VILLAGE AT IZATY’S ASSOCIATION

BOARD OF DIRECTORS MEETING MINUTES

Wednesday, January 11, 2006 at 6:00 p.m.

Corporate Offices of Zappa Management Group, LLC

14194 63rd Avenue North

Maple Grove, Minnesota55311

Call to Order

A regular meeting of the Board of Directors, of The Village at Izatys Association was held on Wednesday, January 11, 2006 at the Corporate Offices of Zappa Management Group. The meeting was called to order at 6:00 p.m. by President Dr. John Eggers, and the following Board Members were present: DeAnn Grimmius, Tom Kraus, Erv Lentz, and Ron Zappa. Ad Hoc Committee member present was Bill Everett. Betsy Neff was present via conference phone. Also present was Tom Baltz, General Manager and Joan Lewis, Controller. Joan Lewis performed the duties of Recording Secretary.

Approve Minutes of December 4, 2005 Board of Directors Meeting & Special Meeting

The minutes of the December 4, 2005Board of Directors Meeting and the December 4, 2005 Special Meeting were presented by John Eggers and discussed. Tom Krausmade a motion to approve the minutes as presented. The motion was seconded by Ron Zappa and passed unanimously.

2006 Board of Directors Meetings and Annual Meeting Schedule

The Board of Directors Meetings will be held on the following dates:

Wednesday, January 11, 2006 at 6:00 p.m.at Zappa Management Group.

Wednesday, April 19, 2006 at 6:00 p.m. at Zappa Management Group.

Saturday, July 22, 2006 at 10:00 at The Village at Izatys Resort Offices.

Finance Committee 2007 Budget Review Meeting

Wednesday, September 20, 2006 at 6:00 p.m.at Zappa Management Group

2006 Budget Approval Meeting

Wednesday, October 26, 2006 at 6:00 p.m. at Zappa Management Group.

Sunday, December 3, 2006 at 10:00 a.m.at site to be determined in Minneapolis.

2006 Annual Owners Meeting

Sunday, December 3, 2006 at 1:00 p.m.at site to be determined in Minneapolis.

2006 Committee Assignments

Policy CommitteeFinance CommitteeHouse & Grounds Communications

Erv Lentz (Chair)Tom Kraus (Chair)DeAnn Grimmius (Chair) Betsy Neff (Chair) John Eggers DeAnn Grimmius Ron Zappa Ron Zappa Bill Everett Debra Lind Bill Everett John Eggers

Presidential Oversight Committee

John Eggers (Chair)

Ron Zappa

Betsy Neff

Committee Reports

Finance Committee

Tom Kraus presented the November year-to-date financial statements. Tom noted several areas that contributed to the negative variance in the budget comparison. The purchase of the ResortOfficeBuilding was not planned into the 2005 budget, thus creating an unfavorable variance in the Depreciation and Miscellaneous accounts of over $30,000. In addition, Real Estate Taxes were underestimated by over $30,000. Board approved maintenance projects, such as dead tree removal and the addition of gutters on single family units accounted for over $25,000 in non-budgeted items. Tom did state that the Association should be close to breaking even for 2005 and that a minimal amount may have to be transferred from the reserve account to cover operating losses.

Tom Kraus asked the management company if Solara Resorts was still acting as the Association’s collection agency. Ron Zappa stated that he was informed by Mindie Fischer, Controller for Solara, that Solara Resorts was no longer collecting maintenance fees or acting as a collection agency for the Association. Ron added that Zappa Management Group had mailed all 2006 maintenance fees and that they would issue past due maintenance fee invoices the 1st of February and March, however, Zappa Management Group does not have a collection department and that all delinquent maintenance fees over 90 days should be turned over to an authorized collection agency. Ron Zappa made a motion to discontinue the collection services of Solara Resorts and authorize Tom Kraus to seek out the services of a collection agency on behalf of the Association and to notify Solara Resorts in writing of the Boards decision to discontinue the collection services of Solara Resorts. Motion was seconded by Erv Lentz and passed unanimously.

John Eggers reviewed recent conversations with Kristie Lacey-Hause, President of Solara Resorts, in his attempt to obtain payment on outstanding bills paid by the Association on behalf of Solara, past due Developer maintenance fees, past due Developer turn fees and past due lease payments. John added that everyone was in receipt of his letter which attempted to reach an agreement with Solara by setting up a payment plan to recover the past due amounts, as well as to become current with all fees coming due. He stated that he had received a phone call from Kristie Lacey-Hause on January 10th stating that she was in agreement with his proposal and would immediately issue a check to the Association in the amount $7500.00 covering Januarys rent and ½ of one months past due amount. John asked Ron Zappa to summarize to the Board all delinquent amounts due the Association from the Developer.

  1. Developer Maintenance Fees – Developer maintenance fees on unsold and unused developer weeks, per the Associations By-Laws, are assessed at the rate of 25% of owner maintenance fees and are calculated on a weekly basis. Developer maintenance fees are due and payable upon receipt of invoiced fees prior to the actual week. To date, net maintenance fees payable are:
  • October 2005 $2126.30
  • November 2005$1722.00
  • December 2005$2571.75
  1. Developer Turn Fees – Developer turn fees were established in 1998 between Premier Resorts and the Association to allow Premier Resorts to use Developer owned weeks for the purpose of promoting sales, rentals, comps,exchanges, etc. This turn fee was designed to offset the actual costs to the Association when developer weeks were used and to not burden the Developer with having to pay a full maintenance fee when used. It was also stated that “Split-Week Usage” is not authorized under the Associations CC&R’s or By-Laws. Additionally, the Developer was authorized to utilize a “Model” for sale purposes and would be charged a $50 weekly fee for its limited use. To date, net Developer turn fees payable are:
  • November 2005$2324.25
  • December 2005$3521.75
  • Split-Week Usage (Jan 1, 2005 – Oct 31, 2005)$7251.85

Zappa Management Group was asked to audit billings for split-week usage in 2005. Results of this audit revealed that, although usage reports submitted by the Resort staff to Midwest Resorts and Solara Resorts included additional turn fees for developer split-week usage, those additional fees were deleted by the accounting department of Midwest Resorts and Solara Resorts.

  1. New Owner Assessments–Developer has always collected $100.00 per full week ownership in an Association approved “New Owner Assessment”. The current developer indicated that they will no longer collect this assessment at time of sale. It is the responsibility of the Developer, acting as a sales agent, that this assessment must be included in the resale disclosure document and collected either by the sales agent or paid directly to the Association. November Association financial statements include $1250.00 in uncollected new owner assessments.
  1. Resort Office Building Lease – As part of the sale of the Resort Office Building, Midwest/Solara agreed to a 5-year lease beginning 6/1/05 at $5000.00/month with a 5-year option to renew at a pre-agreed upon escalating monthly payment. Rent payments are due the 1st of each month. Net rent due and unpaid from Solara Resorts are:
  • October 2005$5000.00
  • November 2005$5000.00
  • December 2005$5000.00
  • January 2005$5000.00
  1. Unpaid Invoices of Midwest/Solara Resorts Paid by VIZ Association – In review of all outstanding invoices of the Association accounts, it was found that a number of authorized charges were made by Midwest/Solara Resorts on Association accounts and were delinquent. These charges were paid by the Association on behalf of Midwest/Solara in order to maintain these ongoing services and to protect the credit rating of the Association. Bills paid by the Association on behalf of Midwest/Solara are as follows:
  • BP Gas$4,493.00
  • Home Depot Supply$ 598.11
  • SCI Broadband Cable$ 39.95
  • ARCO Coffee$ 160.20
  • Frontier Communications$2,269.12

The total amount due at the time of the Board of Directors Meeting is $48,328.28 of which $20,000.00 are in delinquent rent payments. After a lengthy discussion of various options, it was agreed upon that delinquent lease payments be separated from the other delinquencies and handled as a separate issue.

A motion was entered by Tom Kraus that, effective 1/20/06, no reservations or usage by Solara Resorts or Club Solara of developer owned weeks will be allowed unless turns fees and developer maintenance fees are paid in advance. Motion was seconded by DeAnn Grimmius and passed unanimously.

Action Item: Tom Kraus will inform Solara Resorts in written form of the above resolution and that maintenance fees and turn fees must be paid by check and postmarked the Friday prior to the actual week.

At the suggestion of John Eggers, it was agreed upon that the Association should retain legal counsel to protect the Associations interests and to proceed with the filing of an eviction notice for the purpose of collecting past due lease payments and to proceed with collection efforts to obtain past due developer maintenance fees, turn fees and bills paid by the Association on behalf of Solara Resorts. In addition, the filing of liens on developer weeks with delinquent maintenance fees should be researched and filed if recommended by legal counsel.

It was determined that split-week usage is not addressed in the CC&R’s or By-Laws and, as a result, is not allowed by any owner, including the developer. Tom Kraus entered a motion to affirm the Associations position to restrict any owner from split-week usage. Motion was seconded by DeAnn Grimmius and passed unanimously.

John Eggers entered a motion authorizing the engagement of legal counsel to facilitate eviction of Solara Resorts from the Village at Izatys Resort Office located at 8478 Par Five Drive, Onamia, Minnesota 56359 under the terms of the current lease agreement and to proceed with the collection of delinquent developer maintenance fees, turn fees and past due bills paid by the Association on behalf of Solara Resorts. Motion was seconded by Erv Lentz and passed unanimously.

Action Item: Zappa Management Group to retain legal counsel on behalf of The Village at Izatys Association and to proceed with the filing of liens, eviction notice and the collection of past due maintenance fees, turn fees and outstanding bills against Solara Resorts.

Tom Baltz, Resort General Manager, informed the Board that the reservation system information transfer from Solara Resorts to the Associations reservation system was nearing completion despite Solara’s resistance to the transfer. Other previously shared systems at the resort such as the copier, phone system, TimeShareWare, etc. had been separated and is now independent of Solara’s systems.

In light of recent developments the Board agreed to review the 2006 budget, including the Replacement & Renovation schedule and to make necessary adjustments as appropriate.

Action Item:The Board asked the Management Company to review the 2006 budgeted replacement and renovation schedule and to prioritize scheduled projects limiting renovation projects to $50,000 and report its recommendations to the Board by 3/1/06. In addition, the Management Company will provide to the Board quarterly project updates on the Renovation and Replacement schedule.

Ron Zappa posed the question to the Board on the annual compilation report and whether the Board should consider having a full audit performed by an independent accounting firm. The cost of a compilation report is approximately $2600 and a full audit approximately $3200. Ron recommended a full audit be performed due change in management companies. Tom Kraus entered a motion to engage HG&K Accounting Firm to perform a full audit of the Associations financials. Motion was seconded by Ron Zappa and passed unanimously.

Action Item: Zappa Management Group will contact HG&K and obtain an engagement letter to perform a full audit of Association financials.

Ron Zappa made a motion to adjust the 2006 Budget, account 7330-500 (Professional Fees) to $8,000 to account for additional legal expenses and additional accounting fees. The motion was seconded by Tom Kraus and passed unanimously.

Communications Committee

Betsy Neff stated that the website, “ is only functional through the Solara Resorts website. The Board needs to consider obtaining a new domain. Tom Baltz will research the cost of setting up a new website.

Betsy discussed the Spring Newsletter and, although no date of mailing has been set, she recommended that with the current situation with Solara Resorts, a mailing should occur as early as possible to inform all owners of recent events.

The Board recommended that the Annual Picnic be postponed for 2006 in light of the current financialuncertainty pertaining to lease payments, developer maintenance fees and developer turn fees.

House and Grounds Committee

Ron Zappa reported that a problem has been occurring in bath and shower areas with mold. The maintenance staff has been utilizing bleach and other chemicals to remedy the problem, but it keeps persisting. Zappa Management Group is purchasing a commercial grade steamer to eliminate this problem. Ron will report at the next meeting the effectiveness of the new steamer.

Policy Committee

Erv Lentz reported that the proxy to change the late fees and interest fees contained in the CC&R’s lacked a majority vote at the Annual Meeting and failed to pass. Erv distributed the revised Policy and Procedure Manual.

Resort Manager/Property Management Report

Tom Baltz reported that the resort is fully staffed and there has been no turnover since November 1, 2005. Customer service scores continue to run well above industry standards and once again the resort has been awarded by Interval International its prestigious “Customer Service Resort of Distinction” for 2005.

The maintenance building addition to the Resort Office has been finalized with construction beginning approximately January 15th. Completion time is estimated at 60 days.

Developer Report

The Developer, Kristie Lacey-Hause was not in attendance.

Old Business

None

New Business

Tom Baltz reported that the maintenance fee billing went very smoothly and that currently the Association has collected approximately 50% of all maintenance fees due for 2006.

Adjournment

A motion to adjourn was entered. The motion was seconded and passed unanimously. The meeting was adjourned at 8:05p.m.

Respectfully submitted by Joan Lewis, Recording Secretary.

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