MINUTES MEETING OF THE 2006 BOARD OF DIRECTORS OF THE HEARTH, PATIO & BARBECUE ASSOCIATION

9:00am – 4:00pm PDT Tuesday, March 13, 2007

I.

Silver Legacy Resort & Casino Silver Baron A Reno, Nevada

CALL TO ORDER

Chairman Jerry Scott called the meeting of the HPBA Board of Directors to order at 9:00am PDT and welcomed the attendees. He asked those in attendance to introduce themselves.

II.

PRESENT Members: P. Anderson P. Birnstihl W. Dawes M. Derosier R. Dischner R. Forslund S. Hall E. Hosack H. Hudson J. Hussong S. Magnotti B. Lisle (PFI Board Rep) T. McLeod (HPBAC staff rep.) M. Nordby M. Palmer C. Radovic L. Robinette J. Scott D. Smith J. Tully B. Tweardy J. Vukanovich S. Weiss T. Wenke

Staff: A. Cagnoli C. Centra J. Crouch D. Darsa M. Deese J. Goldman D. Johnson D. Kaiser S. Kalish L. Wheeler Guests: G. Balmer P. Braddock S. Brammer M. Cantin D. Ewens E. Geil R. Gomez T. Gottschalk W. Howells F. Kirkpatrick B. Laub G. Leeper L. Meyer K. Teske-Osborne

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Guests, con’t: T. Pugh S. Pulone P. Ranes P. Rosengren D. Rossi J. Shimek F. Smith T. Wofford T. Woodruff

III.

CONSENT DOCKET

Mr. Scott explained that the Consent Docket had only one item, the approval of the Minutes of the November 5, 2006, meeting. He stated that if any Board member feels that discussion is necessary on the minutes, he or she must request that the item be moved to the Issues Docket. It was MOVED BY MR. TWEARDY AND SECONDED BY MR. ROBINETTE that the Minutes of the November 5, 2006, meeting be approved as distributed. MOTION PASSED UNANIMOUSLY.

IV.

REPORT DOCKET

Mr. Scott stated that, due to staff schedules at Expo, the order of the meeting would vary from the previous meeting. A.

MEMBERSHIP COMMITTEE

Membership Committee Chairman Steve Hall and Mr. Kaiser updated the members on membership activities. Mr. Hall reported that membership in HPBA for 2006 reached a new alltime high of 2,741 members, a 5% increase over 2005. This includes 395 manufacturer members and 2,346 non-manufacturer members. Mr. Hall remarked that additional milestones had been reached in 2006, including all-time highs in the following areas: (1) retention rate of 85%, (2) 85 new manufacturer members, (3) 13 returning manufacturers, and (4) 1,825 retailer members. Mr. Hall remarked that the committee continues to focus on membership development and retention. Mr. Hall said that the business liability insurance program, offered through Stratus Insurance, which was rolled out at Expo 2006, has been very successful. He stated that the company works with businesses that are hard to insure. To date, Stratus has written 60 policies for HPBA members. A discount is given for having NFI certified installers on staff. Stratus will have a booth at Expo and will attend the Retailers Caucus meeting. Mr. Kaiser discussed the HPBA Affinity programs. Mr. Kaiser stated that the affiliates have assisted in the promotion of the programs. He also said all the programs have generally experienced an increase in participation. B.

AFFILIATE LEADERS COMMITTEE

Affiliate Leaders Committee Chairman John Vukanovich updated the members on the activities of the Affiliate Leaders Committee. He stated that the Affiliate Leaders Committee is working with the Affiliate Board Committee, the affiliate staff, and the affiliate presidents.

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Mr. Vukanovich said that HPBA Member Success Club development is a priority for the committee. Two meetings have been held and a third meeting has been scheduled for August. It is a best practices exchange for non-competing retailers. While there are costs to participate in the club, the program is self-funding; HPBA supplies some staff time. Mr. Dawes commented that he participated in the meetings and felt that they are a good opportunity for retailers to meet and exchange ideas. Mr. Vukanovich reported that the Affiliate Information Center on the HPBA website is available to all affiliates. It is a secure resource where the affiliates can share information. Mr. Vukanovich related that he has encouraged all HPBA affiliates to do strategic planning so that the individual affiliate strategic plans will be in harmony with HPBA’s strategic plan. Mr. Kaiser said that the affiliate meetings held in June may use the services of a professional strategic planning trainer. C.

AFFILIATE BOARD COMMITTEE

Affiliate Board Committee Chairman Michael Nordby described the latest activities of the Affiliate Board Committee. He related that the committee has reviewed and analyzed the financial information from the affiliates. Mr. Nordby reported that combined for FY2006, the affiliates had a total of $1,824,696 in revenues and $1,555,402 in expenses, for a net revenue of $269,294. Mr. Nordby stated that the combined reserves of the affiliates are $956,326, or 61% of annual expenses. He also said that the Affiliate Board Committee will work directly with affiliates having reserves of 30% or less of annual expenses. For FY2007, the affiliates have budgeted $1.83 million in revenues and $1.76 million in expenses. Mr. Nordby noted that 75% of the affiliates’ revenues are from non-manufacturer membership dues, Expo revenue sharing, and manufacturer dues sharing. Expo revenue and manufacturer dues sharing constitute $640,499 of the affiliates’ revenues. Mr. Kaiser stated that the Affiliate Budget Form, developed by the committee, was used by the affiliates to submit their FY2007 budgets to HPBA. The committee also developed an Affiliate Annual Meeting Comparison Chart to allow affiliates to more easily share information on their meetings. Mr. Kaiser said that the committee will discuss ways to assist the affiliates with government relations, strategic planning, and membership development. D.

PELLET FUELS INSTITUTE

President Bruce Lisle updated the members on PFI and its activities. He reported that PFI had 111 members in 2006. Mr. Lisle said that the majority of new members came from the fuel manufacturer category. He also stated that for 2007, PFI dues were significantly increased, but he feels confident that the same level of membership will be met in 2007.

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Mr. Lisle reported that PFI’s revenues exceeded $250,000 in 2006. This contributed to PFI’s reserves growing to over $200,000. Mr. Lisle stated that in 2006, 1.144 million tons of residential bagged pellets were shipped in North America. Mr. Lisle reviewed the history of the pellet industry. It was mentioned that retailers continue to be concerned about their ability to obtain pellet fuel. A request will be made to PFI to report to the HPBA Board, and to HPBA retail members through a letter, on the current supply situation of pellet fuel in the United States. Mr. Lisle discussed PFI’s efforts in developing new pellet fuel standards and mechanisms to enforce the standards. He stated that PFI’s Standards Committee will develop the new standards under the auspices of ASTM. Mr. Lisle said that with the changes in Congress after the November elections, PFI feels it has a unique opportunity with regard to its government affairs program. He said that, along with the 2007 dues increase, the PFI dues structure was changed to raise funds to pay for the hiring of a lobbying firm. Mr. Lisle traveled to Washington, D.C., and met with congressional representatives in an effort to obtain funding for the RESA provisions of the Energy Policy Act of 2005 or to change the legislation into a tax credit.

V.

ISSUES DOCKET A.

ITEMS REQUIRING A VOTE 1. COMMITMENT TO CREATION OF AN OUTDOOR GAS PRODUCTS STANDARD

Mr. Goldman reported that the Government Affairs Committee has requested that the item be removed from the agenda. The committee will review the current standard and make its recommendation to the Board at a later date. 2. APPROVAL OF REVISED CONFLICT OF INTEREST POLICY Mr. Goldman explained that the Board had approved a Conflict of Interest policy in October, 2004, but it has not been enforced. The Hearth, Patio & Barbecue Education Foundation (HPBEF) Board of Governors had also been looking at instituting a conflict of interest policy. HPBA’s legal counsel, Michael Deese, recommended having one policy that would cover board and committee members of both organizations, HPBA/HPBEF staff, and affiliate staff. Mr. Deese made changes to the HPBA policy to accomplish this. He said that the policy is designed to promote disclosure to the appropriate person or persons and then a solution, if needed, is arrived at by HPBA’s Board of Directors, HPBEF’s Board of Governors, or HPBA’s President, depending upon the person who has made the disclosure.

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It was MOVED BY MR. TULLY AND SECONDED BY MR. FORSLUND that the revisions to the Conflict of Interest Policy, as submitted, be approved as presented. MOTION PASSED UNANIMOUSLY. A copy of the policy is attached and made part of the minutes. 3. ANTI-TRUST POLICY Mr. Deese explained the HPBA must have an anti-trust policy because there are specific antitrust laws that apply to trade associations and involve civil and criminal liabilities. HPBA’s current policy was drafted in 2002. Mr. Deese reviewed the policy and made recommendations to update it. After further discussion, it was MOVED BY MR. DAWES AND SECONDED BY MR. DEROSIER that the revised Anti-Trust Policy, as submitted, be approved as presented. MOTION PASSED UNANIMOUSLY. A copy of the policy, as revised, is attached and made part of the minutes. B. DISCUSSION ITEMS 1. TREASURER’S REPORT Pete Anderson reported that the un-audited December, 2006, statement reflects a net revenue of almost $500,000 for the association. This was mainly due to the success of Expo 2006. Mr. Anderson said that the Budget & Finance Committee may be required to make adjustments in the FY2007 budget, based on the final revenue from Expo. He noted that for 2007, rent expenses will be $12,000 over budget due to pass-throughs that will exceed what was anticipated. The cancellation of booth space by Hearth & Home Technologies (HHT), he reported, will have some financial ramifications for HPBA. However, because HHT did not want its decision to negatively impact HPBA’s programs, it made a substantial, voluntary contribution to HPBA’s programs. It is estimated that between $50,000 and $80,000 will need to be cut from HPBA’s 2007 expenses to reach the budgeted net revenue for the year. Mr. Goldman is working with staff to identify potential areas for reduction. Mr. Anderson explained that the budget process has been revised to include more involvement by the volunteer leadership. The Budget & Finance Committee (B&F) plans to meet in June to

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review the committees’ requests. This will allow the B&F Committee to get back to the committees, in a timely fashion, regarding their requests. 2. REPORT ON IMPLEMENTATION OF STRATEGIC PLAN Mr. Scott said that the Long Range Planning Committee met in August, 2005. There were three major areas of focus for the committee: Government Affairs, Expo, and Communications. Mr. Goldman reviewed the recommendations made by the committee and reported on actions taken to respond to each recommendation. 3. DISCUSSION OF GRILLING AND CANCER ISSUE Mr. Wenke reported that the World Cancer Research Fund (WCRF) will be releasing a report in November, 2007, on how charring beef, pork, poultry, and fish creates carcinogens in the meat. The consensus is that it is important that the association prepare a response to the impending report. It was noted that the WCRF will report that overcooking, whether done through grilling, deep-frying, or broiling, will create the carcinogens. HPBA staff has contacted food-related associations that will, potentially, be affected by the report. Ms. Darsa participated in a teleconference on January 29th with these associations to discuss how they can work together. They discussed the possibility of 1) obtaining a pre-release of the report, 2) developing a unified message, and 3) contracting with a third-party expert to review the report. The teleconference resulted in a list of safety tips for cooking meat that could be made available to consumers through websites and manufacturer literature. The group plans to meet again in the spring. It was recommended that HPBA continue to be proactive and positive.

VI.

REPORT DOCKET, Part II E.

EXPO DEPARTMENT

Expo Committee Chairman Tom Wenke reported the up-to-date Expo figures to the Board. He announced that there were 118 first-time exhibitors in attendance. The New Product Pavilion is very successful, with 57 new products displayed. Mr. Wenke explained that, in honor of HPBA’s recognition by Tradeshow Week as one of the 50 fastest growing trade shows, HPBA recognized its top 50 exhibitors based on their total exhibit square footage between 2005 and 2007. Mr. Wenke stated that the top 25 priority exhibitors have selected exhibit space for Expo 2008 and that the remainder of the exhibitors will be able to select space over the next several days. Mr. Goldman reported that Ms. VanDermark gave birth to a baby boy on March 6, and that mother and child are doing fine.

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F.

GOVERNMENT AFFAIRS DEPARTMENT

Government Affairs Committee Chairman Tom Pugh updated the members on recent government affairs activities. Mr. Pugh discussed the joint project by the Government Affairs and Communications committees to develop a fireplace and stove glass safety guide. The issue was initially raised in British Columbia with a noted increase in reports of children burning themselves on gas fireplace glass. A task force was formed and recommended the following: 1) development of a consumer brochure explaining safety measures to implement when owning a gas fireplace or stove; 2) encouraging manufacturers to include the safety measures in their product literature; and 3) encouraging the use of the new, universal safety symbol. Mr. Cagnoli reported that HPBA has contracted with Capwiz, an on-line advocacy service for federal, state and local legislative issues. This service will assist HPBA in coordination and mobilization of grassroots efforts when issues arise. Mr. Pugh reviewed the current political situation in Congress and the benefit that HPBA may receive from a Democratic-controlled Congress. Mr. Pugh stated that the Government Affairs Committee and a task force of the Hearth, Patio & Barbecue Education Foundation will work together to review and evaluate the HPBA Board Policies on NFI Certification. The group will address the short-term needs and long-term goals of NFI. Mr. Pugh reviewed current state and local issues facing the hearth industry. Mr. Pugh reported that the Libby Changeout is complete. The industry contributed over $1 million to the project. The initial air quality results are positive. This project laid the groundwork for a long-term relationship between HPBA and EPA. The EPA will once again hold its seminar on changeouts during HPBExpo with over 70 state, local, and tribal air regulators in attendance. Several changeouts have taken place or are scheduled in the U.S. and Canada for 2007. Mr. Pugh stated that HPBA has been attending meetings on the Department of Energy’s desire to regulate the efficiency of heater-rated gas fireplaces and free standing stoves. Mr. Pugh reported that staff is continuing to work on a consumer energy efficiency guide for hearth appliances. Mr. Pugh said that the EPA and HPBA have finalized a new voluntary partnership on wood-fired hydronic heaters. Mr. Pugh noted that the ASTM Low Mass Fireplace Task Group was about to distribute the final ballot on the fueling protocol and that, hopefully, a standard will be finalized by the end of 2007.

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The Arizona Hearth, Patio & Barbecue Association presented Mr. Pugh with an award for his work on behalf of the industry. The Government Affairs Committee then presented an award to Tex McLeod for his significant contributions to the hearth industry and HPBA. Mr. Cagnoli announced that Vanessa Golembeski, HPBA’s Government Affairs Project Coordinator, will be leaving HPBA in June. G.

COMMUNICATIONS DEPARTMENT

Ms. Wheeler updated the members on activities of the HPBA Communications Department. She announced that Deidra Darsa has been hired to fill the position of Manager of Media and Public Relations. Ms. Darsa’s first project was the 2006 HPBA Annual Report. The report will also be used in membership recruitment. Ms. Wheeler reported on the 2007 New and Remodeled American homes at the International Builders Show in Orlando. The new home did not have any hearth products but did include a grill. The remodeled home included two fireplaces. The builder of the 2008 New American Home, also in Orlando, will attend HPBExpo 2007 for product ideas. Ms. Wheeler said that consumer traffic has increased on the revamped website. She reported that the woodstovechangeout.org website has been launched and will feature the “Libby Story.” A film crew is attending Expo to obtain footage for the video documentary on the Libby project. The documentary will not be completed until winter 2007-2008, when final air quality data will be available. Ms. Wheeler reviewed the barbecue public relations campaign, including the “May is National Barbecue Month” promotion. The HPBExpo 2007 press program was reviewed for the members. There are four invited journalists and HGTV will again cover Expo to produce the “Hot Grills Cool Patios” program, which will air in July. H.

STATISTICS DEPARTMENT

Mr. Johnson presented the “top of the line” hearth shipment data for 2006 to the Board. Overall, the hearth industry was down 11% from 2005 to 2006. It was noted, however, that 2006 was the third highest shipment year on record. He explained that the Hearth Quarterly Industry Survey data is distributed in aggregate form to only those who participate in the survey. The Statistics Committee will be reviewing the program to determine how to handle biomass appliances. Mr. Johnson reviewed the other statistical and research projects with which he is involved.

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I.

HEARTH, PATIO & BARBECUE EDUCATION FOUNDATION

Hearth, Patio & Barbecue Education Foundation (HPBEF) President Jim Tully and Ms. Kalish updated the members on the activities of the Foundation. They presented HPBEF’s financial position as of December, 2006. Mr. Tully reported that the HPBEF Board of Governors approved a $12,000 increase in the expenses for a new Certification Consultant and new exam scoring company. Changes in the HPBEF budget require HPBA Board approval. It was MOVED BY MR. DEROSIER AND SECONDED BY MR. WENKE to approve the revised 2007 HPBEF budget as presented. MOTION PASSED UNANIMOUSLY Mr. Tully and Ms. Kalish reviewed the Foundation’s current projects, including updating the technical training manuals, the Fireplace Installer Training program, and the on-line academy.

VII.

OLD BUSINESS

A request will be made to the Pellet Fuels Institute to report on the current supply situation of pellet fuel in the United States.

VIII. NEW BUSINESS There was no new business.

IX.

SCHEDULING OF FUTURE MEETINGS

The next Board meeting is scheduled to take place in Atlanta, Georgia, on Friday, June 15th, with the Executive Committee and Affiliate Leaders and staff meetings on Thursday, June 14th. The fall meeting will be held in the Washington, D.C., area. This will reduce the travel expense for staff and give the Board an opportunity to meet the Arlington staff.

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X.

HONORING RETIRING BOARD MEMBERS

Mr. Scott honored the following Board members who are retiring: Paul Birnstihl, Wesley Dawes, Mike Derosier, Bob Dischner, Edward Hosack, Bill Tweardy, John Vukanovich and Tex McLeod.

XI.

ADJOURNMENT

There being no further business to be brought before the Board, It was, MOVED AND SECONDED that the meeting of the Board of Directors of the Hearth, Patio & Barbecue Association be adjourned. MOTION PASSED UNANIMOUSLY The meeting was adjourned at 2:45pm PDT. Respectfully submitted,

Catherine G. Centra Comptroller/Executive Administrator

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