ARTICLE 3 – ASSOCIATION MEMBERSHIP AND VOTING RIGHTS

3.1 MEMBERSHIP. Every OWNER shall be deemed to have a membership in the ASSOCIATION. No OWNER, whether one or more PERSON, shall have more than one (1) membership per LOT owned. In the event the OWNER of a LOT is more than one person, votes and rights of use and enjoyment shall be as provided herein. The rights and privileges of membership may be exercised by a MEMBER or the MEMBER’s spouse. The membership rights of a LOT owned by a corporation or partnership shall be exercised by the individual designated by the OWNER in a written instrument provided to the Secretary.

3.2 VOTING. Only MEMEBRS-IN-GOOD-STANDING shall be allowed to vote. MEMBERS shall be entitled to one equal vote for each LOT (as defined in 2.4) in which they hold the interest required for membership. In any situation in which a MEMBER is entitled personally to exercise the vote for his LOT and more than one person holds the interest in such LOT, the vote shall be exercised as those persons determine among themselves and advise the Secretary of the Association prior to any meeting.  In the absence of such advice, the LOT's vote shall be suspended if more than one person seeks to exercise it.

3.3 MEETINGS. Annual and special meetings shall be held at such place as designated by the Board within Henderson County, North Carolina.

a. ANNUAL MEETINGS shall be held at 7:00 p.m. on the third Wednesday of June of each year. The purpose of the Annual meeting shall be to elect Directors of the Association for the following year (in accordance with 4.1), to approve the ASSOCIATION’s budget for the following year, to set the assessments to be paid by each lot owner for the following year, and the transaction of any other business presented to the members. The President shall preside over the meeting and may limit the time for debate and discussion of all issues presented to the meeting; provided, a reasonable time shall be allowed.

b. SPECIAL MEETINGS of the MEMBERS may be called at any time by the President or the BOARD. A special meeting shall be called by the President or the BOARD within thirty (30) days after delivery to the secretary of a petition signed by at least forty (40) percent of the MEMEBERS requesting a special meeting for a stated purpose.

c. NOTICE. The Board shall mail notice of the annual and special meetings to each voting member, at their address of record, at least thirty (30) days prior to the date of the meeting. The notice will state the time and place of the meeting and any issues that will be voted on at the meeting. The notice will contain a ballot for voting on the issues and will be accompanied by copies of any reports or audits regarding those issues, conducted by outside agencies or companies, and the analysis and recommendations of the Board. Attendance at a meeting shall constitute waiver of notice.

d. QUORUM. A quorum shall consist of whatever number of the MEMBERS-IN-GOOD-STANDING of record, represented either in person or by absentee ballot, are present at the meeting. The vote of the majority of the MEMBERS-IN-GOOD STANDING present at a meeting shall be the act of the MEMBERS.

e. ABSENTEE BALLOTS. * A MEMBER-IN-GOOD-STANDING may vote personally or by absentee ballot duly authorized, in writing and filed with the Secretary any time before the ANNUAL MEETING.

ARTICLE 4-BOARD OF DIRECTORS

4.1 COMPOSITION AND SELECTION. The affairs of the ASSOCIATION shall be governed by a Board of Directors composed if four (4) persons plus one (1) member-at-large. All directors, as well as the member-at-large, shall be owners of LOTs or spouses of such LOT OWNERs and shall be MEMBERS-IN-GOOD-STANDING; provided, however, no LOT OWNER and his or her spouse may serve on the BOARD at the same time. All directors and the member –at-large shall be nominated and elected by the MEMBERS-IN-GOOD-STANDING. Nominations for BOARD members must be received by the Secretary thirty (30) days before the ANNUAL MEETING. All MEMBERS-IN-GOOD-STANDING shall be entitled to cast one (1) vote for each directorship to be filed. There shall be no cumulative voting. The directorships for which elections are held shall be filled by that number of candidates receiving the most votes. Each elected director shall serve for a term of two (2) years, except for the member-at-large who shall serve a one-year term. Election of Board members shall be staggered, with the election of the President and Secretary one year and the election of the Vice-President and Treasurer the following year. All BOARD members shall be elected for the 1997-1998 term. The following year only the Vice-President and Treasurer will be elected. The Member-at-large shall be elected every year.

Removal of directors may be with or without cause by a vote of the majority of the MEMBERs entitled to vote at an election of directors or with cause by a vote of the majority of the BOARD. A director is subject to removal for cause if he or she ceases to be an OWNER or MEMBER-IN-GOOD-STANDING . There shall be no cumulative voting in regard to removal of a director. Upon removal at a duly called meeting directors may be elected at the same meeting. Whenever a vacancy occurs in the BOARD, it may be filled by a majority vote of the remaining members of the BOARD at any meeting called for that purpose.

4.2 POWERS AND DUTIES. The business and affairs of the ASSOCIATION shall be managed by the BOARD, who shall have all powers and duties necessary for the administration of the ASSOCIATION, including, but not limited to, the power to adopt such rules and regulations as it deems necessary and appropriate and to impose sanctions for violations thereof, including, without limitation, monetary fines. With regard to repairs or improvements to the common areas of the association, i.e. the roads, water system, entryways, etc., the Board has the power to replace or repair only in “like Kind”. All other repairs or replacements, except in an emergency situation, must be approved by a majority of members voting on the issue either at an Annual Meeting or a Board Meeting, after being duly notified of the meeting and the vote by Newsletter. Furthermore, the Board must request bids from at least 3 independent contractors, who are appropriately licensed and insured, for repairs or improvements. In addition to duties imposed by these BYLAWS or any resolution the ASSOCIATION that may hereafter be adopted, the BOARD shall have the power to and be responsible for, the following, in way of explanation but not limitation;

a. Preparation and adoption of an annual budget, in which there shall be established the contribution of each LOT OWNER to defray the common expenses.

b. Making assessments to be paid by LOT OWNERs to defray the common expenses, including assessments for road maintenance for the ROADWAYS, establishing the means and methods of collecting such assessments and establishing the period of installment payments of the annual assessment.

c. Collecting the assessment, depositing the proceeds thereof in a bank depository that it shall approve, and using the proceeds to administer the ASSOCIATION.

d. Enforcing by legal means the provisions of the RESTRICTIONS, DECLARATION or these BYLAWS, and the rules and regulations adopted by it and bringing any proceeding that may be instituted on behalf of or against the MEMBERs concerning the ASSOCIATION.

e. Removing officers of the ASSOCIATION, with or without cause, and filling any vacancies which may occur.

4.3 MEETINGS. The annual regular meeting of the BOARD shall be held without notice and immediately after and at the same place as the annual meeting of the MEMBERS. In addition, the BOARD may provide the time and place for the holding of additional regular meetings. Special meetings of the BOARD may be called by or at the request of the President or any two (2) directors. Three directors shall constitute a quorum.

4.4 VOTING. Each director shall have one vote and the vote of a majority of the number of directors present at a meeting of which a quorum is present shall be the act of the BOARD. The member-at-large shall be a non-voting member of the BOARD, and mat vote only in the event of a tie vote of the other BOARD members.

4.5 INFORMAL ACTION. Action taken by a majority of the directors without a meeting is nevertheless BOARD action if written consent to the action in question is signed by all the directors and filed in the Corporate Minute Book, whether done before or after the action is taken.

ARTICLE 5- OFFICERS

5.1 COMPOSITION AND ELECTION. The officers of the ASSOCIATION shall consist of a President, Vice-President, Secretary, Treasurer, and Member-at-Large. Officers of the ASSOCIATION shall be elected at the annual regular meeting of the ASSOCIATION. Each officer shall hold office for two years; except that the member-at-large shall hold office for one year; or until his or her successor is elected and qualifies, whichever occurs first. There shall be no limit to the number of terms any officer can serve if duly elected by the MEMBERS. Officers may be removed from office, with or without cause, by a majority vote of the BOARD. The BOARD shall fill any vacancy of any office.

5.2 DUTIES. The duties of officers shall be as follows:

a. The president shall be the principal administrator and manager of the business and affairs of the ASSOCIATION, bound by the policies and procedures established by the BOARD. He or she may sign any contracts, checks, or other instruments, which the BOARD has authorized to be executed and in general, perform all duties incident to the office of President. The President shall prepare the agenda and preside over all meetings of the MEMBERS.

b. The Vice-President shall serve the duties of the President in the absence of
the President or in the event of the President’s death, disability or refusal to act. The Vice-President shall also perform such other duties as, from time to time, are assigned to the Vice-President by the President of the BOARD.

c. The Secretary shall prepare and keep the minutes of all meetings of the MEMBERs and of the BOARD. The Secretary shall prepare and send notice to each MEMBER of a forthcoming meeting in accordance with Bylaws. The Secretary shall also perform any other duty which the BOARD may assign to the office of Secretary.

d. The Treasurer shall have the following duties:

(1) To keep a list of all MEMBERs and the OWNERs of each LOT.
(2) To receive and record all assessments paid by MEMBERS.
(3) To receive and verify all bills and invoices, and prepare checks of payment therefore, to be signed by the President, or Vice-President in the absence of the President. Checks in the amount of four hundred (400) dollars or more shall require the signatures of both the President and Vice-President.
(4) To deposit all monies received by the ASSOCIATION in bank or banks selected by the BOARD and verify each bank statement sent to the ASSOCIATION.
(5) To perform any other duties which the BOARD may assign to the office of Treasurer.

e. The Member-at-large shall perform any duties which the President or the BOARD may assign.

ARTICLE 6- INDEMNIFICATION

6.1 The ASSOCIATION shall indemnify any director, officer, or former director for former officer of the ASSOCIATION against liabilities and reasonable litigation expenses, including attorney’s fee’s incurred by him or her in connection with any action, suit, or proceeding in which he or she is made or threatened to be made a party by reason of being/or having been such director or officer, except in relation to matters as to which he or she shall be adjudged in such action, suit, or proceeding to have acted in bad faith or to have been liable or guilty by reason of willful misconduct in the performance of his or her duty. The BOARD may purchase and maintain insurance to provide for this indemnification.

ARTICLE 7- FISCAL YEAR

7.1 The BOARD shall have power and authority to fix the fiscal year of the ASSOCIATION. Unless the BOARD shall so fix the fiscal year, the fiscal year shall end on June 30, of each year.

ARTICLE 8- AMENDMENTS

8.1 These Bylaws may be amended or repealed and new Bylaws may be adopted only by the affirmative vote of a majority of the members of the association voting on the issues at either the Annual Meeting or at a Special Meeting, after being duly notified of the meeting and the vote by mail.

ARTICLE 9- ASSESSMENTS

9.1 There shall be two categories of assessments to be paid by the LOT OWNER to carry out the activities and functions of the ASSOCIATION. One category shall be an assessment to pay the cost of maintaining the ROADWAYS. The other category shall be an assessment for the cost of all other activities and functions of the ASSOCIATION. The BOARD shall establish the amount of each assessment to be paid by the LOT OWNER at the annual meeting of the BOARD. The BOARD may call a special meeting of the Directors for the purpose of increasing or decreasing an annual assessment if circumstances so indicate. The assessment shall be based on the budget adopted by the BOARD for the ensuing year at the annual meeting. A copy of the purposed budget shall be mailed to each MEMBER at least thirty (30) days prior to the annual meeting.

9.2 The assessments per LOT for maintenance of the ROADWAYS shall be calculated by dividing the budgeted cost by the number of LOTS, as defined in paragraph 2.4. The LOT OWNER of each LOT, his total assessment for maintenance of the ROADWAYS shall be the calculated assessment per LOT multiplied by the number if LOTS which he owns.

9.3 The assessment per LOT OWNER for the cost of all activities and functions of the ASSOCIATION for the ensuing year other than the maintenance of the ROADWAYS shall be calculated by subtracting the budgeted cost for maintaining the ROADWAYS from the total budget for the ensuing year and dividing the result by the number of LOT OWNERS. Each LOT OWNER shall pay this assessment.

9.4 The assessments calculated under paragraph 9.2 and 9.3 shall be reduced by the amount, if any, of unspent funds remaining from the previous year, except the BOARD may choose to put aside any unspent funds and hold them for future repairs and maintenance of the ROADWAYS and or the water system. Monies retained for future repairs may not be used for regular ASSOCIATION expenses without the express vote of the BOARD.

9.5 The annual payment to be paid by each LOT OWNER to the SSOCIATION is the sum of the amounts attributable to him under Paragraphs 9.2 and 9.3.

9.6 The BOARD shall establish the procedure, amount, and frequency of payments to be made by each LOT OWNER to the ASSOCIATION to satisfy his obligations under Paragraph 9.5.

9.7 The BOARD shall set the penalty for late payments. If a LOT OWNER fails to pay an assessment within 45 days of the date on which it is due and payable, the BOARD shall take whatever legal action is necessary to obtain the payment of the-assessment.

Certified By: _________________________

EXHIBIT A

The  property encompassed by the Homeowners Association of Estates of the Salisbury, Inc. is the subdivision known as the Estates of the Salisbury Subdivision in Henderson County, North Carolina.  This subdivision is depicted in three plats recorded in the Registry of Deeds, Henderson County, North Carolina Deed Book 727, Page 868 and in one plat recorded in the Registry of Deeds, Henderson County, North Carolina Deed Book 848. Page 663.