AMENDMENT TO BYLAWS
OF THE ASSOCIATION OF UNIT OWNERS
OF THE ISLAND

THIS AMENDMENT TO BYLAWS OF THE ASSOCIATION OF UNIT OWNERS OF THE ISLAND is made this 31st day of January, 1997 by ASSOCIATION OF UNIT OWNERS OF THE ISLAND (the “Association”).

RECITALS

1. Association is a condominium association established pursuant to the Declaration Submitting the Island to Oregon Unit Ownership Law and dated April 28, 1979 and recorded June 29, 1979 in Book 102 of the Records of Lincoln County, Oregon at page 626.

2. The By-Laws of the Association of Unit Owners of the Island were recorded in the records of Lincoln County, Oregon on June 29, 1979 in Book 102, commencing on page 641, and amended by instruments recorded in Book 129, page 1579 and Book 251, page 2355 of the Records of Lincoln County, Oregon (the “By-Laws”).

3. Not less than 75 percent of the owners of units within The Island have voted to amend the Bylaws in certain respects.

NOW, THEREFORE, pursuant to Article VIII of the Bylaws and ORS 100.410, the Bylaws are hereby amended as follows:

1. Principal Office. Article I, Section 2 is hereby amended to read as follows:

“2. Principal Office. The principal office of the Association shall be located at PO Box 246, Gleneden Beach, Oregon 97388, or such other address as may be designated by the Board of Directors from time to time.”

2. Incorporation. The following Section 7 is hereby added to Article I:

“7. Incorporation. Upon approval of the Board of Directors, the Association may be incorporated under the Oregon Nonprofit Corporation Law. In such event, the Articles of Incorporation shall be consistent with the Declaration and these Bylaws, and these Bylaws will constitute the Bylaws of the incorporated association.”

3. Ballot Meetings. The following Section 12 is hereby added to Article II:

“12. Ballot Meetings. At the discretion of the Board of Directors, any matter which might come before the Association at a meeting, including election of directors, may be determined by proxy ballot, rather than at a formal gathering. Ballots shall be sent to all unit owners in the same manner as notice of meetings with a specific deadline for return of ballots. Ballots for such meetings must be properly executed and returned in sufficient quantity to constitute a quorum, and determination of the matter presented shall be based upon the require percentage of ballots returned, unless approval of a specified percentage of all voting rights is required by law, the Declaration or these Bylaws. The vote of a ballot meeting shall be determined by the Board of Directors with 48 hours of the deadline for return of ballots. Within 10 days after the ballots have been counted, each unit owner shall be notified by mail or other delivery of written notice of the results of the ballot meeting or that a quorum of ballots was not returned.”

4. Powers and Duties. The following paragraphs (m) and (n) are hereby added to Article III, Section 6:

“(m) Preparing or causing to be prepared and filed any required income tax returns or forms for the Association.”

“(n) The filing of an Annual Report and any amendment in accordance with ORS 100.250.”

5. Insurance. Article 3, Section 15 is hereby amended to read as follows:

“5 Insurance. The Board of Directors shall obtain the following insurance and fidelity bonds. In addition, the Board of Directors, in its discretion, may obtain such other insurance as it deems necessary to protect the interests of the Association or unit owners. The Board of Directors shall conduct an annual insurance review which, if appropriate, shall include an appraisal of all improvements contained in the condominium.”

“5.1 Types of Insurance. For the benefit of the Association and the unit owners, the Board of Directors shall obtain and maintain at all times, and shall pay for out of the common expense funds, the following insurance:

“5.1.1 Property Damage Insurance

“(a) The Association shall maintain a policy or polices of insurance covering loss or damage from fire, with standard extended coverage and “all risk” endorsements, and such other coverage as the Association may deem desirable.”

“(b) The amount of the coverage shall be for not less than one hundred percent (100%) of the current replacement cost of the units and common elements (exclusive of land, foundation, excavation and other items normally excluded from coverage), subject to a maximum deductible of the lesser of $10,000 or one percent (1%) of the policy amount.”

“(c) The policy or polices shall include all fixtures and building service equipment to the extent that they are part of the common elements and all personal property and supplies belonging to the Association, together with all fixtures, improvements and alterations comprising a part of each unit and refrigerators, air conditioners, cooking ranges, dishwashers and clothes washers and dryers contained within units and owned by the unit owner.”

“(d) Such policy or policies shall name the Association as insured, and shall provide for loss payable in favor of the Association, as a trustee of each unit owner and each such unit owner’s mortgagee, as their interests may appear. The policies shall contain the standard mortgage clause, or equivalent endorsement (without contribution) which is commonly accepted by institutional mortgage investors in Oregon.”

“5.1.2 Liability Insurance.

“(a) The Association shall maintain comprehensive general liability insurance coverage insuring the Declarant, the Association, the Board of Directors, the unit owners and the managing agent, against liability to the public or to the owners of units and of common elements, and their invitees or tenants, incident to the operation, maintenance, ownership or use of the property, including legal liability arising out of lawsuits related to employment contracts of the Association. There may be excluded from such policy or policies coverage of a unit owner (other than as a member of the Association or Board of Directors) for liability arising out of acts or omission of such owner and liability incident to the ownership and/or use of the part of the property as to which such unit owner has the exclusive use or occupancy.”

“(b) Limits of liability under such insurance shall not be less than One Million Dollars ($1,000,000) on a combined single limit basis.”

“(c) Such policy or policies shall be issued on a comprehensive liability basis and shall provide a cross liability endorsement wherein the rights of named insured under the policy or policies shall not be prejudiced as respects his, her or their action against another named insured.”

“5.1.3 Worker’s Compensation Insurance. The Association shall maintain workers’ compensation insurance to the extent necessary to comply with any applicable laws.”

“5.1.4 Fidelity Insurance.

“(a) The Association shall maintain fidelity insurance for all officers, directors, trustees and employees of the Association and all other persons handling or responsible for funds of or administered by the Association. In the event the Association has retained a management agent, such agent shall maintain fidelity insurance for its officers, employees and agents handling or responsible for funds of, or administered on behalf of the Association.

“(b) The total amount of fidelity insurance coverage required shall be based upon the best business judgment of the Board of Directors.”

“(c) Such fidelity insurance shall name the Association as obligee and shall contain waivers by the issuers of the insurance of all defenses based upon the exclusion of persons serving without compensation from the definition of ‘employees’ or similar terms or expressions. The insurance shall provide that it may not be canceled or substantially modified (including cancellation for nonpayment of premium) without at least 10 days’ prior written notice to the Association.”

“5.1.5 Directors’ and Officers’ Liability Insurance. The Association shall maintain a policy of directors’ and officers’ liability insurance with coverage in the amount of not less than One Million Dollars ($1, 000,000), subject to a reasonable deductible.”

“5.1.6 Insurance by Unit Owners. Each unit owner shall be responsible for obtaining, at such owner’s own expense, insurance covering his or her property not insured under Section 5.1.1 above and against his or her liability not covered under Section 5.1.2 above, unless the Association agrees otherwise.”

“5.2 Other Insurance Requirements. Insurance obtained by the Association shall be governed by the following requirements:

“(a) All policies shall be written with the State of Oregon or a company licensed to do business in the State of Oregon which falls into a B general policyholder’s rating or a financial performance index of 6 or better, as designated in Best’s Key Rating Guide, or an A or better rating from Demotech, Inc.”

“(b) Notwithstanding the provisions of Section 5.1 above, there may be named as an insured, on behalf of the Association, the Association’s authorized representative, including any trustee with whom the Association may enter into any Insurance Trust Agreement, or any successor to such trustee. Such insurance trustee shall have exclusive authority to negotiate losses under any property or liability insurance policy. Each unit owner appoints the Association, or any insurance trustee or substitute trustee designated by the Association, as attorney-in-fact for the purpose of purchasing and maintaining such insurance including: the collection and appropriate disposition of the proceeds thereof, the negotiation of losses and execution of releases of liability, the execution of all documents, and the performance of all other acts necessary to accomplish such purchase. The Association or insurance trustee shall receive, hold or otherwise properly dispose of any proceeds of insurance in trust for unit owners and their first mortgage holders, as their interests may appear.”

“(c) All property insurance policies shall contain a ‘Special Condominium Endorsement’ or its equivalent providing for the following: recognition of any Insurance Trust Agreement, a waiver of the right of subrogation against unit owners individually, that the insurance is not prejudiced by any act or neglect of individual unit owners which is not in the control of such owners collectively, and that the policy is primary in the event the unit owner has other insurance covering the same loss.”

“(d) For purposes of this article, insurance policies are unacceptable where (i) under the terms of the insurance carrier’s charter, bylaws or policy, contributions or assessments may be made against the Association or unit owners, or (ii) by the terms of the carrier’s charter, bylaws or policy, loss payments are contingent upon action by the carrier’s Board of Directors, policy holders or members, or (iii) policy includes any limiting clauses (other than insurance conditions) which could prevent the owners from collecting insurance proceeds.

“(e) All policies required by this article shall provide that they may not be canceled or substantially modified without at least 10 days’ prior written notice to the Association and to each holder of a first mortgage which is listed as a scheduled holder of a first mortgage in the insurance policy. Evidence of insurance shall be issued to each unit owner and mortgagee upon request.”

“(f) Each unit owner shall be required to notify the Board of Directors of all improvements made by the owner to his or her unit, the value of which is in excess of Five Hundred Dollars ($500). Nothing in this paragraph shall permit an owner to make improvements without first obtaining the approval of the Board of Directors pursuant to Article VII, Section 2.”

“(g) Any unit owner who obtains individual insurance policies covering any portion of the property other than such owner’s personal property and fixtures shall file a copy of such individual policy or policies with the Association within thirty (30) days after the purchase of such insurance.”

“5.3 Optional Provisions. The Board of Directors shall make every effort to secure insurance policies that will provide for the following:

“(a) To the extent appropriate and available at reasonable cost, the Association shall maintain additional coverage against such other risks as are customary covered with respect to projects similar in construction, location and use, including but not limited to, host liquor liability, contractual and all-written contract insurance, employer’s liability insurance, comprehensive automobile liability insurance, and an endorsement patterned after “use and occupancy” insurance providing relief from monthly assessments while a unit is uninhabitable due to a covered loss.”

“(b) If reasonably available, the insurance policies shall include Inflation Guard Endorsement, and Construction Code Endorsements (such as a Demolition Cost Endorsement, a Contingent Liability from Operation of Building Laws Endorsement, and an Increased Cost of Construction Endorsement).”

“(c) Flood insurance, if the condominium is in a Special Flood Hazard area.”

6. Open Meetings. The following Section 16 is hereby added to Article III:

“16 Open Meetings. All meetings of the Board of Directors shall be open to unit owners. Such meetings may be conducted by telephonic communication, except that if a majority of the units are principal residences of the occupants, then: (a) for other than emergency meetings, notice of each Board of Director’s meeting shall be posted at a place or places on the property at least three (3) days prior to the meeting, or notice shall be provided by a method otherwise reasonably calculated to inform the unit owners of such meeting; and (b) only emergency meetings of the Board of Directors may be conducted by telephonic communication.”

7. Default in Payment of Assessments. Article V, Section 5 is amended to read as follows:

“5. Default in Payment of Assessments. In the event of default by any unit owner in paying any assessments to the Association, including assessed common expenses and any other charge imposed or levied by the Association pursuant to the provisions of the Declaration, these bylaws or the Oregon Condominium Act, such unit owner shall be obligated to pay interest at the rate of twelve percent (12%) per annum on such assessment from the due date thereof, or at such greater rate as may be established by the Board of Directors from time to time, not to exceed the maximum lawful rate, if any. In addition, the defaulting unit owner shall pay a late charge for any assessment not paid within ten (10) days of its due date in the amount of five percent (5%) of the delinquent payment, or such other reasonable late charge as may be established by the Board of Directors from time to time, together with all expenses incurred by the Association in collecting such unpaid assessments, including attorneys’ fees (whether or not suit is instituted, and at trial or any appeal or petition for review therefrom). If the assessment is not paid within thirty (30) days of its due date, the Board of Directors may declare any remaining installments of assessments for the balance of the fiscal year immediately due and payable. The Board of Directors shall have the right and duty to recover for the Association such assessments, together with such charges, interest and expense of the proceedings, including attorneys’ fees, by an action brought against such unit owner or by foreclosure of the lien upon the unit granted by the Oregon Condominium Act. The Board of Directors shall notify the holder of any first mortgage upon a unit of any default not cured within sixty (60) days of the date of default.”

8. Availability of Records. Following Section 7 is hereby added to Article VI:

“7. Availability of Records. During normal business hours or under other reasonable circumstances, the Association shall make available to unit owners, prospective purchasers and lenders, and to holders, insurers, or guarantors of any first mortgage, current copies of the Declaration, Bylaws other rules concerning the condominium, amendments or supplements to such documents and the books, records, financial statements and current operating budget of the Association. Upon written request, the Association shall make such documents, information and records available to such persons for duplication during reasonable hours. The Association may charge a reasonable fee for furnishing copies of such documents, information or records.

9. Maintenance and Repair. Article VII, Section I is hereby amended to read as follows:

“1. Maintenance and Repair. Except as otherwise provided in Section 3 of this Article for damage or destruction caused by casualty:

“(a) By Unit Owner. Except as otherwise provided in paragraph (b) of this section, the owner of each unit, at his or her own expense, shall be responsible for maintenance of and repairs to such unit and shall keep the same in good order, condition, and repair and shall do all redecorating, painting and staining which at any time may be necessary to maintain the good appearance and condition of the unit. Such repairs shall include, without limitation, maintenance, repair or replacement of any forced air furnace, plumbing, heating and/or air conditioning fixtures, telephones, water heaters, fans, lighting fixtures and lamps within the unit, fireplaces, refrigerators, dishwashers, ranges, other appliances and accessories that may be in or connected to the unit, automatic garage door openers and systems, light bulbs in exterior fixtures for the unit, broken seal damage and window screens for windows and sliding glass doors, interior doors and ordinary maintenance of exterior doors other than casualty damage. Further, each unit owner shall be responsible for damage or destruction to the unit or common elements due to the act or neglect of the unit owner or a member of his or her family or household pet or of a guest or other authorized occupant or visitor of such unit owner to the extent provided in Section 3 (c) of this Article.”

“(b) By Association. The Association shall be responsible for all the maintenance, repairs and replacements to the common elements, including without limitation: decks, fences, railings, gutters, downspouts and underground drains leading from downspouts, roofs, siding, gates, garage doors (except automatic garage door openers and systems), exterior chimney and exterior chimney screens, exterior sensor lights, exterior light fixtures (except light bulbs), casualty damage of windows and sliding glass doors (exclusive of broken seal damage and window screens), casualty damage of doors (leading to exterior only), painting (exterior only), and landscaping.

10. Damage or Destruction. The following provision is hereby added at the end of Article VII, Section 3 (b):

“including that portion of the deductible of the Association’s insurance policy reasonably allocable to the unit.”

The following provision is hereby added at the end of Article VII, Section 3(d):

“If the property is removed from condominium ownership, the insurance proceeds together with the proceeds from the sale of the property, shall be distributed to the unit owners and their mortgagees, as their interest may appear, in the manner described in the Oregon Condominium Act.”

11. Condemnation. Article VII, Section 4 is hereby amended to read as follows:

“4. Condemnation. If any portion of the condominium is made the subject matter of any condemnation or eminent domain proceeding or is otherwise sought to be acquired by a condemning authority, notice of the proceeding or proposed acquisition shall promptly be given to each unit owner and to each mortgagee. The Association shall represent the unit owners in any condemnation proceedings or in negotiations, settlements and agreements with the condemning authority for acquisition of any portion of the common elements, and each unit owner appoints the Association to act as his attorney-in-fact for such purposes. All compensation, damages or other proceeds of the taking, other than any award for moving expenses of specific unit owners, shall be payable to the Association and allocated and distributed as provided in this Section 4.

“(a) Complete Taking. If the entire condominium property is taken, or if unit owners holding ninety percent (90%) of the voting power agree that such substantial portion of the condominium has been taken as to make the project obsolete, then the property shall be deemed removed from unit ownership. In such event, any proceeds of the condemnation paid to the Association, together with any other proceeds upon sale of the remaining condominium property, shall be distributed among the unit owners and their mortgagees, as their interests may appear, in accordance with the provisions of the Oregon Condominium Act.”

“(b) Partial Taking. If less than the entire condominium property is taken and the property is not determined to be obsolete as provided in paragraph (a) above, then as soon as practicable the Board of Directors shall, reasonably and in good faith, allocate the award among the units in accordance with the reduction in the value of each unit and its interest in the common elements, compared to the total reduction in value of all units and their interest in the common elements. In the event any unit owner or mortgagee objects to the allocation determined by the Board of Directors, the matter shall be submitted to arbitration in accordance with the rules of the American Arbitration Association. The cost of such determination shall be paid out of the proceeds of the condemnation. Any portion of the award allocated to a unit owner under this paragraph shall be paid first to all mortgagees and holders of liens on the unit owner’s interest in accordance with the existing priorities, and the balance to the unit owner. If any reconstruction or repair is undertaken as a result of the condemnation, the Board of Directors may retain and apply such portion of each unit owner’s share of the award as is necessary to discharge the owner’s liability for any special assessment arising from such reconstruction or repair.”

12. Abatement and Enjoining of Violations. Article VII, Section 8 is amended to read as follows:

“8. Abatement and Enjoining of Violations. The violation of any provision of the Declaration or these bylaws, of any rule or regulation adopted pursuant to these bylaws, or of any decision of the Association made pursuant to such documents, shall give the Board of Directors acting on behalf of the Association, the right, in addition to any other rights set forth in these bylaws, to do any or all of the following after giving notice and an opportunity to be heard:

“(a) to enter the unit in which or as to which such violation exists and to summarily abate and remove, at the expense of the defaulting unit owner, any structure, thing or condition that may exist contrary to the intent and meaning of such provisions, and the Board of Directors shall not thereby be deemed guilty of any manner of trespass, provided, however, that judicial proceedings shall be instituted before any items of construction may be altered or demolished, or

“(b) to enjoin, abate, or remedy such thing or condition by appropriate legal proceedings,

“(c) to levy reasonable fines, or

“(d) to terminate the right to receive utility services paid for out of assessments or the right of access to and use of recreational and service facilities of the Condominium until correction of the violation has occurred.

“The offending unit owner shall be liable to the Association for all costs and attorneys’ fees incurred by the Association, whether or not legal proceedings are instituted and including attorneys’ fees on appeal or petition for review, together with any expense incurred by the Association in remedying the default, damage incurred by the Association or unit owners, or fines so levied. Such sums shall be assessed against the offending unit as an assessment and enforced as provided in Article V. In addition, any aggrieved unit owner may bring an action against such other unit owner or the Association to recover damages or to enjoin, abate, or remedy such thing or condition by appropriate legal proceedings.”

13. Amendments to Bylaws. Article VIII of the Bylaws is hereby amended to read as follows:

ARTICLE VIII
AMENDMENTS TO BYLAWS

“1. How Proposed. Amendments to the bylaws shall be proposed by either a majority of the Board of Directors or by unit owners holding thirty percent (30%) of the voting rights. The proposed amendment must be reduced to writing and shall be included in the notice of any meeting at which action is to be taken thereon or attached to any request for consent to the amendment.

“2. Adoption. A resolution adopting a proposed amendment may be proposed by either the Board of Directors or by the unit owners and may be approved by the unit owners at a meeting called for this purpose or by ballot vote. Unit owners not present at the meeting considering such amendment may express their approval in writing or by proxy. Any resolution must be approved by unit owners holding a majority of the voting rights and by mortgagees to the extent required by the Declaration, except that any amendment relating to age restrictions, pet restrictions, limitations on the number of persons who may occupy units, or limitations on the rental or leasing of units must be approved by unit owners holding seventy-five percent (75%) of the voting rights.

“3. Execution and Recording. An amendment shall not be effective until certified by the chairman and secretary of the Association as being adopted in accordance with these bylaws and the provisions of the Oregon Condominium Act and recorded as required by law.”