby created for the flow of surface water. Further, surface drainage along the roadway is not to be interrupted by any improvement constructed by any lot owner.

2.13 Other Easements. The common area and each lot are subject to all easements, dedications, and right of way granted or reserved in, on, over and under the property as shown on the Map.

2.14 Rights of Entry and Use. The lots and common area shall be subject to the following rights of entry and use:

1. The right of the Association agents to enter any lot to cure any violation of this Declaration or the Bylaws, provided that the owner has received notice and a hearing as required by the Bylaws (except in the case of an emergency) and the owner has failed to cure the violation within thirty (30) days after the finding of a violation by the Association;
2. The access rights of the Association to maintain, repair or replace improvements on property located in the common area as described in section 5.2.4;
3. The easements described in this Article ll;
4. The right of the Association's agents to enter any lot to perform maintenance as described in section 8.6;
5. The rights of the Declarant during the construction period as described in section 8.9.

2.15 Partition of Common Area. There shall be no subdivision or partition of the common area, nor shall any owner seek any partition or subdivision thereof.

Notwithstanding any provisions to the contrary contained in this Declaration and in order to provide for a means of terminating the project if this should become necessary or desirable, on occurrence of any of the conditions allowing an owner of a lot to maintain an action for partition, two-thirds (2/3) of the owners of lots shall have the right to petition the Court having jurisdiction to alter or vacate the recorded Subdivision Map of the property and to vest title to the property in owners as tenants in common and order an equitable partition of the property in accordance with the laws of the State of Colorado.

Nothing herein shall be construed to prohibit partition of a joint tenancy or co-tenancy in any lot.

3.1 Association to own and Maintain Common Areas. The Association shall own and manage the common area in accordance with the provisions of this Declaration, the Articles and Bylaws of the Association.

3.2 Membership. The owner of a lot shall automatically upon becoming the owner of same, be a member of the Association, and shall remain a member thereof until such time as his ownership ceases for any reasons. Membership shall be appurtenant to and may not be separated from ownership of a lot. Membership shall be held in accordance with the Articles and Bylaws of the Association.

3.3 Transfer of Membership. Membership in the Association shall not be transferred, encumbered, pledged or alienated in any way, except upon the sale or encumbrance of the lot to which it is appurtenant, and then only to the purchaser. In the case of a sale, or mortgage, in the case of an encumbrance, of such lot on any transfer of title to an owner's lot, including a transfer on the death of an owner, membership passes automatically with title to the transferee.

3.4 Owner’s and Association's Address for Notices. Unless an owner shall have notified the Association by registered, certified mail of a different address, any notice required to be given, or otherwise given, by the Association or this Declaration to any owner, or any other written instrument to be given to any owner, may be mailed to such Association in a postage prepaid envelope by first class, registered or certified mail, to the address of the lot shown on the Association's records as being owned by such owner. If more than one owner owns a particular lot, then any notice or other written instrument may be addressed to all such owners, may be mailed in one envelope in accordance with the foregoing. Any notice or other written instrument given by the Association in accordance with the foregoing will be deemed to have been given three (3) days after the date it is deposited in the United States Mail. All notices and demands intended to be served upon the Board of Directors shall be sent by regular United States mail, postage prepaid to the following address:

The Knolls Homeowners Association, Inc 954 East 2^nd. Avenue Durango, Colorado 81301

until such address is changed or a notice of address change of the Board of Directors pursuant to this section.

3.5 Membership, Classes and Voting Rights. The Association shall have one (1 ) class of voting membership which shall entitle the owners of each lot or unit within the subdivision to one (1) vote on any issues subject to voting by the membership.

4.1 Creation of the Lien and Personal Obligations of Assessments. The Declarant, for each lot owned within the project, hereby covenants, and each owner of any lot by acceptance of a deed therefor, whether or not it shall be so expressed in such deed, does covenant and agree: (1) to pay to the Association annual assessments or charges and special assessments for purposes permitted herein, such assessments to be established and collected as hereinafter provided; and (2) to allow the Association to enforce an assessment lien established hereunder by nonjudicial proceeding under a power of sale or by any other means authorized by law. The annual and special assessments, together with interest, late charges, collections costs and reasonable attorneys’ fees, shall be a charge on the land and shall be a continuing lien upon the property against which each such assessment is made, the lien to become effective upon recordation of a notice of delinquent assessment. Each such assessment, together with interests, late charges, collection costs, and reasonable attorney’s fees, shall also be the personal joint and several obligation of the person who was the owner of such property at the time when the assessments fell due. The personal obligation for delinquent assessments shall not pass to his successors in title unless expressly assumed by them. No owner of a lot may exempt himself from liability for his contribution towards the common expenses by waiver of the use or enjoyment of any of the common areas or by the abandonment of his lot.

4.2 Purpose of Assessments. The assessments levied by the Association shall be used exclusively to promote the economic interests, recreation, health, safety, and welfare of all the residents in the project and to enable the Association to perform the obligation hereunder.

4.3 Annual Assessment.

4.3.1 Limits on Annual Assessment. The Board has authority to impose annual assessments, provided that it may not impose a regular assessment that is more than ten percent (10) of the regular assessment for the Association's preceding fiscal year or impose special assessments which in the aggregate exceed five percent (5%) of the budgeted gross expenses of the Association for that fiscal year without the approval of owners casting a majority of the votes at a meeting or election of the Association, provided, further, that the foregoing provisions do not limit assessment increases for the following purposes:

1. The maintenance or repair of the common areas or other areas which the Association is obligated to maintain or repair, including, but not limited to:

1. Maintenance and repair of all private streets, emergency roads and access roads including snow removal for the same:
2. Payment of all insurance premiums and utility bills;
3. Drainage, pedestrian way and entry facility maintenance and repair including street lighting and costs incurred in maintaining structures, improvements and boundary fences;
4. Funding reserves, especially those reserves established for street maintenance.
5. Maintenance and repair of pump house, well & water lines; and
6. Payment of assessment for use of private road.
7. Addressing emergency situations.

4.3.2 Failure to Adopt Annual Assessment. Failure by the Board to set assessments shall not be deemed a waiver of the assessments but rather the prior year's assessment shall automatically become the assessment for the immediate succeeding year until Board action expressly adopts an assessment for the remainder of such year.

4.3.3 Adjustments to Assessments During the Course of the Fiscal Year. Subject to the limitations on the maximum and minimum amount of assessments herein provided, if at any time during the course of any year the Board shall deem the amount of the annual assessment to be inadequate or excessive, the Board shall have the power, at a regular or special meeting, to revise the assessment for the balance of the assessment year, effective on the first day of the month next following the date of the revision, provided that the Board may not by such action increase the assessments by more than five percent (5%) in the aggregate (including increases in special assessments) of the budgeted gross expenses of the Association for that fiscal year without the consent of a majority other than the Declarant.

4.4 Special Assessments for Capital Improvements or Extraordinary Expenses; Reserves for Replacement. The Board of Directors may levy, in any assessment year, a special assessment applicable to that year only for the purpose of defraying, in whole or in part, the cost of any construction, reconstruction, repair or replacement of a capital improvement upon the common area, including fixtures and personal property related thereto, or for extraordinary expenses incurred by the Association, provided that in the event special assessments exceed in the aggregate five percent (5%) of the budgeted gross expenses of the Association for that fiscal year, the vote or written consent of a majority of the voting power of the Association residing in members other than the Declarant shall be required to approve such assessments and the Association shall obtain any approval that may be required under section 4.3.1. Special assessments shall be levied on the same basis as regular assessments.

As part of the regular annual assessments for maintenance authorized above, the Board of Directors shall annually fix the amount to be contributed pro rata by each member to reserve funds for the purpose of defraying, in whole or in part, the cost of estimated cost of any reconstruction, repair or replacement of improvements (e.g. private street maintenance and repair). Such determination shall be made after consideration of the need for additional funds and of the Association's capital position. The Board shall maintain a separate account for those reserve funds. The Board shall fix the method of payment of such assessments and shall be empowered to permit either lump sum or monthly payments. Separate records shall be maintained for all funds deposited to the said account, which shall be designated as a "Reserve Account". To establish a maintenance reserve, each Owner shall pay to the Association upon conveyance of the Lot from Declarant the sum of $250.00 to be held by the Association as a reserve for long-term maintenance and repairs. Such reserve may be supplemented by contributions from annual assessments.

Amounts received by the Association as contributions, assessments or dues from the owners shall be held in one (1) or more accounts. Deposits shall be made, and funds accounted for, so that reserves for capital improvements and for replacement may be separated from funds for operating expenses or repair and maintenance funds if the Board considers it necessary. Capital improvement and replacement funds shall be used solely for capital improvements and replacements of the common area within the project.

4.5 Notice and Quorum for Any Action Authorized Under Sections 4.3 and 4.4. Any action authorized under Sections 4.3 and 4.4, which requires a vote of the membership, shall be taken at a meeting called for that purpose, written notice of which shall be sent to all members not less than ten (10) nor more than ninety (90) days in advance of the meeting specifying the place, day and hour of the meeting and, in the case of a special meeting, the nature of the business to be undertaken. The action may also be taken without a meeting pursuant to the provisions of Colorado Law.

4.6 Division of Assessments. All assessments, both annual and special, shall be charged to and divided among the lot owners, including the Declarant. Assessments may be collected on a monthly, quarterly or semiannual basis.

4.7 Date of Commencement of Annual Assessments/Due Dates. The regular assessments provided for herein shall commence as to all lots on the first day of the month following the first conveyance of a lot to an owner other than the Declarant. The first annual assessment shall be adjusted according to the number of months remaining in the calendar year.

Subject to the provisions of section 4.3 hereof, the Board of Directors shall use its best efforts to fix the amount of the annual assessment against each lot and send written notice thereof to every owner at least forty-five (45) days in advance of each annual assessment period, provided that failure to comply with the foregoing shall not affect the validity of any assessment levied by the Board of Directors. The Association shall, upon demand, and for a reasonable charge, furnish a certificate signed by an officer of the Association setting forth whether the assessments on a specified lot have been paid. Such a certificate shall be conclusive evidence of such payment.

4.8 Effect of Nonpayment of Assessments. Any assessment not paid within thirty (30) days after the due date shall be delinquent, shall bear interest at the rate of fourteen percent (14%) per annum until paid, and shall incur a late penalty in an amount to be set by the Board from time to time, not to exceed the maximum permitted by Colorado Law or in the absence of the setting of an amount for late penalty by the Board of Directors, the penalty shall be Ten Dollars ($10.00) or ten percent (10%) of the delinquent assessment, whichever is greater.

4.9 Transfer of Lot by Sale or Foreclosure. Sale or transfer of any lot shall not affect the assessment lien. However, the sale of any lot pursuant to mortgage foreclosure of a first mortgage shall extinguish the lien of such assessments including attorney's fees, late charges, or interests levied in connection therewith as to payments which became due prior to such sale or transfer except for assessment liens recorded prior to the mortgage. No sale or transfer shall relieve such lot 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 obtains title to the same as a result of foreclosure of any such first mortgage, such acquirer of title, his successor and assigns, shall not be liable for the share of the common expenses or assessment by the Association chargeable to such lot which became due prior to the acquisition of title to such lot by such acquirer except for assessment liens recorded prior to the mortgage. No amendment of the preceding sentence may be made without the consent of owners of lots to which at least sixty-seven percent (67%) of the votes in the Association are allocated, and the consent of the eligible mortgage holders holding first mortgages on lots comprising fifty-one percent (51%) of the lots subject to first mortgages. Such unpaid share of common expenses or assessments shall be deemed to be common expenses collectible from owners of all of the lots including such acquirer, his successors or assigns. If a lot is transferred, the grantor shall* remain liable to the Association for all unpaid assessments against the lot through and including the date of the transfer. The grantor shall be entitled to a statement from the Association dated as of the date of transfer, setting forth the amount of unpaid assessments against the grantor due the Association and the lot so transferred shall not be subject to a lien for unpaid assessments in excess of the amount set forth in the statement, provided, however, the grantee shall be liable for any such assessment that becomes due after the date of transfer.

4.10 Priorities/Enforcement/Remedies. If an assessment is delinquent, the Association may record a notice of delinquent assessment and establish a lien against the lot of the delinquent owner prior and superior to all other liens except (1) all taxes, bonds, assessments and other levies which, by law, would be superior thereto, and (2) the lien or charge of any first mortgage of record (meaning any recorded mortgage or deeds of trust with first priority over other mortgages or deed of trust) made in good faith and for value. The notice of delinquent assessment shall state the amount of the assessment, collection costs, attorneys' fees, late charges and interest, a description of the separate interest against which the assessment and other sums are levied, the name of the record owner, and the name or address of the trustee authorized by the Association to enforce the lien by sale. The notice shall be signed by any officer of the Association or by any management agent retained by the Association.

An assessment lien may be enforced in any manner permitted by law, including sale by the court, sale by the trustee designated in the notice of delinquent assessment, or sale by a substituted trustee. Any sale shall be conducted in accordance with the provisions of the Colorado Law, applicable to the exercise of powers of sale in mortgages and deeds of trust, or in any other manner permitted by law. Nothing herein shall preclude the Association from bringing an action directly against the owner for breaching the personal obligation to pay assessment.

Fines and penalties for violation of restrictions are not "assessments, and are not enforceable by assessment lien.

The Association, acting on behalf of the owners, shall have the power to bid for the lot at foreclosure sale, and to acquire and hold, lease, mortgage and convey the same. Where the purchase of a foreclosure lot will result in a five percent (5%) or greater increase in assessments, the purchase shall require the vote or written consent of a majority of the total voting power of the Association, including majority of members other than Declarant. During the period a lot is owned by the Association, following foreclosure: (1) no right to vote shall be exercised on behalf of the lot; and (2) no assessment shall be assessed or levied on the lot; and (3) each other lot shall be charged, in addition to its usual assessment, its share of the assessment that would have been charged to such lot had it not been acquired by the Association as a result of foreclosure. After acquiring title to the lot at foreclosure sale following notice and publication, the Association may execute, acknowledge and record a deed conveying title to the lot which deed shall be binding upon the owners, successors, and all other parties. Suit to recover a money judgment for unpaid common expenses, rent and attorneys' fees shall be maintainable without foreclosing or waiving the lien securing the same. The Board may temporarily suspend the voting rights of a member who is in default in payment of any assessment, after notice and hearing, as provided in the Bylaws.

4.11 Allocated Taxes. In the event that any taxes are assessed against the common area, or the personal property of the Association, rather than being assessed to the lots, said taxes shall be included in the assessments made under the provisions of Section 4.1 and, if necessary, a special assessment may be levied against the lots in an amount equal to said taxes, to be paid in two (2) installments, thirty (30) days prior to the due date of each tax installment.

5.1 Duties. In addition to the duties enumerated in its Articles of Incorporation and Bylaws, or elsewhere provided for in this Declaration, and without limiting the generality thereof, the Association shall perform the following duties:

5.1.1 Maintenance. The Association shall maintain and repair (A) The common area, all improvements and landscaping thereon, and all property owned by the Association, including without limitation, recreational facilities, irrigation systems, lighting fixtures, pathways, street. sign age, entry facilities, structures, project boundary fences, drainage retention ponds, and utility, sewer or drainage systems; (b) Private streets. Owners acknowledge that the streets in the project are private in nature and will not be maintained, repaired, resurfaced or snow plowed by La Plata County. It shall be the sole responsibility of the owners to provide sufficient maintenance and reserve funds to insure the streets are at all times serviceable for normal roadway functions including but not limited to emergency police and fire protection.

5.1.2 Insurance. The Association shall obtain and maintain the following insurance: .

A. A casualty policy insuring all improvements and fixtures owned by the Association, its agents, the Declarant, and the owners and occupants of the lots and their respective family members, guests, invitees and agents against any liability incident to the ownership or maintained real or personal property;

B. A comprehensive public liability insuring the Association, its agents, the Declarant, and the owners and occupants of the lots and their respective family members, guests, invitees and agents against any liability incident to the ownership or maintained real or personal property.

C. Workers' compensation insurance to the extent required by law;

D. Fidelity bonds or insurance covering officers, directors, and employees that have access to any Association funds:

E. Officers and Directors liability insurance; and

F. Such other insurance as the Board in its discretion considers necessary or advisable.

The amount, term and coverage of any policy required hereunder (including the type of endorsements, the amount of the deductible, the named insurers, the loss payees, standard mortgage clauses, and notices of changes or cancellations) shall satisfy the minimum requirements imposed for this type of project by the Federal National Mortgage Association ("FNMA) and the Federal Home Loan Mortgage Corporation ("FHLMC) or any successor thereto. If the FNMA or FHLMC requirements conflict, the more stringent requirement shall be met. If FNMA and FHLMC do not impose requirements on any policy required hereunder, the term, amount and coverage of such policy shall be no less than that which is customary for similar policies on similar projects in the area.

Each owner appoints the Association or any insurance trustee designated by the Association to act on behalf of the owners in connection with all insurance matters, arising from any insurance policy maintained by the Association, including without limitation, representing the owners in any proceeding, negotiation, settlement or agreement.

Any insurance maintained by the Association shall contain "waiver of subrogation" as to the Association and its officers, directors and members, the owners and occupants of the lots (including Declarant) and mortgagees, and, if obtainable, a cross liability or severability of interest endorsement insuring each insured against liability to each other insured. The Association shall periodically (and not less than once every three (3) years) review all insurance policies maintained by the Association to determine the adequacy of the coverage and to adjust the policies accordingly.

Each owner shall obtain and maintain, at the owner's sole expense, fire and casualty coverage as may be required by any mortgagee of the owner's lot and in no event less than the amount and type of fire and casualty insurance required to be obtained and maintained as determined by the Board. All such individually carried insurance shall contain a waiver of subrogation by the carrier as to the other owners, the Association, Declarant, and the mortgagees of such lot.

The Association, and its directors and officers, shall have no liability to any owner or mortgagee if, after a good faith effort, it is unable to obtain the liability insurance required hereunder, because the insurance is no longer available or, if available, can be obtained only at a cost that the Board in it sole discretion determines is unreasonable under the circumstances, or the members fail to approve any assessment increase needed to fund the insurance premiums. In such event the Board immediately shall notify each member and any mortgagee entitled to notice that the liability insurance will not be obtained or renewed.

5.1.3 Discharge of Liens. The Association shall discharge by payment, if necessary, any lien against the common area and charge the cost thereof to the member or members responsible. for the existence of the lien after notice and hearing as provided by the Bylaws.

5.1.4 Assessments. The Association shall fix, levy, collect and enforce assessments as set forth in Article IV hereof.

5.1.5 Payment of Expenses. The Association shall pay all expenses and obligations incurred by the Association in the conduct of its business including, without limitation, all licenses, taxes or governmental charges levied or imposed against the property of the Association.

5.1.6 Enforcement. The Association shall enforce this Declaration.

5.2 Powers. In addition to the powers enumerated in its Articles of Incorporation and Bylaws, or elsewhere provided for herein, and without limiting the generality thereof, the Association shall have the following powers:

5.2.1 Easements. The Association shall have authority (by majority vote) to grant easements in addition to those shown on the Subdivision Map where necessary for utilities, cable television and sewer facilities over the common area to serve the common areas, lots and all contiguous private and public property.

5.2.2 Manager. The Association may employ a manager or other persons and to contract with independent contractors or managing agents to perform all or any part of the duties and responsibilities of the Association, except for the responsibility to levy fines, impose discipline, hold hearing, file suit, record or foreclose liens, or make capital expenditures, provided that any contract with a firm or person appointed as a manager or managing agent shall not exceed a one (1) year term, shall provide for the right of the Association to terminate the same at the first annual meeting of the members of the Association, and to terminate the same without cause or payment of a termination fee on ninety (90) days' written notice, or for cause on thirty (30) days' written notice.

5.2.3 Adoption of Rules. The Association or the Board may adopt reasonable rules not inconsistent with this Declaration relating to the use of the common area and all facilities thereon and the conduct of owners and their tenants and uses with respect to the property and other owners.

5.2.4 Access. The Board or its agents may enter upon any lot as necessary in connection with any maintenance or emergency repairs for which the Association is responsible. Such entry shall be made with as little inconvenience to the owners as practicable, and any damage caused thereby shall be repaired by the Association at the expense of the common fund. Except in case of emergency, twenty-four (24) hour advance notice shall be given to the owner or Occupant.

5.2.5 Assessments, Liens and Fines. The Association shall have the power to levy and collect assessments in accordance with the provisions of Article IV hereof. The Association may impose fines or take disciplinary action against any owner for failure to pay assessments or for violations of any provision of the project documents.

Penalties may include but are not limited to fines, temporary suspension of voting rights, or other appropriate discipline, provided the member is given notice and a hearing as provided by rules and regulations adopted by the Board of Directors from time to time.

5.2.6 Enforcement of this Declaration. The Association shall have the authority to:

5.2.6.1 Acquisition and Disposition of Property. The Association shall have the power to acquire (by gift. purchase or otherwise, own, hold, improve, build upon, operate, maintain, convey, sell, lease, transfer, or otherwise dispose of real or personal property in connection with the affairs of the Association. Any transfer of property shall be by document signed or approved by three-fourths (3/4) of the total voting power of the Association which shall include three-fourths (3/4) of the members other than Declarant, or where the two (2) class voting structure is still in effect, three-fourths (3/4) of the voting power of each class of members.

5.2.6.2 Loans. The Association shall have the power to borrow money, and only with the assent (by vote or written consent) of three-fourths (3/4) of the total voting power of the Association including three-fourths 13/4) of the members other than Declarant, or where the two (2) class voting structure is still in effect, three-fourths (3/4) of the voting power of each class of members, to mortgage, pledge, deed in trust, or hypothecate any or all of its real or personal property as security for money borrowed or debts incurred.

5.2.6.3 Dedication. The Association shall have the power to dedicate, sell, or transfer all or any part 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 shall be effective unless an instrument has been signed or approved by three-fourths (3/4) of the total voting power of the Association including three-fourths (3/4) of the members other than Declarant, or where the two (2) class voting structure is still in effect, three-fourths (3/4) of the voting power of each class of members agreeing to such dedication, sale or transfer.

5.2.6.4 Contracts. The Association shall have the power to contract for goods and/or services for the common area, facilities and interests or for the Association, subject to limitations of Section 13.09 of the Bylaws, or elsewhere set forth in the project documents.

5.2.6.5 Delegation. The Association. The Board, and the officers of the Association shall have the power to delegate their authority and powers to committees, officers or employees of the Association or to a manager employed by the Association, provided that the Board shall not delegate its responsibility:

A. To make expenditures for capital additions or improvements chargeable against the reserve funds;

B. To conduct hearings concerning compliance by an owner or his tenant, lessee, guest or invitee with the Declaration, Bylaws or rules and regulations promulgated by the Board;

C. To make a decision to levy monetary fines, impose special assessments against individual units, temporarily suspend an owner's rights as a member of the Association or otherwise impose discipline;

D. To make a decision to levy regular or special assessments; or

E. To make a decision to bring suit, record a claim of lien or institute foreclosure proceedings for default in payment of assessment.

5.2.7 Other Powers. In addition to the powers contained herein, the Association may exercise the powers granted to a not-for-profit corporation under Colorado law.

5.2.8 Commencement of Association's Duties and Powers. Until incorporation of the Association, all duties and powers of the Association as described herein, including all rights of consent and approval, shall be and remain the duties and powers of Declarant. From and after the date of incorporation of the Association, the Association shall assume all duties and powers, and Declarant shall be relieved of any further liability there for.

6.1 Architectural Control. All improvements constructed within The Knolls, shall be accomplished only after full compliance with the Residential Development Standards of The Knolls, as amended from time to time, and approval of the Design Review Board.

6.2 Design Review Board. A Design Review Board is hereby established and shall consist of a minimum of three members which shall be appointed, or removed from time to time by the Board of Directors. The Design Review Board shall administer the Residential Development Standards and have the authority to amend or promulgate new rules and regulations as nessecery.

7.1 Use of Lot. No lot shall be occupied and used except for single family residential purposes by the owners, their tenants, and social guests, except that Declarant, its successors or assigns, may use the property for a model homesite or sit as a display and sales office during construction until the last lot is sold by Declarant. No tent, shack, trailer, basement, garage, out building or structure of a temporary character shall be used on any lot at any time as a residence, either temporarily or permanently.

No health care facilities operating a business or charity and serving the sick, elderly, disabled, handicapped or retarded shall be permitted in the project.

No lot or lots or any portion thereof in the project shall be leased, subleased, occupied, rented, let, sublet, or used for or in connection with any time sharing agreement, plan, program or arrangement, including, without limitation any so called vacation license, travel club, "extended vacation", or other membership or time interval ownership arrangement. The term "time sharing" as used herein shall be deemed to include, but shall not be limited to, any agreement, plan, program, or arrangement under which the right to use, occupy, or possess the lot or lots or any portion thereof in the project rotates among various persons, either corporate, partnership, individual, or otherwise, on a periodically recurring basis for value exchanged, whether monetary or like kind use privileges, according to a fixed or floating interval or period of time of twenty-five (25) consecutive calendar days or less. Provided, this section shall not be construed to limit the personal use of any lot or any portion thereof in the project by any lot owner or his or her or its social or familial *use.

7.2 . Nuisances. No noxious, illegal, or seriously offensive activities shall be carried on upon any lot, or any part of the property, nor shall anything be done thereon which may be or may become a serious annoyance or a nuisance to or which may in any way interfere with the quiet enjoyment of each of the owners of his respective lot.

7.3 Vehicle Restriction. No trailer, camper, mobile home, commercial vehicle, truck (other than standard size pickup truck or standard size van), boat, inoperable automobile, or similar equipment shall be permitted to remain upon any area within the property other than temporarily and unless placed or maintained within an enclosed garage. Commercial vehicles shall not include sedans (or standard size vans or pickup trucks) which are used both for business and personal use, provided that any signs or marking of a commercial nature on such vehicle shall be unobtrusive and inoffensive as determined by the Board. Manufactured motor homes may be permitted on a lot. Motor home must be located on a site specifically prepared to accommodate it i.e. compacted gravel, asphalt or concrete and subject to approval by the Design Review Board. Any recreational vehicle visible from the street shall be maintained in good repair and subject to approval by the Design Review Board.

No noisy or smoky vehicles shall be operated on the property. No unlicensed motor vehicles shall be operated on the property twenty-four (24) hours after notice has been personally delivered to the vehicle owner by an agent of the Association or places on the windshield of a vehicle, or seventy-two (72) hours after notice has been mailed to the address of the registered owner of a vehicle parked, stored, or maintained on the premises, in violation of the provisions of this Declaration, the vehicle owner shall be deemed to have consented to the removal of said vehicle from the project, and the Association or its agents or employees shall have the authority to tow away and store any such vehicle, whether said vehicle shall belong to a lot owner, or his tenant, a member of his family, or his guest or invitee. Charges for such towing and storage shall be paid by the lot owner responsible for the presence of such vehicle.

7.4 Parking.

7.4.1 All streets within the project are designated as fire lanes. As such, at no time will parking be allowed on the private streets of the project. Any such illegal parking shall subject the offender to immediate towing with the violating vehicle owner being deemed to have consented to the removal of said vehicle from the project, and the Association or its agents or employees shall have the authority to tow away and store any such vehicle, regardless of who owns the vehicle. Charges for such towing and storage shall be paid by the lot owner responsible for the presence of such vehicle.

7.4.2 All lots shall have situated thereon a minimum of two (2) off street parking spaces, stacking allowable, in addition to any area spaces.

7.5 Commercial Activity. No business, professional, or commercial activity of any kind shall be conducted on any lot except home occupations or vocational activities conducted as an accessory use to the residential use, and secondary to the residential use in accordance with the home occupation definitions and requirements of the County of La Plata, Land Use and Development Code, Section 10112. Notwithstanding the provisions of this

7.6 Storage in Common Area. Nothing shall be stored in the common area without the prior consent of the Board.

7.7 Animals. No animals of any kind shall be raised, bred, or kept on any lot or in the common area except no more than two (2) usual and ordinary household pets such as dogs or cats provided they are not kept, bred, or maintained for any commercial purposes, and are kept under strict control at all times. Notwithstanding the foregoing, no pets may be kept on the property which result in an annoyance or are obnoxious to other owners. No pets shall be allowed in the common area except as may be permitted by rules of the Board. No owner shall allow his or her dog to enter the common area except on a leash. After making a reasonable attempt to notify the owner, the Association or any owner may cause any unleashed dog found within the common area to be removed by the Association (or any owner) to a pound or animal shelter under the jurisdiction of the County of La Plata by calling the appropriate authorities, whereupon the owner may, upon payment of all expenses connected, therewith, repossess the dog. Owners shall prevent their pets from soiling the common area and shall promptly clean up any mess left by their pets. owners shall be fully responsible for any damage caused by their pets.

7.8 Garbage and Refuse Disposal. All rubbish, trash and garbage shall be regularly removed from the lots, and shall not be allowed to accumulate thereon. Trash, garbage and other waste shall not be kept except in sanitary containers. All equipment for the storage or disposal of such materials shall be kept in a clean and sanitary condition, and shall be screened from view of neighboring lots, common areas and street. Because the street in The Knolls is privately owned, the County of La Plata is not obligated to provide trash pickup service to individual lots.

7.9 Power Equipment and Car Maintenance. No power equipment, hobby shops, or car maintenance or boat maintenance (other than emergency work) shall be permitted on the property except with prior written approval of the Board. Approval shall not be unreasonably withheld and in deciding whether to grant approval the Board shall consider the effects of noise, air pollution, dirt or grease, fire hazard, interference with radio or television reception, and similar objections.

7.10 Liability of owners for Damage to Common Area. The owner of each lot shall be liable to the Association for all damage to the common area improvements *including landscaping) caused by such owner or the owner's agents, occupants, invitees, or pets, except for that portion of damage covered by insurance carried by the Association. The responsible owner shall be charged with the cost of repairing such darn aye (including interest thereon) as described in section 5.1.1.

7.11 Leasing of Lots. No owner shall be permitted to lease his lot for any period less than thirty (30) days. Any lease agreement shall be required to provide that the term of the lease shall be subject in all respects to the provisions of the Declaration, Articles and Bylaws and to all house rules and regulations adopted by the Board and that any failure of the lessee to comply with the terms of such documents shall be a default under the lease. All leases shall be required to be in writing. Other than the foregoing, there is no restriction in the right of any owner to lease his lot. All owners leasing or renting their lots shall promptly notify the Secretary of the Association in writing of the names of all tenants and members of tenant's family occupying such lot and of the address and telephone number where such owner can be reached.

7.12 Mineral Activity/Private Wells and Septic Systems. No oil or gas drilling or the extraction thereof or mining operations shall be permitted on a lot. No lot owner shall be permitted to drill a well intended for the extraction of water from the ground, nor construct a septic or sewage disposal system on any lot. All lots are to be provided with central water from Mesa Water and sewer from the Hermosa Sanitation District.

7.13 Motorcycle, Snowmobiles, etc. No person shall operate a motorcycle, snowmobile or other similar motorized vehicle upon any part of the project. This shall not prohibit the use of normally licensed vehicles on the private street of the project.

7.14 Exterior Maintenance. A lot and all improvements thereon shall be maintained at all times by the owner in good condition and repair. The owner shall cause all dwellings and other improvements to be refinished, resurfaced or repaired periodically as effects of damage, deterioration or weather become apparent. Appearance, color, type of painting or stain or other exterior conditions shall not be changed without prior approval of the Architectural Review Committee. All appropriate repairs and replacements shall be made as often as necessary. Unsightly conditions shall constitute a nuisance as defined in these Declarations.

7.15 Limitations on Burning. No coal or other type of fuel which gives off smoke, except wood and charcoal, shall be used for heating, cooking or any other purpose within a lot unless approved by the Architectural Review Committee.

7.16 Storage Tanks. No elevated tanks or appurtenances of any kind shall be erected, placed or permitted upon any part of a lot. Any tank used in connection with any dwelling (e.g. for storage of propane, gas, oil or water) or any type of refrigeration or heating apparatus must be located underground or concealed by appropriate fencing or screening. This restriction may be varied or waived only by the approval of the Architectural Review Committee.

7.17 No Unsightliness. All unsightly structures, facilities, equipment, objects, and conditions shall be kept in an approved enclosed structure or be screened from roads, common areas and other Lots. Items subject to this provision shall include but not be limited to: sporting equipment, garden, maintenance or snow removal equipment except when in actual use. No laundry shall be dried or hung outside of any residence. Equipment intended for children’s use such as swings, slides etc shall be screened from view. Toys shall be properly stored out of view when not in use. Lawn furniture, BBQ’s and other such equipment shall be properly screened from view.

8.1 Enforcement. The Association, or any owner, shall have the right (but not the obligation) to enforce, by any proceeding at law or in equity, all restrictions, conditions, covenants, reservations, liens, and charges now or hereafter imposed by the provisions of this Declaration, the Articles and Bylaws and in such action shall be entitled to recover reasonable attorneys' fees as are ordered by the Court. Failure by the Association or by any owner to enforce any covenant or restriction herein contained shall in no event be deemed a waiver of the right to do so thereafter.

8.2 Invalidity of Any Provision. Should any provision or portion hereof be declared invalid or in conflict with any law of the jurisdiction where this project is situated, the validity of all other provisions and portions hereof shall remain unaffected and in full force and effect.

8.3 Term. The covenants and restrictions of this Declaration shall run with and bind the property, and shall inure to the benefit of and shall be enforceable by the Association or the owner of any property subject to this Declaration, their respective legal representatives, heirs, successors and assigns, for a term of thirty (30) years from the date this Declaration is recorded, after which time they shall be automatically extended for successive periods of ten (10) years, unless an instrument in writing, signed by a majority of the then owners of the lots, has been recorded within the year preceding the beginning of each successive period of ten (10) years, agreeing to change said covenants and restrictions in whole or in part or to terminate the same.

8.4 Amendments. Prior to close of escrow on the sale of the first lot, Declarant may amend this Declaration. After sale of the first lot, this Declaration may be amended only by the affirmative vote (in person or proxy) or written consent of members representing a majority of the total voting power of the Association, and a majority of the affirmative votes or written consent of members other than the Declarant, or where the two (2) class voting structure is still in effect, a majority of each class of membership. However, the percentage of voting power necessary to amend a specific clause shall not be less than the prescribed percentage of affirmative votes required for action to be taken under that clause. Any amendment must be certified in writing under that clause. Any amendment must be certified in writing, executed and acknowledged by the President and recorded in the Recorder's office of the County of La Plata; further, all amendments affecting matters within the regulatory power of the City must be approved by the attorney for the County of La Plata. No amendment shall adversely affect the right of the holder of any mortgage of record prior to the recordation of such amendment.

8.5 Rights of Lenders. No breach of any of the covenants, conditions and restrictions herein contained, nor the enforcement of any lien provisions herein, shall render invalid the lien of any mortgage on any lot made in good faith and for value, but all of said covenants, conditions and restrictions shall be binding upon and effective against any owner whose title is derived through foreclosure or trustee's sale, or otherwise. Notwithstanding any provision in this Declaration to the contrary, lenders shall have the following rights:

8.5.1 Copies of Project Documents. The Association shall make available to lot owners and lenders, and to holders, insurers or guarantors of any mortgage, current copies of the Declaration, Bylaws, Articles or other rules concerning the project and the books, records and financial statements of the Association. "Available" means available for inspection, upon request, during normal business hours or under other reasonable circumstances.

8.5.2 Financial Statement. Any holder, insurer or guarantor of a first mortgage shall be entitled, upon written request, to a financial statement for the immediately preceding fiscal year, free of charge to the party so requesting. Such statement shall be furnished within a reasonable time following such request.

8.5.3 Notice of Action. Upon written request to the Association, identifying the name and address of the eligible mortgage holder or eligible insurer or guarantor, and the lot number or address, such eligible mortgage holder or eligible insurer or guarantor will be entitled to timely written notice of: (1) Any condemnation loss or any casualty loss which affects a material portion of the project or any lot on which there is a first mortgage held, insured, or guaranteed by such eligible mortgage holder or eligible insurer or guarantor, as applicable; (2) any default in performance of obligations under the project documents or delinquency in the payment of assessments or charges owed by an owner of a lot subject to a first mortgage held, insured or guaranteed by such eligible mortgage holder or eligible insurer or guarantor, which remains insured for a period of sixty (60) days; (3) any lapse, cancellation or material modification of any insurance policy or fidelity bond maintained by the Association; (4) any proposed action which would require the consent of a specified percentage of eligible mortgage holders as specified in section 8.5.4. The Association shall discharge its obligation to notify eligible holders or eligible insurers or guarantors by sending written notices required herein to such parties at the address given on the current request for notice, in the manner prescribed by section 8.12.

(1) Except as provided by statute or by other provision of the project documents in case of substantial destruction of condemnation or the project:

(a) The consent of owners of lots to which at least sixty-seven percent (67%) of the votes in the Association are allocated and the approval of eligible mortgage holders holding mortgages on lots which have at least sixty-seven percent (67%) of the votes of lots subject to eligible holder mortgages, shall be required to terminate the legal status of the project as a planned unit development project;

(b) The consent of owners of lots to which at least sixty-seven percent (67%) of the votes in the Association are allocated and the approval of eligible mortgage holders holding mortgages on lots which have at least fifty-one percent (51%) of the votes of the lots subject to eligible holder mortgages, shall be required to add or amend any material provisions of the project documents which establish, provide for, govern or regulate any of the following: (i) voting; (ii) assessments, assessment liens or subordination of such liens; (iii) reserves for maintenance, repair and replacement of the common area(s) (or lots if applicable); (iv) insurance or fidelity bond; (v) rights to use of common areas; (vi) responsibility for maintenance and repair of the several portions of the project; (vii) expansion or contraction of the project or the addition, annexation or withdrawal of property to or from the project (except as provided in paragraphs 8.11 and 8.12; (viii) boundaries of any lot; (ix) the interests in the general or restricted common areas; (x) convert ability of lots into common areas or of common areas into lots; (xi) leasing of lots; (xii) imposition of any right of first refusal or similar restriction on the right of a lot owner to sell, transfer, or otherwise convey his or her lot; (xiii) any provisions which are for the express benefit of mortgage holders, eligible mortgage holders, or eligible insurers or guarantors of first mortgages on lots:

(c) An addition or amendment to such document shall not be considered material if it is for the purpose of corrections technical errors, or for clarification only. An eligible mortgage holder who receives a written request to approve additions or amendments who does not deliver or post to the requesting party a negative response within thirty (30) days shall be deemed to have approved such a request. .

Unless the holder(s) of at least two-thirds (2/3) of the first mortgages (based upon one (1 ) vote for each mortgage or deed of trust owned), or two-thirds (2/3) of the owners (other than Declarant) of the individual lots in the project have given their prior written approval, the Association and/or the owners shall not be entitled to:

(a) By act or omission, seek to abandon or terminate the project, or abandon, partition, subdivide, encumber, sell or transfer the common area or property owned directly or indirectly, by the Association (the granting of easements for public utilities or for other public purposes consistent with the intended use of such property shall not be deemed a transfer within the meaning of this clause); or

(b) Change the method of determining the obligations, assessments or dues or other charges which may be levied against an owner: or

(c) By act or omission, change, waiver or abandon any scheme of regulations, or enforcement thereof, pertaining to the architectural design or the exterior appearance of lots, the exterior maintenance of lots, the maintenance of the common area walks or fences and driveways, or the upkeep of landscaping in the common area; or

(d) Fail to maintain fire and extended coverage on insurable Association common area improvements on a current replacement cost basis in an amount not less than one hundred percent (100%) of the insurable value (based on current replacement costs): or

(e) Use hazard insurance proceeds for losses to any Association common property for other than the repair, replacement or reconstruction of such common area property.

8.5.5 Right of First Refusal. The right of a lot owner to sell, transfer, or otherwise convey his or her lot shall not be subject to any right of first refusal or similar restriction.

8.5.6 Contracts. Any agreement for professional management of the project, or lease or any other contract providing for services of the developer, sponsor, or builder, may not exceed one (1) year. Any agreement, contract, or lease, including a management contract entered

into prior to passage of control of the Board of Directors of the Association to lot purchasers, must provide for termination by either party for cause on thirty (30) days' written notice, or without cause and without payment of a termination fee or penalty on ninety (90) days' or less written notice.

8.5.7 Reserves. Association dues or charges shall include an adequate fund for maintenance, repairs, and replacement of those improvements which the Association is obligated to maintain that must be replaced on a periodic basis, and the assessments therefor shall be payable in regular installments rather than by special assessments.

8.5.8 Priority of Liens. Any lender who obtains title to a lot pursuant to the remedies provided in the mortgage or foreclosure of the mortgage will not be liable for such lot's unpaid assessments and fees, late charges, fines or interest levied in connection therewith which accrue prior to the acquisition of title to such lot by the mortgagee (except for claims for a pro rata share of such assessments or charges to all project lots including the mortgaged lot, and except for assessment liens recorded prior to the mortgage) .

8.5.9 Distribution of Insurance or Condemnation Proceeds. No owner, or any other party shall have priority over any rights of first lenders pursuant to their mortgages in the case of a distribution to lot owners of insurance proceeds or condemnation awards for losses to or taking of common area property.

8.5.10 Restoration or Repair. Any restoration or repair of the project, after a partial condemnation or damage due to an insurable hazard, shall be performed substantially in accordance with the Declaration and the original plans and specifications, unless other action is approved by eligible mortgage holders holding mortgages on lots which have a least fifty-one percent (51%) of the votes of lots subject to eligible holder mortgages.

8.5.11 Termination. Any election to terminate the legal status of the project after substantial destruction or a substantial taking in condemnation of the project property must require the approval of eligible mortgage holders holding mortgages on lots which have at least fifty-one percent (51%) of the votes of such remaining lots subject to eligible holder mortgages.

8.5.12 Reallocation of Interests. No reallocation of interest in the common areas resulting from partial condemnation or partial destruction of the project may be effected without prior approval of eligible mortgage holders holding mortgages on all remaining lots whether existing in whole or in part, and which have at least fifty-one percent (51%) of the votes of such remaining lots subject to eligible holder mortgages.

8.5.13 Termination of Professional Management. When professional management has been previously required by any eligible mortgage holder or eligible insurer or guarantor, whether such entity became an eligible mortgage holder or eligible insurer or guarantor at that time or later, any decision to establish self management by the Association shall require the prior consent of owners of lots to which at least sixty-seven percent (67%) of the votes in the Association are allocated and the approval of eligible mortgage holders holding mortgages on lots which have at least fifty-one percent (51%) of the votes of lots subject to eligible holder mortgages.

8. 5.14 Payment of Taxes or Insurance by Lenders. First lenders may, jointly or singly, pay taxes or other charges which are in default and which may or have become a charge against the common area property and may pay overdue premiums on hazard insurance policies, or secure new hazard insurance coverage on the lapse of a policy, for such common area property and first lenders making such payment provided that said lender(s) have given notice to the Association prior to the making of such payment(s) and the Association has failed to pay the same.

8.5.15 Owner's Rights and Obligation to Maintain and Repair. Except for those portions of the project which the Association is required to maintain and repair, each lot owner shall, at his sole cost and expense, maintain and repair his lot and all improvements thereon, and all landscaping thereon, save and except for the landscaping which shall be maintained by the Association as herein provided, keeping the same in good condition.

In the event an owner of any lot shall fail to maintain his lot and the improvements thereon as required herein, the Association's agents may, after notice and a hearing as provided in the Bylaws, enter the lot and perform the necessary maintenance. The cost of such maintenance shall immediately be paid to the Association by the owner of such lot, together with interest at the rate of fifteen percent (15%) per annum (but not to exceed the maximum interest rate authorized by law) from the date the cost was incurred by the Association until the date the cost is paid by the owner.

8.7 Damage or Destruction. If an improvement on any lot other than a common area lot is damaged or destroyed by fire or other casualty, the owner of such lot shall repair or reconstruct the improvement in accordance with the original as-built plans and specifications, modified as may be required by applicable building codes and regulations in force at the time of such repair or reconstruction or as authorized by the Architectural Review Committee. The repair or reconstruction shall commence no later than ninety (90) days after the date of such damage or destruction, and shall be completed no later than one hundred eighty (180) days after such date, subject to delays that are beyond the control of the owner. Notwithstanding the foregoing, the owner immediately shall take such steps as may be reasonably required to secure any hazardous conditions resulting from the damage or destruction.

If any project and/or common area improvements is damaged or destroyed by fire or other casualty, the improvement shall be repaired or reconstructed substantially in accordance with the original as-built plans and specifications, modified as may be required by applicable building codes and regulations in force at the time of such repair or reconstruction and subject to such alterations or upgrades as may be approved by the Architectural Review Committee, unless either of the following occurs: (1) the cost of repair or reconstruction is more than fifty percent (50%) of the current replacement costs of all project improvements, available insurance proceeds are not sufficient to pay for at least eighty-five percent (85%) of the cost of such repairs or reconstruction, and three-fourths (3/4) of the total voting power of the Association residing in members and their first lenders vote against such repair and reconstruction; or (2) available insurance proceeds are not sufficient to substantially repair or

reconstruct the improvement within a reasonable time as determined by the Board, a special assessment levied to supplement the insurance fails to receive the requisite approval (if such approval is required) as provided in section 4.4 and the Board, without the requirement of approval by the owners, if unable to supplement the insurance by borrowing on behalf of the Association sufficient monies to enable the improvements to be substantially repaired or reconstructed within a reasonable time.

If the common area improvement is to be repaired or reconstructed and the cost for repair or reconstruction is in excess of $20,000.00, the Board shall designate a construction consultant, a general contractor, and an architect for the repair or reconstruction. All insurance proceeds, Association monies allocated for the repair or reconstruction, and any borrowing by the Association for the repair or reconstruction shall be deposited with a commercial lending institution experienced in the disbursement of construction loan funds (the "depository") as selected by the Board. Funds shall be disbursed in accordance with the normal construction loan practices of the depository that require as a minimum that the construction consultant, general contractor and architect certify within ten (10) days prior to any disbursement substantially the following:

A. That all the work completed as of the date of such request for disbursement has been done in compliance with the approved plans and specifications;

B. That such disbursement request represents monies which either have been paid by or on behalf of the construction consultant, the general contractor or the architect and/or are justly due to contractors, subcontractors, material men, engineers, or other persons (whose names and address shall be stated) who have rendered or furnished certain services or materials for the work and giving a brief description of such services and materials and the principle subdivisions or categories thereof and the respective amounts paid or due to each of said persons in respect thereof and stating the progress of the work up to the date of said certificate:

C. That the sum then requested to be disbursed plus all sums previously disbursed does not exceed the cost of the work insofar as actually accomplished up to the date of such certificate:

D. That no part of the cost of the services and materials described in the foregoing paragraph A has been or is being made the basis for the disbursement of any funds in any previous or then pending application; and

E. That the amount held by the depository, after payment of the amount requested in the pending disbursement request, will be sufficient to pay in full the costs necessary to complete the repair or reconstruction. If the cost of repair or reconstruction is $20,000.00 or less, the Board shall disburse the available funds for the repair and reconstruction under such procedures as the Board deems appropriate under the circumstances. If the common area improvement is not repaired or reconstructed in accordance with the foregoing, all available insurance proceeds shall be disbursed among all owners and their respective mortgagees in the same proportion that the owners are assessed, subject to the rights of the owners' mortgagees.

8.8 Condemnation. If all or any part of a lot (except the common area) is taken by eminent domain, the award shall be disbursed to the owner of the lot subject to the rights of the owner's mortgagees. If the taking renders the lot uninhabitable, the owner shall be divested of any further interest in the project, including membership in the Association, and the interests of the remaining owners shall be adjusted accordingly. If all or any part of the common area is taken by eminent domain, the proceeds of condemnation shall be used to restore or replace the portion of the common area affected by condemnation, if restoration or replacement is possible, and any remaining funds, after payment of any and all fees and expenses incurred by the Association relating to such condemnation, shall be distributed among the owners in the same proportion as such owners are assessed, subject to the rights of mortgagees. If necessary, the remaining portion of the project shall be resurveyed to reflect such taking. The Association shall participate in the negotiations, and shall propose the method of division of the proceeds of condemnation, where lots are not valued separately by the condemning authority or by the court. The Association shall represent the lot owners in any condemnation proceeding or in negotiations, settlements and agreements with the condemning authority for acquisition of the common area(s), or part thereof.

8.9 Limitation of Restrictions on Declarant. Declarant is undertaking the work of construction of a planned unit development subdivision and incidental improvements upon the property. The completion of that work and the sale, rental, and other disposal of lots is essential to the establishment and welfare of said property as a residential community. In order that said work may be completed and said property be established as a fully occupied residential community as rapidly as possible, nothing in this Declaration shall be understood or controlled.

A. Prevent Declarant, its contractors, or subcontractors from doing on the property or any lot, whatever is reasonably necessary or advisable in connection with the completion of said work; or

B. Prevent Declarant or its representatives from erecting, constructing and maintaining on the property (except upon lots owned by others), such structures as may be reasonable and necessary for developing said property as a residential community and disposing of the same by sale, lease or otherwise; or

C. Prevent Declarant from conducting on the property (except upon lots owned by others) its business of completing said work and of establishing a plan of residential ownership and of disposing of said property in lots by sale, Iease or otherwise; or

D. Prevent Declarant from maintaining such sign or signs on the property (except upon lots owned by others) as may be necessary for the sale, lease or disposition thereof. The foregoing rights of Declarant shall terminate upon sale of Declarant's entire interest in the project, or ten (10) years after the date of recordation of the deed of the first lot to be sold in the project, whichever occurs first.

So long as Declarant, its successors and assigns, owns one (1) or more of the lots described herein, Declarant, its successors and assigns, shall be subject to the provisions of this Declaration. Declarant shall make reasonable efforts to avoid disturbing the use and enjoyment of lots and the common area by their owners, while completing any work necessary to said lots or common area.

8.10 Termination of Any Responsibility of Declarant. In the event Declarant shall convey all of its rights, title and interest in and to the property to any partnership, individual or individuals, corporation or corporations, then and in such event, Declarant shall be relieved of the performance of any further duty or obligation hereunder, and such partnership, individual or individuals, corporation or corporations, shall be obligated to perform all such duties and obligations of the Declarant.

11. Annexation. Declarant reserves the right to annex all or any part of the real property described on Exhibit A. Each Owner of a Lot hereby grants to the Declarant the right to annex all or any part of the real property described on Exhibit A to the Association and or Common Interest Community and to modify such Owner’s allocated interest accordingly. Declarant makes no assurances that all or any portion of the real property described in Exhibit A will be annexed.
12. Annexation Procedure. The annexation of additional real property to the Association and or the Common Interest Community shall be accomplished by the recording of a Supplemental Declaration containing a legal description of the land to be added, a Supplemental Plat and amending this Declaration accordingly. The Supplemental Declaration shall assign an identifying number to each new lot created thereby, and shall reallocate the interest’s of all Lot Owners pro rata. In no event shall any annexation increase the number of total lots beyond 100. The annexation of additional real property may be accomplished by successive Supplemental Declarations, in no particular or pre-established order, and may provide that such property is phased so that it is made subject to this Declaration at different times. Upon recording of a Supplemental Declaration, the Annexed Property described therein shall be subject to all of the covenants, conditions, restrictions, limitations, reservations, exceptions, equitable servitude’s and other provisions set forth in this Declaration, except to the extent specifically stated in the Supplemental Declaration or as modified. Any such Supplemental Declaration may impose additional provisions and annexed property.
13. Annexation of Additional Unspecified Real Estate. Declarant reserves the right to annex additional unspecified real estate to the common interest community to the fullest extent permitted by the Act. Declarant shall annex any such additional unspecified real estate as set forth above.
14. Owner's Compliance. Each owner, tenant or occupant of a lot shall comply with the provisions of this Declaration, and (to the extent they are not in conflict with the Declaration) the Articles and Bylaws, and the decisions and resolutions of the Association or the Board, as lawfully amended from time to time. Failure to comply with any such provisions, decisions, or resolutions shall be grounds for an action (1 ) to recover sums due, (2) for damages, (3) for injunctive relief, or (4) for costs and attorneys fees, or (5) for any combination of the foregoing. All agreements and determinations lawfully made by the Association in accordance with the voting percentages established in this Declaration or the Articles or Bylaws, shall be deemed to be binding on all lot owners, their successors and assigns.
15. Notices. Any notice permitted or required by the Declaration, Articles or Bylaws may be delivered either personally or by mail. If delivery is by mail, it shall be deemed to have been delivered seventy-two (72) hours after a copy of the same has been deposited in the United States Mail, first class or registered, postage prepaid, addressed to the person to be notified at the current address given by such person to the Secretary of the Board or addressed to the residence of such person if no address has been given to the Secretary.
16. Fair Housing. No owner shall, either directly or indirectly, forbid or restrict the conveyance, encumbrance, leasing, or mortgaging, or occupancy of his lot to any person of a specified race, sex, adulthood, marital status, color, religion, ancestry, physical handicap, or national origin.
17. Binding Arbitration. In case of any claim or dispute between the Declarant, its builder, general contractor, or broker, or their agents or employees, on the one hand and any lot owner(s), on the other hand, which claim or dispute relates to the right and/or duties of the parties under the project documents, or relates to the design or construction of the project or any part thereof (except for disputes relating to alleged common area deficiencies), the procedure shall be as follows: The aggrieved party or parties shall notify the other party or parties of the grievance, in writing. When such a notice is received by Declarant, it shall promptly respond with an investigation, inspection meeting, discussion, or other action reasonably appropriate to the circumstances. Appropriate action shall include, without limitation, prompt communication with the aggrieved party or parties, and a proposed course of action to resolve the problem. All parties involved in the matter shall negotiate in a good faith attempt to amicably resolve the problem. If the parties are unable to resolve the problem within a reasonable period of time (not to exceed ninety (90) days after the first notice of claim or dispute) the matter shall be submitted to binding arbitration pursuant to the rules of the American Arbitration Association, provided that if the dispute or claim involves a sum not in excess of the jurisdictional limit of the Small Claims Court, the lot owner shall have the option of taking the matter to Small Claims Court in lieu of binding arbitration.

IN WITNESS WHERE OF, the undersigned, being the Declarant herein has executed this Declaration this Twenty-seventh day of May, 1997.

_____________________________________

Don Ricedorff, President

DRG Properties, Inc.

STATE OF COLORADO }

}

COUNTY OF LA PLATA }

Sworn to and subscribed before me by Don Ricedorff, President, DRG Properties, Inc., this 27^th day of May 1997.

_____________________________________ My Commission Expires:______________________

Notary Public