MASTER DECLARATION OF COVENANTS, CONDITIONS, EASEMENTS AND RESTRICTIONS FOR THE MARINA AT PEPPER'S CREEK DAGSBORO HUNDRED, SUSSEX COUNTY, DELAWARE

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1 ~~~~~~.. ~- ~---~ Tax Map Parcel Numbers: Sec Exhibit "B" attached hereto for list of Tax Parcel Numbers Prepared by and Return to: Daniel P. Johnson, Esquire John C. Kuffel, Esquire Young Conaway Stargatt & Taylor, LLP 110 W. Pine Street P.O. Box 594 Georgetown, DE BK: 3687 PG: 213 MASTER DECLARATION OF COVENANTS, CONDITIONS, EASEMENTS AND RESTRICTIONS FOR THE MARINA AT PEPPER'S CREEK DAGSBORO HUNDRED, SUSSEX COUNTY, DELAWARE DB02: I

2 --~---~ BK= 3687 lpg:: 214- TABLE OF CONTENTS Page ARTICLE I DEFINITIONS 1.1. "Association" "Association Documents" "Association Member" or "Association Members" "Association Property" "Class A Association Member" "Class B Association Member" "Cotnmon Expenses" "Cotnmunity-Wide Standard" "Declarant" "Development Plans" "Eligible Mortgage Holder" "Emergency" "Facilities"... 9 "Irrigation Facilities"... 9 "Lawn and Garden Area"... 9 "Laws"...: "Lot" "Mortgagee" "Owner" "P arcel123 Owner" "Parce1123" "Participating Builder" "Project" "Property" "Recorder's Office"...; "Wastewater Agreement" "Wastewater Service Line" "Wastewater Utility" :

3 ~~ ~~---~~ ~---- ~ ~~~~~~---~ BK: 3687 PG: 2:15 ARTICLE II DECLARANT'S RIGHT TO SUBJECT PROPERTY TO DECLARATION 2.1. Property Subject to this Declaration Annexations Deannexation ARTICLE III ASSOCIATION PROPERTY RIGHTS 3.1. Owners' Easements of Enjoyment Lhnitations Delegation of Use ARTICLE IV ASSOCIATION MEMBERSHIP AND VOTING RIGHTS 4.1. Association Membership Association Voting Rights Proxies ARTICLEV COVENANT FOR MAINTENANCE ASSESSMENTS 5.1. Creation of the Lien and Personal Obligation for Assessments Purpose of Assessments Annual Assessments; Budgets Initial Working Capital Contribution Special Assessments, Budget Amendments Notice and Quorum Unifonn Rate of Assessment Declarant's Exemption from Annual and Special Assessments Date of Commencement of Annual Assessments; Due Dates; Lien Docket Effect ofnon-payrnent of Assessments; Remedies of the Association Subordination ofthe Lien to Mortgages Reserve Fund Budget and Contribution Special Actions ARTICLE VI ARCHITECTURAL CONTROL 6.1. General Provisions : I 2

4 BK:: Design Committee Criteria For Submission, Review and Decisions or Plans ARTICLE VII USE RESTRICTIONS 7.1. Permitted Uses Prohibited Uses and Nuisances... : Satellite Dishes Leasing and Transfers Parking House Rules, Etc Exemptions Notice of Special Provisions Regarding the Property and Project ARTICLE VIII DECLARATION OF EASEMENTS AND RIGHTS 8.1. Declaration of Easements and Rights Wastewater Utility Lien Wastewater Service Line Wastewater Utility Exemption for Assessments Association Easements Energy Services Provider/Agreement ARTICLE IX MAINTENANCE 9.1. Owners' Maintenance Association Maintenance Additional Maintenance Responsibilities ARTICLE X INSURANCE Required Coverage...! Fidelity Coverage Repair and Reconstruction of Association Property After Fire or Other Casualty.45 ARTICLE XI MANAGEMENT Management Agent : , II

5 ~-" ~ ~--~~~~-~-- ~ BIK: 3687 PG: 2::1L Duration of Management Agreement.... : ARTICLE XII GENERAL PROVISIONS Association Property Responsibility Personal Property and Real Property for Common Use Implied Rights Limitation ofliability Enforcement Fines Severability Duration and Amendment Changes and Modifications by Declarant...., Casualty Losses condemnation or Eminent Do1nain ~.12. Notice to Eligible Mortgage Holders; Deemed Consent Declarant's Power of Attorney Successors ofdeclarant...., Arbitration No Dedication to Public Use Declarant Reserved Rights Perpetuities Captions and Gender... ~ JoinderofMortgagee..., ARTICLE XIII PARCEL 123 PROVISIONS Parcell Parce1123 Temporary License..., Admission ofno Property Rights Rights of Access and Parking..., Assumption ofrisk and Indemnification Maintenance and Landscape Easement...., Parcel123 Activities Easement...., DB02: I

6 -~--~~~----- ~----~ ~ ~--~~~~~-~-~--~-- --~ BIK: 3687 PG: 2Jl Declaration of Easements and Rights..., Association Property Responsibility Personal Property and Real Property for Common Use Exhibit "A" - Property Description Exhibit "B" - Tax Parcel Numbers Schedule "A"- Design Guidelines and Procedures Schedule "B"- Irrevocable Power of Attorney 5 DB02: I

7 ~ ~ BK: 3687 F'G: 219 MASTER DECLARATION OF COVENANTS, CONDITIONS, EASEMENTS AND RESTRICTIONS FOR THE MARINA AT PEPPER'S CREEK THIS MASTER DECLARATION OF COVENANTS, CONDITIONS, EASEMENTS AND RESTRICTIONS FOR THE MARINA AT PEPPER'S CREEK (this "Declaration") is made this :J.q1Jtday of June, 2009 (the "Effective Date"), by HKS 4, LLC, a Delaware limited liability company, hereinafter referred to as the "Declarant" in this Declaration. WHEREAS, pursuant to the Deed recorded in the Office of the Recorder of Deeds in and for Sussex County, Delaware (the "Recorder's Office") at Deed Book 3388, Page 9, Declarant is the legal and equitable owner of those certain lots, pieces or parcels of land, comprising approximately acres, more or less (the "Property"), being more particularly bounded and described on Exhibit "A", attached hereto and made a part hereof, and depicted on The Marina At Pepper's Creek Subdivision Plat prepared by George, Miles & Buhr, LLC, dated June 8, 2005, and last revised on November 13, 2007, said plat being recorded in the Recorder's Office at Plat Book 117, Page 70, as it may be amended from time to time (the "Master Plan"), which Property is currently designated for the construction of a residential community project to be known as "The Marina At Pepper's Creek" consisting of one hundred twenty-two (122) single family subdivided dwelling lots (individually a "Lot" and collectively the "Lots") and open spaces, storm water management areas, and improvements and other amenities; provided, however, that, for purposes of this Declaration, the term "Property" shall expressly exclude Parcel 123 (as hereinafter defined) unless and until the Declarant, in its sole subjective and absolute discretion and judgment, elects to extend the covenants, conditions, restrictions, and easements of this Declaration to Parcel 123 in accordance with Section 2.2 hereof (collectively, with all the Lots, but expressly excluding Parcel123, the "Project"); and WHEREAS, Declarant desires to control and restrict both the construction of original structures and improvements on the Property as generally depicted on the Master Plan, as well as any modification to the original residential dwellings and other improvements that shall be built in accordance with and subject to the terms and conditions of those certain Design Guidelines and Procedures, as the same may be amended from time to time (the "Design Guidelines"), the tenus of which are more fully set forth in Schedule "A" attached hereto and made a part hereof, together with the use to which all dwellings, structures, and improvements in the Project, as more fully described below, are put so as to promote and facilitate the development of a healthful, safe, harmonious, attractive and valuable residential community and for the preservation of the values and amenities in the Project. Towards this end, Declarant desires to subject the Property and Project to certain covenants, restrictions and agreements as hereinafter more particularly set forth, all of which Declarant deems to be for the benefit of the Declarant, Association, Parcel 123 Owner, and each Owner and their respective heirs, personal representatives, successors, assigns, and transferees. 0802: I 6

8 -~-- --~-~----~ ~~~~-~ BIK:: 3687 PG::: 2210 ~-~-~--~~~~--~----- WITNESSETH: NOW, THEREFORE, Declarant hereby declares that the Property and Project shall be held, conveyed, hypothecated, encum}?ered, sold, leased, rented, used, occupied and improved subject to the covenants, conditions, restrictions and easements set forth in this Declaration, which are for the purpose of protecting the value and desirability of, and which shall run with the Property and Project and be binding on all parties having any right, title or interest in all or any portion of the Property and Project, and any other real property annexed within the jurisdiction of the Association in accordance with Article II hereof, their heirs, personal representatives, successors, transferees and assigns, and which shall inure to the benefit of the Declarant, Parcel 123 Owner, Association and each Owner and their respective heirs, personal representatives, successors, transferees and assigns. ARTICLE I DEFINITIONS 1.1. "Association" shall mean and refer to The Marina At Pepper's Creek Homeowners Association, a non-stock Delaware corporation, its successors and assigns "Association Documents" shall mean the Articles of Incorporation and By-Laws of the Association, as amended, as well as other agreements, documents, rules, regulations, or other enactments promulgated, enacted or adopted thereunder "Association Member" or "Association Members" shall mean and refer to every person, group of persons, associations, limited liability company, corporation, partnership, trust, or other legal entity, or any combination thereof, who holds any class of membership in the Association "Association Property.'' shall mean all areas of the Property and Project, other than and expressly excluding the Lots, Parcel 123, and any property dedicated for public purpose, together with any and all improvements and Facilities located thereon and any additional property annexed within the jurisdiction of the Association in accordance with Article II hereof. Unless and until Parcel 123 is annexed within the jurisdiction of the Association in accordance with Article II hereof, which annexation shall be in Declarant's sole subjective and absolute discretion, PARCEL 123 IS NOT PART OF THE ASSOCIATION PROPERTY "Class A Association Member" shall mean every person, group of persons, corporation, partnership, trust or other legal entity, or any combination thereof, who is an Owner of any Lot which is part of the Property "Class B Association Member" shall mean the Declarant, its successors, assigns or nominees, and shall include every person, group of persons, association, corporation, limited liability company, partnership, trust or other legal entity, or any combination thereof, who shall obtain any Class B membership by specific assigrunent in writing from the Declarant. 0802:

9 "Common Expenses" shall mean and refer to the actual and estimated expenses of operating the Association, including, without limitation, a reasonable reserve and expenses for the maintenance, repair and/or replacement of the Association Property in accordance with Article IX hereof and all annual and special assessments found to be necessary or appropriate by the Board in accordance with Article V hereof, and such other costs and expenses as may be found to be necessary or appropriate by the Board of Directors of the Association (the "Board") pursuant to this Declaration and the Association Documents "Community-Wide Standard" shall mean the standard of conduct, maintenance or other activity generally prevailing in connection with the Property. Such standard may be more specifically determined and set forth by the Board "Declarant" shall be HKS 4, LLC, a Delaware limited liability company, its successors and assigns, but only to the extent that any of the rights, reservations, easements, interests, exemptions, privileges or powers of the Declarant are specifically assigned or transferred to any such successors or assigns by an instrument in writing "Development Plans" shall mean and refer collectively to the approved site plan and plats for the Property and Project, including, by way of example and not of limitation, the Master Plan, as well as any and all amendments,. modifications and extensions thereof as may be made from time to time in accordance with all applicable laws "Eligible Mortgage Holder" shall mean a holder, insurer or guarantor of a First Mortgage on a Lot or the Association Property, as applicable, who has submitted a written request for notice from the Association of amendments to this Declaration or the Association Documents, or other significant matters which would affect the interests of the mortgagee "Emergency" and its various derivations shall mean any event, circumstance or condition created or arising out of the use, operation, or occupancy of any portion of the Property or Project, including, but not limited to, any Lot, or the Association Property, which may, in the absence of immediate action by the Declarant, the Parcel 123 Owner, an Owner, or the Association, as applicable, and as otherwise provided under this Declaration (i) pose an immediate threat or irreparable harm to the Declarant, the Parcel 123 Owner, the Association, or any Owner or Association Member, or their respective successors, assigns, tenants, subtenants, agents, officers, directors, employees, agents, contractors, customers, visitors, licensees, invitees, guests, members or concessionaires or any other third party or (ii) pose an immediate threat or irreparable harm or significant property damage to any portion of the Property or Project (including, but not limited to, any Lot or the Association Property) or to any property adjacent to the Property or Project or to Parcel123, or (iii) violate or result in the revocation of any or all authorizations, approvals, certificates or permits or other instruments or documents that are issued by and from any local, county, state or federal agency or body which govern the occupancy, use and operation ofthe Property or Project (including, but not limited to, any Lot or the Association Property) or Parcel 123, or (iv) invoke, create or impose civil or criminal liability upon the Declarant, the Parcel 123 Owner, the Association or any Owner or Association Member by any govenunental authority or third parties as a result of 8 DB02: I

10 BIK: 3687 PrG:: 222 the acts or omissions of the Declarant, the Parcel 123 Owner, the Association or any Owner or Association Member or (v) as reasonably determined by Declarant "Facilities" shall mean any and all improvements, structures and facilities or other betterments, including, by way of illustration and not limitation, (i) private streets, parking areas, sidewalks, active and passive recreational facilities (including, but not limited to, any trails and walkways, and pool facilities), any Irrigation Facilities, entrance features or improvements, and street lighting, (ii) any and all storm water management facilities and utility services (including, but not limited to, any private community sewer system) to the extent that Sussex County, Delaware, or any other governmental agency or third party does not assume responsibility for the maintenance, repair and replacement of the storm water management facilities, including, without limitation, drainage pipes, infiltration trenches, ponds, basins, swales, berms, out-flow control devices, drainage areas, filters, inlets, oil/grit separators and underground facilities, if any, whether such stoltil. water management facilities are located within the Property or not, (iii) any rights-of-way, swales, culvert pipes, entry strips, signage, and entrance features or improvements that are situated within or that are appurtenant to and serve the Property, including, without limitation, any landscaping and other flora and improvements situated thereon, and (iv) any other real and personal property, facilities and equipment, including, but not limited to, any pool facilities "Irrigation Facilities" shall mean and refer to any above or below ground infrastructure (including but not limited to equipment, improvements, apparatus, pipes, conduits and sprinkler heads) installed by the Declarant and designed and intended to be used for the purpose of watering the landscaping located on the Property, including, but not limited to, trees, shrubs, lawns, and other vegetation located on the Lots or Association Property, as applicable "Lawn and Garden Area" shall mean and refer to any portion ofthe front, side or rear (if applicable) yard areas of any Lot that contains grass, shrubs, bushes, trees or other planted materials; provided, however, that any portion of a Lot which is enclosed by a wall, fence or other obstruction and which is not readily accessible to the Association as detennined by the Board shall not be considered a Lawn and Garden Area "Laws" shall mean all statues, laws, rules, regulations, ordinances and similar enactments or promulgations, by and from any local, county, state or federal agency or body, including, but not limited to, environmental laws and regulations and applicable zoning, subdivision, health and building codes and any and all authorizations, approvals, certificates or pennits or other instruments or documents that are issued by and from any local, county, state or federal agency or body which govern the ownership, occupancy, use, or operation (including, but not limited to, any maintenance, repair and or replacement) of all or any portion of the Property or Project, including, but not limited to, the Lots or Association Property "Lot" shall mean any one of the Lots, and shall not include and express! y exclude Parcel 123, the Association Property, any property dedicated for public use, and any other areas of the Property or Project. 0802:

11 ~--~ ~ IBIK:: 3687 PG: "Mortgagee" shall mean the holder of any recorded mortgage encumbering one or more of the Lots or all or any portion of the Association Property. "First Mortgage", as used herein, shall mean a mortgage with priority over all other mortgages. As used in this Declaration, the term "mortgagee" shall mean any mortgagee and shall not be limited to institutional mortgagees. As used in this Declaration, the term "institutional mortgagee" or "institutional holder" shall include banks, trust companies, insurance companies, mortgage insurance companies, savings and loan associations, trusts, mutual savings banks, credit unions, pension funds, mortgage companies, Federal National Mortgage Association ("FNMA"), Government National Mortgage Association ("GNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), all corporations and any agency or department of the United States Government or of any state or municipal government, or any other organization or entity which has a security interest in any Lot or all or any portion of the Association Property. In the event any mortgage is insured by- the Federal Housing Administration ("FHA") or guaranteed b.y the Department of Veterans Affairs ("VA"), then as to such mortgage the expressions "mortgagee" and "institutional mortgagee" include the FHA or the VA as the circumstances may require, acting, respectively, through the Federal Housing Commission and the Secretary of Veterans Affairs or through other duly authorized agents "Owner" shall mean and refer to the record owner, whether one or more persons, group of persons, association, corporation, limited liability company, partnership, trust or other legal entity, or any combination thereof, of fee simple title to any Lot, including the Declarant, but specifically excluding those having such interest merely as security for the performance of an obligation "Parcel 123 Owner" shall mean and refer to the record owner, whether one or more persons, group of persons, association, corporation, limited liability company, partnership, trust or other legal entity, or any combination thereof, of fee simple title to Parcel 123, including the Declarant, but specifically excluding those having such interest merely as security for the performance of an obligation "Parcel 12 3" shall mean and refer to that certain lot of land, comprising approximately 5.77 acres, more or less, as the same is more particularly depicted on the Master Plan as Lot 123, together with any and all improvements and Facilities located thereon and any additional property annexed within the jurisdiction of tlie Parcel 123 Owner by the Parcel 123 Owner in its sole subjective and absolute discretion "Participating Builder" refers to a person or entity other than the Declarant that, in the ordinary course of such person's or entity's business, constructs residential structures on any portion of the Property or Project, including, but not limited to, the Lots, for sale or lease to others, including by way of example and not limitation, R.D.M., Inc "Project" as used in this Declaration shall mean and refer to the residential community, together with the improvements erected and maintained thereon, to be known as "The Marina At Pepper's Creek" consisting of the Lots and Association Property and all Facilities located on any of the foregoing, all to be built on the Property. Notwithstanding anything to the contrary contained herein, the Project shall expressly exclude Parcel 123, unless DB02:

12 ~~~~~~~~-~~-~-~~-~~ ~---~--- ~-----~ ~--~-~~-~-~~---~~----- ~ ~ ~ ~~~~~~ -~~-- -~ ~ BK:: 3687 PG:: 224 and until the Declarant, in its sole subjective and absolute discretion and judgment, decides to extend the covenants, conditions, restrictions and easements of this Declaration to Parcel 123 in accordance with Section 2.2 hereof "Property" shall mean and refer to that certain real property described on Exhibit "A" attached hereto and made a part hereof. Notwithstanding anything to the contrary contained herein, the Property shall expressly exclude Parcel123, unless and until the Declarant, in its sole subjective and absolute discretion and judgment, decides to extend the covenants, conditions, restrictions and easements of this Declaration to Parcel 123 in accordance with Section 2.2 hereof "Recorder's Office" shall mean and refer to the Office of the Recorder of Deeds in and for Sussex County, Delaware "Wastewater Agreement" shall mean and refer to that certain Wastewater Agreement for the Project between Declarant and Sussex County, a political subdivision of the State of Delaware (or other authorized provider), with respect to the operation, management, control, repair, maintenance and/or replacement of community waste water system, together with any and all amendments thereto and any replacements thereof, together with any collateral documents, permits, approvals, agreements or easements related thereto "Wastewater Service Line" shall mean the pipe, clean-outs, and fittings that lie between the structure foundation or exterior wall on any Lot and the wastewater collection system owned by the Utility "Wastewater Utility" shall mean Sussex County, a political subdivision of. the State of Delaware, its successor in interest or such other entity that is or may become responsible for collecting, treating and disposing of sanitary sewer wastewater from improved Lots or the Association Property and any other improved or unimproved areas within the Property. ARTICLE II DECLARANT'S RIGHT TO SUBJECT PROPERTY TO DECLARATION 2.1. Property Subject to this Declaration. The Property shall be held, conveyed, hypothecated, encumbered, sold, leased, rented, used, occupied and improved subject to all of the covenants, conditions and restrictions of this Declaration Annexations. (a) The covenants, conditions, restrictions, and easements of this Declaration may be extended to any real property contiguous to or in the vicinity of the Property (the "Annexable Property"). Any portion of the Annexable Property may be annexed within the Project by the Declarant without the consent of any Owner, Association Member or the Association, Parcel 123 Owner or any Mortgagee, for a period of twenty (20) years from the date of recordation of this Declaration; provided, however, that if the Declarant is delayed in the improvement and development of the Property on account of a sewer, water, building permit or DB02: I

13 BK: 3687 F'G:: 225 other moratorium or any other causes or events beyond the Declarant's control, then the aforesaid twenty (20)-year period shall be extended by a period of time equal to the length of the delays or an additional three (3) years, whichever is greater. The scheme of this Declaration shall not, however, be extended to include any Annexable Property unless and until the Annexable Property is annexed within the Project, as determined by Declarant in its sole subjective and absolute discretion and in compliance with all Laws, by the recordation of a Supplementary Declaration as provided in Section 2.2(b) hereof. Except as otherwise provided above with respect to annexations of real property by the Declarant, annexations of real property within the Project and the jurisdiction of the Association shall require the consent of two-thirds (2/3) of each class of Association Members. (b) Any annexations made pursuant to this Article, or otherwise, shall be made by recording a Supplementary Declaration with the Recorder's Office, which Supplementary Declaration shall extend the scheme of this Declaration to such annexed property. Any Supplementary Declaration made pursuant to the provisions of this Article, or otherwise, may contain such complementary or supplemental additions and modifications to the covenants, conditions, restrictions, and easements set forth in this Declaration as may be considered necessary by the maker of such Supplementary Declaration to reflect the different character or use, if any, of the annexed property, including, without limitation, a partial or complete waiver of all or any portion of the covenants, conditions, restrictions, and/or easements of this Declaration with respect to the annexed property. Every Owner of a Lot in property annexed within the Project and the jurisdiction of the Association shall have a non-exclusive easement (in common with others entitled thereto) of enjoyment in and to the Association Property and such other rights of use as are provided in Article III of this Declaration Deannexation. The Declarant may deannex any property annexed within the Project and the jurisdiction of the Association as provided in Section 2.2 or any portion of the Property without the consent of any Owner, Association Member, or the Association, Parcel123 Owner or Mortgagee, for a period of twenty (20) years from the date of recordation of this Declaration subject to and in accordance with all Laws; provided, however, that (i) the Declarant is the owner of such property at the time of deannexation, or (ii) if the Declarant is not the owner of such property, the Declarant deannexes such property with the written consent of the owner thereof. If the Declarant is delayed in the improvement and development of the annexed property or any portion of the Property on account of a sewer, water or building permit moratorium or any other cause or event beyond the Declarant's control, then the aforesaid twenty (20)-year period to exercise the deannexation right shall be extended by a period of time equal to the length of the delays or an additional three (3) years, whichever is greater. Any deannexed property shall no longer be subject to the covenants, conditions, restrictions and easements of this Declaration except for (i) any easements, rights, reservations, exemptio:r;ts, powers or privileges reserved to the Declarant pursuant to this Declaration which affect the deannexed property and (ii) any other easements, rights, reservations, exemptions, powers or privileges which are expressly reserved to the Declarant in the instrument effectuating such deannexation. Such deannexation shall be made by recording a Supplementary Declaration with the Recorder's Office, withdrawing the effect of the covenants, conditions, restrictions, and easements of this Declaration from the deannexed property. Such deannexed property may be utilized by the 0802:

14 BK: Declarant and any successor, assign or transferee thereof, in accordance with all applicable Laws. ARTICLE III ASSOCIATION PROPERTY RIGHTS 3.1. Owners' Easements of Enjoyment. Every Owner shall have a nonexclusive right and easement (in common with others entitled thereto) of enjoyment in and to the use of the Association Property which shall be appurtenant to and shall pass with the title to every Lot, subject to the following provisions: (a) the right of the Association to charge reasonable and uniform admission and other fees and assessments for the use of the Association Property; (b) the right of the Association to suspend an Owner's voting rights and right to use the Association Property (i) for any period during which any assessment against such Owner's Lot remains unpaid and (ii), after notice and an opportunity for a hearing, for a period not to exceed sixty (60) _days for any infraction of its published rules and regulations; provided, however, that the obligation of such Owner to pay assessments shall continue unabated during such period of suspension of voting rights or right to utilize the Association Property; (c) the right of the Association to dedicate, sell or transfer all or any part of the Association Property to any public agency, authority, or utility for such purposes and subject to such conditions as may be agreed to by the Association Members. No such dedication, sale or transfer shall be effective without the consent of Declarant (for so long as the Declarant shall own any portion of the Property) and two-thirds (2/3) of the total votes of the Association Members. Notwithstanding anything contained herein to the contrary, the Declarant shall retain control of the Association Property until such time as the Declarant decides to transfer control of the Association to the Owners and/or the Association. Such transfer shall be evidenced by a deed to be recorded in the Recorder's Office and the Owners and the Association, as applicable, shall not refuse to accept the conveyance of any such Association Property, provided the Association Property complies with all applicable Laws. Declarant shall have a limited irrevocable power of attorney coupled with an interest to consummate any such transfer to the extent necessary pursuant to Article XII, Section below. (d) the right of the Association to limit the number of guests, visitors, licensees, invitees, or lessees of Owners utilizing the Association Property; (e) the right of the Association to establish uniform rules and regulations pertaining to the use of the Association Property; (f) the right of the Association to provide for the exclusive use by specified Owners of certain designated parking spaces within the Association Property; (g) the right of the Association, in accordance with the Association Documents and with the consent of the Declarant (for so long as the Declarant shall own any portion of the Property) and two-thirds (2/3) of the total votes of the Association Members, to DB02:

15 ~~ BK::: 3687 PG::: 227 borrow money for the purpose of improving the Association Property in a manner designed to promote the enjoyment and welfare of the Association Members and in aid thereof to mortgage any portion of the Association Property; (h) the right of the Association to take such steps as are reasonably necessary to protect the Association Property against mortgage default and foreclosures; provided, however, that such steps are in conformity with the other provisions of this Declaration; (i) the right of the Association, acting by and through the Board, to grant easements, licenses or other rights of use of the Association Property to persons or entities that are not Association Members for such consideration and on such terms and conditions as the Board may from time to time consider appropriate or in the best interest ofthe Association; (j) the right of the Association to be the lessee of any portion or all of the Association Property and the right of the Association to enforce the terms of the lease with respect to the Association Property against such property and the Owners and their guests, visitors, licensees, invitees, or lessees; and (k) the right of the Association, acting by and through the Board, to transfer or convey portions of the Association Property for purposes of adjusting the boundary lines of one or more Lots or the Association Property; provided, however, that such transfer or conveyance has been approved, as necessary, by applicable local governmental authorities or agencies, or is otherwise in confonnance with applicable Laws Limitations. Notwithstanding any other provision of this Declaration to the contrary, the Association shall have no right to suspend the right of any Association Member to use the Association Property for necessary, ordinary and reasonable vehicular and pedestrian ingress and egress to and from such Owner's Lot, or to suspend any easement, license or other property interest over the Association Property for stonn water drainage, electrical energy, water, sanitary sewer, natural gas, telephones, or similar services or utilities to the Lots. The Association Property will be available for the type of active and passive recreational and open space uses contemplated under the Development Plans and the Laws. All Owners shall have the non-exclusive right (in common with others entitled thereto) to access and make reasonable use of the Association Property as described in the approved Development Plans and the Laws both before and after they are conveyed to the Association, with the exception of those areas as may be reasonably and necessarily restricted for access because of temporary safety reasons in connection with the development of the Property or Project, subject to the terms and provisions ofthis Declaration. In addition, the rights of the Association, as provided in this Declaration, are subject to (a) the right of the Declarant, as more fully set forth in Section 8.1 of this Declaration, to grant easements, to utilize reserved rights and easements, and to otherwise utilize the Association Property as it deems appropriate, in the Declarant's sole subjective and absolute discretion and judgment, in connection with the development and use of the Property and Project, and (b) the right of the Parcell23 Owner, as more fully set forth in Article XIII of this Declaration, to grant easements, to utilize reserved rights and easements, and to otherwise utilize those portions of the Association Property as it deems appropriate or reasonably necessary, in the 14 DB02: I

16 Parcel123 Owner's sole subjective and absolute judgment, in connection with the development and use ofthe Parcel Delegation of Use. Any Owner may delegate, in accordance with and subject to the Association Documents and the rules and regulations of the Association as well as this Declaration, such Owner's right of enjoyment to the Association Property to such Owner's family members, guests, visitors, licensees, invitees, or lessees. ARTICLE IV ASSOCIATION MEMBERSHIP AND VOTING RIGHTS 4.1. Association Membership. Every Owner of a Lot shall be a member of the Association. Membership shall be appurtenant to and may not be separated from ownership of any Lot Association Voting Rights. The Association shall have two (2) classes of voting membership; Class A and Class B Memberships: Class A. With the exception of the Declarant (until conversion of the Class B memberships as provided below), every Owner of any Lot which is part of the Property and Project shall be a Class A Member of the Association; provided, however, that any such person or group of persons, association, corporation, limited liability company, partnership, trust or other legal entity, or any combination thereof, who holds such interest solely as security for the perfonnance of an obligation shall not be a Class A Member solely on account of such interest. Class A Members shall be entitled to one (1) vote for each Lot in which they hold the interest required for membership. When more than one (1) person or entity are Owners of any Lot, all such persons and entities shall be Association Members. The vote for such Lot shall be exercised as they among themselves determine, but in no event shall more than one (1) vote be cast with respect to any Lot owned by a Class A Member. In the event that Owners, who hold title to any Lot either by the entireties, or as joint tenants, or as tenants in common, attempt to cast the vote for such Lot in conflicting ways, such vote shall be recorded as a fractional vote. Class B. The Class B Member shall be the Declarant, its successors and assigns. The Class B membership shall be entitled to three hundred sixty-six (366) votes for as long as Declarant owns all or any portion of the Property or Project; provided, however, that when, in its sole and absolute discretion, the Class B Member elects to convert its Class B memberships into Class A membership(s), the Class B memberships shall cease and be converted to Class A memberships. Within a reasonable time (not to exceed ninety (90) days) after the occurrence of the abovereferenced membership conversion (the "Conversion") the Declarant shall call an organizational meeting of the Association, if the same has not previously occurred. At the time of the Conversion, all privileges, rights, powers, duties, obligations and authority of the Declarant with respect to the Association shall automatically become assigned to and vest in the Association and the Association shall automatically assume such rights, powers, duties, obligations and authority without the need or requirements of any further action on the part of Declarant or the Association :

17 fe'.k:: 3687 PG:: Proxies. Each Owner entitled to vote at a meeting of the Association, is entitled to vote in person or by proxy, in a writing signed by such Owner and provided to the Association, but no proxy shall be voted after one (1) year from its date, unless it provides for a longer period. Every proxy shall be revocable and shall automatically cease upon conveyance of the Lot owned by the Owner executing the proxy. Such right to vote shall be subject to the right of the Board to close the transfer books or to fix a record date for voting Owners as hereinafter provided and if the Board shall not have exercised such right, no vote shall be cast at any election for Directors of the Board by anyone who shall have accepted membership in the Association within ten (10) days of such election. ARTICLEV COVENANT FOR MAINTENANCE ASSESSMENTS 5.1. Creation o(the Lien and Personal Obligation for Assessments. There are hereby created assessments for Common Expenses as may be from time to time specifically authorized by the Board to be commenced at the time and in the manner set forth in this Article V. Subject to Section 5.8 and Article XIII hereof, each Owner of any Lot 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: (i) annual assessments and (ii) special assessments. The annual and special assessments, together with interest, costs, late fees and reasonable attorneys' fees, shall be a charge on the Lot (including all improvements thereon), and shall be a continuing lien upon the Lot against which each such assessment is made. Each such assessment, together with interest, costs, late fees and reasonable attorneys' fees, shall also be the personal obligation of the person who was the Owner of the Lot at the time when the assessment fell due. The personal obligation for delinquent assessments shall not pass to a prior Owner's successors in title unless expressly assumed in writing by such successors Purpose o(assessments. (a) The assessments levied by the Association shall be used exclusively to (i) promote the recreation, health, safety, and welfare of the residents in the Project; (ii) for the improvement, maintenance, repair, and replacement of the Association Property; (iii) for the payment of real estate taxes, assessments and utility services for the Association Property; and (iv) for management fees, administration expenses, insurance and all other costs and expenses incurred by the Association in the proper conduct of its activities, including, without limitation, reserves for replacements or contingencies and charges accruing under any cross-easement or other agreement (including, without limitation, any such agreement for the maintenance of any Association Property and fees for the Wastewater System under the Wastewater Agreement). The assessments may also be used for the maintenance, repair and replacement of any property or facilities serving or appurtenant to the Project which the Association is obligated or elects to maintain whether or not such property or facilities are owned by the Association or are located within the Project (including, without limitation, any property or facilities which the Association is authorized to maintain pursuant to this Declaration). (b) The assessments levied by the Association with respect to the Association Property shall also be used for maintenance, repair and replacement (including 0802: LOO 1 16

18 """"---" ""-""""""-""""""- BK:: 3687 PG: 230 reserves) of any and all storm water management facilities to the extent that they are part of the Association Property and Sussex County, Delaware does not assume responsibility for the maintenance, repair and replacement of the storm water management facilities, including, without limitation, drainage pipes, infiltration trenches, ponds, basins, swales, berms, out-flow control devices, drainage areas, filters, inlets, oil/grit separators and underground facilities, if any, whether such storm water management facilities are located within the Project or not, as long as such storm water management facilities are designed to benefit or serve any portion of the Project, or are required or intended to be maintained by the Association pursuant to any easement, agreement or the direction of any governmental authority or agency. The Association shall not refuse to accept the conveyance of any such facilities from the Declarant so long as such facilities are in compliance with all applicable Laws. Declarant shall have a limited irrevocable power of attorney coupled with an interest to consumate any such conveyance to the extent necessary pursuant to Article XII, Section below. Such storm water management facilities may also benefit property not within the jurisdiction of the Association, including, by way of example and not of limitation, Parcell23 and the maintenance of such facilities may be set forth herein, or in a cross-easement or other agreement, in which event the Association shall maintain the facilities pursuant to the terms of this Declaration or such other agreement Annual Assessments, Budgets. (a) Until January 1 of the year immediately following the first conveyance of a Lot to a Class A Association Member, the applicable annual assessment shall be the amount established by the Declarant. Thereafter, the Board shall from time to time set the annual assessment at an amount sufficient to meet the Common Expenses of the Association. Without limiting the generality of the foregoing, the Association shall, at all times, levy and collect annual assessments in sufficient amounts to (i) maintain the Association Property in accordance with sound property and facility management standards and (ii) establish necessary reserves for ili.e future repair and replacement of any capital improvements compromising the Association Property. The Board shall determine the amount of the annual assessment before the beginning of each fiscal year in connection with preparation of the Association's annual budget, and may do so at more frequent intervals should circumstances so require. Upon resolution of the Board, installments of annual assessments may be levied and collected on a monthly, quarterly, semi-annual or annual basis. Any Class A Association Member may prepay one or more installments of any annual assessment levied by the Association without premium or penalty. (b) The Board shall make a reasonable effort to prepare a budget at least thirty (30) days before the beginning of each fiscal year. The Board shall make a reasonable effort to cause a copy of the budget, and the amount of the assessments to be levied against each Lot for the following year, to be delivered to each Owner at least thirty (30) days prior to the commencement date of the new assessments. The budget shall be approved by majority vote of the Board; provided, however, that (after conversion of all of the Class B Association memberships) any budget under consideration by the Board pursuant to this Section 5.3 that (i) would result in an increase in the Common Expenses of the Association in excess of twenty-five percent (25%) of the budgeted amount for Common Expenses set forth in the budget for the immediately preceding fiscal year, or (ii) would result in an increase in the annual 0802: II

19 IE'-K: 3687 IF'G::: 231. assessments payable by the Association Members in excess of thirty percent (30%) of the budgeted amount for annual assessments set forth in the budget for the immediately preceding fiscal year, shall be approved by the affirmative vote of Association Members entitled to cast not less than sixty-seven percent (67%) of the votes of the Association Members present, in person or by proxy, and voting at any meeting of the Association duly called for this purpose. Subject to the foregoing, all budgets approved by the Board shall become effective unless a special meeting of the Association is duly held and at such special meeting the budget is disapproved by a vote of Association Members entitled to cast not less than sixty-seven percent (67%) of the votes of Association Members present, in person or by proxy, and voting at such meeting. Notwithstanding the foregoing, however, in the event that the membership disapproves the budget or the Board fails for any reason to determine the budget for any fiscal year of the Association, then and until such time as a budget shall have been determined as provided herein, the budget in effect for the immediately preceding fiscal year shall continue for the succeeding fiscal year Initial Worldng Capital Contribution. The Declarant shall establish a working capital fund for the initial and ongoing operation of the Association. An assessment (in addition to all other assessments) equal to Five Hundred Dollars ($500.00) is hereby levied to provide the working capital of the Association and is payable by each Owner upon the purchase of such Owner's Lot and by the purchaser of any such Lot upon any voluntary subsequent resale or other transfer of the Lot (with the sole exception of a mortgagee who acquires title to such Lot by a foreclosure or a bona fide deed in lieu of foreclosure transaction). All such working capital arising from the foregoing assessments may be used by the Association towards the Common Expenses and to make up any budget deficits Special Assessments. Budget Amendments. (a) In addition to the annual assessments authorized by this Article, the Association may levy, in any assessment year, one or more special assessments applicable to that year only for such purposes as the Board may deem appropriate, including, without limitation, for purposes of funding, in whole or in part, the cost of any construction, reconstruction, repair or replacement of any capital improvement located upon the Association Property and all fixtures and personal property related thereto, and to meet unforeseen or special expenditures as well as any budget deficit; provided, however, that, after conversion of all of the Class B memberships, any such assessment shall be approved by Association Members entitled to cast not less than sixty-seven percent (67%) of the votes of Association Members present, in person or by proxy, and voting at any meeting of the Association duly called for this purpose; provided, further, that any special assessment required because of conditions which, if not corrected, could constitute an Emergency or reasonably result in a threat to the health or safety of the Association Members or a significant risk of damage to the Association Property may be approved by the Board without the foregoing vote of the Association Members. (b) The Association may also levy a special assessment against any Owner to reimburse the Association for costs incurred in bringing the Owner and/or such Owner's Lot into compliance with the provisions of this Declaration, or the Association Documents and rules and regulations of the Association, or any applicable Laws; provided, that 0802: