MINUTES MEETING OF THE 2007 BOARD OF DIRECTORS OF THE HEARTH, PATIO & BARBECUE ASSOCIATION

9:00am – 4:00pm EDT Friday, June 15, 2007

I.

Hyatt Regency Peachtree Centennial Ballroom III Atlanta, Georgia

CALL TO ORDER

Chairman Stephen Magnotti called the meeting of the HPBA Board of Directors to order at 9:05am EDT and welcomed the attendees. He asked that those in attendance have a moment of silence in memory of Dick Forslund, who had passed away the previous month. After the moment of silence, Mr. Magnotti welcomed Dan Devlin to the HPBA Board of Directors as the Board representative from MWHPBA. Mr. Magnotti asked those in attendance to introduce themselves. Mr. Deese, HPBA’s counsel, referred the members to the HPBA anti-trust policy and reminded them that the meeting would be conducted in strict adherence to the policy.

II.

PRESENT Members: P. Anderson M. Cantin D. Devlin R. Gomez T. Gottschalk (HPBAC staff rep.) S. Hall W. Howells H. Hudson J. Hussong F. Kirkpatrirck B. Lisle (PFI Board Rep.) S. Magnotti M. Nordby M. Palmer C. Radovic P. Ranes J. Scott J. Shimek D. Smith J. Tully S. Weiss

Staff: A. Cagnoli C. Centra J. Crouch J. Goldman D. Johnson D. Kaiser S. Kalish M. Deese J. Goldman K. VanDermark B. Weathersby L. Wheeler Guests: P. Braddock S. Brammer M. Deese S. Dumais E. Erickson D. Ewens R. Huta

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Guests, con’t: S. Pulone P. Rosengren D. Rossi A. Springer F. Smith G. Stanley K. TeskeOsborne

T. Wenke T. Wofford

J. Loyd T. Pugh

Member Not Present: L. Robinette

III.

CONSENT DOCKET

Mr. Magnotti explained that the Consent Docket had two items, the approval of the Minutes of the March 13, 2007, meeting and the approval of the HPBA Budget & Finance Committee charter. He stated that if any Board member feels that discussion is necessary on either of these topics, he or she could request that the item be moved to the Issues Docket. It was, MOVED BY MR. SCOTT AND SECONDED BY MR. PALMER that the Minutes of the March 13, 2007, meeting and the HPBA Budget & Finance Committee charter be approved as distributed. MOTION PASSED UNANIMOUSLY.

IV.

ISSUES DOCKET A.

ITEMS REQUIRING A VOTE 1.

APPROVAL OF HPBA MISSION STATEMENT

Jack Goldman directed the members to the draft HPBA Mission Statement included in the board materials. Mr. Goldman said that, in preparing the first HPBA Annual Report, it was noted that HPBA had no Mission Statement. The Executive Committee developed a statement and is recommending it to the Board for adoption. After a general discussion, It was, MOVED BY MR. TULLY AND SECONDED BY MR. NORDBY to approve the HPBA Mission Statement as presented. MOTION PASSED UNANIMOUSLY.

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2.

APPROVAL OF HPBA RESERVE POLICY

Mr. Anderson referred the members to the draft Reserve Policy for HPBA as contained in the board materials. The members had a general discussion on the components of the draft policy, including the target reserve level of 55% of gross annual expenses, which is an increase from the current 50% target level. The 55% reserve level tracks closely with the fixed expenses of HPBA without the variable expenses incurred at Expo. It was noted that the investment policy referred to in the draft Reserve Policy has not been formalized or approved yet by HPBA. There was general agreement that the members were comfortable with the direction of the draft Reserve Policy, subject to the creation of the HPBA investment policy. After additional discussion, It was, MOVED BY MR. SCOTT AND SECONDED BY MR. TULLY to approve the HPBA Reserve Policy as presented, subject to the creation of an Investment Policy by the HPBA Budget and Finance Committee to be presented to the HPBA Board of Directors for approval at the Fall 2007 Board Meeting. MOTION PASSED UNANIMOUSLY. B.

DISCUSSION ITEMS 1.

TREASURER’S REPORT

Pete Anderson directed the Board members to the financial data in the board materials. He reported that the year-end 2007 projections as prepared by staff are very close to budget for both revenues and expenses, with the exception of the decision to not hold both the Manufacturers’ and Installing Distributors’ meetings in 2007. Mr. Anderson related that the Manufacturers’ Meeting has had declining attendance in recent years. Mr. Goldman said that notification will be sent out to the membership regarding the decision to not have the Manufacturers’ Meeting this year, and will solicit input from the membership regarding program ideas, speakers, events, and the timing of the meeting. After additional discussion, It was, MOVED BY MR. HUDSON AND SECONDED BY MR. WENKE to approve the Treasurer’s report as presented. MOTION PASSED UNANIMOUSLY.

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2.

STATUS OF BARBECUE MANUFACTURING MEMBERSHIP AND SUPPORT

Mr. Goldman began a discussion on the status of barbecue manufacturing membership and support at HPBA. He related that the barbecue industry has seen substantial changes since the merger between HPA and the Barbecue Industry Association (BIA). Mr. Goldman described the activities of the Barbecue Manufacturers’ Caucus, which was populated in previous years with many of the BIA leadership and was important in the transition and merger of the two associations. The caucus has become less active recently. In addition to Expo, the most important current member benefits for the barbecue manufacturers are public relations and statistics. The members had a general discussion on the current status of the barbecue manufacturing members. It was noted that the barbecue segment at Expo was increasing, but mainly in the accessories area, as the number of grill manufacturers displaying was holding steady. There was general agreement that HPBA needs to continue to find ways to provide benefits for barbecue manufacturers so that they continue to be engaged in the association. It was suggested that perhaps HPBA could provide education to retail members on barbecue islands and their installation. It was agreed that HPBA should be proactive with the barbecue manufacturers and find out from this segment of the membership the programs that they would find to be beneficial. After additional discussion, It was, MOVED BY MR. WENKE AND SECONDED BY MS. RADOVIC that HPBA staff should actively solicit input from the barbecue manufacturing members of HPBA for member benefits they desire and to actively support the membership of the barbecue industry. MOTION PASSED UNANIMOUSLY. 3.

THE GREEN MOVEMENT AND HEARTH AND BARBECUE PRODUCTS

Tom Pugh and John Crouch began a discussion with the members on the “Green Movement” and its potential role and impact on HPBA and its industries. Mr. Pugh related that the definition of “green” is still nebulous and that it is important for HPBA to attempt to be a player in defining the term. The definition of “green” as it relates to energy efficiency, indoor air quality, production of the product, delivery of the fuel, and renewable fuels was discussed. The definition of “green” can also vary depending on geography. Mr. Pugh noted that the HPBA Government Affairs Committee has started a dialogue on the “Green Movement” and wanted to expand the dialogue to the HPBA Board of Directors.

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Mr. Crouch introduced Fred Kirkpatrick, the OHPBA/NWHPBA Representative to the Board, to discuss the “Heat Green Council.” Mr. Kirkpatrick reported that the new organization is a 501(c)3 organization that is comprised of retailers in the Pacific Northwest. The central mission of the group is to identify products in the hearth industry that they consider to be green. The group would have a “green ranking” for different product categories based on criteria that it establishes. The purpose of the rankings would be to assist consumers and builders with purchasing “green” home heating appliances. The hearth retailers would be given “green” label hang tags for the appliance categories for use at their stores. Following Mr. Kirkpatrick’s presentation, the members had a discussion. There was concern about the liability issues and potential for arbitrary rankings for products by the organization. Mr. Kirkpatrick was applauded for his efforts to try to be proactive in the “green movement.” Mr. Deese, as General Counsel, believed that there were significant issues for HPBA should it get involved with this group and that the potential liability could be quite significant. The members asked Mr. Kirkpatrick to email his presentation to staff so that they can send it to the Board. 4.

SHOULD BOARD MEETING CONTINUE TO BE OPEN?

Mr. Deese discussed his experience with his association clients with respect to open and closed board meetings. He stated that HPBA was his sole client that had open board meetings. The norm for his clients was that only board members and senior staff could attend board meetings. Mr. Deese said that closed meetings are intended to protect the board members and the association. He reviewed with the members the fiduciary duties that they have as board members, including the duty of care, duty of loyalty, including the avoidance of conflicts of interest, and the duty of confidentiality. Mr. Deese noted that other attendees were not specifically bound by the same fiduciary responsibilities and that could pose an issue for the board members and the association. Moreover, he noted that the attorney/client privilege only applied to advice given to the Board and staff, and that this privilege could be jeopardized with additional members in attendance. Finally, Mr. Deese said that board members may be reluctant to speak freely if other people other than Board members were present. While respecting the tradition of open board meetings at HPBA, he felt that it was his duty to inform the members of the potential issues presented by open board meetings. Mr. Deese explained that, in his opinion, that there were four potential courses of action for the Board regarding the conduct of meetings: (1) maintain the status quo, (2) keep the meetings open, but only allow Board members and senior staff to speak, (3) close the meetings, and (4) establish a hybrid whereby some portions of the meeting are open and some are closed, such as the following: (i) set aside open and closed portions of the meeting in advance, and (ii) excuse non-Board members for sensitive discussions. Mr. Goldman said that the HPBA Executive Committee has discussed the matter and was looking for opinions and a dialogue with the Board members. There was a general discussion on the issue of closed Board meetings. Some noted that open Board meetings are beneficial because they expose affiliate staff and volunteer leaders to the decisions that impact their affiliates. It was explained that the notion of a closed meeting was not to exclude specific audiences from the meetings – in fact, all affiliate regions are represented on the Board. After additional discussion, the Board asked Mr. Deese to prepare a memo outlining the closed board meeting issue for further consideration. Mr. Goldman said that he would welcome feedback from the affiliate staff and leaders on this issue.

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5.

RESPONSES TO LOCAL GOVERNMENT PLANS FOR CHANGEOUTS

Mr. Crouch updated the members on changeouts. He reiterated that changeouts can occur at any time and in any locale and that HPBA and affiliates needed to be ready to respond. Ms. Wofford related the experience of HPBAP and changeout programs in California. She urged affiliate board representatives to make sure that their staff is ready in case a changeout program is established in their affiliate. 6.

RESPONSE TO DECLINE IN HEARTH PRODUCTS IN NEW HOME CONSTRUCTION

Mr. Johnson discussed the data on the relation of placement of builder fireplaces in new home construction. While single family housing starts have increased dramatically in the past fifteen years, the percentage of new homes built with at least one fireplace has declined. Mr. Johnson related that the fireplace has been competing with other amenities, such as media rooms, and is not necessarily seen as essential by homeowners. The members had a general discussion on the issue of the decline of hearth products in new home construction. Some members said that consumer awareness of hearth products is a significant issue and that HPBA and the industry need to be more proactive in educating consumers. Educating builders and architects about hearth products and the value that they create in a home was also seen as essential. It was generally agreed that HPBA could not mount an expensive, consumer-direct marketing campaign. However, it was suggested that HPBA work closely with the National Association of Home Builders (NAHB) to submit questions as part of the NAHB supplemental survey to find out more about new home construction and hearth products for future discussion.

V.

REPORT DOCKET A.

MEETINGS & EXPOSITIONS

Mr. Wenke and Ms. VanDermark updated the members on Expo committee activities. Mr. Wenke reported that 2,039 total booths spaces were sold in Reno in 2007, compared to 2,118 in Salt Lake City in 2006. However, the number of exhibiting companies increased from 435 in 2006 to 474 in 2007. The total number of registrants in 2007 was 10,822, including 2,038 buying entities, compared to 11,501 registrants in 2006 with 2,047 buying entities. Ms. VanDermark discussed the feedback that HPBA has received from attendees and exhibitors regarding Reno, including issues with the Outdoor Burn Area, the high cost of airfare, airline schedules, and housing, and that HPBA is in discussions with representatives of Reno to address these issues for the 2009 Expo. Mr. Johnson presented the results of the attendee survey, which had a 24% response rate. The survey showed that attendees were generally satisfied with Reno, but did prefer Salt Lake City as a venue. Mr. Wenke reported on the early figures for the 2008 Expo in Atlanta, and said that booth spaces sold to date were encouraging and were ahead of the same time period last year for Reno. The attendee and exhibitor promotions for HPBExpo 2008 were discussed and that the Expo was

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being marketed very aggressively. Ms. VanDermark presented the layout of the indoor exhibit area and highlighted changes to the outdoor exhibit area from the previous Atlanta Expo. B.

GOVERNMENT AFFAIRS

Mr. Pugh updated the members on HPBA government affairs activities and referred them to the written report in the board materials. He discussed the “Fireplace and Stove Glass Safety Brochure” that was jointly produced with the Communications Department. Mr. Pugh said that the brochure has been completed and will be mailed free of charge to all HPBA retailers, manufacturers, and others. Mr. Pugh then updated the members on federal legislation and that current congressional policies would be focused on the environment and domestic renewable energy. He highlighted the 2007 Farm Bill, global warming, the successor to the Murphy-Hart bill, and RESA as topics under consideration by federal legislators. Mr. Pugh then discussed state legislation, including developments in Washington, Oregon, Idaho, and Virginia. The members were also updated on the Libby, Montana, changeout, which is completed and was a very big success for HPBA and the industry with 1,132 stoves installed. Mr. Pugh said that the early emissions numbers look very favorable for the changeout improving the indoor and ambient air quality in Libby. Finally, Mr. Pugh briefly discussed the work that staff was doing on development of regulations for outdoor wood-fired hydronic heaters and of ASTM standards for low mass fireplaces , and referred the members to the board materials for additional information. C.

COMMUNICATIONS COMMITTEE

Ms. Wheeler reported on communications activities since Expo, as well as upcoming projects. Ms. Wheeler discussed the Wood Stove Changeout Program and the public relations program related to the Libby, Montana, changeout. Additional hearth-related communications activities discussed by Ms. Wheeler included the online consumer guide to hearth heating products, hearth makeover stories on the website, and the glass safety brochure. Ms. Wheeler then discussed the barbecue-related communications activities, including the very successful “May is National Barbecue Month” campaign. Ms. Wheeler reported that the campaign was supported with a promotional kit developed for retailers that includes promotional ideas, a fact sheet, a tip card, and a press release. Finally, Ms. Wheeler reviewed the highly successful Expo Press Program that brought over 80 journalists to Expo, including HGTV, which filmed a one-hour program to air just prior to the July 4th holiday. D.

HEARTH, PATIO & BARBECUE EDUCATION FOUNDATION

Mr. Tully and Ms. Kalish updated the members on the activities of the Hearth, Patio & Barbecue Education Foundation (HPBEF). Mr. Tully discussed the Fireplace Installer Training System (FITS) program, including the company support package and installer training kits developed by HPBEF. He said that orders for the FITS products had already been received and shipped, and

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that HPBEF would be making a concerted marketing effort of the program directly to manufacturers and installing distributors. The new HEARTH online training program was described by Mr. Tully. He said that the program has been very successful to date and that registrations and feedback from participants were very positive. It was believed that the online training program would continue to be a significant educational tool for HPBEF. Finally, Mr. Tully unveiled a sample of the Master Hearth Professional (MHP) certificate that would be presented to holders of all three NFI certifications. E.

STATISTICS COMMITTEE

Mr. Johnson updated the members on market research and statistics activities. He discussed the HPBA Quarterly Industry Survey, which continues to collect accurate shipment statistics for the hearth industry. Mr. Johnson then described the HPBA consumer research, which will focus this year on the barbecue industry. The data collection for this project will begin shortly, with results available by late summer. Mr. Johnson related that he is working on a survey for HearthMasters to assist HPBA in learning what the members desire from this program. Additionally, he is working with HPBAC to collect data about gas fueled hearth appliances shipped within and into Canada for the EnerGuide Program. Finally, Mr. Johnson described the housing and remodeling report that he produced for the first time in May 2007. The report summarized forecast information from conferences attended on new home construction and remodeling. F.

MEMBERSHIP COMMITTEE

Ms. Wofford and Mr. Kaiser updated the members on the activities of the Membership Committee. She reported that HPBA currently has 2,764 members, including 368 manufacturing members and 2,396 non-manufacturing members – a new all-time high for HPBA for total membership. However, HPBA manufacturing membership is down from 2006. The decline in manufacturing membership may be due to the reduction of non-member rates for booth fees at Expo. Ms. Wofford said that overall membership retention remained very high, at 85%. Ms. Wofford discussed the HPBA affinity programs. The business liability insurance program has been very well received, with over 70 policies written to date. Other affinity programs, such as the credit card merchant account and freight/shipping programs, also continue to see growth. Mr. Kaiser said that HPBA staff are continuing to gather testimonials to help market the programs. In addition, the second annual Retailer Member Survey will be distributed at the end of June to help HPBA continue to benchmark retailer satisfaction with existing programs and to help shape future programs. Finally, Ms. Wofford and Mr. Kaiser discussed a national membership drive to be undertaken in 2008 for 2009 membership. The Membership Committee has been discussing the idea and will be working closely with the affiliates in implementing this aggressive push for new members.

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G.

AFFILIATE BOARD COMMITTEE

Mr. Nordby discussed the activities of the Affiliate Board Committee. He said that staff was currently compiling the financial information from the affiliates’ Form 990 tax returns and that the committee would be discussing the results at an upcoming teleconference. Mr. Nordby related that the internal financial statements submitted by the affiliates showed that the affiliates had aggregate total revenues of $1.82 million and aggregate total operating expenses of $1.56 million, for a total net income of approximately $269,000. Total affiliate reserves at the end of 2006 were $956,000, which equates to 61% of total affiliate operating expenses. Mr. Nordby said that the committee is continually looking at additional tools to assist the affiliates in their operations and will be working with the Affiliate Leaders Committee to create these tools. H.

AFFILIATE LEADERS COMMITTEE

Mr. Palmer and Mr. Kaiser updated the members on the activities of the Affiliate Leaders Committee. Mr. Palmer said the Affiliate Leaders Committee and affiliate staff had met in Atlanta on the previous day for a day-long training session on strategic planning. HPBA hired Dennis McCuistion, a professional facilitator and trainer, to train the leaders and staff on how to conduct strategic planning. The goal of the session was to enable the leaders and staff to do strategic planning sessions at their own affiliates without having to incur the cost of hiring an outside facilitator. Mr. Kaiser updated the members on the Affiliate Staff meeting, which occurred in Atlanta on Wednesday. Mr. Kaiser said that a variety of topics were discussed, but that the focus was on membership development and providing better member services. The staff would be meeting via teleconference every other month to continue to share best practices. Mr. Palmer said that the affiliate annual meetings were in full gear and that they have been generally well attended with good educational sessions, with many having CEUs. Mr. Palmer encouraged all members to attend an affiliate annual meeting to support the affiliates. Finally, Mr. Kaiser discussed the HPBA Member Success Clubs that were launched at EXPO 2006. The first club was launched in 2006, with the next meeting scheduled for Denver in August. Mr. Kaiser related that the HPBA Member Success Clubs have been slower to form than had been anticipated and that staff and the members have been aggressively marketing the program. XSCEND Performance Services, the outside vendor contracted by HPBA to coordinate the program, has recently reduced its fee for the program in an attempt to grow the program.

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I.

PELLET FUELS INSTITUTE

Mr. Lisle updated the members on the activities of the Pellet Fuels Institue (PFI). He related that PFI has hired Fleishman-Hillard (FH) to provide lobbying services for 2007. PFI raised dues in order to pay for the services. This new initiative has raised the profile of the pellet industry significantly on Capitol Hill in a very short time. Mr. Lisle said that the goal of these efforts is to get funding for the Renewable Energy Security provision in the Energy Policy Act of 2005 (RESA). FH has arranged a number of visits on Capitol Hill for PFI staff and volunteer leaders. PFI staff has also submitted testimony to both the Ways and Means Committee and the House Committee on Small Business. PFI has augmented this strategy with a significant grassroots effort that has garnered over 500 letters to federal lawmakers, urging the appropriations of funds for RESA. Mr. Crouch described the Renewable Energy Expo that PFI had participated in earlier in the week in Washington, D.C. Mr. Lisle related that PFI continues to work on the revision of current fuel standards and the development of additional standards. The standards work is being done with the goal of having pellet fuel that is reliable for the consumer. Mr. Lisle said that the PFI Standards Committee would be discussing its work with the membership at the PFI annual meeting at Pinehurst, North Carolina, in July. The PFI annual meeting will be the largest in PFI history, both in terms of attendees and exhibitors, and reflects the growth in the industry and PFI. Finally, Mr. Lisle stated that PFI membership was at record levels and that PFI finances continue to grow accordingly.

VI.

OLD BUSINESS

There was no old business.

VII.

NEW BUSINESS

There was no new business.

VIII. SCHEDULING OF FUTURE MEETINGS The next Board meeting is scheduled to take place in Arlington, Virginia, on October 3rd, with a reception on the evening of October 2nd at HPBA headquarters.

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IX.

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 3:58 EDT. Respectfully submitted,

Donald R. Kaiser Director of Affiliate Relations & Membership Development

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