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BOARD OF DIRECTORS MEETING HIGHLIGHTS: OCT. 21, 2021 ATTORNEY REPORT (in blue) Rian Jones of Epsten Grinell and Howell, who has been representing the HOA since 2012 in the Majestic Asset Management litigation, gave a background on the golf course litigation. In 2012, golf course owners Jen and Hai Huang/-Majestic/Wintech, sued the HOA and HOA countersued. In 2015, the case went to trial and the HOA won. The court found that Majestic's claims were not supported and ordered a Judgment against them. The court also found that Huangs were not living up to recorded documents to maintain/operate the golf course to required standards. A Judgment was entered against them, including attorney fees and an injunction on how to maintain the golf course. Huangs appealed and Appellate Court upheld the Judgment. In 2019, the Huangs were not living up to the Judgment so HOA filed a motion to enforce the Judgment. One option was foreclosing on the golf course if owners were not complying with the Judgment. The HOA owns a Performance Deed of Trust, giving them the right to foreclose on the golf course for not upholding Judgment requirements. In August 2019, the Judge hearing the matter, frustrated, told the Huangs if they did not show progress, he would order foreclosure. Two days later, a Deed of Trust in the amount of $3.4M was recorded against the golf course in favor of Tso Jen Chu. This was obviously done to prevent foreclosure and to encumber the golf course. The HOA filed a separate lawsuit to have the Deed of Trust declared a fraudulent transfer to avoid a creditor. That lawsuit is pending and trial is set for mid-January 2022. In March 2020, a Receiver was appointed to take over the golf course and to comply with the terms of the Judgment. Huangs removed $250,000 from golf course bank accounts, leaving the Receiver with $60K to operate the course. Soon after, COVID happened and the course shut down for two months. Finally,in May 2020, it reopened for play. The Receiver made strides to get the course back in shape. The court mandated that fingers and slopes were also golf course responsibility. This required replanting since they stopped watering in 2009 and irrigation systems have rotted away. Receiver is focused on getting the course in shape. Play has increased and is pretty robust. Huangs claimed they were losing $250K to $500K a year on the course. Receiver proved that a properly-operated course can generate revenue. Over the summer, the HOA entered into settlement discussions with Mr. Chu and Huangs, which inevitably fell apart. The Receiver Review Hearing will be Nov. 5, 2021. Receiver has indicated he will be unable to generate enough income to repair the golf course after years of deferred maintenance. Receiver has filed a petition with the court (that the HOA is supporting) asking for 3 options: 1) The court order Huangs/Majestic to contribute more capital: approximately $1.3M, $950K exclusively directed toward repair of fingers and slopes, and the remaining to purchase modern equipment, improve the fairways and fix the Bar & Grill. Majestic and Wintech are the alter egos of Hai and Jen Huang, so the Judgment is personal against the Huangs as well as the Corporation. The court could order the Huangs to give more money. 2) The Receiver will ask the court to issue a Receiver's Certificate, which is a guarantee to a lender pledging the golf course as collateral for a loan. It acts as a super lien and takes priority over all prior encumbrances on the golf course, including the $3.4M fraudulent deed of trust. Mr. Jones is unsure if the court will allow this. It may ask for further briefing or proposals from lenders. 3) The Receiver will inform the court that if he is unable to obtain capital from the Huangs/Majestic or a Receiver's Certificate, he will recommend foreclosure of the golf course. The HOA has a trial in January 2022 for the Fraudulent Re- conveyance issue to remove the $3.4M note against the golf course. No one will bid on the course with this encumbrance. If left in place, there is a real possibility the course will revert back to the Huangs, who may put up a fence around the course, shut it down and there will be no more golf course. Legal Counsel will fight to keep this from happening. On Oct. 27, the Attorney for Mr. Chu asked to be relieved of his duties because he cannot communicate with his client, who refuses to take advice from him and is not paying his legal fees. The court may not allow Mr. Chu's attorney to step down as his attorney two months before the trial, or the court may allow Mr. Chu's attorney to withdraw, but allow Mr. Chu another 60 days to find another attorney. We hope this does not happen and we can proceed to trial. Pacific Golf, the former golf course owner, created a Performance Deed of Trust between their company and the Huangs, requiring them to abide by certain standards to operate the golf course. If they do not maintain the course according to the PDT, Pacific Golf could foreclose on the property. Pacific Golf later sold the PDT to the HOA, giving us a valuable asset to encumber the golf course. The PDT requires Huangs to maintain the course to a certain standard under the threat of foreclosure. If the court orders foreclosure and Mr. Chu's Trust Deed is not extinguished, the PDT, which was recorded prior to Mr. Chu's Trust Deed, says the Association agrees to subordinate the Trust Deed up to $1.25M. The court and appellate court agree the Association's PDT is valid. The HOA has come a long way and Legal Counsel is fighting hard to keep the golf course open. Golf Course Committee is putting a series of smaller meetings together to update members on golf course status. Q&A will be allowed during these sessions. Highlights as presented are a condensed preliminary draft until the next meeting when, after review and approval by the Board, the minutes become official. Corrections and changes may occur. A complete copy is available in the HOA Office. Golf Course Committee was introduced: President Bowman, Vice President Dalfonso, Treasurer Nash, Director Deacon, Director Mitchum, Members-At-Large Daryl Hansen and George Steele. 10 | THE COLONY NEWS | DECEMBER 2021 | HOA NEWS Continued on following page

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