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6. 1. F. - Page 34 Internal Revenue Service and the California Franchise Tax Board as will prevent such funds from being taxed as income to the Association. Section 4.4 Exemptions from Annual Assessments. Notwithstanding the provisions of Sections 4.3 and 4.8, the Board shall exempt each Owner of a Condominium which satisfies Section 4.4(a) (Condominium Buildings) and may exempt all Owners if Section 4.4(b) (Association Common Area) is satisfied, from the payment of a portion of the Annual Assessment levied against that Condominium as described in those paragraphs. (a) Condominium Buildings. An Owner of a Condominium is exempt from payment of that portion of the Annual Assessment which is allocated for defraying operating expenses and reserves directly attributable to the existence and use of buildings containing Units until the first to occur of the following events: (i) a notice of completion of construction of the Building in which the Owner's Unit is contained has been recorded; (ii) the Owner's Condominium is occupied or otherwise used; or (iii) the structural components of the Building in which the Owner's Unit is contained are complete. (b) Association Common Area. Each Owner may be exempted from payment of that portion of the Annual Assessment which is allocated for defraying operating expenses and reserves directly attributable to the existence and use of a common facility (including landscaping) that is not complete at the time Annual Assessments commence until the first to occur of the following events: (i) a notice of completion of the common facility is recorded; (ii) the common facility has been placed into use; or (iii) in the case of landscaping, the landscaping is installed and no one other than the Association has been obligated to maintain the landscaping. Section 4.5 Special Assessments In addition to the Annual Assessment authorized above, the Association may levy, in any fiscal year, a Special Assessment applicable to that year only, for the purpose of defraying, in whole or in part, the Common Expenses of the Association for such fiscal year (including, but not limited to, unanticipated delinquencies, costs of construction and unexpected repairs, replacement or reconstruction of capital improvements in or on the Common Area including fixtures and personal property related thereto). The aggregate of Special Assessments during any fiscal year shall not exceed five percent (5 %) of the budgeted gross expenditures of the Association for that fiscal year without an approval of Owners casting a majority of the votes at a meeting or election of the Association at which a quorum was present and in accordance with Section 4.5 conducted in accordance with Corporations Code Sections 7510 et seq. and 7613. Any such voting of the Owners regarding assessments shall be by secret ballot and shall comply with the applicable procedures in Civil Code Section 1363.03. This Section shall not limit Assessment increases necessary for the following emergency situations: (1) an extraordinary expense required by an order of a court; (2) an extraordinary expense necessary to repair or maintain the Development or any part of it for which the Association is responsible where a threat to personal safety in the Development is discovered; (3) an extraordinary expense necessary to repair or maintain the Development or any part thereof for which the Association is responsible that could not have been reasonably foreseen by the Board in preparing and distributing the Budget (prior to the imposition or collection of an Assessment under this subsection (3), the Board shall pass a resolution containing written findings as to the necessity of the extraordinary expense involved and a determination as to why the expense was not or could not have been reasonably foreseen in the budgeting process and such resolution shall be distributed to the Members with the notice of Assessment). Unless exempt from Federal and State of California income taxes, all proceeds from any Special Assessment shall be segregated and deposited into a special account and shall be used solely for the purpose or purposes for which it was levied, or otherwise shall be handled and used in a manner 24 CCRS -One Marina. docx