NUMBER TWO

DEED OF AMENDED AND RESTATED DECLARATION OF RIGHTS, RESTRICTIONS, CONDITIONS AND CONSTITUTION OF RESTRICTIVE COVENANTS AND ESTABLISHMENT OF PROVISIONS FOR PALMAS DEL MAR HOMEOWNERS ASSOCIATION INCORPORATED 

In the City of San Juan, Commonwealth of Puerto Rico, this twenty seven (27) day of August, Nineteen ninety seven (1997). 

BEFORE ME RAFAEL CUEVAS KUINLAM  

   Of legal age, married, Attorney at Law, and Notary Public in and for the Commonwealth of Puerto Rico with residence in San Juan, Puerto Rico and offices in the Hato Rey Tower Building, Suite nine, zero, three (903), two hundred sixty eight (268) Munoz Rivera Avenue, Hato Rey, Puerto Rico.

   APPEARS AS THE SOLE PART: PALMAS DEL MAR HOMEOWNERS ASSOCIATION, INCORPORATED, Security Social Number XXXXXXXXXXXXX herein after referred to as the "ASSOCIATION" a nonprofit corporation organized and existing under the Laws of the Commonwealth of Puerto Rico, having its administration office in the City of Humacao, Puerto Rico, herein represented by its President Mr. Hector Lavergne Roure, with Security Social Number XXXXXXXXXXXXXX of legal age married, executive and resident of Humacao, Puerto Rico, duly authorized by said Corporation to appear herein on its behalf, which authority he will show wherever and whenever required to do so and its Secretary, Raul Rivera Ortiz, with Social Security Number XXXXXXXXXXXXX of legal age, single, Architect and resident of San Juan, Puerto Rico.

   I give faith to the personal circumstances of the appearing party. 

   I hereby certify that I have identified the appearing party as to their names, personal circumstances and relation to Palmas del Mar Homeowners Association and their authority to execute this Deed. 

   The appearing party's representatives assure me of their legal capacity and personal qualifications to execute this Deed and being, to the best of my knowledge and belief, legally competent to execute this Deed, they freely and voluntarily, herein: 

   SET FORTH 

 FIRST: Pursuant to Deed Number Thirteen (13) of Declaration of Rights, Restrictions, Conditions and Constitution of Restrictive Covenants and Establishment of Provisions of the Palmas del Mar Homeowners Associations, Inc., (hereinafter referred to as the Declaration), executed on September fourteen, nineteen hundred seventy two, before Notary Public Guillermo A. Nigaglioni, recorded at Page Sixty Five (65), Volume One Hundred Ten (110) Yabucoa Section, Property Number Four Thousand Nine Hundred Forty Six (4,946) and at Page One Hundred Twenty One (121), Volume Two Hundred Ten (210) of the Registry of the Property of Puerto Rico, Humacao Section, Property Number Six Thousand Six Hundred Two (6,602), Seventh Inscription, Palmas del Mar Company, hereinafter referred to as "The Company", established The Declaration of Rights, Restrictions, Conditions and Constitution of Restrictive Covenants and Establishment of Provisions for the Palmas del Mar Homeowners Association Incorporated (hereinafter sometimes referred to as the Covenants and/or The Declaration) for the benefit of each and every owner of any and all parts of the above referenced real property or any additions thereto. 

 SECOND: In order to carry out the aforesaid, the Company caused to be incorporated under the laws of the Commonwealth of Puerto Rico, the Palmas del Mar Homeowners Association, Incorporated, a non profit corporation of which, each and every owner of Property within the Palmas del Mar Development is a member. 

 THIRD: Pursuant to Deed Number Sixteen (16) of Extension of Declaration of Rights, Restrictions, Conditions and Constitution of Restrictive Covenants and Establishment of Provisions for the Palmas del Mar Homeowners Association, Incorporated to Additional Real Estate Properties of Palmas del Mar Company (hereinafter referred to as the EXTENSION TO THE DECLARATION) executed on August thirty first, nineteen hundred seventy three, before Notary Public Guillermo A. Nigaglioni, the Company extended the operation and effect of the Covenants. 

 FOURTH: Pursuant to Deed Number Four (4) of Amendment to Declaration of Rights, Restriction, Conditions and Constitution of Restrictive Covenants and Establishments of Provisions for the Palmas del Mar Homeowners Association, Inc., executed in the city of San Juan on the thirteenth day of May, nineteen hundred and seventy six before Notary Public Guillermo Nigaglioni, the covenants set forth in the Declaration were amended and to such effect therein the Declaration was amended. 

 FIFTH: Pursuant to Deed Number Five of Deed of Amendment to Declaration of Rights, Restrictions, Conditions and Constitution of Restrictive Covenants and Establishment of Provisions for the Palmas del Mar Homeowners Association, Incorporated, executed in the City of Humacao on the nineteenth (19) day of February, nineteen eighty five (1985) before Notary Public Enrique Alvarado Hernandez, the covenants set forth in the Declaration were amended and to such effect therein the Declaration was amended. 

 SIXTH: Existing Property. The real property which is, and shall be held, transferred, sold conveyed, given, donated, leased and occupied subject to these covenants is described as follows: 

"RURAL: Tract of land located at Buenavista and Candelero Abajo wards of Humacao and Playa ward of Yabucoa, Puerto Rico, comprising an area, according to its titles of TWO THOUSAND SEVEN HUNDRED SIXTY SEVEN CUERDAS AND NINE HUNDRED SIXTY NINE TEN THOUSANDTHS OF ANOTHER (2,767.0969), but according to a survey by David Lebrón López, comprising an actual area of ten million seven hundred fifty seven thousand one hundred seventy five (10,757,175) square meters and six hundred seventy two (.0672) ten thousandths of a square meter, equivalent to two thousand seven hundred thirty six (2,736) cuerdas nine thousand one hundred ninety three ten thousandths of a cuerda (.9193), equivalent to one hundred fifteen million seven hundred eighty eight thousand eight hundred and five (115,788,805) square feet and five thousand nine hundred sixteen (.5916) ten thousandths of a square foot equivalent to two thousand six hundred fifty eight (2,658) acres and one thousand four hundred fifty two (1,452) ten thousandths of an acre. Of the area above mentioned, three hundred fifty three {353) cuerdas and six thousand two hundred (6,200) ten thousandths of another cuerda lie at the municipality of Yabucoa, Puerto Rico, and two thousand three hundred eighty three (2,383) cuerdas with two thousand nine hundred ninety three (.2993) ten thousandths of a cuerda lie at the municipality of Humacao, Puerto Rico. Bounded on the North, by lands property of: Hermanos Fernandez Garzot, Jesús Ayala Carrillo, State Road Number Nine Hundred six (906), State Road Number Nine Hundred Twenty Three (923), Gregoria Gonzalez, Demetrio Cintrón, Jose Robledo, Juan Robledo, Carmen Pou, Sucesión Luis Pou, Esteban Villegas; Eduardo Rios, Sucesión Luciano Rios, Eladio Vellón Cruz, Felix Navarro Cruz, Justa Jimenez Rivera; Sucesión Pedro Lopez, Marcos Encarnación Vargas; Inocencio Carradero, Sucesión Vistorio Ortiz, Paula Pena Garcia, Francisco Bravo, Sucesión Alfonso López Valdes, Cesar Perez, Antonio López Diaz, Oscar Ortiz Martinez, Modesta Cruz Solis, Sucesión Maria Diaz Torres, Jacinta Solis Delgado, Susana Cruz Burgos, Sucesión Victor Lazú Delgado, Palmas del Mar Company, Cangrejos Rural Community; on the South, Caribbean Sea, Palmas del Mar Company, Sucesión Belen Cruz, Sucesión Modesto Correa, Sucesión Hilaria Santiago, Federico Ayala Cruz, Sucesión Carlos Ayala Cruz, Department of Agriculture of Puerto Rico, Francisco de León Cruz, Francisco Morales Rodriguez, Emeterio Sanchez Lopez, Hermanos Fernandez Garzot, Zoila Rodriguez de León, Cangrejos Rural Community and partially with Sucesión Luis Pou, Sucesión Feliciano Diaz Vellon, Eladio Vellon Cruz; on the East, Caribbean Sea, Palmas del Mar Company, Municipal Road to Buenavista ward, State Road Nine Hundred Six (906), Carmen Pou, Sucesión Luis Pou, Teresa de Thomas, Sucesión Luciano Rios, Marcos Encarnación Vargas, Susana Cruz Burgos; Sucesión Maria Diaz Torres, Modesta Cruz Solis, Cangrejos Ward Community; on the West, Juan Robledo, Jose Robledo, Eduardo Rios, Sucesión Feliciano Diaz Vellón, Juan Cruz Diaz Vellón, L. Ortiz, Eladio Vellón Cruz; Marcos Encarnación Vargas, Susana Cruz Burgos, Sucesión Victor Lazú Delgado, Sucesión Laureano Hernandez, Sucesión Laureano Hernandez, Sucesión Maria Diaz Torres, Sucesión Belen Cruz, State Road Number Nine Hundred Six (906), Ernesto Morales Rodriguez, Sucesión Maria Cruz de León, Sucesión Martin Cruz, Sucesión Petra Cruz, Sucesión Carlos Ayala Cruz, Raman Sanchez Ortiz, Zoila Rodriguez de León, Cangrejos Rural Community, State Road Number Three (3). With the above described parcel there are four (4) enclosed parcels, one of five cuerdas and four thousandths of another (5.004 cuerdas) and one of five cuerdas and sixteen thousandths of another (5.016 cuerdas) belonging to Palmas del Mar Company, one of nine cuerdas as five hundred and forty thousandths of another (9.540 cuerdas) belonging to Palmas Beach Village Company, and the fourth, one of six cuerdas eight thousand nine hundred forty nine ten thousandths of another (6.8949 cuerdas) belonging to Sucesión Patricio Russi Solis." 

This property was grouped as one independent, distinct and individual parcel pursuant to the terms of Deed Number Seventeen (17), of Consolidation of Real Property executed on August thirty one (31), nineteen hundred seventy three(1973), before Notary Public Guillermo A. Nigaglioni and recorded at page one hundred sixty five (165), volume two hundred forty (240), of Humacao, property number eight thousand seven (8777) hundred seventy seven, first inscription, as to the portion of property located in Humacao and at page one (1), volume one hundred thirty two (132) of the Registry of the Property of Puerto Rico, Yabucoa Section, property number five thousand eight hundred twenty seven (5827), first inscription, as to the portion of property located in Yabucoa. 

 SEVENTH: According to paragraph twelve (12), section B of said Deed Thirteen (13) of Nineteen seventy two (1972), the Association can amend said Deed.

Paragraph twelve (12) read as follows:

 Section B. Amendments: This Declaration can be amended at any time provided that three fourths (3/4) of the votes cast, either by referendum or at a duly called meeting of the Association, vote in favor of the proposed amendment. In the event the amendment is requested through a duly call meeting notice shall be given at least thirty (30) days prior to the date of the meeting at which such proposed amendment is to be considered. If any proposed amendment to this Declaration is approved by the Members as set forth above, the President and Secretary of the Association shall execute a Deed of Amendment to this Declaration which shall set forth the amendment, the effective date of the amendment, the total number of votes necessary to adopt the amendment, and, if the amendment was requested through a meeting, the date of the meeting at which such amendment was adopted, the date that notice of such meeting was given the total number of votes of members of the Association, the total number of votes required to constitute a quorum at a meeting of the Association, the number of votes necessary to adopt the amendment and the total number of votes cast against the amendment. Such Deed of Amendment shall be recorded in the Registry of the Property of Puerto Rico, Humacao Section.

 EIGHT: Pursuant to Notice of Meeting given on or before the fifth (5) day of March of nineteen ninety seven (1997), amendments and restatement to the Covenants and Declaration of Deed number five (5) of nineteen eighty five (1985) and of Deed number four (4) of nineteen seventy six (1976), and of Deed number sixteen (16) of nineteen seventy three (1973) and of Deed number thirteen (13) of nineteen seventy two (1972) were voted upon on April five (5) nineteen ninety seven (1997) at a duly called meeting. 

 NINTH: The total number of eligible votes in the Association was two thousand four hundred sixty five (2,465). The total number of votes required for a quorum was one thousand four hundred seventy nine (1,479). The number of votes necessary to adopt the amendments was one thousand two hundred ninety nine (1,299). 

 TENTH: The total number of votes, cast in favor of the amendments was one thousand seven hundred seventy four (1774), the total number of votes cast in opposition to the amendments was thirty two (32). Present were one thousand eight hundred six  (1,806) eligible votes either in person or by proxy, therefore quorum was established. 

 ELEVENTH: In view of the above, it is now the desire of the Association to amend by restatement the covenants set forth in the preceding paragraphs and to such effect the parties herein do amend the said Deed so that henceforth it shall read as follows: 

 AMENDMENT BY RESTATEMENT 

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 I. DEFINITIONS The following words and terms when used in this Declaration or any supplemental declaration (unless the context shall clearly indicate otherwise) shall have the following meanings: 

A. "Affiliate" shall mean any corporation of which more than fifty percent (50%) of the voting stock is owned or controlled by the company and any partnership or joint venture in which the company has more than fifty percent (50%) proprietary interest. 

B. "Amenities and Sport Facilities" shall mean property utilized for any recreational and/or sport facilities, with the exception of Common Properties, Restricted Common Properties and Purchased Common Properties, designated as such by the Company on its Master Plan including but not limited to golf courses, equestrian center, nurseries, botanical parks, marinas, tennis courts and the like.

C. "Association" shall mean and refer to the Palmas del Mar Homeowners Association, Inc., a Commonwealth of Puerto Rico non profit corporation, its successors and assigns. 

D. "Board of Directors" or " Board" shall mean and refer to the Board of Directors of the Association. 

E. "Commercial Lot and Commercial Unit" A Commercial Lot shall mean any unimproved parcel of land within the Properties, with the exception of Common Properties, Restricted Common Properties and Purchased Common Properties, intended for a commercial use as designated on the Master Plan. A Commercial Unit shall mean an improved Commercial Lot, for which a use or occupancy permit has been issued, designed and/or, utilized for any commercial or business enterprises serving residents and guests of the Palmas d Mar Development and/or the public, including but apt limited to, business and professional and services, banks or other financial institutions, restaurants, hotels, motels, inns, theaters, lounges and gasoline stations, provided, however, that a "Commercial Lot and Commercial Unit" shall not include property upon which improvements are to be built which also qualifies as a Family Lot or Family Dwelling Unit. A Commercial Lot shall be deemed to be unimproved until the improvements being construed thereon are complete and a commercial use permit is issued for such improvements. 

F. "Common Property or Properties" shall mean and refer to those tracts of land identified as such in official Company plats or which are actually deeded or leased to the Association and designated in said deed or lease as "Common Properties". The term "Common Properties" shall also include any personal property acquired by the Association if said property is designated as "Common Property". All Common Properties are to be. devoted to an intended for the common use and enjoyment of the Owners, their families, guests of the Owners, persons occupying dwelling places or accommodations of Owners on a guest or tenant basis, and visiting members of the general public subject to the fee schedules and operating rules adopted by the Association to the extent permitted by law, provided however, that any lands which are leased by the Association for use as Common Properties, shall lose their character as Common Properties upon the expiration of such lease. Common Properties shall not include those tracts of land falling within the definition of "Restricted Common Properties" set forth below.

G. "Community Facilities Lot and Community Facilities" A Community Facilities Lot shall mean any unimproved parcel of land within the Properties, with the exception of Common Properties, Restricted Common Properties and Purchased Common Properties, intended for Community Facilities use. Community Facilities shall mean an improved Community Facilities Lot, for which a use or occupancy permit has been issued, designated and/or utilized to serve residents and guests of Palmas del Mar Development and/or the public. Such term shall include, but not be limited to, places of worship, community, civic, social and cultural clubs and center, libraries, nursery and other schools of special instruction, medical centers, hospitals, clinics, nursing, care, rest and convalescent homes and charitable institutions. A Community Facilities Lot shall be deemed to be unimproved until the improvements being constructed thereon are complete and a use permit is issued for the particular use intended. 

H. "CommunityWide Standard" shall mean the standard of conduct, maintenance, or other activity generally prevailing throughout the Properties. Such standard shall be established by the Developer and may be more specifically defined under the Design Guidelines, the rules and regulations or the Association and its Board resolutions. 

I. "Delegate" shall be that person, or his alternate, appointed by the Board of Directors of a regime, condominium, association or a Neighborhood Area to represent the association or Neighborhood Area at any meeting of the Association. The use of the term Delegate shall also refer to his alternate, when, at such times, the Delegate is unable to perform his duties.

J. "Developer" or "Company" shall mean Palmas del Mar Company, its successors and such of its assigns to which all or any portion of the rights of the Developer hereunder are assigned by written instruments recorded in the Registry of Property of Puerto Rico, Humacao Section. In the event of a full assignment of all of the Developer's rights hereunder to a successor, assignee, or pledgee, the result of which is that the Developer named herein shall no longer have any rights hereunder, such successor or assignee shall be deemed the Developer for all purposes hereunder. In the event of an assignment of less than all of the rights of the Developer, the assignee shall not be deemed the Developer, but may exercise such rights of the Developer as are specifically assigned to it. Any assignment of Developer's rights may be on a nonexclusive basis, and any assignment described herein may be further assigned, in whole or in part, by the assignee thereunder, unless restricted or prohibited in the assignment made by the Developer or a prior assignee. Nothing contained in this Declaration shall be effective or construed to limit any of the foregoing rights of the Developer to make any or all of the assignments provided for herein. 

K. "Declaration" or "Covenants" or "Covenants and Restrictions" shall mean the Declaration of Rights, Restrictions, Covenants and Constitution of Restrictive Covenants and Establishment of Provisions for the Palmas del Mar Homeowners Association, Inc. 

L. "Development" shall mean Palmas del Mar, either the existing development or future development to be constructed on the Properties.

M. "Family Dwelling Unit" shall mean and refer to any improved property, for which a use or occupancy permit has been issued, intended for use as a single family detached dwelling, patio house, condominium unit, or town house unit, located within the Properties. 

N. "Intended for Use" shall mean the use intended for various parcels within the Properties as designated on the Master Plan for the Properties prepared by or for the Company as the same may be revised from time to time by the company, or the use to which any particular parcel of land is restricted by Covenants expressly set forth or incorporated by reference in deeds by which the Company has conveyed the property.

O. "Master Plan" shall mean and refer to the drawing which represents the conceptual plan of the company for the development of the Palmas del Mar community. Since the concept of the future development of Palmas del Mar is subject to continuing revision and change, present and future references to the "Master Plan" shall be references to the latest revision thereof. 

P. "Member" or "Membership" shall mean and refer to all those Owners who are Members of the Association as provided in Section A of Article III hereof. A Member in good standing shall be a Member who is not in violation of the provisions of these Covenants including the performance of his assessment obligations hereunder, either by payment and/or through the approval of and compliance with a payment or other plan by the Board of Directors. Notwithstanding the aforesaid or anything to the contrary in the Certificate or these Covenants, nothing herein shall be construed or interpreted as adversely affecting or in any manner or form diminishing or lessening the existing rights and privileges of the company granted in the Certificate or pursuant to these Covenants.

Q. "Mortgagee" shall mean any bank, savings and loan association, insurance company, mortgage company real estate investment trust, agency of the United States or Puerto Rican government, or a lender generally recognized in the community as an institutional lender, any of which holds a mortgage encumbering any portion of the Property, any assignee of a loan made by one of the foregoing, Palmas del Mar Company, any of its subsidiaries or affiliated companies or entities, the Developer or any other lender designated as such by the Developer in a Supplemental Declaration. 

R. "Neighborhood Area" shall mean and refer to those parcels, tracts or lots of land located in close proximity to each other which are intended for, and have been subdivided for, use as sites for Family Dwelling Units, and which are approved by the Board of Directors of the Association as a "Neighborhood Area" pursuant to such rules and regulations as may be established by the Board.

S. "Owner" shall mean and refer to the Owner as shown by the records in the Registry of the Property of Puerto Rico, Humacao Section whether it be one or more persons, firms, associations, corporations, or other legal entities, of fee simple title to any Residential Lot, Family Dwelling Unit, Community Facilities Lot, Commercial Lot, Community Facilities, Commercial Unit or Rural Tract situated upon the Properties but, notwithstanding any applicable theory of a mortgage shall not mean or refer to the mortgagee, its successors and assigns, unless and until such mortgagee has acquired title pursuant to foreclosure or a proceeding of deed in lieu of foreclosure. 

The term "Owner" shall not mean or refer to any lessee or tenant of an Owner.

In the event that there is a recorded in the office of the Registry of the Property of Puerto Rico, Humacao Section, a longterm contract of sale covering any lot or parcel of land within the Properties, the Owner of such lot or parcel of land shall be the purchaser under said c tract and not the fee simple title holder. A longterm contract of sale shall be one where the purchaser is required to make payment of the property for a period extending beyond nine months from the date of the contract and where the purchaser does not receive title to the property until such payments are made although the purchaser is given the use of said property.

T. "Properties" shall mean and refer to the Existing Property described in Article III, Section A thereof, and additions thereto, as are subjected to this Declaration or any supplemental declaration under the provisions of Article III, Section B. 

U. 'Purchased Common Properties" shall mean and refer to those tracts of land with any improvements thereon, acquired by the Association, to be operated as a Membership recreational facility with Membership criteria to be selected and determined by mutual agreement between the Association's Board and the Company or other owner of such facilities and user costs and operating rules for such facilities to be determined by the Board of Directors of the Association.

V. "Referendum" shall mean and refer to power of all or some specific portion of the Members to vote by mailed ballots on certain actions by the Board of Directors of the Association as provided in this Deed or the Bylaws. 

W. "Residential Assessment" shall mean that assessment charged to any Residential Unit within Palmas del Mar. A unit shall become a Residential Unit at such time that a Use Permit is issued on the unit. 

X. "Residential Lot' shall mean any unimproved parcel of land located within the properties, with the exception of the Common Properties, Restricted Common Properties and Purchased Common Properties, which is intended for use as a site for a single family detached dwelling or patio dwelling, duly recorded or presented for recordation in the Registry of Property of Puerto Rico, Humacao Section as a separate, distinct and individual parcel pursuant to the execution of a deed of segregation to such effect. A Residential Lot shall be deemed to be unimproved until the improvements being constructed thereon are completed and a use or occupancy permit is issued for such improvements. 

Y. "Residential Unit" shall mean any Family Dwelling Unit for which a Use Permit has been issued, 

Z. "Resort Area" shall mean and refer to all those parcels or tracts of land included within the Palmas del Mar community designated as such by the Company and so identified in official Company plate. 

AA. "Restricted Common Properties" shall mean and refer to those tracts of land with any improvements thereon which are actually deeded or leased to the Association and designated in such deed or lease as "Restricted Common Properties." All Restricted Common Properties are to be devoted to and intended for the common use and enjoyment of Owners of Residential Lots and Family Dwelling Units, their immediate families, guests accompanying such Owners tenants of such Owners holding leases of six (6) months duration or longer, and the Company, and to be closed to use of: (a) tenants of such Owners holding leases less than six (6) months duration; (b) resort accommodation "paying guests," (c) visiting members of the general public, with all use of Restricted Common Properties to be subject to the fee schedules and operating rules adopted by the Association. Any lands which are leased by the Association for use as Restricted Common Properties shall lose their character as Restricted Common Properties upon the expiration of such lease. 

BB. 'Rural Tract' shall mean and include all property within the Properties not classified as other types on land or building under (E, F, G, M, U, X and AA) above and (U and Y) infra, including undeveloped lands owned by the Company.

CC. "Security" shall not mean protection by the Association from bodily harm or personal injury to any person within the Palmas del Mar Properties or protection of property of any Owner or Member of the Association. Protection from bodily harm, or theft or destruction of property, is the responsibility of the local municipality. 

DD. 'Support Facilities" shall mean property utilized in the maintenance and service of the Palmas del Mar Community designated as such by the Company on its Master Plan including but not limited to airport facilities, warehouses, utilities (including the property of PDM Utility Corporation), transportation systems, automobile parking facilities and the like. 

EE. "Voting Certificate" shall be a document signed by the board of directors of a regime, condominium or other association, or by the Neighborhood Area chairman, authorizing the Delegate from the regime, condominium or other association, or Neighborhood Area, to cast the votes of that regime, condominium or other association or Neighborhood Area at a Membership meeting of the Association in the manner reflecting the results of the votes cast by the Owners in that regime, condominium or other association or Neighborhood Area. 

FF. "Voting Districts" shall mean a geographic area designated by the Board, which area shall be entitled to elect one (1) Directors to the Association Board of Directors. 

II. PROPERTY                           back to Table of Contents 

Section A Existing Property. The real property which is, and shall be held, transferred, sold, conveyed, given, donated, leased and occupied subject to these covenants is described as follows: 

(PROPERTY DESCRIPTIONS DELETED SEE LEGAL TEXT)

All of the real property herein above described shall sometimes be referred to herein as the "Existing Property."

The Company intends to develop the Existing Property in accordance with the Master Plan prepared by or for the Company and placed on display in its reception and sales office and other areas. The Company reserves the right to review and modify the Master Plan at it's sole option from time to time based upon its continuing research and design program. The Master Plan shall not bind the Company, its successors and assigns to adhere to the Master Plan in the development of the land shown thereon. Subject to its right to modify and convey to the Association properties designated for such use on official Company plats, and in addition, may at its option convey, to the Association, as provided in Article III, those parcels of land designated as properties which may be transferred to the Association on the Master Plan, as in the reasonable exercise of its discretion, it so chooses without regard to the relative location of such portions or sections within the overall plan. The, Company shall not be required to follow any predetermined sequence or order of improvements and developments and it may bring within the plan of these covenants additional lands, and develop the same before completing the development of the Existing Property. The Company shall have full power to add to, subtract from, or make changes in, the Master Plan regardless of the fact that such actions may alter the relative voting strength of the various types of Membership of the Association.    

Section B Additions, Mergers and/or Reductions to Existing Property. Lands may become subject to, or released from this Declaration in the following manner: (a) Additions The Company, its successors and assigns shall have the right, but not the obligation, without further consent of the Association, to bring within the plan and operation of this Declaration, additional Properties in future stages of the Development. The additions authorized under this and the succeeding subsection, shall be made by filing at the Registry of the Property of Puerto Rico, Humacao Section, a Public Deed with respect to the additional Property which shall extend the operation and effect of the Covenants and Restrictions of the Declaration to such additional Property. 

The aforesaid Public Deed may contain such complementary additions and modifications of the Covenants and Restrictions contained in this Declaration as may be necessary or convenient, in the judgment of the Company, to reflect the different character, if any, of the added Properties and as are not inconsistent with the plan of this Declaration, but such modifications shall have no effect on the property described in Section A, Article II above. 

(b) Other Additions Upon approval in writing of the Association, pursuant to threefourths (75%) of the total votes of the Association as represented by their Delegates, at a duty called meeting, the Association, with the consent of the owner of the property, may subject additional property to these Covenants and Restrictions by filing a Public Deed at the Registry of the Property of Puerto Rico, Humacao Section, with respect to his property which shall extend the operation and effect of the Covenants and restrictions of the Declaration to such property.

The aforesaid Public Deed may contain such complementary additions and modifications of the covenants and Restrictions contained in this Declaration as may be necessary or convenient, in the judgment of the Association, to reflect the different character, if any, of the added Properties and as are not inconsistent with the plan of this Declaration. 

(c) Mergers Upon a merger or consolidation of the Association with another association as provided for in the Bylaws of the Association, its Properties, rights and obligations may, by operation of law, be transferred to another surviving or consolidated association, or, in the alternative, the properties, rights and obligations of another association may, by operation of law, be added to the properties of the Association as a surviving corporation pursuant to a merger. The surviving or consolidated association may administer the Covenants and Restrictions established by this Declaration within the Existing Property, together with the covenants and restrictions established upon other properties

(d) Reductions The Company, its successors and assigns, shall have the right, without further consent of the Association, to release from the plan and operation of this Declaration certain undeveloped parcels. The reductions authorized under this subsection shall be made by filing at the Registry of the Property of Puerto Rico, Humacao Section, a Public Deed with respect to such undeveloped parcel(s) releasing same from the operation and effect of the Covenants and Restrictions of the Declarations.

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III MEMBERSHIP AND VOTING RIGHTS IN THE ASSOCIATION  

Section A. Membership Every Owner shall be a Member of the Association. The Company shall be a Member of the Association. 

Section B. Voting Rights The Association shall have four (4) types of voting Membership. No Member shall have the right to vote at any regular or special meeting, or in any referendum, unless all such Member's assessments and any interest, late charges, administrative fees, attorney's fees or other charges, due thereon are paid and/or the compliance with a payment or other plan that has been secured from the Board of Directors as of the record date for such meeting or Referendum. Notwithstanding the aforesaid or anything to the contrary in the Certificate or these Covenants, nothing herein shall be construed or interpreted as adversely affecting or in any manner, or form diminishing or lessening the existing rigs and privileges of the Company granted the Certificate or pursuant to these Covenant

Type 'A' Type 'A" Members shall be all those Owners of Residential Lots and Family Dwelling Units recorded in the Property Registry as individual properties. A Type "A" Member shall be entitled to one (1) vote for each Family Dwelling Unit and/or Residential Lot which he owns. 

Type "B" Type "B" Member shall be all those Owners of Commercial Lots shown on recorded plats for which a construction permit has been issued to develop same. A Type "B" Member shall be entitled to one (1) vote for each one (1) acre, or fraction thereof, contained in the commercial Lot which such Type "B" Member owns. 

Type "C" Type "C" Members shall be all those Owners of Commercial Units. A Type "C" Member shall be entitled to one (1) vote for each one thousand (1000) square feet, or fraction thereof, contained in the Commercial Unit which he owns.

Type "D" Type "D" Members shall be the Owners of Rural Tracts within the Palmas del Mar boundaries. A Type "D" Member shall be entitled to one (1) vote for each five (5) acres of rural land owned, including that owned by the Company. When any property entitling the Owner to Membership as Type "A", "8", "C" or "D" Member of the Association is owned of record in the name of two (2) or more persons or entities, whether fiduciaries, joint tenants in common, joint or common ownership, or if two (2) or more persons or entities have the same fiduciary relationship respecting the same property, the vote for such Membership shall be exercised as the parties decide among themselves and advise the Secretary of the Association, in writing, at least thirty (3) days prior to the meeting. In the absence of such advice, if more than one Owner wishes to vote, then the vote for that Membership shall be void. 

Section C: Voting Districts As the Palmas del Mar community develops, the Owners of the Properties will be designated Type "A", "B", "C" or D" Members. In order to guarantee all Owners representation on the Board of Directors, the Board shall establish Voting Districts. A Voting District shall be a geographic area that contains any or all of the following: Residential Units, Residential Lots, Commercial Units, Commercial Lots or Rural Tract Acreage. Each Voting District shall be represented on the Board of Directors by at least one (1) Director. At large Directors may be elected by all of the voting Members of the Association, provided that at no time shall there be more than thirteen (13) Directors. Each director shall have one (1) vote on the Board of Directors. For example, if one (1) Voting District is established by the Board, that Voting District shall be represented by one (1) Director. The balance of the Directors will be elected at large, by all of the Members of the Association, with the exception of the Company. Notwithstanding anything to the contrary above, the Company shall not be entitled to appoint more than five (5) Directors to the Board of Directors without the approval of the Directors elected by the Membership. 

After the date of recordation of the amendments to this Declaration, representation on the Board shall be reduced as follows:

After the closing of the next one thousand (1,000) residential units in Palmas del Mar, the Company shall be entitled to appoint four (4) Directors; 

After the closing of the next two thousand (2,000) residential units in Palmas del Mar, the Company shall be entitled to appoint three (3) Directors; 

After the closing of the next three thousand (3,000) residential units in Palmas del Mar, the Company shall be entitled to appoint two (2) Directors. 

Until the last residential unit in Palmas del Mar is ,closed, the Developer shall be entitled to appoint two (2) Directors to the Board. 

Directors from Voting Districts shall be elected by the President or his appointed representative, of each regime, condominium or other association, or the Chairman of the Neighborhood Areas within the Voting District.

The President, or his appointed representative, of each regime, condominium or other association, or the chairman of the Neighborhood Area, shall each have one (1) vote in the election of the one (1) Director to represent their Voting District, regardless of the number of units or homes within the respective association or Neighborhood Areas. (This voting procedure is designed to limit high density areas within a Voting District from controlling the election of the Director from that Voting District.) 

At the first election of Directors from a Voting District, the one (1) Director shall be elected for a period of three (3) years. Thereafter, the one (1) Director from each Voting District shall be elected at such time as the Director's term expires or the Directorship becomes vacant due to resignation, death or any other reason. 

Until the establishment of Voting Districts by the Board, all Directors representing the Class B Membership shall be elected by the Membership atlarge.

Section D: Delegates The Board of Directors of each regime, condominium or other association, or Neighborhood Area, shall appoint a Delegate, and an alternate, who shall act in the absence of the Delegate, to represent the regime, condominium or other association, or Neighborhood Area at meetings of the Membership. The Delegates shall represent all of the Owners in the regime, condominium or other association, or Neighborhood Area, with regards to the establishment of a quorum as Membership meetings. (i.e. If a Delegate lives in a condominium that .has 100 units, attendance at a meeting of the Membership by the Delegate shall constitute attendance by all 100 Owners with regards to establishing a quorum,)

Votes to be cast at a meeting of the Membership shall be cast by the Delegate in the following manner. The Delegate shall inform the Board of Directors of the regime, condominium or other association, or the chairman of the Neighborhood Area, that a vote on a particular item is required by all Owners within the condominium or other association, or Neighborhood Area. After the voting by the Owners is completed, the Board of Directors shall sign a Voting Certificate indicating the results of the vote. (i.e. If a condominium has 100 units, and 50 owners vote yes, 20 owners vote no and 30 owners do not vote, the Board shall authorize the Delegate to cast 50 votes yes, 20 votes no with 30 Owners not voting.) The Voting Certificate, signed by the Board, shall be presented by the Delegate to the Association Board of Directors. The Association Board of Directors shall tally all of the Voting Certificates from the regimes, condominiums or other associations, or Neighborhood Areas, to determine the results of the vote. 

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IV PROPERTY RIGHTS IN THE COMMON PROPERTIES   

Section A. Members Obligation to Maintain Roadways The Association, in the best interest of all its Members, shall be authorized to repair, rehabilitate, resurface and otherwise maintain the roadways and streets (except those found within a condominium regime or other private property) and to provide for the maintenance and cleanup of rightofway; to provide drainage along said roadways, and to provide for motorized security patrols. The Board of Directors of the Association shall request from the concerned governmental entities the power to place any reasonable restrictions upon the use of roadways and streets within Palmas del Mar including, but not limited to, the types and sizes of vehicles permitted to use said roads, the maximum and minimum speeds of vehicles using said roads, all other necessary traffic and parking regulations, and the fact that maximum noise levels of vehicles using the roads shall be more restrictive than the laws of Puerto Rico shall not make such restrictions unreasonable. 

Section B. Member's Easements of Enjoyment in Common Properties Subject to the provisions of these Covenants, the rules and regulations of the Association, and any fees or charges established by the Association, every Member and every tenant and guest of such Member shall have a right and easement of enjoyment in and to the Common Properties. Such easement shall be appurtenant to, and shall pass with, the title of every Property within Palmas del Mar. The privilege granted to guests and tenants of six (6) months or less of Members to use and enjoy the Common Properties may be denied to or withdrawn from such guests or tenants of six (6) months or less by an affirmative vote of ninety percent (90%)