HOA/POA Joint Meeting and Merger Discussion

October 9, 2003

HOA/POA 02-03 ActivitiesJAN-JUNE 02- ATTEMPT TO RENEGOTIATE USE AGREEMENT UNSUCCESSFUL

JAN-JUNE 03: ATTEMPT TO RENEGOTIATE USE AGREEMENT UNSUCCESSFUL

JULY: PROPOSED NEW USE AGREEMENT NULLIFIED.

AUGUST: MERGER COMMITTEE FORMED BY BOTH BOARDS

SEPTEMBER: COMMITTEE REOMMENDATIONS MADE TO POA/HOA BOARDS

SEPTEMBER: POA/HOA BOARDS VOTE TO CALL A SPECIAL MEETING FOR MEMBERS TO VOTE ON MERGER.

NOVEMBER: HOA/POA SPECIAL MEETINGS SET

Merger Committee

GRANT FARRIS. (HOA) PHONE: 281.556.5601

JOYCE CONTRERAS. (HOA) PHONE: 281.493.3361

DIANA MOSVOLD. (HOA) PHONE: 281.493.6128

JON JOINER. PHONE: (POA) 281.679.7161

LARRY OAKES. PHONE: (POA) 281.556.9155

PATTY VASEY. PHONE: (POA) 281.556.1814

Reviewed HOA/POA Deed Restrictions, Bylaws, Articles of Incorporation, Budgets, Financial Statements.

POA Facts

452 RESIDENCES/LOTS.

CURRENT ANNUAL ASSESSMENT: $330./YR.

COMMON AREAS: SWIMMING POOL, BATH HOUSE, CLUB HOUSE, TENNIS COURTS, BASKETBALL COURT, PLAYGROUNDS, PICNIC AREA, OPEN ACREAGE, ONE SUBDIVISION SIGN.

MANAGEMENT: SELF MANAGED

CURRENT BOARD MEMBERS: SEVEN

HOA Facts411 RESIDENCES ON 437 LOTS1 UNIMPROVED LOTCURRENT ANNUAL ASSESSMENT: $ 420./YEARCOMMON AREAS: TWO RETENSION PONDS, FOUR SUBDIVISION SIGNS.MANAGEMENT: PROFESSIONAL MANAGEMENT COMPANY.USE AGREEMENT WITH POA EXECUTED JANUARY 28, 1983.CURRENT BOARD MEMBERS: FOUR

Professional Vs. Self Management

PROFESSIONAL MANAGEMENT WILL COST LESS THAN SELF MANAGEMENT. (Merged Cost <40% )PROFESSIONAL MANAGEMENT ELIMINATES THE BURDEN OF HOMEOWNERS (BOARD MEMBERS) POLICING OTHER HOMEOWNERS.PROFESSIONAL MANAGEMENT HAS BROAD UNDERSTANDING OF THE DEED RESTRICTION ENFORCMENT LEGAL REQUIRMENTS, ISSUES AND NEEDS OF HOMEOWNERS’ ASSOCIATIONS.PROFESSIONAL MANAGEMENT HAS THE EXPERIENCE AND EXPERTISE TO NEGOTIATE CONTRACTS, MANAGE FUNDS, ADMINISTER RECORD KEEPING, ACCOUNTING AND REPORTING MATTERS.

POA Amenity And Common Area Fair Market Value

PROPERTY CANNOT BE USED FOR COMMERCIAL PURPOSES.THE DEED RESTRICTIONS PROHIBIT SUBDIVIDING, LEASING, SUB-LETTING, OR CHANGING THE PURPOSE FOR WHICH THE AMENTIES WERE BUILT.EVEN THOUGH FINANCIAL VALUE IS SET FOR INSURANCE PURPOSES, IT IS DIFFICULT TO ESTABLISH A FAIR MARKET VALUE FOR SALE OR OTHER PURPOSES.FAILURE TO MAINTAIN THE AMENITIES WILL HAVE A NEGATIVE EFFECT ON PROPERTY VALUES IN THE HOA/POA.

THE AMENITIES ADD VALUE TO ALL RESIDENCES BY:INCREASING THE OVERALL APPEAL OF THE NEIGHBORHOOD TO PROSPECTIVE BUYERS.OFFERING RECREATIONAL ACTIVITIES TO OWNERS THAT ARE UNAVAILABLE IN OTHER NEIGHBORHOODS.PROVIDING AN AREA FOR COMMUNITY USE BY ALL OWNERS.

The Use Agreement EXECUTED AND EFFECTIVE: JANUARY 28, 1983

HOA PAYMENT FOR USE IS MADE IN ADVANCE, BASED ON PRIOR YEARS’ OPERATING EXPENSES

COVERS REPAIR AND MAINTENANCE OF AMENITIES

DOES NOT COVER IMPROVEMENTS OF AMENITIES (UNLESS IMPROVEMENTS ARE CONSIDERED LESS COSTLY THAN REPAIRS)

HOA PAYMENT HAS CHANGED YEARLY, BASED ON PRIOR YEARS’ POA ACTUAL EXPENSES

WILL BECOME NULL AND VOID UPON MERGER

DOES NOT REQUIRE REIMBURSEMENT TO THE

POA

Merged Board/by LawsEffective Date of the Merged Assoc: January 2004Interim Board: January-March 2004 New Board: Seven MembersThree Members from the POA (2 year term)Three Members from the former HOA (2 year term)One Member @ Large (1 year term)Board Elections and Annual Meeting March 2004Minimum Cash Reserve $75KMaximum annual dues increase 10% with 2/3 vote over 5%

Deed RestrictionsTHERE IS ESSENTIALLY NO CHANGE IN THE MERGED ASSOCAITION DEED RESTRICTIONS

THE MERGER COMMITTEE ANALYZED THE POA AND HOA RESTRCITIONS AND INSURED ALL COVENANTS FROM BOTH ASSOCIATIONS WERE INCLUDED.

ANY DIFFERENCES WERE STRENGTHED

Questions & Answers POA/HOACapital Improvements to POA Amenities- Joint Decision will be made by Merged Board rather than conflict arising from separate groups

Annual Fee 2004- NO CHANGE HOA: $420 POA: $330

Base Annual Fee 2005 $330

Cash balance from POA 12/31/03 $176k

Cash from HOA- HOA 12/31/03 $133k (HOA shortfall of $35K)

Equivalent Cash Make-up from HOA- HOA adds $35K through 2004 annual fee

Intangible $ Value of Amenities- Adds value to all residences

Tangible $ Value of POA Amenities- No financial value

Vote Required to pass Merger: 2/3 of all residents

Benefits of Merged Association

Decisions based on one community.Balanced BoardGreater Negotiating Power (863 Residences).Ten Year Cash Savings: $250K-$400KUpdated Deed Restrictions & BylawsProfessional Management vs. Private Management.Joint Decisions on Security, Grounds, Trash, Amenities.Combined Working Capital (2004): $640KNet Working Capital after Expenses (2004): $325K

Important DatesNext Information Meeting November 6, 2004HOA Mailing of Proxy/Ballot Revised Deed Restrictions, Bylaws

On or Before October 18, 2003HOA Mailing of Proxy/Ballot Revised Deed Restrictions, Bylaws

On or Before November 2, 2003POA Vote for Proposed Merger November 18,2003HOA Vote for Proposed Merger November 17,2003

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