By-Laws of BACK CREEK LANDING

COMMUNITY SERVICE ASSOCIATION

1. Article I. Name and Location
   • Section 1. Name and Location
     • The name of the unincorporated association is:
     • BACK CREEK LANDING COMMUNITY SERVICE ASSOCIATION
     • Its principal office and mailing address are as follows:
     • c/o Seawright Corporation, Manager
     • 7500 Old Georgetown Road
     • Bethesda, Maryland 20814-6195
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2. Article II. Definitions
   • Section 1. Association
     • "Association" means the unincorporated association of all of the Lot Owners in the Community.
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   • Section 2. Declaration
     • "Declaration" means the Declaration recorded in the Land Records for Talbot County, Maryland, in Liber ______ at folio ______.
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   • Section 3. Other Definitions
     • Unless these By-Laws provide to the contrary, or unless it is evident from the context that a different meaning is intended or required, all other terms used herein shall have the same meaning as they are defined to have in the Declaration.
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3. Article III. Membership
   • Section 1. Members
     • A person or legal entity holding fee simple title to a Lot in the Community shall be a member of the Association and is hereafter spoken of, interchangeably, as an "Owner" or "Member." An interest held solely as security for the performance of an obligation shall not make the holder a member of the Association.
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   • Section 2. Association Membership
     • The Association shall have two classes of membership known "Class A" and "Class B":
       1. There shall be a Class A membership in the Association appurtenant to each Lot subject to the Declaration. With the exception of the Declarant, every person or legal entity, or any combination thereof, who is a record Owner of a fee interest in a Lot which is part of the premises described in Article II of the Declaration, or which otherwise becomes subject by the covenants set forth in the Declaration to assessment by the Association, shall be a Class A Member of the Association; provided, however, that the holder of an interest solely as security for the performance of an obligation shall not be a Class A Member by reason of that interest. Each Class A Member shall be entitled to one (1) vote for each Lot in which such Member holds the interest required for a Class A membership, provided, however, that the votes appurtenant to a Lot occupied by persons other than the Owner thereof shall be cast only by tenants of the Lot who are possessed of certificates of good standing showing no delinquencies issued by the Association and /or Owner of the Lot and endorsed to the use of the tenant by the Member who owns the Lot. Such certificate of good standing shall be dated within ten (10) days of the date upon which it is presented and shall confirm the identity of the tenant and the Lot and shall certify whether or not there is a delinquency in the performance of the tenant under any terms of the lease for the Lot.
       2. There shall be as many Class B memberships as there are Class A memberships in the Association. The Class B Member shall be the Declarant, its nominee or nominees, including any builder to whom Declarant has elected to transfer Class B membership, and shall include every person or legal entity, or any combination thereof, who shall obtain any Class B membership by specific assignment from the Declarant. Each Class B Member shall be entitled to three (3) votes for each Class B membership which it holds. The Declarant shall lose three (3) votes for each Lot conveyed to a third-party purchaser (other than a builder to whom a lot has been sold for purposes of constructing a residence, who shall have two (2) votes, unless all Class B votes are already assigned). At such time as all Lots shall have been conveyed to third-party purchasers, the Class B memberships shall be deemed terminated and of no further validity. Notwithstanding the foregoing, holders of Class B memberships may, at any time, exchange a Class B membership for a Class A membership and thereby assume its responsibilities and financial obligations.
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4. Article IV. Meetings of Members
   • Section 1. Place of Meeting
     • Meetings of the Association shall he held at the principal office of the Association or at such other suitable place within the State of Maryland reasonably convenient to the Members as may be designated by the Board of Directors.
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   • Section 2. Annual Meetings
     • The first annual meeting of the Association Members shall be held when the Board of Directors determines but, in any event, on or before the earlier of (i) sixty (60) days from the date that fifty percent (50%) of the Lots have been conveyed to third party purchasers, or (ii) within five (5) years from the date that the first Lot is conveyed to an owner other than Declarant or its successors, whichever occurs earlier. Thereafter an annual meeting of the Association Members shall be held once each calendar year, during the same calendar month as the first annual meeting. At each annual meeting there shall be elected by ballot of the Members a Board of Directors, in accordance with the requirements of Article V of these By-Laws. The Association may transact such other business within the powers of the Association as may properly come before it.
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   • Section 3. Special Meetings
     • It shall be the duty of the President to call a special meeting of the Members as directed by resolution of the Board of Directors or upon a petition signed by the Members representing at least twenty-five percent (25%) of the total votes of the Members having been presented to the Secretary; provided, however, that except upon resolution of the Board of Directors or upon a petition signed by the Members representing at least a majority of the total votes of the Members having been presented to the Secretary, no special meeting of the Association shall be called either
     1. prior to the first annual Association meeting as above provided; or
     2. to consider any matter which is substantially the same as a matter voted on at any special meeting of the Association held during the preceding twelve (12) months.
     • The Secretary shall inform the Members who petition for a special meeting of the reasonably estimated cost of preparing and mailing a notice of the meeting and, upon payment of the estimated cost to the Association, shall notify each Member entitled to notice of the meeting. The notice of a special meeting shall state the time and place of the meeting and its purpose. No business shall be transacted at a special meeting except as stated in the notice.
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   • Section 4. Notice of Meetings
     • It shall be the duty of the Secretary to mail or otherwise deliver by hand delivery a notice of each annual and special meeting of the Association, stating the time and place where it is to be held, to each Member at the Member's address as it appears on the roster of Members, at least ten (10) but not more than ninety (90) days before the meeting. Notice by either method shall be considered as notice served and proof of notice shall be made by affidavit of the person giving notice. The purpose of the meeting shall be stated if the meeting is a special meeting or if notice of the purpose is required by any provision of law. Attendance by a Member at an annual or special meeting in person or by proxy, shall be a waiver of notice by him of the time, place and purpose thereof. Notice of annual or special meeting of the Association may also be waived by any Member before or after the meeting.
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   • Section 5. Quorum
     • A quorum is deemed present throughout any meeting of the Association if Members entitled to cast forty percent (40%) of the total votes of the Members are present, either in person or by proxy at the calling of the roll.
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   • Section 6. Adjourned Meetings
     • If a meeting of the Association cannot be conducted because a quorum is not present, the Members who are present, either in person or by proxy, may adjourn and reconvene the meeting in accordance with the provisions and requirements of Section 5-206 of the Corporations and Associations Article, Annotated Code of Maryland (1985 Repl. Vol.), as from time to time amended.
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   • Section 7. Action without Meeting
     • Any action required or permitted to be taken at an annual or special meeting of the Association may be taken without a meeting if all of the Members individually or collectively consent in writing to that action, and if such written consent or consents is filed with the minutes of the Association.
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   • Section 8. Voting
     • At every annual or special meeting of the Association, each of the Members shall have the right to cast one (1) vote, there being a single vote appurtenant to each Lot, on each question. The votes of the Members representing a majority of the votes of the Members listed on the current roster of Members, present and voting, in person or by proxy, shall decide any question brought before the Association, unless the question is one upon which, by requirement of law, or of the Declaration or of these By-Laws, a different vote is required, in which case such other requirement shall govern and control.
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   • Section 9. Proxies
     • A Member may appoint an adult natural person as his proxy. An appointment of a proxy must be in writing and must be filed with the Secretary in a form approved by the Board of Directors at or before the appointed time of each meeting. Unless limited by its terms, an appointment of a proxy shall continue until revoked by a written notice of revocation filed with the Secretary or by the death of the Member appointing the proxy; provided, however, that no proxy is effective for a period in excess of one hundred eighty (180) days unless granted to a lessee or mortgagee of the Community to which the vote is appurtenant. A proxy who is not appointed to vote as directed by a Member may only be appointed for purposes of meeting quorums and to vote for matters of business before the Association, other than an election of officers and members of the Board of Directors. In order for a proxy to vote for officers and members of the Board of Directors, the Member must direct the proxy to vote for certain officers and members of the Board of Directors.
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   • Section 10. Order of Business
     • The order of business at all annual meetings of the Association shall be as follows:
       1. Roll call and certification of proxies;
       2. Proof of notice of meeting or waiver of notice;
       3. Reading and disposal of minutes of preceding meetings, if any;
       4. Reports of officers, if any;
       5. Reports of committees, if any;
       6. Election or appointment of inspectors of election;
       7. Election of directors and officers;
       8. Unfinished business;
       9. New Business; and
       10. Adjournment.
     • In the case of special meetings, items (a) through (d) shall be applicable and thereafter the agenda shall consist of the items specified in the notice of the meeting.
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5. Article V. Directors
   • Section 1. Number and Qualification
     • The affairs of the Association shall be governed by a Board of Directors composed of an uneven number of Directors, but no less than three (3) natural persons and not more than seven (7) natural persons ("Directors"). At least two of the Directors must be Lot Owners. Prior to the first annual meeting of the Association, the number of initial Directors shall be three (3). Thereafter, the number of Directors shall be determined by a vote of the Members at the first annual meeting of the Association and the number of Directors may be changed by a vote of the Members at any subsequent annual or special meeting of the Association; provided, however, that
     1. the limitations of this Section shall continue to apply; and
     2. no such change shall operate to curtail or extend the term of any incumbent Director.
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   • Section 2. Initial Directors
     • The initial Directors shall be named by the Declarant and shall act as such from the date upon which the Declaration is recorded until the first annual meeting of the Association.
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   • Section 3. Powers and Duties
     • The Directors shall have all the powers and duties necessary for the administration of the affairs of the Association and may do all things not by law or these By-Laws directed to be exercised and done by the Members. The powers and duties of the Directors shall include, but not be limited to, the following:
       1. To provide for the maintenance of the Community and to provide services in a manner consistent with law and the provisions of these By-Laws and the Declaration; and
       2. To provide for the establishment, collection and expenditure of assessments from the Members and for the assessment, filing and enforcement of contract liens in a manner consistent with law and the provisions of these By- Laws and the Declaration; and
       3. To provide for the designation, hiring and dismissal of the personnel necessary for the good working order of the Community and for the proper care of the common elements; and
       4. To provide for the promulgation and enforcement of reasonable rules and regulations, restrictions and/or requirements as may be deemed proper respecting the use, occupancy and maintenance of the facilities of the Community, all of which shall be consistent with law and the provisions of these By-Laws and the Declaration; and
       5. To enter into agreements for or to acquire leaseholds, memberships and other possessions or use interests in real or personal property for the purpose of promoting the welfare of the Members and to declare expenses thus incurred to be the common expenses of the Association; and
       6. To purchase insurance for the Community in the manner required by law and provided in these By-Laws; and
       7. To repair, restore or reconstruct the Community Facilities after a casualty loss in a manner consistent with law and the provisions of these By-Laws and to otherwise improve the Community; this power shall be deemed to include the power of restoring a residence constructed upon a Lot structurally if its Owner fails to do so following a casualty which the Directors deems to be of such aesthetic or structural significance to the Community as to require correction; and
       8. To lease, grant licenses, easements, rights-of-way and other rights of use in all or any part of the common elements of the Community; and
       9. To purchase the Community s in the Community and to lease, mortgage or convey the subject to the provisions of these By-Laws and the Declaration; and
       10. Any contract undertaken by the Directors in execution of the foregoing powers or any others herein reserved or granted, shall be an arms-length agreement with a person or entity unrelated to any Director or any Member unless the undertaking is approved by seventy-five percent (75%) of the members of the Directors.
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   • Section 4. Management Agent
     • The Directors may employ a management agent or manager (the "Management Agent") for the Association at a rate of compensation established by the Directors to perform such duties and services as the Directors authorizes in writing. Any management agreement entered into by the Association shall provide, inter alia, that such agreement may be terminated, without the payment of any termination fee, without cause upon ninety (90) days written notice or with cause upon thirty (30) days written notice. The term of such management agreement shall not exceed one (1) year; provided, however, that the term of the management agreement may be renewed by mutual agreement of the parties for successive one (1) year periods.
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   • Section 5. Election and Term of Office
     • The term of the Directors named by the Declarant shall expire when their successors have been elected at the first annual meeting of the Association. The election of Directors shall be by ballot, unless balloting is dispensed with by the unanimous consent of the Members present at any meeting, in person or by proxy. There shall be no cumulative voting. Directors shall be elected for terms of one (1), two (2) and three (3) years. Directors shall hold office until their successors have been elected and hold their first regular meeting.
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   • Section 6. Vacancies
     • Vacancies on the Board of Directors caused by any reason other than the removal of a Director by a vote of the membership, or an increase in the number of Directors, shall be filled by vote of the majority of the remaining Directors, even though they may constitute less than a quorum, and each person so elected shall be a Director until a successor is elected by the Members at the next annual meeting of the Association to serve out any unexpired portion of the term. Vacancies on the Board of Directors caused by an increase in the number of Directors shall be filled by a vote of the majority of the Directors, and each person so elected shall be a Director until a successor is elected by the Members at the next annual meeting.
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   • Section 7. Removal of Directors
     • At an annual meeting or a special meeting called for that purpose, a Director may be removed with or without cause by vote of a majority of Members present and voting, in person or by proxy, and a successor may then be elected by the Members to fill the vacancy created. A Director whose removal has been proposed by the Members shall be given an opportunity to be heard at the meeting. The term of a Director who becomes more than sixty (60) days delinquent in the payment of assessments or carrying charges due the Association may be terminated by resolution of the remaining Directors, and the remaining Directors shall appoint his successor.
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   • Section 8. Compensation
     • No compensation shall be paid to Directors for their services as Directors. After the first annual meeting of the Association, no remuneration shall be paid to any Director who is also a Member for services performed by him for the Association in any other capacity unless a resolution authorizing such remuneration has been adopted by the Directors before such services are undertaken. Directors may be reimbursed for their actual out-of-pocket expenses reasonably and necessarily incurred in connection with their services as Directors.
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   • Section 9. Organization Meeting
     • The first meeting of newly elected Directors shall be held within ten (10) days of election at a place determined by the Directors at the meeting at which they were elected, and no notice shall be necessary to the newly elected Directors in order to legally constitute that meeting, provided a majority of the Directors is present at such first meeting.
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   • Section 10. Regular Meetings
     • Regular meetings of the Directors may be held at a time and place determined by a majority of the Directors, but at least two (2) meetings shall be held during each fiscal year. Notice of the time and place of regular meetings of the Directors shall be given to each Director, personally or by mail, telephone or telecopy or facsimile transmission, at least six (6) days prior to the day named for the meeting. Notice of the time and place of regular meetings of the Directors shall also be given to each Member in the manner required by applicable law.
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   • Section 11. Special Meetings
     • Special meetings of the Directors may be called by the President on three (3) days notice to each Director, given personally or by mail, telephone, telecopy or facsimile transmission, which notice shall state the time and place of the meeting. Special meetings of the Directors shall be called by the President or Secretary in like manner and on like notice on the written request of at least one-third (1/3) of the Directors.
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   • Section 12. Meetings Open-Closed Session
     • Except as otherwise provided for in these By- Laws or as required by statute, all meetings of the Directors shall be open to all Members. A meeting of the Directors may be held in closed session only for the following purposes:
       1. Discussion of matters pertaining to employees and personnel; or
       2. Protection of the privacy or reputation of individuals in matters not related to the business of the Association; or
       3. Consultations with legal counsel; or
       4. Consultations with staff personnel, consultants, attorneys or other persons in connection with pending or potential litigation; or
       5. Compliance with a specific constitutional, statutory or judicially imposed requirement protecting particular proceedings or matters from public disclosure; or
       6. For some other exceptional reason so compelling as to override the general public policy in favor of open meetings, and upon an individually recorded affirmative vote of at least two-thirds (2/3) of the Directors present at the meeting.
     • If a meeting of the Directors is held in closed session, then no action may be taken nor matter discussed if it is not permitted by the provisions of Section 11-109.1, Real Property Article, Annotated Code of Maryland (1988 Repl. Vol.). A statement of the time, place and purpose of a meeting of the Directors held in closed session, the record of the vote of each Director by which such meeting was closed, and the authority for holding the meeting in closed session shall be included in the minutes of the next meeting of the Directors.
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   • Section 13. Waiver of Notice
     • Before, at or after a meeting of the Directors, any Director may, in writing, waive notice of that meeting and the waiver shall be deemed equivalent to the giving of notice. Attendance by a Director at a meeting of the Directors is a waiver of notice by him of the time, place and purpose thereof. If all the Directors are present at any meeting of the Directors, no notice shall be required and any business may be transacted at such meeting.
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   • Section 14. Quorum
     • At all meetings of the Directors a majority of the Directors shall constitute a quorum for the transaction of business, and the acts of the majority of the Directors present at a meeting at which a quorum is present shall be the acts of the Directors. If at a meeting of the Directors there is less than a quorum present, the majority present may adjourn the meeting to another time. At an adjourned meeting, any business which might have been transacted at the meeting as originally called may be transacted without further notice.
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6. Article VI. Officers
   • Section 1. Designation
     • The principal officers of the Association shall be a President, one or more Vice Presidents, a Secretary, and a Treasurer, all of whom shall be elected by the Directors. Except for the President, the officers of the Association need not be Directors. Prior to the first annual meeting of the Association, the officers of the Association need not be Lot owners. Thereafter, except for the President, the officers of the Association need not be Members. The Directors may appoint an Assistant Secretary and an Assistant Treasurer and such other officers as in their judgment may be necessary. A person may hold more than one office but may not serve concurrently as both President and Vice President or as President and Secretary.
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   • Section 2. Election of Officers
     • The officers of the Association shall be elected annually by the Directors at the organization meeting of the Directors and shall hold office at the pleasure of the Directors.
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   • Section 3. Removal of Officers
     • Upon the affirmative vote of a majority of the members of the Directors, any officer may be removed, with or without cause, and his successor elected at any regular meeting of the Directors or at any special meeting of the Directors called for such purpose.
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   • Section 4. President
     • The President shall be a Director of the Association. The President shall be the chief executive officer of the Association. He shall preside at all meetings of the Members and of the Directors and shall have all of the general powers and duties which are usually vested in the office of president of a corporation.
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   • Section 5. Vice President
     • The Vice President shall take the place of the President and perform his duties whenever the President shall be absent or unable to act. If neither the President nor the Vice President is able to act, the Directors shall appoint a Director to do so on an interim basis. The Vice President shall also assist the President generally and shall perform such other duties as shall from time to time be delegated to him by the Directors.
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   • Section 6. Secretary
     • The Secretary shall keep the minutes of all annual and special meetings of the Directors and the minutes of all annual and special meetings of the Association and shall maintain accurate and complete books for the recording of the resolutions of the Association. The Secretary shall count all votes at annual and special meetings of the Directors and annual and special meetings of the Association. The Secretary shall give notice of all annual and special meetings of the Association in conformity with the requirements of these By-Laws. The Secretary shall have charge of the membership roster and of such other books and papers as the Directors directs and the Secretary shall, in general, perform all of the duties incident to the office of Secretary.
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   • Section 7. Treasurer
     • The Treasurer shall have responsibility for funds and securities of the Association and shall be responsible for keeping, or causing to be kept, full and accurate accounts of all receipts and disbursements in books belonging to the Association. He shall be responsible for causing the deposit of all funds and other valuable effects in the name and to the credit, of the Association in such depositories as may from time to time be designated by the Directors.
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7. Article VII. Liability and Indemnification of Officers and Directors
   • Section 1. Liability and Indemnification of Officers and Directors
     • The Association shall indemnify every officer or Director of the Association who is threatened to be made a named defendant in an action by reason of service in that capacity, if that person:
     1. acted in good faith;
     2. reasonably believed
        1. in the case of conduct in that person's official capacity, that the conduct was in the best interests of the Association, and
        2. in all other cases, that the conduct was at least not opposed to the best interests of the Association; and
     3. in the case of any criminal proceeding, had no reasonable cause to believe that the conduct was unlawful.
     • This indemnification is against judgments, fines, settlements and reasonable expenses actually incurred in connection with any threatened, pending or completed action; provided, however, that if an action, suit or proceeding was won by or in the name of the Association, indemnification shall be only against reasonable expenses and shall not be made in respect of any proceeding in which the person otherwise entitled to indemnity has been adjudged liable to the Association. The termination of an action by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, creates a rebuttal presumption that the person otherwise entitled to indemnity did not meet the required standard of conduct.
     • A person who is or was an officer or Director of the Association is not indemnified under the provisions of this Section 1 in respect of any threatened, pending or completed action, suit or proceeding charging improper personal benefit to that person, whether or not involving action in that person's official capacity, in which the person was adjudged to be liable on the basis that personal benefit was improperly received.
     • The provisions of this Section 1 are intended to provide every person who is or was an officer or Director of the Association and who was, is or is threatened to be made a named defendant or respondent in any threatened, pending or completed action, suit or proceeding by reason of service in that capacity with indemnification to the extent permitted in Section 2-418(b) of Title 2, Corporations and Associations Article, Annotated Code of Maryland (1985 Repl. Vol.), as from time to time amended or superseded.
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   • Section 2. Determination that Indemnification is Proper
     • Indemnification under Section 1 of this Article VII may not be made by the Association unless authorized in each specific case, after a determination has been made that indemnification is permissible because the person who is or was an officer or Director of the Association has met the standard of conduct set forth in Section 1 of this Article VII. Such determination shall be made in the manner provided in Section 2-418(e) of Title 2, Corporations and Associations Article, Annotated Code of Maryland (1985 Repl. Vol.), as from time to time amended or superseded.
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   • Section 3. Payment of Expenses in Advance of Final Disposition of Action
     • Reasonable expenses incurred by any person who is or was an officer or Director of the Association and who is a party to any threatened, pending or completed action, suit or proceeding by reason of service in that capacity may be paid or reimbursed by the Association in advance of the final disposition of that proceeding, after a determination that the facts then known to those making the determination would not preclude indemnification under Section 1 of this Article VII, upon receipt by the Association of:
       1. A written affirmation by that person of his good-faith belief that the standard of conduct necessary for indemnification by the Association has been met; and
       2. A written undertaking by that person to repay the amount if it shall ultimately be determined that the standard of conduct necessary for indemnification by the Association has not been met. This undertaking shall be an unlimited general obligation of the person making it, but need not be secured and may be accepted without reference to financial ability to make the repayment.
     • Determinations and authorizations of payments under this Section 3 of Article VII shall be in the manner specified in Section 2-418 (e), Title 2, Corporations and Associations Article, Annotated Code of Maryland (1985 Repl. Vol.), as from time to time amended or superseded.
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   • Section 4. General Provisions
     • The officers and Directors of the Association shall not be liable to the Association for any mistake of judgment or negligence, except for their own individual willful misconduct or bad faith. The officers and Directors of the Association shall have no personal liability with respect to any contract or other commitment made by them, in good faith, on behalf of the Association, and the Association shall indemnify and forever hold each such officer and Director free and harmless against all liability to others on account of any contract or commitment.
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   • Section 5. Provisions of this Article Not Exclusive
     • The provisions of this Article VII do not limit the power of the Association to pay expenses incurred by a person who was or is an officer or Director of the Association in connection with an appearance as a witness by reason of service in that capacity, when that person has not been made a named party in the proceeding. Any right to indemnification provided in this Article VII shall be in addition to, and not exclusive of, other rights which a person who is or was an officer or Director of the Association may be entitled, by law.
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   • Section 6. Insurance
     • The Association may purchase insurance on behalf of a person who is or was an officer or Director of the Association against liability asserted as arising out of the person's position, whether or not the Association would have the power to indemnify against liability.
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   • Section 7. Report to Association Members
     • Indemnification or an advance of expenses in accordance with the provisions of this Article VII shall be reported in writing to the Members with the notice of the next annual meeting of the Association or prior to the next annual meeting of the Association.
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   • Section 8. Interested Director Transactions
     • The Directors shall exercise their powers in good faith and with a view to the interests of the Association and the Community. A contract or other transaction between the Association and any of its Directors, or between the Association and any entity in which any of its Directors is a director or has a material financial interest is not void or voidable solely because of the common directorship or interest, or because the Director is present at the meeting of the Directors which approves or ratifies the contract or transaction, or because the vote of the Director was counted for the approval or ratification of the contract or transaction, if any of the following conditions exist:
       1. The fact of the common directorship or interest is disclosed or known to the Directors and it approves or ratifies the transaction by a majority vote of disinterested Directors, even if the disinterested Directors constitute less than a quorum; or
       2. The fact of the common directorship or interest is disclosed or known to the Members entitled to vote, and the transaction is authorized or ratified by a majority of the votes cast by the Members entitled to vote other than the votes appurtenant to the Community owned by the interested Director or corporation, firm or other entity; or
       3. The transaction is fair and reasonable to the Association at the time it was authorized or ratified.
     • Common or interested Directors or the votes which they are entitled to cast or which are entitled to be cast by an interested corporation, firm or other entity, may be counted in determining the presence of a quorum at a meeting of the Directors or at a meeting of the Association, as the circumstances may require, at which the transaction is authorized or ratified.
     • If a transaction is not authorized or ratified as provided in subparagraphs (a) or (b) of this Section 8, the person asserting the validity of the contract or transaction bears the burden of proving that the contract or transaction was fair and reasonable to the Association at the time it was authorized, approved or ratified.
     • This Section 8 does not apply to the fixing by the Directors of reasonable compensation for a Director, whether as a Director or in any other capacity.
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8. Article VIII. Fiscal Management
   • Section 1. Fiscal Year
     • The fiscal year of the Association shall begin on the first day of January every year, except the first year which shall begin at the date of recording of the Declaration. The fiscal year shall be subject to change by the Directors.
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   • Section 2. Principal Office
     • The principal office of the Association shall be as set forth in Article I, Section 1 of these By-Laws. The Directors may change the location of the principal office provided, however, that no change shall become effective until a certificate evidencing the change is made by the Secretary or Assistant Secretary of the Association and recorded, in the name of the Association, among the Land Records for Talbot County, Maryland.
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   • Section 3. Books and Accounts
     • Books and accounts of the Association shall be kept under the direction of the Treasurer in accordance with generally accepted accounting practices consistently applied. They shall include books with detailed accounts, in chronological order, of receipts and expenditures and other transactions of the Association and shall specify the maintenance and repair expenses of the Community, services provided with respect to the same, and any other expenses incurred by the Association. The amount of assessment required for payment of any capital expenditures or reserves of the Association may be credited upon the books of the Association to the "Paid-in-Surplus" account as a capital contribution by the Members. The receipts and expenditures of the Association shall be credited and charged to other accounts under at least the following classifications:
       1. "Current Operations" which shall involve the control of actual expenses of the Association, including reasonable allowances for necessary contingencies and working capital funds in relation to the assessments and expenses herein elsewhere provided for; and
       2. "Reserves" which shall involve the control of the reserves provided in these By-Laws and any other reserve funds which may be approved by the Directors; and
       3. "Investments" which shall involve the control over the investment of reserve funds and such other funds deemed suitable for investment on a temporary basis by the Directors.
     • All records kept shall be in the State of Maryland.
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   • Section 4. Auditing
     • At the close of each fiscal year, the books and records of the Association may be audited by an independent Certified Public Accountant, if requested by forty percent (40%) or more of the Members. Whether audited or not, an annual report shall be prepared in accordance with generally accepted accounting principles, consistently applied. Based upon such report, the Association shall furnish the Members and any mortgagee requesting it by notice in writing with an annual financial statement, including the income and disbursements of the Association for that annual period, within ninety (90) days following the end of each fiscal year.
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   • Section 5. Inspection of Books
     • The books and accounts of the Association, vouchers accrediting the entries made thereupon and all other records maintained by the Association shall be available for examination by the Members and by their duly authorized agents or attorneys, and by the institutional holder of any first mortgage on any the Community and its duly authorized agents or attorneys, at some place designated by the Directors, during normal business hours and for purposes reasonably related to their respective interests and after reasonable notice.
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   • Section 6. Execution of Documents
     • With the prior authorization of the Directors, all notes and contracts shall be executed on behalf of the Association by either the President or a Vice President, and all checks shall be executed on behalf of the Association by such officers, agents or other persons as are from time to time so authorized by the Directors.
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9. Article IX. Amendments
   • Section 1. Amendments
     • These By-Laws may be amended by the affirmative vote of Members representing seventy percent (70%) of the then Members (Class A and Class B) of the Association at any annual meeting of the Association or at any special meeting of the Association duly called for such purpose, in accordance with the provisions and requirements of these By-Laws and Title 11, Real Property Article, Annotated Code of Maryland (1988 Repl. Vol.), and as amended. Any amendment to these By-Laws shall become effective only upon the recordation of such amendment among the Land Records for Talbot County, Maryland, together with a certificate in writing of the President of the Association stating that the amendment was approved as aforesaid.
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   • Section 2. Proposal of Amendments
     • Amendments to these By-Laws may be proposed by the Directors of the Association or by petition signed by Members representing at least thirty percent (30%) of the total votes of the Association, which petition shall be delivered to the Secretary. A description of any proposed amendment shall accompany the notice of any annual or special meeting of the Association at which such proposed amendment is to be considered and voted upon.
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10. Article X. Interpretation - Miscellaneous
    • Section 1. Conflict
      • These By-Laws are subordinate and subject to all provisions of the Declaration. All of the terms hereof, except where clearly repugnant to the context, shall have the same meaning as in the Declaration or the aforesaid statute. In the event of any conflict between these By-Laws and the Declaration, the provisions of the Declaration shall control and where there is any conflict or ambiguity in provisions of the Declaration, the interpretation of the Declaration shall control.
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    • Section 2. Notices
      • Unless another type of notice is elsewhere specifically required, any notices called for in the Declaration and in these By-Laws shall be given in writing.
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    • Section 3. Severability
      • In the event any provision or provisions of these By-Laws shall be determined to be invalid, void or unenforceable, such determination shall not render invalid, void or unenforceable any other provisions hereof which can be given effect.
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    • Section 4. Waiver
      • No restriction, condition, obligation or provision of these By-Laws shall be deemed to have been abrogated or waived by reason of any failure or failures to enforce the same.
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    • Section 5. Cautions
      • The captions contained in these By-Laws are for convenience only and are not a part of these By-Laws and are not intended in any way to limit or enlarge the terms and provisions of these By- Laws.
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    • Section 6. Gender, Etc.
      • Whenever in these By-Laws the context so requires, the singular number shall include the plural and the converse; and the use of any gender shall be deemed to include all genders.

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