===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 28, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-26091
BOOTH CREEK SKI HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1359604
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
1000 South Frontage Road West, 81657
Suite 100 (Zip Code)
Vail, Colorado
(Address of Principal Executive
Offices)
(970) 476-4030
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes[X] No[ ]
As of February 25, 2000, the number of shares outstanding of the
registrant's Common Stock, par value $.01 per share, was 1,000 shares.
===============================================================================
<PAGE>
TABLE OF CONTENTS
Item Page Number
- ---- -----------
PART I - FINANCIAL INFORMATION
1. Financial Statements........................................ 1
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 9
3. Quantitative and Qualitative Disclosures about
Market Risk................................................. 19
PART II - OTHER INFORMATION
1. Legal Proceedings........................................... 20
6. Exhibits and Reports on Form 8-K............................ 22
Signatures........................................................ 23
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
January 28, October 29,
2000 1999
--------------- ---------------
ASSETS (Unaudited)
Current assets:
Cash ....................................... $ 1,796 $ 461
Accounts receivable, net of allowance of
of $66 and $65, respectively............... 1,878 1,709
Insurance proceeds receivable............... 6,092 1,799
Inventories ................................ 3,714 2,786
Prepaid expenses and other current
assets .................................... 2,588 1,032
--------------- ---------------
Total current assets ......................... 16,068 7,787
Property and equipment, net .................. 155,491 152,316
Real estate held for development and sale .... 8,828 8,851
Deferred financing costs, net of
accumulated amortization of $3,313 and
$3,078, respectively ....................... 5,869 6,071
Timber rights and other assets ............... 8,016 7,246
Goodwill, net of accumulated amortization
of $7,171 and $6,581, respectively ......... 27,482 28,075
--------------- ---------------
Total assets ................................. $ 221,754 $ 210,346
=============== ===============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Senior credit facility .................... $ 12,568 $ 23,035
Current portion of long-term debt ......... 2,064 1,468
Accounts payable and accrued liabilities .. 47,862 28,593
--------------- ---------------
Total current liabilities ................... 62,494 53,096
Long-term debt .............................. 137,621 136,483
Other long-term liabilities ................. 50 50
Commitments and contingencies
Preferred stock of subsidiary; 28,000
shares authorized, 16,000 shares issued
and outstanding at January 28, 2000
(17,000 shares at October 29, 1999);
liquidation preference and redemption
value of $2,007 at January 28, 2000 ....... 2,007 2,133
Shareholder's equity:
Common stock, $.01 par value; 1,000
shares authorized, issued and
outstanding .............................. - -
Additional paid-in capital ................ 72,000 72,000
Accumulated deficit ....................... (52,418) (53,416)
--------------- ---------------
Total shareholder's equity .................. 19,582 18,584
--------------- ---------------
Total liabilities and shareholder's
equity .................................... $ 221,754 $ 210,346
=============== ===============
See accompanying notes.
<PAGE>
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
Three Months Ended
--------------------------
January 28, January 29,
2000 1999
------------ -----------
(Unaudited)
Revenue:
Resort operations.................... $ 43,869 $ 46,299
Real estate and other................ 845 -
------------ -----------
44,714 46,299
Operating expenses:
Cost of sales - resort operations.... 26,145 29,289
Cost of sales - real estate and
other............................... 333 -
Depreciation......................... 4,887 4,207
Amortization of goodwill and other
intangible assets................... 606 594
Selling, general and administrative
expense............................. 6,650 7,071
------------ -----------
Total operating expenses............... 38,621 41,161
------------ -----------
Operating income....................... 6,093 5,138
Other income (expense):
Interest expense..................... (4,825) (4,968)
Amortization of deferred financing
costs............................... (235) (329)
Other income......................... 12 4
------------ -----------
Other income (expense), net.......... (5,048) (5,293)
------------ -----------
Income (loss) before minority interest. 1,045 (155)
Minority interest...................... (47) (59)
------------ -----------
Net income (loss)...................... $ 998 $ (214)
============ ===========
See accompanying notes.
<PAGE>
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
-------------------------------
January 28, January 29,
2000 1999
------------- -------------
(Unaudited)
Cash flows from operating activities:
Net income (loss) ............................. $ 998 $ (214)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation................................ 4,887 4,207
Amortization of goodwill and other
intangible assets ......................... 606 594
Noncash cost of real estate sales .......... 331 -
Amortization of deferred financing costs ... 235 329
Minority interest .......................... 47 59
Changes in operating assets and liabilities:
Accounts receivable ....................... (169) (772)
Insurance proceeds receivable.............. (4,293) -
Inventories ............................... (928) (914)
Prepaid expenses and other current assets.. (1,556) (992)
Accounts payable and accrued liabilities... 18,219 11,384
Other long-term liabilities ............... - 32
------------- -------------
Net cash provided by operating activities...... 18,377 13,713
Cash flows from investing activities:
Capital expenditures for property and
equipment .................................... (5,251) (7,246)
Acquisition of businesses ..................... - (525)
Capital expenditures for real estate
held for development and sale ................ (308) (94)
Other assets .................................. 267 (865)
------------- -------------
Net cash used in investing activities ......... (5,292) (8,730)
Cash flows from financing activities:
Net repayments of senior credit facility ...... (10,467) (1,803)
Principal payments of long-term debt .......... (1,077) (1,204)
Deferred financing costs ...................... (33) (203)
Purchase of preferred stock of subsidiary
and payment of dividends ..................... (173) (184)
------------- -------------
Net cash used in financing activities ......... (11,750) (3,394)
------------- -------------
Increase in cash .............................. 1,335 1,589
Cash at beginning of period ................... 461 625
------------- -------------
Cash at end of period ......................... $ 1,796 $ 2,214
============= =============
See accompanying notes.
<PAGE>
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 28, 2000
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies
Booth Creek Ski Holdings, Inc. ("Booth Creek") owns and operates various
ski resorts, including Northstar-at-Tahoe ("Northstar"), Sierra-at-Tahoe
("Sierra"), Bear Mountain, Waterville Valley, Mt. Cranmore, the Summit at
Snoqualmie (the "Summit"), Grand Targhee and Loon Mountain. Booth Creek also
conducts certain real estate development activities, primarily at Northstar.
The consolidated financial statements include the accounts of Booth Creek
and its subsidiaries (collectively referred to as the "Company"). Booth Creek
owns all of the common stock of its subsidiaries. Ski Lifts, Inc. (the owner
and operator of the Summit) has shares of preferred stock owned by third
parties. All significant intercompany transactions and balances have been
eliminated.
Booth Creek is a wholly-owned subsidiary of Booth Creek Ski Group, Inc.
("Parent").
The accompanying consolidated financial statements as of January 28, 2000
and for the three month periods ended January 28, 2000 and January 29, 1999 are
unaudited, but include all adjustments (consisting only of normal, recurring
adjustments) which, in the opinion of management of the Company, are considered
necessary for a fair presentation of the Company's financial position at
January 28, 2000, and its operating results and cash flows for the three month
periods ended January 28, 2000 and January 29, 1999. Due to the highly seasonal
nature of the Company's business, the results for the interim periods are not
necessarily indicative of results for the entire year. Certain information and
footnote disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles have been omitted
pursuant to generally accepted accounting principles applicable for interim
periods. Management believes that the disclosures made are adequate to make the
information presented not misleading. The unaudited consolidated financial
statements should be read in conjunction with the following notes and the
Company's consolidated financial statements and accompanying notes included in
the Company's Annual Report on Form 10-K for the fiscal year ended October 29,
1999.
Reporting Periods
The Company's reporting periods end on the Friday closest to the end of
each month.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. Insurance Proceeds Receivable
For the 1999/00 ski season, the Company has arranged for four separate paid
skier visit insurance policies covering its Lake Tahoe resorts (Northstar and
Sierra), the New Hampshire resorts (Waterville Valley, Mt. Cranmore and Loon
Mountain), Bear Mountain and the Summit. The policies have a deductible for the
initial decline from targeted paid skier visit levels, coinsurance for a
portion of the next 10% decline in paid skier visits, and a stated maximum
coverage level. The policies provide coverage for substantially all risks
relating to paid skier visit levels, including weather perils, road and airport
closures, downturns in the economy, strikes and most other events that reduce
the targeted number of paid skier visits. In the accompanying consolidated
financial statements as of and for the three months ended January 28, 2000, the
Company has recorded a receivable and resort operating revenues of $5,000,000
for expected claims proceeds attributable to the decline from targeted paid
skier visits for the three months ended January 28, 2000. This estimate assumes
that targeted policy levels of paid skier visits are achieved for the Company's
second fiscal quarter ending April 28, 2000. In the event that actual paid
skier visits for the Company's second fiscal quarter of 2000 differ from
targeted policy levels, the eventual claim under the paid skier visit insurance
policies could be higher or lower than the $5,000,000 estimated claim as of
January 28, 2000.
<PAGE>
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Also included in insurance proceeds receivable as of January 28, 2000 is
$1,092,000 due for reconstruction of the restaurant facility at the top of
Northstar's terrain, which was destroyed in an electrical fire on February 26,
1999.
3. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
January 28, October 29,
2000 1999
----------- -----------
(In thousands)
Accounts payable ............................ $ 14,715 $ 10,072
Accrued compensation and benefits ........... 3,903 3,279
Taxes other than income ..................... 1,710 1,099
Unearned revenue and deposits - resort
operations ................................ 11,419 9,887
Unearned revenue - real estate operations.... 7,050 -
Interest .................................... 6,735 2,492
Other ....................................... 2,330 1,764
---------- ----------
$ 47,862 $ 28,593
========== ==========
4. Financing Arrangements
Senior Credit Facility
The total maximum borrowing availability under the provisions of the
Company's Amended and Restated Credit Agreement (the "Senior Credit Facility")
is $25 million. The final maturity date of the Senior Credit Facility is March
31, 2002. The Senior Credit Facility requires that the Company not have
borrowings thereunder in excess of $8 million in addition to certain amounts
maintained by the Company in certain depository accounts with Fleet National
Bank (formerly BankBoston, N.A.), for a period of 60 consecutive days each year
commencing between February 1 and February 28. Total borrowings outstanding
under the Senior Credit Facility at January 28, 2000 were approximately $12.6
million, which bore interest at an annual rate of 8.5% on such date.
Long-Term Debt
As of January 28, 2000, the Company had outstanding $133.5 million
aggregate principal amount of its senior debt securities (the "Senior Notes").
The Senior Notes mature on March 15, 2007, and bear interest at 12.5% per
annum, payable semi-annually on March 15 and September 15. The Senior Notes are
redeemable at the option of the Company, in whole or in part, at any time after
March 15, 2002, with an initial redemption price of 106.25% declining through
maturity, plus accrued and unpaid interest to the redemption date.
<PAGE>
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Senior Notes are unconditionally guaranteed, on an unsecured senior
basis, as to the payment of principal, premium, if any, and interest, jointly
and severally (the "Guarantees"), by all Restricted Subsidiaries of the Company
(as defined in the Indenture) having either assets or shareholders' equity in
excess of $20,000 (the "Guarantors"). All of the Company's direct and indirect
subsidiaries are Restricted Subsidiaries, except DRE, LLC. Each Guarantee is
effectively subordinated to all secured indebtedness of such Guarantor. The
Senior Notes are general senior unsecured obligations of the Company ranking
equally in right of payment with all other existing and future senior
indebtedness of the Company and senior in right of payment to any subordinated
indebtedness of the Company.
The Senior Notes are effectively subordinated in right of payment to all
secured indebtedness of the Company and the Guarantors, including indebtedness
under the Senior Credit Facility. In addition, the Senior Notes are
structurally subordinated to any indebtedness of the Company's subsidiaries
that are not Guarantors. The indenture for the Senior Notes (the "Indenture")
contains covenants for the benefit of the holders of the Senior Notes that,
among other things, restrict the ability of the Company and any Restricted
Subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends and make
distributions; (iii) issue stock of subsidiaries; (iv) make certain
investments; (v) repurchase stock; (vi) create liens; (vii) enter into
transactions with affiliates, (viii) enter into sale and leaseback
transactions, (ix) create dividend or other payment restrictions affecting
Restricted Subsidiaries; (x) merge or consolidate the Company or any
Guarantors; and (xi) transfer and sell assets.
The Guarantors are wholly-owned subsidiaries of Booth Creek and have fully
and unconditionally guaranteed the Senior Notes on a joint and several basis.
Booth Creek is a holding company and has no operations, assets or cash flows
separate from its investments in its subsidiaries. In addition, the assets,
equity, income and cash flow of DRE, LLC, Booth Creek's only non-guarantor
subsidiary, are inconsequential and the common stock of DRE, LLC is entirely
owned by Booth Creek. Accordingly, Booth Creek has not presented separate
financial statements and other disclosures concerning the Guarantors or its
non-guarantor subsidiary because management has determined that such
information is not material to investors.
During the three months ended January 28, 2000, the Company entered into
long-term debt and capital lease obligations of $2,811,000 for the purchase of
equipment.
5. Northstar Real Estate Sales
On November 17, 1999, the Company, through its wholly-owned subsidiary,
Trimont Land Company ("TLC"), consummated the sale of certain single family
development property located at Northstar (the "Unit 7 and 7A Development") to
Trimont Land Holdings, Inc. ("TLH"), a wholly-owned subsidiary of Parent and an
affiliate of the Company, for an aggregate sales price of $7,050,000, subject
to adjustment as described below. The consideration paid to TLC consisted of
$6,000,000 in cash and a promissory note (the "TLH Note") for a minimum of
$1,050,000. Under the terms of the TLH Note, TLC will receive the greater of
(a) $1,050,000 plus accrued interest at 7% per annum, or (b) the Net Cash
Proceeds of the resale of the lots within the Unit 7 and 7A Development. "Net
Cash Proceeds" is defined as gross proceeds received by TLH from the subsequent
resale of the lots, after deduction for (1) the proceeds applied to repay any
indebtedness incurred by TLH in connection with its financing of the purchase
of the lots, (2) any fees or other costs incurred by TLH in connection with its
financing of the purchase or sales of the lots, and (3) any corporate overhead
costs incurred by TLH attributable to the purchase, maintenance, marketing or
sale of the lots. The TLH Note is prepayable at any time, and is due on the
earlier to occur of January 30, 2001 or the date on which the last of the lots
owned by TLH has been sold. Pursuant to the terms of the sale, TLC has (1)
retained the obligation to complete the scheduled construction of the
development in accordance with the tentative site development plan, and (2) an
option to repurchase the Unit 7 and 7A Development from TLH. Northstar will
recognize revenue and related cost of sales for these real estate transactions
upon the substantial completion of construction and the close of escrow for the
sales between TLH and third party buyers.
<PAGE>
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company has reached an agreement for the proposed sale of certain
developmental real estate (the "Joint Venture Development Property"),
consisting of approximately 250 acres of land at Northstar, to a newly formed
joint venture between the Company and East West Partners, Inc. ("East West"), a
Colorado based real estate development firm. The proposed transaction is
subject to a number of significant closing conditions, including (1) required
consents and approvals, including those of certain of the Company's creditors
and (2) completion of title evaluations and subdivision requirements to effect
the transfer of the Joint Venture Development Property. Under the terms of the
proposed transaction, the Company would receive an upfront cash payment ranging
from $10 million to $15 million depending on the amount of real estate
transferred at the initial closing (with the remainder of the upfront cash
payment being paid upon the subsequent transfer of parcels not transferred at
the initial closing), and additional payments based on gross sales of the
developed real estate as well as a 20% interest in the joint venture. The
Company is required to invest $5 million of the $15 million upfront cash
payment in capital improvements to the Northstar resort. Additionally, in the
event the planned transaction with East West is consummated, the Company
anticipates using a portion of the proceeds therefrom to repurchase the Unit 7
and 7A Development property from TLH. The Company has retained approval rights
over certain components of the master development plan for the proposed
development. There can be no assurances that the conditions to the transaction
will be satisfied or that the transaction will be consummated on the terms
described or at all.
6. Income Taxes
Due to the Company's lack of profitable history, the tax benefits of
operating losses are fully offset by a valuation reserve. Similarly, no income
tax benefit is expected for the year ended October 27, 2000 due to continued
operating losses. Accordingly, during the quarter ended January 28, 2000, no
income tax provision has been provided.
7. Business Segments
The Company currently operates in two business segments, Resort Operations
and Real Estate and Other. Data by segment is as follows:
Three Months Ended
-------------------------
January 28, January 29,
2000 1999
----------- -----------
(In thousands)
Revenue:
Resort operations .............. $ 43,869 $ 46,299
Real estate and other .......... 845 -
----------- -----------
$ 44,714 $ 46,299
=========== ===========
Operating income:
Resort operations............... $ 5,581 $ 5,138
Real estate and other .......... 512 -
----------- -----------
$ 6,093 $ 5,138
=========== ===========
<PAGE>
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
January 28, October 29,
2000 1999
----------- -----------
(In thousands)
Identifiable assets:
Resort operations............... $ 198,843 $ 188,870
Real estate and other .......... 13,340 13,363
----------- -----------
$ 212,183 $ 202,233
=========== ===========
A reconciliation of combined operating profits for Resort Operations and
Real Estate and Other to consolidated income before income taxes is as follows:
Three Months Ended
-------------------------
January 28, January 29,
2000 1999
----------- -----------
(In thousands)
Total profit for reportable
segments ..................... $ 6,093 $ 5,138
Interest expense................ (4,825) (4,968)
Amortization of deferred
financing costs .............. (235) (329)
Other income (expense).......... 12 4
----------- -----------
Income (loss) before minority
interest...................... $ 1,045 $ (155)
=========== ===========
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The discussion and analysis below relates to the historical consolidated
financial statements and historical results of operations of the Company and
the liquidity and capital resources of the Company. The following discussion
should be read in conjunction with the consolidated financial statements and
related notes thereto included elsewhere in this report. The following
discussion contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to the differences are
discussed in "Forward-Looking Statements" and elsewhere in this report.
General
The Company's ski operations are highly sensitive to regional weather
conditions and the overall strength of the regional economies in the areas in
which the Company operates. The Company believes that the geographic diversity
of the Company's resorts and the use of extensive snowmaking technology coupled
with advanced trail grooming equipment, which together can provide consistent
skiing conditions, can partially mitigate the risk of both economic downturns
and adverse weather conditions in any given region. However, the Company
remains vulnerable to warm weather, heavy rains and drought and other types of
severe or unusual weather conditions, which can have a significant effect on
the operating revenues and profitability at any one of the Company's resorts.
The Company's four most weather-sensitive resorts, Bear Mountain,
Waterville Valley, Loon Mountain and Mt. Cranmore, have invested heavily in
snowmaking capabilities to provide coverage on virtually all of their trails
and have been open for skiing at least 123, 143, 142, and 103 days,
respectively, during each of the last five ski seasons. The Company's
Northstar, Sierra, Summit and Grand Targhee resorts are less weather-sensitive
based on their historical natural snowfall, averaging approximately 367, 546,
493, and 544 inches of snowfall, respectively, per year for the past five ski
seasons. As a result of their historic natural snowfall, their snowmaking
capabilities are considerably less extensive than at Bear Mountain, Waterville
Valley, Loon Mountain or Mt. Cranmore, and therefore, such resorts are more
dependent upon early season snowfall to provide necessary terrain for the
important Christmas holiday period.
The Company's results of operations are also highly dependent on its
ability to compete in each of the large regional ski markets in which it
operates. At Northstar and Sierra, more than 70% of the 1998/99 ski season
total skier days were attributable to residents of the San Francisco,
Sacramento, Central California Valley and Lake Tahoe regions. At Bear Mountain,
more than 90% of the 1998/99 ski season total skier days were attributable to
residents of the Los Angeles and San Diego metropolitan regions. At Waterville
Valley, Loon Mountain and Mt. Cranmore, more than 70% of the 1998/99 ski season
total skier days were attributable to residents of Massachusetts and New
Hampshire, with a large percentage of such visitors coming from the Boston
metropolitan area. At the Summit, the Company estimates that more than 90% of
the 1998/99 ski season total skier days were attributable to residents of the
Seattle/Tacoma metropolitan region. The Company's Grand Targhee resort attracts
more than 40% of its skiers from outside its local skiing population.
In addition to revenue generated from skiing operations, the Company's
resorts generate significant revenue from non-ski operations, including
lodging, conference center services, health and tennis clubs and summer
activities such as mountain biking rentals and golf course fees.
A significant portion of total operating costs at the Company's resorts are
variable, consisting primarily of retail and food service cost of sales,
utilities and labor expense. These variable costs can fluctuate significantly
based upon skier days and seasonal factors. With the exception of certain
management, marketing and maintenance personnel, all of the Company's employees
are compensated on an hourly basis.
<PAGE>
Results of Operations of the Company
Overview
The Company's results of operations are significantly impacted by weather
conditions. Northstar and Sierra experienced unseasonably dry weather and a
lack of natural snowfall during November and December of 1999. However,
snowfall for these resorts returned to more normal levels during January 2000.
Bear Mountain experienced a lack of natural snowfall during the first half of
the 1999/00 ski season due to dry weather in Southern California. The East
experienced variable temperatures and a lack of natural snowfall through the
middle of January 2000, although conditions began to improve in the second half
of January. These conditions negatively impacted terrain availability,
snowmaking conditions and skier days at the Company's California and New
Hampshire resorts during the Company's first fiscal quarter of 2000. The Summit
experienced generally favorable snow conditions during the first half of the
1999/00 ski season. Grand Targhee had a delayed opening due to lower than
expected levels of natural snowfall through early December 1999, however,
increased snowfall during the remainder of December 1999 and January 2000 have
returned snow conditions to more typical levels.
Three Months Ended January 28, 2000 as Compared to the Three Months Ended
January 29, 1999
Total revenue for the three months ended January 28, 2000 was $44,714,000,
a decrease of $1,585,000, or 3%, from the Company's revenues for the three
months ended January 29, 1999. Revenues from resort operations decreased
$2,430,000, or 5%, for the 2000 period as compared to the 1999 period. Revenues
from real estate operations for the three months ended January 28, 2000 were
$845,000, which was due to the closing of escrow on three lots within Phases 4
and 4A of the Big Springs development located at Northstar.
For the 1999/00 ski season, the Company introduced new aggressively priced
season pass products at Sierra, Bear Mountain, Waterville Valley, Mt. Cranmore,
Loon Mountain, the Summit and Grand Targhee, which were designed to stimulate
demand and take advantage of off-peak capacity. This initiative resulted in an
increase of approximately $7,100,000 in the total amount of season pass
products sold for the 1999/00 season when compared to the 1998/99 season.
Revenues from these season pass products are recognized ratably over the ski
season, and increased by approximately $3,100,000 for the three months ended
January 28, 2000 as compared to the 1999 period.
Due to the unfavorable weather and terrain conditions experienced by most
of the Company's resorts during the first half of the 1999/00 ski season, the
Company experienced significant declines in both paid and total skier visits
during the three months ended January 28, 2000 as compared to the same period
in 1999. In addition, as anticipated, the Company has experienced a shift
between paid skier visits and season pass visitation due to the introduction of
new season pass products at most of the Company's resorts. Total skier visits
declined by 18% for the 2000 period as compared to the 1999 period, while paid
skier visits declined by 27%.
For the 1999/00 ski season, the Company has arranged for four separate paid
skier visit insurance policies covering its Lake Tahoe resorts (Northstar and
Sierra), the New Hampshire resorts (Waterville Valley, Mt. Cranmore and Loon
Mountain), Bear Mountain and the Summit. The policies have a deductible for the
initial decline from targeted paid skier visit levels, coinsurance for a
portion of the next 10% decline in paid skier visits, and a stated maximum
coverage level. The policies provide coverage for substantially all risks
relating to paid skier visit levels, including weather perils, road and airport
closures, downturns in the economy, strikes and most other events that reduce
the targeted number of paid skier visits. For the three months ended January
28, 2000, the Company has recorded a receivable and resort operating revenues
of $5,000,000 for expected claims proceeds attributable to the decline from
targeted paid skier visits for the three months ended January 28, 2000. This
estimate
<PAGE>
assumes that targeted policy levels of paid skier visits are achieved for the
Company's second fiscal quarter ending April 28, 2000. In the event that actual
paid skier visits for the Company's second fiscal quarter of 2000 differ from
targeted policy levels, the eventual claim under the paid skier visit insurance
policies could be higher or lower than the $5,000,000 estimated claim as of
January 28, 2000.
Excluding the effects of paid skier visit insurance, Northstar, Sierra and
Bear Mountain experienced declines in resort revenues for the 2000 period as
compared to the 1999 period of $2,566,000, $2,580,000 and $1,873,000
respectively, which was due primarily to reduced skier visits. Revenues for
Waterville Valley, excluding the effects of paid skier visit insurance,
declined by $1,106,000 for the 2000 period, of which $635,000 was due to the
conversion of the resort's retail operations to a concessionaire arrangement
for the 1999/00 ski season, with the remaining shortfall due primarily to lower
skier visits. Revenues for Loon Mountain, excluding the effects of paid skier
visit insurance, increased by $312,000 due primarily to higher season pass
revenues, which offset declines in paid skier visits, lift ticket revenues and
other ski related revenues experienced as a result of the poor early season
conditions. The Summit generated $463,000 in additional revenues due
principally to increased season pass revenue, which was partially offset by
decreased lift ticket revenue. Revenues for Mt. Cranmore, excluding the effects
of paid skier visit insurance, and Grand Targhee were generally comparable
between the periods.
Cost of sales for resort operations for the three months ended January 28,
2000 were $26,145,000, a decrease of $3,144,000, or 11%, as compared to the
1999 period. The decline was primarily due to the combined effects of the
following: (1) lower business volumes and aggressive variable cost management
at most of the resorts, (2) elimination of certain nonrecurring maintenance,
operations, snow removal and other costs at the Summit, and (3) elimination of
$400,000 in retail costs of sales at Waterville Valley due to the conversion of
the resort's retail operations to a concessionaire arrangement for the 1999/00
ski season. Selling, general and administrative expenses for the three months
ended January 28, 2000 were $6,650,000, a decrease of $421,000, or 6%, as
compared to the 1999 period. The decrease was due to reduced corporate general
and administrative costs coupled with efforts to maintain marketing and sales
costs at historical levels at all of the Company's resorts.
Cost of sales for real estate operations was $333,000 for the three lot
closings which occurred during the 2000 period, including $331,000 of noncash
cost of real estate sales.
Interest expense for the three months ended January 28, 2000 totaled
$4,825,000, a decrease of $143,000 from the Company's interest expense for the
three months ended January 29, 1999.
Due to the Company's lack of profitable history, the tax benefits of
operating losses are fully offset by a valuation reserve. Similarly, no income
tax benefit is expected for the year ended October 27, 2000 due to continued
operating losses. Accordingly, during the three months ended January 28, 2000,
no income tax provision has been provided.
"EBITDA" represents income from operations before depreciation and
amortization expense and the noncash cost of real estate sales. EBITDA for the
three months ended January 28, 2000 was $11,917,000, an increase of $1,978,000
or 20% over EBITDA of $9,939,000 for the three months ended January 29, 1999.
Three Months Ended January 29, 1999 as Compared to the Three Months Ended
January 30, 1998
The Company's results of operations for the historical three months ended
January 29, 1999 includes the results of all of the Company's resorts for the
entire period. The results of operations for the historical three months ended
January 30, 1998 excluded the results of Loon Mountain, which was acquired on
February 26, 1998.
Total revenue for the three months ended January 29, 1999 was $46,299,000,
an increase of $7,283,000, or 19%, over the Company's revenues for the three
months ended January 30, 1998. The increase was principally due to the
inclusion of Loon Mountain in the 1999 period, which contributed $5,407,000 in
revenues during the first quarter of fiscal 1999. In addition, Northstar and
Sierra generated additional revenues of $530,000 and $196,000, respectively,
due to improved yields. The Summit generated $1,503,000 in additional revenues
due to an earlier opening and improved yields in its food and beverage, snow
school and retail businesses. These gains were partially offset by reduced
revenues at Waterville Valley and Mt. Cranmore due to unfavorable weather
conditions in December 1998 and January 1999. Bear Mountain realized increased
revenues in November 1998 due to an
<PAGE>
earlier opening. However, the early season gains at Bear Mountain were eroded
in the following January due to the continued lack of natural snowfall.
Revenues for Grand Targhee were generally comparable between the periods.
Total operating expenses for the three months ended January 29, 1999 were
$41,161,000, an increase of $10,766,000 over the 1998 period. The principal
causes of the increase are as follows:
(In thousands)
Total operating expenses - three months
ended January 29, 1998........................... $30,395
Acquisition of Loon Mountain:
Cost of sales - resort operations................ 3,431
Selling, general and administrative.............. 588
Depreciation and amortization.................... 605
----------
4,624
Additional maintenance, operations, snow
removal and severance costs, and costs
associated with an earlier opening and
revenue penetration efforts and new
operations at the Summit......................... 1,982
Costs of new corporate initiatives and
process improvements and costs associated
with new management personnel and functional
expertise........................................ 1,236
Increased depreciation due to higher average
asset balances................................... 603
Increased snowmaking costs at Bear Mountain due
to the lack of natural snowfall.................. 456
Lease costs for three new lifts at the
Summit and Bear Mountain......................... 247
Labor associated with earlier openings at
Northstar, Sierra and Bear Mountain.............. 197
Inflation, consistent accrual practices
among resorts and other changes, net............. 1,421
----------
Total operating expenses - three months
ended January 29, 1999........................... $41,161
==========
As reflected above, the inclusion of Loon Mountain in the 1999 period
resulted in an increase of $4,624,000 in expenses as compared to the 1998
period.
At the Summit, the Company incurred significant nonrecurring costs during
the three months ended January 29, 1999 to appropriately prepare its
facilities, vehicle and snow grooming fleet, communications infrastructure and
processes and systems for the operation of the resort. In addition, record
levels of snowfall severely hampered operating efforts and resulted in
significant increases in snow removal, grounds maintenance and related costs.
The Company also accrued severance costs associated with certain personnel
changes at the Summit. Further, the resort opened thirteen days earlier for the
1998/99 ski season as compared to the prior season. Also, the resort
implemented various revenue penetration efforts and began operating a new ski
school business that was previously operated by a third party, which
contributed to the cost increases at the Summit. The earlier opening, revenue
penetration efforts and new ski school generated an increase in revenues of
$1,503,000 for the three months ended January 29, 1999 as compared to the 1998
period.
During fiscal 1999, the Company initiated various efforts to improve its
marketing collateral and database, establish strategic marketing alliances,
introduce new service offerings, evaluate potential revenue growth
opportunities and strategies, install public relations channels, implement
enhanced guest service training for employees, institute performance management
systems and evaluate technology related tools and methodologies. Further,
during the 1999 period the Company was conducting system and process
improvements in substantially all key administrative and operations areas. The
Company also added certain key corporate personnel and functional expertise
during the 1999 period to enhance its management team.
Interest expense for the three months ended January 29, 1999 totaled
$4,968,000, an increase of $881,000 over the Company's interest expense for the
three months ended January 30, 1998, reflecting generally higher levels of
borrowings in the 1999 period due principally to debt incurred to finance the
Loon Mountain acquisition.
Due to the Company's lack of profitable history, the tax benefits of
operating losses are fully offset by a valuation reserve. Similarly, no income
tax benefit was recognized for the year ended October 29, 1999 due to
<PAGE>
continued operating losses. Accordingly, during the three months ended January
29, 1999, no income tax provision was provided.
EBITDA for the three months ended January 29, 1999 was $9,939,000, a
decrease of $2,275,000 or 19% over EBITDA of $12,214,000 for the three months
ended January 30, 1998.
Liquidity and Capital Resources
The Company's primary liquidity needs are to fund capital expenditures,
service indebtedness and support seasonal working capital requirements. The
Company's primary sources of liquidity are cash flow from operations and
borrowings under the Senior Credit Facility. Virtually all of the Company's
operating income is generated by its subsidiaries. As a result, the Company is
dependent on the earnings and cash flow of, and dividends and distributions or
advances from, its subsidiaries to provide the funds necessary to meet its debt
service obligations. The Senior Credit Facility, as amended and restated on
January 28, 1999 and May 18, 1999, currently provides for borrowing
availability of up to $25 million during the term of such facility, which
expires March 31, 2002. The Senior Credit Facility requires that the Company
not have borrowings thereunder in excess of $8 million, in addition to certain
amounts maintained by the Company in certain depository accounts with Fleet
National Bank (fomerly BankBoston, N.A.), for a period of 60 consecutive days
each year commencing between February 1 and February 28. The Company intends to
use borrowings under the Senior Credit Facility to meet seasonal fluctuations
in working capital requirements, primarily related to off-season operations and
maintenance activities during the months of May through November, to fund
capital expenditures for lifts, trail work, grooming equipment and other
on-mountain equipment and facilities and to build retail and other inventories
prior to the start of the skiing season and for other cash requirements. As of
January 28, 2000 and February 25, 2000, outstanding borrowings under the Senior
Credit Facility totaled approximately $12.6 million and $2.2 million,
respectively.
On November 17, 1999, the Company, through its wholly-owned subsidiary,
Trimont Land Company ("TLC"), consummated the sale of certain single family
development property located at Northstar (the "Unit 7 and 7A Development") to
Trimont Land Holdings, Inc. ("TLH"), a wholly-owned subsidiary of Parent and an
affiliate of the Company, for an aggregate sales price of $7,050,000, subject
to adjustment as described below. The consideration paid to TLC consisted of
$6,000,000 in cash and a promissory note (the "TLH Note") for a minimum of
$1,050,000. The proceeds of the sale were applied against the outstanding
borrowings under the Senior Credit Facility in order to provide the Company
with additional liquidity for early 1999/00 ski season operations. Under the
terms of the TLH Note, TLC will receive the greater of (a) $1,050,000 plus
accrued interest at 7% per annum, or (b) the Net Cash Proceeds of the resale of
the lots within the Unit 7 and 7A Development. "Net Cash Proceeds" is defined
as gross proceeds received by TLH from the subsequent resale of the lots, after
deduction for (1) the proceeds applied to repay any indebtedness incurred by
TLH in connection with its financing of the purchase of the lots, (2) any fees
or other costs incurred by TLH in connection with its financing of the purchase
or sales of the lots, and (3) any corporate overhead costs incurred by TLH
attributable to the purchase, maintenance, marketing or sale of the lots. The
TLH Note is prepayable at any time, and is due on the earlier to occur of
January 30, 2001 or the date on which the last of the lots owned by TLH has
been sold. Pursuant to the terms of the sale, TLC has (i) retained the
obligation to complete the scheduled construction of the development in
accordance with the tentative site development plan, and (ii) an option to
repurchase the Unit 7 and 7A Development from TLH. Northstar will recognize
revenue and related cost of sales for these real estate transactions upon the
substantial completion of construction and the close of escrow for the sales
between TLH and third party buyers.
The Company had a net working capital deficit of $35.0 million (including
$12.6 million in outstanding borrowings under the Senior Credit Facility, and
excluding $11.4 million of unearned revenue and deposits from resort operations
for deferred season pass and loyalty membership product sales, lodging
deposits, prepaid ticket vouchers and other advance product sales, which will
not require cash spending to settle such liabilities) as of January 28, 2000,
which will negatively affect liquidity during the remainder of 2000.
The Company generated cash from operating activities of $18.4 million for
the three months ended January 28, 2000 as compared to $13.7 million for the
three months ended January 29, 1999. This increase is principally due to the
sale of the Unit 7 and 7A Development to TLH as previously discussed.
Cash used in investing activities totaled $5.3 million and $8.7 million for
the three months ended January 28, 2000 and January 29, 1999, respectively. The
results for the 2000 and 1999 periods primarily reflect capital
<PAGE>
expenditures for the purchase of property and equipment.
Cash used in financing activities totaled $11.8 million and $3.4 million
for the three months ended January 28, 2000 and January 29, 1999, respectively.
The results for the 2000 and 1999 periods primarily reflect repayments on the
Senior Credit Facility and long-term debt.
The Company's capital expenditures for property and equipment during the
three months ended January 28, 2000 were approximately $8.1 million (including
$2.8 million of equipment acquired through capital lease arrangements and other
debt). Based on the Company's existing operations, management anticipates that
remaining capital expenditures for property and equipment in fiscal 2000 and
fiscal 2001 will be approximately $14 million to $16 million in the aggregate,
including approximately $4 million in resort maintenance for each year. The
Company plans to fund these capital expenditures from available cash flow,
vendor financing to the extent permitted under the Senior Credit Facility and
the Indenture for the Company's Senior Notes and borrowings under the Senior
Credit Facility.
There were no significant commitments for future capital expenditures at
January 28, 2000. However, the Company has an early buy-out option that has
been extended to April 28, 2000 for the purchase of three high speed detachable
quad lifts that were installed at the Summit and Bear Mountain at the start of
the 1998/99 ski season. The lifts were obtained under an operating lease
arrangement. In the event the early buy-out option is exercised, the Company
would be required to pay approximately $4.5 million to purchase the lifts.
Management believes that there is a considerable degree of flexibility in
the timing (and, to a lesser degree, the scope) of its capital expenditure
program, and even greater flexibility as to its real estate development
objectives. While the capital expenditure program described above is regarded
by management as important, both as to timing and scope, discretionary capital
spending above maintenance levels can be deferred, in some instances for
substantial periods of time, in order to address cash flow or other
constraints. As a result of the Company's recent operating performance and
liquidity constraints, it may be required to defer or abandon certain of its
capital expenditure projects.
With respect to the Company's potential real estate development
opportunities, management believes that such efforts would enhance ski-related
revenues and contribute independently to earnings. In addition, with respect to
significant development projects, the Company anticipates entering into joint
venture arrangements that would reduce infrastructure and other development
costs. Nonetheless, existing lodging facilities in the vicinity of each resort
are believed to be adequate to support current skier volumes and a deferral or
curtailment of development efforts is not regarded by management as likely to
adversely affect skier days and ski-related revenues or profitability. The
Company also believes that its current infrastructure is sufficient, and that
development of real estate opportunities is not presently necessary to support
its existing operations.
The Company's liquidity has been and will continue to be significantly
affected by its high leverage. As a result of its leveraged position, the
Company will have significant cash requirements to service debt and funds
available for working capital, capital expenditures, acquisitions and general
corporate purposes are limited. In addition, the Company's high level of debt
may increase its vulnerability to competitive pressures and the seasonality of
the skiing and recreational industries. Any decline in the Company's expected
operating performance could have a material adverse effect on the Company's
liquidity and on its ability to service its debt and make required capital
expenditures.
In addition, the Senior Credit Facility and the Indenture each contain
covenants that, among other things, significantly limit the Company's ability
to obtain additional sources of capital and may affect the Company's liquidity.
These covenants restrict the ability of the Company and its Restricted
Subsidiaries to, among other things, incur additional indebtedness, create
liens, make investments, consummate certain asset sales, create subsidiaries,
issue subsidiary stock, consolidate or merge with any non-guarantor, or
transfer all or substantially all of the assets of the Company. Further, upon
the occurrence of a Change of Control (as defined in the Indenture), the
Company may be required to repurchase the Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest. The occurrence of a Change of
Control may also constitute a default under the Senior Credit Facility. No
assurance can be given that the Company would be able to finance a Change of
Control repurchase offer.
<PAGE>
The Senior Credit Facility also requires the Company to maintain specified
consolidated financial ratios and satisfy certain consolidated financial tests.
The Company's ability to meet these financial covenants may be affected by
events beyond its control, and there can be no assurance that the Company will
meet those covenants.
The Company reached agreement for the proposed sale of certain
developmental real estate (the "Joint Venture Development Property"),
consisting of approximately 250 acres of land at Northstar, to a newly formed
joint venture between the Company and East West Partners, Inc. ("East West"), a
Colorado based real estate development firm. The proposed transaction is
subject to a number of significant closing conditions, including (1) required
consents and approvals, including those of certain of the Company's creditors
and (2) completion of title evaluations and subdivision requirements to effect
the transfer of the Joint Venture Development Property. Under the terms of the
proposed transaction, the Company would receive an upfront cash payment ranging
from $10 million to $15 million depending on the amount of real estate
transferred at the initial closing (with the remainder of the upfront cash
payment upon the subsequent transfer of parcels not transferred at the initial
closing), and additional payments based on gross sales of the developed real
estate as well as a 20% interest in the joint venture. The Company is required
to invest $5 million of the $15 million upfront cash payment in capital
improvements to the Northstar resort. Additionally, in the event the planned
transaction with East West is consummated, the Company anticipates using a
portion of the proceeds therefrom to repurchase the Unit 7 and 7A Development
property from TLH. The Company has retained approval rights over certain
components of the master development plan for the proposed development. There
can be no assurances that the conditions to the transaction will be satisfied
or that the transaction will be consummated on the terms described or at all.
The Company currently has $133.5 million aggregate principal amount of
Senior Notes outstanding, which will result in annual cash interest
requirements of approximately $16.7 million. The Company expects that cash
generated from operations, cash proceeds of planned real estate sales at
Northstar and planned divestitures of other real estate and non-strategic
assets, together with borrowing availability, will be adequate to fund the
interest requirements on the Senior Notes and the Company's other cash
operating and debt service requirements over the next twelve months. However,
for the twelve months ended January 28, 2000, the Company's ratio of EBITDA
before unusual items to interest expense was 1.63, and as of January 28, 2000,
the ratio of the Company's total debt to EBITDA before unusual items for the
last twelve months was 5.10. For the twelve months ended January 28, 2000, the
Company's earnings would have been inadequate to cover fixed charges by $17.6
million. Any decline in the Company's expected operating performance or the
failure to sell real estate at Northstar or achieve planned divestitures of
other real estate and non-strategic assets, in each case on the terms
anticipated, could have a material adverse effect on the Company's financial
position and liquidity. In such case, the Company could be required to attempt
to refinance all or a portion of its existing debt, sell other assets or obtain
additional financing. No assurance can be given of the Company's ability to do
so or the terms of any such transaction. In addition, the Company would require
additional financing for expansion of its existing properties or for future
acquisitions, if any. No assurances can be given that any such financing would
be available on commercially reasonable terms. See "Forward-Looking Statements"
herein.
The Company believes that inflation has had little effect on its results of
operations and any impact on costs has been largely offset by increased
pricing.
Impact of the Year 2000 Issue
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in normal
business activities.
In prior years, the Company discussed the nature and progress of its plans
to become year 2000 compliant. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believes those systems successfully responded to the year
<PAGE>
2000 date change. The Company expended approximately $800,000 during 1999 in
connection with remediating its systems. The Company is not aware of any
material problems resulting from year 2000 issues, either with its services,
its internal systems, or the products and services of third parties. The
Company will continue to monitor its mission critical computer applications and
those of its suppliers and vendors throughout the year 2000 to ensure that any
latent year 2000 matters that may arise are addressed.
Seasonality
The business of the Company is highly seasonal, with the vast majority of
its annual revenues expected to be generated between November and April of each
fiscal year. Management considers it essential to achieve optimal operating
results during key holidays and weekends during this period. The Company's
results of operations are, in turn, significantly dependent on favorable
weather conditions and other factors beyond the Company's control. The Company
has sought to mitigate the downside risk of its seasonal business by purchasing
paid skier day insurance policies for the 1999/00 ski season. However, these
policies would not fully protect the Company against poor weather conditions or
other factors that adversely affect the Company's operations.
During the off-season months of May through October, the Company's resorts
typically experience a substantial reduction in labor and utility expense due
to the absence of ski operations, but make significant expenditures for
maintenance, expansion and capital improvement in preparation for the ensuing
ski season.
Regulation and Legislation
The Company's operations are dependent upon its ownership or control over
the real property constituting each resort. The real property presently used at
the Northstar and Mt. Cranmore resorts is owned by the Company. The Company has
the right to use a substantial portion of the real property associated with the
Bear Mountain, Sierra, Summit, Grand Targhee, Loon Mountain and Waterville
Valley resorts under the terms of Term Special Use Permits issued by the United
States Forest Service. The Bear Mountain permit expires in 2020, the Sierra
permit expires in 2039, the Waterville Valley permit expires in 2034, the
Summit permit expires in 2032 and the Grand Targhee permit expires in 2034.
A substantial portion of the real property associated with the Loon
Mountain resort is likewise used under United States Forest Service permits. In
1993, the United States Forest Service authorized various lift, trail and
snowmaking improvements on Loon Mountain and an expansion onto South Mountain.
In 1996, the United States Court of Appeals for the First Circuit (the "First
Circuit") overturned this authorization on the ground that the United States
Forest Service had failed to properly address certain environmental issues
under the National Environmental Policy Act ("NEPA"). Certain improvements,
including a snowmaking pipeline and part of the expansion, had been constructed
before the First Circuit ruled. On May 5, 1997, the United States District
Court for the District of New Hampshire (the "District Court") entered a
stipulated order which authorized existing improvements to remain in place and
existing operations to continue but generally prohibited future construction,
restricted use of a major snowmaking water source, and required certain water
discharge permits to be pursued, pending United States Forest Service
reconsideration of the projects under NEPA. These authorizations and
limitations were incorporated into the final order issued by the District Court
on December 11, 1998, and will remain in effect until the United States Forest
Service completes its NEPA review and issues a new decision. On February 12,
1999, the District Court agreed that the United States Forest Service may
combine this NEPA review with its evaluation and analysis of the existing
snowmaking pipeline. On December 13, 1999, the United States Forest Service
announced that it expects to issue the draft NEPA documentation by June 2000
and the final NEPA documentation by November 2000.
In August 1997, the United States Forest Service authorized the Loon
Mountain resort to construct a new snowmaking pipeline across permitted land.
The United States Forest Service found that such construction was consistent
with the District Court order and enabled the resort to modify its snowmaking
operations to better protect water resources and replace snowmaking capacity
lost under the order. Although the pipeline was completed, its use was
challenged by private parties who asserted that the United States Forest
Service violated NEPA. On March 10, 1998, the District Court issued a series of
further orders which, among other things, directed the United States Forest
Service to re-evaluate the pipeline and enjoined the Loon Mountain Resort from
using the pipeline pending further action by the court. On July 2, 1998, the
United States Forest Service issued a new decision approving the pipeline,
which was challenged by several private parties, who again asserted that it
violated NEPA. The United
<PAGE>
States Forest Service subsequently withdrew its decision authorizing the
pipeline to conduct further review and the District Court consolidated the
lawsuits concerning the pipeline. On November 19, 1998, the District Court
modified the injunction allowing Loon Mountain to use the pipeline to withdraw
and convert 159.7 million gallons of water per ski season into snow while the
United States Forest Service further reviews the pipeline under NEPA. On
February 12, 1999, the District Court issued a final order, which dismissed the
consolidated lawsuit concerning the pipeline in light of the United States
Forest Service's decision to conduct further review of the pipeline, and
specified that the limitation on pipeline usage will continue until that review
is completed and a new decision is issued. On January 28, 2000, the District
Court modified the final order to allow Loon Mountain to convert up 190 million
gallons of water into snow during the 1999/00 ski season subject to certain
additional conditions.
Existing use of Loon Mountain is authorized under a Term Special Use
Permit, which covers facilities and expires in 2006; existing non-skiing use of
Loon Mountain's South Mountain area is authorized under an annual permit issued
by the United States Forest Service that is subject to reissuance each year.
After the United States Forest Service reconsiders the pipeline improvements
and expansion under NEPA, it will need to render a new decision and, if
appropriate, issue a new Term Special Use Permit. At that time, the conditions
imposed by the two District Court orders will terminate. Based upon the
existing administrative record, and certain proposed modifications to the
resort's snowmaking operations which are intended to better protect water
resources, the Company expects that the pipeline improvements and expansion
will be approved by the United States Forest Service. However, no assurance can
be given regarding the timing or outcome of this process.
The United States Forest Service has the right to approve the location,
design and construction of improvements in permit areas and many operational
matters at resorts with permits. Under the Term Special Use Permits, the
Company is required to pay fees to the United States Forest Service. The fees
range from 1.5% to approximately 4.0% of certain revenues, with the rate
generally rising with increased revenues. The calculation of gross revenues
includes, among other things, revenue from lift ticket, ski school lesson, food
and beverage, rental equipment and retail merchandise sales. Total fees paid to
the United States Forest Service by the Company during the year ended October
29, 1999 were $1,189,000.
The Company believes that its relations with the United States Forest
Service are good, and, to the best of its knowledge, no Term Special Use Permit
for any major ski resort has ever been terminated by the United States Forest
Service. The United States Secretary of Agriculture has the right to terminate
any Term Special Use Permit upon 180-days notice if, in planning for the uses
of the national forest, the public interest requires termination. Term Special
Use Permits may also be terminated or suspended because of non-compliance by
the permitee; however, the United States Forest Service would be required to
notify the Company of the grounds for such action and to provide it with
reasonable time to correct any curable non-compliance.
The Company's resorts are subject to a wide variety of federal, state and
local laws and regulations relating to land use, water resources, discharge,
storage, treatment and disposal of various materials and other environmental
matters. Management believes that the Company's resorts are presently in
compliance with all land use and environmental laws, except where
non-compliance is not expected to result in a material adverse effect on its
financial condition. The Company also believes that the cost of complying with
known requirements, as well as anticipated investigation and remediation
activities, will not have a material adverse effect on its financial condition
or future results of operations. However, failure to comply with such laws
could result in the imposition of severe penalties and other costs or
restrictions on operations by government agencies or courts that could
materially adversely affect operations.
The operations at the resorts require numerous permits and approvals from
federal, state and local authorities including permits relating to land use,
ski lifts and the sale of alcoholic beverages. In addition, the Company's
operations are heavily dependent on its continued ability, under applicable
laws, regulations, policies, permits, licenses or contractual arrangements, to
have access to adequate supplies of water with which to make snow and service
the other needs of its facilities, and otherwise to conduct its operations.
There can be no assurance that new applications of existing laws, regulations
and policies, or changes in such laws, regulations and policies will not occur
in a manner that could have a detrimental effect on the Company, or that
material permits, licenses or agreements will not be canceled, not renewed, or
renewed on terms materially less favorable to the Company. Major expansions of
any one or more resorts could require, among other things, the filing of an
environmental impact statement or other documentation with the United States
Forest Service and state or local governments under NEPA and certain state or
local NEPA counterparts if it is determined that the expansion may have a
significant impact
<PAGE>
upon the environment. Although the Company has no reason to believe that it
will not be successful in implementing its operations and development plans, no
assurance can be given that necessary permits and approvals will be obtained.
Except for certain permitting and environmental compliance matters relating
to the Loon Mountain resort, the Company has not received any notice of
material non-compliance with permits, licenses or approvals necessary for the
operation of its properties or of any material liability under any
environmental law or regulation.
Pursuant to the air emissions reduction program currently in effect in the
area regulated by the South Coast Air Quality Management District in California
where Bear Mountain is located, depending on Bear Mountain's operations and
emissions, Bear Mountain may be required to acquire emission credits from other
facilities which have already implemented nitrogen oxide emission reductions.
When necessary, the Company may purchase "banked" emission credits at
prevailing market rates.
Bear Mountain has a water supply contract for 500 acre-feet per year with
Big Bear Municipal Water District executed January 8, 1988, the initial
fifteen-year term of which expires on January 7, 2003. Big Bear Municipal Water
District's primary source of water is from a portion of the water in Big Bear
Lake shared with Bear Valley Mutual Water Company, the senior water rights
holder. The water supply contract provides for water primarily for snowmaking
and slope irrigation purposes. The obligation of Big Bear Municipal Water
District to supply water is excused only if the level of Big Bear Lake recedes
below 6,735.2 feet above sea level or eight feet below the top of Big Bear Lake
Dam. Bear Valley Mutual Water Company recently claimed that its rights in the
lake are not subject to Big Bear Municipal Water District's obligation to
supply water to Bear Mountain. This claim is being vigorously contested by all
interested parties including Bear Mountain and a two-year moratorium agreement
between Bear Valley Mutual Water Company and Big Bear Municipal Water District
was executed in November 1998, which withdraws Bear Valley's claim for two
years while the issues between Bear Valley and Big Bear Municipal are resolved.
This allows continued service to Bear Mountain on an uncontested basis during
the moratorium period. No assurance can be made regarding the outcome or timing
of resolution of this matter.
Pursuant to the previously described decision of the First Circuit and the
order of the District Court, Loon Mountain applied and was issued, by the
Environmental Protection Agency ("EPA"), a Clean Water Act (the "CWA")
discharge permit covering discharges associated with its snowmaking operations.
Certain ongoing discharges are authorized by the District Court order pending
final action on the permit and subject to the District Court's reserved power
to modify such approval to address any resulting environmental issues.
Certain regulatory approvals associated with the new snowmaking pipeline at
Loon Mountain impose minimum stream flow requirements on the Loon Mountain
resort. These requirements will compel the Loon Mountain resort to construct
water storage facilities within the next ten years, and such construction will
require further regulatory approvals and environmental documentation under
NEPA. No assurances can be given that such regulatory approvals will be
obtained or that the Company will have the financial resources to complete such
construction.
In addition, the Loon Mountain resort was notified in September 1997 that
it had allegedly filled certain wetlands at the resort in violation of the CWA.
In response, Loon Mountain worked with the EPA to remove the alleged fill and
implement certain erosion control measures. On January 15, 1998, an individual
notified the EPA, Loon Mountain, and certain other persons that he intended to
initiate a lawsuit under the CWA regarding the alleged wetland violation. On
February 2, 1998, the EPA wrote to such individual stating that the alleged
fill had been removed and that the EPA does not believe there is a continuing
violation at the site. On January 18, 2000, in papers filed in connection with
the District Court's modification of the final order in the pipeline
litigation, the same individual again alleged that Loon Mountain had previously
filled wetlands in violation of the CWA. The Company does not have any further
notice of any threatened lawsuit or other action regarding this matter.
Forward-Looking Statements
Except for historical matters, the matters discussed in Part I, Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are forward-looking statements that involve risks and
uncertainties. The forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on management's current views and
assumptions and involve risks and uncertainties that could significantly affect
expected results. The Company
<PAGE>
wishes to caution the reader that certain factors, including those described
below, could significantly and materially affect the Company's actual results,
causing results to differ materially from those in any forward-looking
statement. These factors include, but are not limited to: uncertainty as to
future financial results, the substantial leverage and liquidity constraints of
the Company, the capital intensive nature of development of the Company's ski
resorts, uncertainties associated with obtaining financing for future real
estate projects and to undertake future capital improvements, demand for and
costs associated with real estate development, the discretionary nature of
consumers' spending for skiing and resort real estate, regional and national
economic conditions, the successful or unsuccessful integration of acquired
businesses, weather conditions, natural disasters (such as earthquakes and
floods), industry competition, governmental regulation and other risks
associated with expansion and development, the occupancy of leased property and
property used pursuant to the United States Forest Service permits, and the
ability of the Company to make its information technology assets and systems
year 2000 compliant and the costs of any modifications necessary in this
regard.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in information relating to market risk
since the Company's disclosure in Item 7a. of the Company's Annual Report on
Form 10-K for the year ended October 29, 1999 as filed with the Securities and
Exchange Commission.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Each of the Company's resorts has pending and is regularly subject to
litigation, and the threat thereof, with respect to personal injury claims
relating principally to skiing activities at its resorts but also relating to
premises and vehicular operations and worker's compensation matters. The
Company maintains extensive liability insurance that the Company considers
adequate to monetarily insure claims related to such usual and customary risks
associated with the operation of four-season recreation resorts.
Killington West, Ltd., formerly known as Bear Mountain, Ltd., ("Killington
West "), filed a breach of contract lawsuit in the Superior Court of the State
of California, San Bernardino County, against Fibreboard Corporation
("Fibreboard") and Bear Mountain, Inc. alleging that Fibreboard and Bear
Mountain, Inc. breached the asset purchase agreement dated October 6, 1995 (the
"Original Bear Mountain Agreement") among Killington West, Fibreboard and Bear
Mountain, Inc. pursuant to which Bear Mountain, Inc. acquired the Bear Mountain
ski resort from Killington West. Killington West's lawsuit concerned an alleged
breach by Fibreboard and Bear Mountain, Inc. of a change of control provision
in the Original Bear Mountain Agreement. In connection with the Company's
acquisition of Bear Mountain, Inc. in December 1996, the Company obtained from
Fibreboard indemnification for any claim that might be made by Killington West,
and further, required that $1 million of the purchase price be held in escrow
pending the outcome of any potential disputes with Killington West. Fibreboard
acknowledged its obligation to indemnify Bear Mountain, Inc. with respect to
the Killington West lawsuit and will defend such lawsuit on behalf of
Fibreboard and Bear Mountain, Inc.
In connection with the merger with Loon Mountain Recreation Corporation
("LMRC"), certain shareholders of LMRC (the "LMRC Shareholder Plaintiffs")
filed a lawsuit against LMRC and its former directors alleging breach of
fiduciary duty and against the Company alleging that the Company failed to
comply with the New Hampshire Security Takeover Disclosure Act (the "Takeover
Statute") in connection with the transaction. The two lawsuits were
consolidated in the Superior Court of Grafton County, New Hampshire. Prior to
the filing of the lawsuit against the Company, the Company received a "no
action" order from the Bureau of Securities Regulation, New Hampshire
Department of State (the "Bureau") finding that the Takeover Statute was
inapplicable to the proposed merger. The LMRC Shareholder Plaintiffs' initial
request for a preliminary injunction prohibiting the Company (or its
affiliates) from proceeding with the LMRC merger was denied by the court.
Before the litigation proceeded further, and prior to the merger, the parties
to the merger agreement amended such agreement. The Company then obtained an
additional order by the Bureau that the Takeover Statute did not apply to the
merger transaction. The Company answered the LMRC Shareholder Plaintiffs'
petition and filed a motion to dismiss the LMRC Shareholder Plaintiffs' action
against the Company asserting that the Takeover Statute did not apply to the
transaction as a matter of law. The court initially denied the Company's motion
to dismiss but granted the motion to dismiss upon reconsideration. LMRC
Shareholder Plaintiffs appealed the dismissal to the New Hampshire Supreme
Court and oral arguments were heard in January of 2000; the New Hampshire
Supreme Court's decision has not yet been entered. Potential remedies under the
Takeover Statute include money damages and rescission of the transaction. While
the Company does not believe the LMRC Shareholder Plaintiffs will prevail in
their actions, no assurances can be made regarding the outcome of these
actions.
LMRC Shareholder Plaintiffs' breach of fiduciary duty action against LMRC,
Parent and its former directors remains pending and discovery is being
conducted. The Company has filed a Motion for Summary Judgement and has
requested a continuance from an April of 2000 trial date, pending the outcome
of the Corporation Act case described below. The LMRC Shareholder Plaintiffs
were given leave by the court to amend their complaint to seek money damages
against the Company, LMRC and its former directors. If the LMRC Shareholder
Plaintiffs are successful in obtaining a judgment against the former LMRC
directors, the Company may have certain obligations to indemnify the former
directors pursuant to the former LMRC by-laws. While the Company does not
believe LMRC Shareholder Plaintiffs will prevail in this lawsuit, no assurances
can be made regarding the outcome of this litigation.
Also in connection with the merger with LMRC, the LMRC Shareholder
Plaintiffs exercised dissenters' rights under the New Hampshire Business
Corporation Act (the "Corporation Act"). Under the statutory procedure for
settling the LMRC Shareholder Plaintiffs' dissenters' rights, LMRC paid the
plaintiffs an aggregate of $34,436, or $30.61 per share, as its estimate of the
fair value of their 1,125 shares. The LMRC Shareholder Plaintiffs demanded
<PAGE>
additional payments necessary to compensate them for the $71.38 per share
price, plus interest, which they asserted as the fair value of their shares.
Pursuant to the Corporation Act, LMRC commenced a proceeding in the Superior
Court of Grafton County, New Hampshire seeking a judicial appraisal of the
value of the LMRC Shareholder Plaintiffs' shares in LMRC. Discovery in the case
is pending and trial is to be set for March of 2000. While the Company believes
that the amount paid to the LMRC Shareholder Plaintiffs prior to the
commencement of the appraisal proceeding represents the fair value of their
shares, there can be no assurance as to the value which the appraisal
proceeding will assign to the LMRC Shareholder Plaintiffs' 1,125 shares.
In 1995, an individual sued the United States Forest Service (the "Forest
Service") in the United States District Court for the District of New Hampshire
(the "District Court") alleging that the Forest Service had violated the
National Environmental Policy Act ("NEPA"), the Clean Water Act ("CWA"), and an
executive order in approving improvements to facilities on Loon Mountain and an
expansion of the Loon Mountain resort on to South Mountain. LMRC and an
environmental group intervened in the lawsuit. The District Court entered
summary judgment for the Forest Service on all claims and the original
plaintiff, along with the intervening environmental group, (collectively or
individually, the "Environmental Plaintiffs") appealed. In December 1996, the
United States Court of Appeals for the First Circuit (the "First Circuit")
reversed the District Court decision and ruled that the Forest Service must
reconsider certain environmental issues under NEPA and that LMRC must obtain a
discharge permit under the CWA for certain discharges from its snowmaking
system. The District Court then entered a stipulated order that: enjoins LMRC
from any further construction implementing the project with certain limited
exceptions; imposes various restrictions on LMRC's existing snowmaking
operations and requires LMRC to apply for a CWA discharge permit for discharges
of water and any associated pollutants associated with its snowmaking; allows
existing construction to remain in place and existing uses to continue;
requires LMRC to undertake certain erosion control and monitoring measures;
requires the Forest Service to prepare supplemental NEPA documentation on the
improvements and expansion; and reserves the right to require restoration of
areas developed under the original Forest Service approval to their preexisting
condition if not ultimately re-approved by the Forest Service. This order
remains in effect until the supplemental NEPA process is completed. The Forest
Service has revised its target date for when it expects to issue draft NEPA
documentation from the Fall of 1999 to June of 2000. The Company can give no
assurance regarding the timing or outcome of such process. The Environmental
Plaintiffs also filed a motion asking the District Court to impose against LMRC
a CWA civil penalty of $5,550,125 and attorney's fees and costs in connection
with LMRC's discharges into Loon Pond during its snowmaking operations for the
1996/97 ski season and prior years. The discharge at issue involved water
transfers from the East Branch of the Pemigewasset River and drain back from
the snowmaking system into Loon Pond. The District Court dismissed the claim
for civil penalties and attorney's fees under the CWA and one of the
Environmental Plaintiffs appealed to the First Circuit. The District Court
stayed the appeal through March 6, 2000, initially to wait for the United
States Supreme Court to rule in a different case involving the CWA, and then to
permit settlement negotiations; the parties have jointly requested the stay
continue through April 5, 2000. The parties are required to file a status
report with the First Circuit by March 7, 2000. In connection with the merger
with LMRC, the Company obtained a specific insurance policy providing $4.5
million of coverage (above a $1.2 million deductible) to cover any civil
penalties, fees and costs that the District Court may assess against LMRC.
In 1997, the Environmental Plaintiffs filed a second lawsuit against the
Forest Service in the District Court alleging that the Forest Service violated
NEPA in authorizing LMRC to construct and operate a snowmaking pipeline across
permitted land. LMRC intervened in the lawsuit. The District Court held that
the Forest Service had violated NEPA by failing to consider the potential
effects of an increase in snowmaking capacity. The District Court then enjoined
Loon Mountain from using the pipeline but later modified the injunction to
permit LMRC to use the pipeline provided that, among other things, it does not
make snow in excess of the historic production level utilizing 159.7 million
gallons. On February 12, 1999, the District Court dismissed the pipeline
litigation and allowed the Forest Service to combine its NEPA analysis of the
pipeline with the pending NEPA analysis of the South Mountain expansion. The
injunction authorizing LMRC to use the pipeline to supply water for making
historical levels of snow remains in place, but was further modified to permit
LMRC to use 190 million gallons of water for snowmaking during the 1999/00 ski
season subject to certain additional conditions.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Form of Agreement for Purchase and Sale of Real
Property dated February 11, 2000 by and between
Trimont Land Company and East West Partners,
Inc.
10.2 Form of Operating Agreement of Northstar
Holdings, L.L.C. by and between Trimont Land
Company and East West Resort Development V,
L.L.L.P.
27.1 Financial Data Schedule
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarterly period ended January
28, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
Undersigned, thereunto duly authorized.
BOOTH CREEK SKI HOLDINGS, INC.
(Registrant)
By: /s/ ELIZABETH J. COLE
------------------------------------------
Elizabeth J. Cole
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ BRIAN J. POPE
------------------------------------------
Brian J. Pope
Vice President of Accounting and Finance,
(Principal Accounting Officer)
March 10, 2000
AGREEMENT FOR PURCHASE AND SALE
OF
REAL PROPERTY
BETWEEN
TRIMONT LAND COMPANY
AND
EAST WEST PARTNERS, INC.
This document represents the form of the Agreement for Purchase and Sale of
Real Property (the "Agreement") between Trimont Land Company and East West
Partners, Inc. Certain exhibits to the Agreement may be modified or are
required to be completed at the time of the intended closing of the
transactions contemplated by the Agreement, and are not complete as of the
filing date of the Company's Report on Form 10-Q for the quarterly period ended
January 28, 2000.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINITIONS......................................1
Section 1.1. Closing Date................................1
Section 1.2. Contract Obligations........................1
Section 1.3. Conveyable Tract............................2
Section 1.4. Density.....................................2
Section 1.5. Hazardous Substances, Environmental
Laws........................................2
Section 1.6. Improvements................................2
Section 1.7. Land........................................3
Section 1.8. Laws and Restrictions.......................3
Section 1.9. Master Development Plan.....................3
Section 1.10. NEWCO.......................................3
Section 1.11. Personal Property...........................3
Section 1.12. Property....................................3
Section 1.13. Title Company...............................3
Section 1.14. Title Report................................4
Section 1.15. Unit........................................4
Section 1.16. Water Rights................................4
ARTICLE II PURCHASE AND SALE OF THE PROPERTY................4
Section 2.1. Purchase and Sale...........................4
Section 2.2. Purchase Price..............................4
ARTICLE III CONDITIONS TO AGREEMENT..........................5
Section 3.1. Buyer's Conditions Precedent................5
Section 3.2. Seller's Conditions Precedent...............5
Section 3.3. Waiver......................................5
<PAGE>
Page(s)
-------
ARTICLE IV REPRESENTATIONS AND WARRANTIES COVENANTS
AND INDEMNIFICATIONS.............................6
Section 4.1. Seller's Express Representations and
Warranties..................................6
Section 4.2. Express Covenants...........................9
Section 4.3. Breaches of Representations/Warranties
and Covenants..............................10
Section 4.4. Indemnification............................10
Section 4.5. Buyer's Representations....................11
ARTICLE V TITLE, ESCROW AND CLOSING.......................12
Section 5.1. Conditions of Title........................12
Section 5.2. Title Insurance............................12
Section 5.3. Closing Date...............................12
Section 5.4. Deposits and Deliveries by Seller..........13
Section 5.5. Deposits and Deliveries by Buyer...........13
Section 5.6. Closing....................................14
Section 5.7. Prorations.................................15
Section 5.8. Closing Costs..............................16
Section 5.9. Possession.................................16
Section 5.10. Filing of Reports..........................16
ARTICLE VI LIQUIDATED DAMAGES/ SPECIFIC PERFORMANCE........17
Section 6.1. Liquidated Damages.........................17
Section 6.2. Multiple Closings..........................17
ARTICLE VII DAMAGE AND DESTRUCTION, CONDEMNATION............17
Section 7.1. Damage and Destruction.....................17
Section 7.2. Condemnation...............................18
ARTICLE VIII COMMISSIONS.....................................18
<PAGE>
Page(s)
-------
Section 8.1. Brokerage Commission and Finder's Fee......18
ARTICLE IX PARKING, CAPITAL IMPROVEMENTS, GOLF COURSE
AND PROPERTY/RENTAL MANAGEMENT, RIGHT OF
FIRST OFFER ON RESORT...........................19
Section 9.1. Ski Resort Parking.........................19
Section 9.2. Capital Improvements.......................19
Section 9.3. Intentionally Deleted......................19
Section 9.4. Intentionally Deleted......................19
Section 9.5. Intentionally Deleted......................19
Section 9.6. Project Land...............................19
ARTICLE X GENERAL PROVISIONS..............................20
Section 10.1. Notices....................................20
Section 10.2. Agreement, No Modifications................21
Section 10.3. Time.......................................21
Section 10.4. Attorneys' Fees............................22
Section 10.5. Relationship...............................22
Section 10.6. No Merger..................................22
Section 10.7. Successors and Assigns.....................23
Section 10.8. Further Assurances.........................23
Section 10.9. Counterparts...............................23
Section 10.10. Construction...............................23
Section 10.11. Termination................................23
Section 10.12. Seller's Inability.........................23
Section 10.13. Additional Re: Due Diligence..............24
Section 10.14. Confidentiality............................24
Section 10.15. Reimbursable Expenses......................26
<PAGE>
Page(s)
-------
Section 10.16. Additional Re: Consent....................27
Section 10.17. Exculpation................................27
Section 10.18. Re: Exhibits. ...........................27
Section 10.19. Modifications to Closing Conditions........27
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
OF
REAL PROPERTY
THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY (the
"Agreement") is made and entered into as of the 11th day of February, 2000 by
and between TRIMONT LAND COMPANY, a California corporation ("Seller"), and EAST
WEST PARTNERS, INC., a Colorado corporation ("Buyer").
Recitals
A. Seller owns approximately 8000 acres of land in Placer County,
California in a ski area development known as Northstar-at-Tahoe ("Northstar").
B. Within Northstar are several parcels of land upon which Buyer
desires to construct approximately 1,800 multifamily units in accordance with
the Master Development Plan (as defined in Section 1.7 below, the
"Development"), the basic locations of such parcels being depicted on Exhibit A
attached hereto and made a part hereof, and further described in Section 1.5
below.
C. Seller and East West Resort Development V, L.L.L.P., a Delaware
limited liability limited partnership ("EWRD V"), an affiliate of Buyer, have
agreed to form Newco, a Delaware limited liability company ("Newco"), to own,
develop and operate said parcels.
ARTICLE I
DEFINITIONS
Unless the context otherwise specifies or requires, for the purposes
of this Agreement the following terms shall have the meanings set forth in this
Article 1:
Section 1.1. Closing Date. The term "Closing Date" or "Closing"
shall mean the date scheduled pursuant to the provisions of Section 5.3 for the
delivery of the Deed (as defined in Section 5.1 below) and the payment of the
Purchase Price (as defined in Section 2.2 below). If there is more than one
closing as contemplated by Section 10.19 hereof ("Multiple Closings"), then the
terms "Closing Date" or "Closing" shall refer to the closing applicable to the
portion of the Property being conveyed at a particular time and the term
"Purchase Price" shall refer to the portion of the Purchase Price applicable to
such portion of the Property being conveyed pursuant to and as specified in
Section 10.19 hereof. The term "Initial Closing" shall refer to the first
Closing that a conveyance of all or any portion of the Property occurs or is
scheduled to occur pursuant to the provisions of this Agreement.
Section 1.2. Contract Obligations. The term "Contract Obligations"
shall mean those contracts, agreements, and obligations, whether or not in
writing, which will be assigned by Seller to Buyer on the Closing Date and
which Buyer will assume from and after the Closing Date,
<PAGE>
pursuant to an assignment and assumption agreement (the "Obligations Assumption
Agreement") in the form attached hereto and made a part hereof as Exhibit B,
all of which are listed in Exhibit C to this Agreement.
Section 1.3. Conveyable Tract. The term "Conveyable Tract" shall
mean a parcel of real property that (i) is legally subdivided and can be
legally conveyed by Seller and (ii) lies solely within the black bordered
outline ("Black Outline") of any of the Parcels shown on the Master Development
Plan.
Section 1.4. Density. The term "Density" shall mean the number of
Units that can be developed as of the date hereof as of right pursuant to
existing zoning and/or existing governmental approvals or approved plans
affecting the Property.
Section 1.5. Hazardous Substances, Environmental Laws. The term
"Hazardous Substances" shall mean and include any chemical, compound, material,
mixture, waste or substance that is now or hereafter defined or listed in, or
otherwise classified pursuant to, any Environmental Laws (as defined below) as
a "hazardous substance," "hazardous material," "hazardous waste," "extremely
hazardous waste," "infectious waste," "toxic substance," "toxic pollutant" or
any other formulation intended to define or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity or toxicity, including any petroleum, natural gas, natural gas
liquids, liquefied natural gas or synthetic gas usable for fuel (or mixture of
natural gas and such synthetic gas). "Hazardous Substances" shall include,
without limitation, any hazardous or toxic substance, material or waste, or any
chemical, compound or mixture which is (i) asbestos, (ii) designated as a
"hazardous substance" pursuant to Section 1317 of the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), (iii) defined as a "hazardous
waste" pursuant to Section 6903 of the Federal Resource Conservation and
Recovery Act (42 U. S.C. Section 6901 et seq.), (iv) defined as "hazardous
substances" pursuant to Section 9601 of the Comprehensive Environmental
Response, Compensation and Liability Act, (42 U. S.C. Section 9601 et seq.) (v)
listed in the United States Department of Transportation Table (49 CFR 172.101)
or by the Environmental Protection Agency as hazardous substances (40 CFR part
302), (vi) in any laws and regulations of the State of California and Placer
County, California, and in any and all amendments thereto in effect as of the
Closing Date, and (vii) any such chemicals, compounds, mixtures, substances,
materials or wastes otherwise regulated under any applicable local, state or
federal Environmental Laws. Notwithstanding anything contained in this
Agreement to the contrary, for purposes of this Agreement, a chemical,
compound, material, mixture, waste or substance shall not be considered to be a
"Hazardous Substance" unless it exists in such quantities or is used in such a
manner so as to be in violation of the Environmental Laws (as hereinafter
defined). The term "Environmental Laws" shall mean any and all presently
existing federal, state and local laws (whether under common law, statute,
rule, regulation or otherwise), requirements under permits issued with respect
thereto, and other requirements of any federal, state or local governmental
agency, court, board, bureau or other authority having jurisdiction with
respect to or relating to the environment, to any Hazardous Substance or to any
activity involving Hazardous Substances, and shall include, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act (42 U.
S.C. Section 9601, et seq.) and the Federal Resource Conservation and Recovery
Act (42 U. S.C. Section 6901, et seq.), and all amendments thereto in effect as
of the Closing Date.
Section 1.6. Improvements. The term "Improvements" shall mean all
improvements and fixtures now or hereafter located on the Land provided,
however, that any
<PAGE>
improvements or fixtures located on the Excess Property (the "Excess Property
Improvements") shall remain the property of Seller.
Section 1.7. Land. Subject to all of the provisions of this
Agreement, the term "Land" shall mean the real property in Placer County,
California described in Exhibit A to this Agreement (a) as parcels D, H, I, J,
K, L, M, N, P, Q and R; (b) those portions of parcels E, F and G that are not
included within the EFG Subdivision Land (as defined in Section 10.19(b)(ii)
below) and (c) those portions of parcels A, B and C owned by Seller and
specifically designated as a portion of the Land in the Final Master
Development Plan (collectively, the "Parcels"), including, as to each of
clauses (a), (b) and (c) of this Section 1.7, all easements, rights of way,
other interests appurtenant thereto, all zoning and development entitlements
relative thereto, and all right, title and interest of Seller in and to any
land lying in the bed of any street, road, highway or avenue, open or proposed,
in front of, adjacent to or adjoining such real property as set forth in the
Final Master Development Plan.
Section 1.8. Laws and Restrictions. The term "Laws and Restrictions"
shall mean all applicable federal, state, local and other laws, statutes,
regulations, codes, orders, ordinances and rules including, without limitation,
those relating to fire, safety, land use, subdivision, health, labor,
environmental protection, seismic design, conservation, parking, handicapped
access, zoning and building, and all restrictive covenants (if any), other
title encumbrances, all Environmental Laws, all applicable provisions of the
Fair Housing Act of 1968 and the Americans With Disabilities Act of 1990, and
all amendments thereto.
Section 1.9. Master Development Plan. The term "Master Development
Plan" shall refer to the plan annexed hereto as Exhibit A and the term "Final
Master Development Plan" shall mean the master development plan that is
contemplated by Buyer and Seller to be Exhibit G of the operating agreement of
Newco.
Section 1.10. NEWCO. NEWCO shall mean that certain entity created by
Seller and EWRD V to own, develop and operate the Property.
Section 1.11. Personal Property. The term "Personal Property" shall
mean those items of personal property, if any, listed in Exhibit O, attached to
and made a part of this Agreement.
Section 1.12. Property. The term "Property" shall mean collectively
the Land, the Improvements, and the Water Rights (as defined in Section 1.16
below and subject to the limitations set forth in Section 10.19 below), or if
there are Multiple Closings, then if the context so requires, the portion of
the Property being conveyed at a particular Closing.
Section 1.13. Title Company. The term "Title Company" shall mean
First American Title Insurance Company, whose address for this transaction is
as follows:
First American Title Insurance Company
228 East 45th Street
New York, New York 10017-3303
Attn: Christopher Burdick, Esq.
Telephone No.: (212) 850-0627
Fax No.: (212) 331-1514
<PAGE>
Notwithstanding the above address of the Title Company, for this
transaction, the Deposit (as defined in Section 2.2 below) shall be held in
escrow by the Title Company at an address of the Title Company within
California.
Section 1.14. Title Report. The term "Title Report" shall mean the
commitment for title insurance with respect to the Land and Improvements dated
as of November 23, 1999, and issued by the Title Company as Commitment Number
16498.
Section 1.15. Unit. The term "Unit" shall mean one residential
housing unit, whether in a multi-family or single family building.
Section 1.16. Water Rights. The term "Water Rights" shall mean any
and all water and water rights, ditches and ditch rights, reservoir and
reservoir rights, wells and well rights, springs and spring rights, whether
surface or subsurface, tributary or non-tributary, adjudicated or
unadjudicated, used on or in connection with the Land.
ARTICLE II
PURCHASE AND SALE OF THE PROPERTY
Section 2.1. Purchase and Sale. Seller agrees to sell the Property
to Buyer, and Buyer agrees to purchase the Property from Seller, on all of the
terms, covenants and conditions set forth in this Agreement. As part of the
consideration for the sale by Seller to Buyer, (a) Buyer shall (i) cause EWRD
V, immediately prior to the Initial Closing, to enter into a limited liability
company operating agreement of Newco (the "Operating Agreement") with Seller,
in the form attached hereto and made a part hereof as Exhibit D (Seller agrees
to simultaneously enter into the Operating Agreement with EWRD V), and (ii) at
the Initial Closing, assign all of its right, title and interest in this
Agreement to Newco and Newco shall assume all obligations and liabilities of
Buyer under this Agreement, pursuant to an assignment and assumption agreement
(the "Contract Assignment"), in the form attached hereto and made a part hereof
as Exhibit E, which shall be executed at the Initial Closing by Buyer and
Newco, and (b) Seller and Newco will, at the Initial Closing, enter into (i) an
agreement in the form attached hereto and made a part hereof as Exhibit F (the
"Exclusive Agreement"), (ii) the Obligations Assumption Agreement, (iii) an
agreement with respect to non-residential property (the "Non-Residential
Property Agreement") in the form attached hereto and made a part hereof as
Exhibit J and (iv) the other documents set forth in Section 5.5 to which Newco
and/or Seller are parties.
Section 2.2. Purchase Price. The purchase price for the Property
(the "Purchase Price") shall be $15,000,000 which, subject to all prorations
and adjustments provided in this Agreement, shall be paid by Buyer to Seller as
follows:
(a) Deposit. $500,000 (the "Deposit") which Buyer shall
deposit with the Title Company on or before February 11, 2000 (the "No Return
Date"), by good unendorsed certified check of Buyer or by immediately available
federal wire transfer of funds, and which sum the Title Company shall deposit
in a federally insured interest-bearing "money market" account at a bank
designated by or reasonably acceptable to Seller, with fifty percent of the
interest from such account to be paid to Buyer and fifty percent to be paid to
Seller at the Initial Closing, or all of the interest shall be paid to Buyer
upon the termination of this Agreement for any reason other than the Buyer's
default. The entire Deposit shall be paid to Seller at the Initial Closing.
Subject to Article VI below,
<PAGE>
if Buyer shall default in the performance of its obligations under this
Agreement, then the Deposit together with all interest thereon shall be paid by
the Title Company to Seller within two business days of Seller's demand
therefor made in writing, as Seller's liquidated damages (except that Buyer
shall also remain liable under Sections 4.4 and 10.15 below and as may
otherwise be provided hereunder). At the Initial Closing, the non-interest
portion of the Deposit will be paid to Seller as a part of the Purchase Price
and the interest portion shall be paid as hereinabove provided. In all other
events, the Deposit, and the interest thereon as hereinabove provided, shall be
returned by the Title Company to Buyer within five business days of Buyer's
demand therefor made in writing following Buyer's termination of this Agreement
in accordance with the provisions of this Agreement. Notwithstanding anything
contained in this Agreement to the contrary, if any check delivered by Buyer
fails due collection the same shall constitute a default by Buyer hereunder and
Seller, at its option, may, in addition to all of Seller's other rights and
remedies, (i) terminate this Agreement and all rights of Buyer hereunder, (ii)
sue to collect on any such check, and (iii) pursue against Buyer any or all of
Seller's rights and remedies resulting from such default, such remedies being
cumulative.
(b) Cash Payment. $10,000,000, including the Deposit (less
the interest portion thereof, which shall not be credited toward the Purchase
Price), shall be paid on the Closing Date by immediately available federal
wire-transfer of funds to Seller.
(c) Deferred Payment. $5,000,000 shall be paid on the
Closing Date by the execution and delivery to Seller by Newco of the $5M Note
and Deed of Trust referred to and defined in Section 5.5 below.
ARTICLE III
CONDITIONS TO AGREEMENT
Section 3.1. Buyer's Conditions Precedent. Buyer's obligation to
purchase the Property or otherwise to perform any obligation provided in this
Agreement shall be conditioned expressly upon the satisfaction of the following
condition precedent:
The due and timely performance by Seller of each and every covenant,
undertaking and agreement to be performed by Seller pursuant to this Agreement
at or prior to Closing and the truth, accuracy and completeness of each
representation and warranty made in this Agreement by Seller.
Section 3.2. Seller's Conditions Precedent. Seller's obligation to
sell the Property or otherwise to perform any obligation provided in this
Agreement shall be conditioned expressly upon the satisfaction of the following
conditions precedent:
The due and timely performance by Buyer of each and every covenant,
undertaking and agreement to be performed by Buyer pursuant to this Agreement
at or prior to Closing and the truth, accuracy and completeness, of each
representation and warranty made in this Agreement by Buyer, the breach of
which would have a material adverse effect on Seller or the Property.
Section 3.3. Waiver. At any time or times on or before the Closing
Date, at Buyer's or Seller's election as the case may be, either Buyer or
Seller may waive any of the foregoing conditions set forth in Sections 3.1 or
3.2 respectively, by written notice to the other. Other than Buyer's and
Seller's consummation of the transaction contemplated herein pursuant to this
<PAGE>
Agreement which shall waive all such unfulfilled conditions, no waiver shall be
effective unless made in writing by the party having the benefit of the
condition, specific as to the conditions or matters so waived. No such waiver
shall be inferred or implied by any act or conduct of Buyer or Seller, or
reduce the rights or remedies of Buyer or Seller arising from any breach of any
undertaking, agreement, covenant, warranty or representation by the other party
under this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
COVENANTS AND INDEMNIFICATIONS
Section 4.1. Seller's Express Representations and Warranties. All
references in this Agreement to the "actual knowledge", "best of knowledge" or
"knowledge" of Seller shall refer to only the current (i.e., upon the date of
this Agreement) actual knowledge of the Designated Employees (as hereinafter
defined) of Seller or its affiliates and shall be based on the understanding
and agreement that the Designated Employees shall be under no duty to
undertake, and shall not be deemed to have undertaken, any investigations or
inquiries with respect to the matters in question. For purposes of this
Agreement, the term "Designated Employees" shall refer to Tim Beck, Elizabeth
J. Cole, Christopher P. Ryman and Tim Silva.
In addition to the representations and warranties contained
elsewhere in this Agreement, Seller hereby makes the following representations
and warranties to and for the benefit of Buyer, each of which representations
and warranties in this Agreement (i) is material and being relied upon by
Buyer, (ii) is made as an inducement to Buyer to enter into this Agreement and
consummate the transaction contemplated hereby, (iii) is true in all respects
as of the date of this Agreement, and (iv) shall survive the Closing for the
period set forth in Section 10.6 below:
(a) To the best of Seller's knowledge, the present use and
operation of the Property is in material compliance with all Laws and
Restrictions. To the best of Seller's knowledge, there is no litigation, action
or proceeding pending nor any present or contemplated plan or study by any
governmental authority or agency (other than the ongoing Northstar Drive
traffic monitoring study) (or employee of any such authority or agency) or any
private party or entity (or employee of any such party or entity) (other than
by the existing homeowner's association), which in any way challenges or
materially and adversely affects, or would challenge or materially and
adversely affect, the continuation of the present use or operation of the
Property, or the present use, size, alignment or location of any access to any
street or highway serving or adjacent to the Property. To the best of Seller's
knowledge, Seller has performed all conditions to any existing permits,
licenses or other approvals for the Property, including, without limitation,
the payment of all impact or other fees.
(b) Except as may be disclosed in or inferred by Seller's
Environmental Surveys (as such term is defined below in this Section), or as
otherwise set forth in this clause (b) of this Section 4.1 to the best of
Seller's knowledge, (i) there is not present, nor was there present at any time
during Seller's period of ownership, in or at the Property any Hazardous
Substances or any structures, fixtures, equipment or other objects or materials
containing Hazardous Substances, (ii) there is not present, nor was there
present at any time during Seller's period of ownership, upon, in, at or about
the Property, or the soil or groundwater thereof, any Hazardous Substances, and
(iii) no portion of the Property is presently, nor was it at any time during
Seller's period of ownership, used, operated or occupied for the generation,
<PAGE>
manufacture, treatment, storage, transportation, discharge or disposal (whether
intentional or accidental) of any Hazardous Substances, and (iv) Seller has
received no notice, report or advice that the Property is not currently in
compliance with Environmental Laws. Notwithstanding the foregoing provisions of
this clause (b), Seller makes no representation or warranty whatsoever
concerning any environmental conditions affecting Parcel P on Exhibit A or any
of the structures on the Property.
BUYER ACKNOWLEDGES RECEIPT OF COPIES OF THOSE CERTAIN ENVIRONMENTAL
SURVEY REPORTS DATED RESPECTIVELY (A) MARCH, 1993, CALLED PHASE I ENVIRONMENTAL
SITE ASSESSMENT BY SHB - AGRA, INC., (B) OCTOBER 6, 1993 PREPARED BY RAY C.
HAMPSON AND ASSOCIATES, AND (C) OCTOBER, 1996 PREPARED BY RAY C. HAMPSON &
ASSOCIATES (COLLECTIVELY THE "SELLER'S ENVIRONMENTAL SURVEYS".)
(c) There are no existing and, to the best of Seller's
knowledge, proposed or contemplated eminent domain proceedings which would
materially and adversely affect the Property in any way. There are no presently
pending and, to the best of Seller's knowledge, planned public improvements
which will result in any charge being levied or assessed against, or will
result in creation of any lien upon, the Property.
(d) Except as provided by the Conditions of Title (as
defined in Section 5.1 below) or as otherwise set forth in this Agreement, (i)
there are no written leases, work letter agreements, improvement agreements or
other written rental, use or occupancy agreements affecting the Property, and
(ii) at Closing no person shall have any right of possession, use or occupancy
of the Property or any part of it.
(e) Seller has delivered to Buyer true, accurate and
complete copies of all Contract Obligations, all of which, to the best of
Seller's knowledge, are in full force and effect. To the best of Seller's
knowledge, no default or breach by Seller exists under any such Contract
Obligations, nor, to the best of Seller's knowledge, has any event occurred
which, but for the giving of notice or passage of time, or both, would
constitute a default by the Seller thereunder.
(f) Except for the Contract Obligations, and the Conditions
of Title, Seller has not entered into or undertaken, and there do not exist,
any written or oral commitments, arrangements, agreements or obligations of any
kind (other than applicable laws and regulations) affecting the Property which
would be binding on Buyer after the Closing or that are not cancelable on not
more than thirty days' notice.
(g) There is no litigation, action or administrative
proceeding pending or, to the best of Seller's knowledge, threatened, which
does or will materially and adversely affect the Property or Seller's ability
to perform its obligations under this Agreement or any documents executed by
Seller pursuant to this Agreement.
(h) To the best of Seller's knowledge, neither this
Agreement nor anything required to be done under it, including, without
limitation, the transfer, assignment, sale and further encumbrance of the
Property contemplated by this Agreement, violates or shall violate any written
or oral contract, agreement or instrument to which Seller is a party or is
bound, or which affects the Property or any part of it.
<PAGE>
(i) To the best of Seller's knowledge, Seller has not
received any written notices of any new tax bills or assessments regarding
increases of Property taxes over those in effect as of the date of this
Agreement.
(j) Seller is not the subject of any voluntary or
involuntary proceedings in bankruptcy, reorganization or similar proceedings
under the Federal bankruptcy laws or under any state laws relating to the
protection of debtors, nor has Seller made any general assignment for the
benefit of creditors and, to the best of Seller's knowledge, no involuntary
proceedings in bankruptcy against Seller have been threatened.
(k) Seller is a corporation, duly organized, validly
existing and in good standing under the laws of the State of California, with
full corporate power and authority to own and operate the Property and perform
all of its obligations under this Agreement and any documents executed by
Seller pursuant hereto; Seller has the full right and authority to enter into
this Agreement and consummate the sale, transfer and assignment contemplated by
it. The person or persons signatory to this Agreement on behalf of Seller have
full power and authority to bind Seller; the execution and performance by
Seller of this Agreement and any documents executed by Seller pursuant hereto
shall not constitute or result in a violation or breach by Seller of any
judgment, order, writ, injunction or decree issued or imposed upon Seller, or
result in a violation of any Laws and Restrictions; and no approval, consent,
order, authorization, designation, or filing (other than recording), except of
a ministerial nature, by or with any judicial or governmental authority is
required in conjunction with Seller's execution of this Agreement and the
performance of its obligations hereunder.
(l) Seller is not a "foreign person" as defined in Internal
Revenue Code Section 1445 and any related regulations.
(m) To the best of Seller's knowledge, there is no union
contract affecting the Property or the employees of Seller, if any, thereon.
(n) To the best of Seller's knowledge, there are no
permits, licenses or consents required by any governmental authority in
connection with the current ownership, operation and occupancy of the Property
(other than those applicable to the Excess Property or to the operations at the
Village Core, as such term is defined in the Operating Agreement), other than
those which Seller has obtained and will, if transferable, transfer to Buyer on
the Closing Date, provided that such transfer will not have any affect upon the
balance of Seller's property not being conveyed to Purchaser.
(o) Seller has no knowledge of any unusual facts or
circumstances affecting the Property which would prevent the Development (as
defined below in Section 9.6) or the Development with reasonable modifications
from being substantially completed provided, however, that the foregoing shall
not be construed or interpreted in any manner as being a representation or
warranty that the Development or the Development with reasonable modifications
can be substantially completed on an "as of right" basis without the need for
obtaining any governmental approvals, variances, exceptions, consents, or
permits.
(p) To the best of Seller's knowledge, Seller is not in
default with respect to any of its obligations pertaining to the Property nor,
<PAGE>
to the best of Seller's knowledge, are there any facts or circumstances which,
but for notice or lapse of time, or both, would constitute or result in any
such default.
(q) To the best of Seller's knowledge, there are no written
commitments by Seller to, or written agreements between Seller and, any
federal, state or local governmental authority or agency affecting the Property
and which have not been disclosed to Buyer in writing.
(r) To the best of Seller's knowledge, the Property is not
located on or near any active earthquake fault lines.
(s) To the best of Seller's knowledge, the Property is not
located within any historic district.
(t) To the best of Seller's knowledge, none of the
representations or warranties of Seller in this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statement of facts contained therein not misleading.
Notwithstanding any other provision of this Agreement to the
contrary, none of Seller's representations or warranties are applicable to the
Excess Property or, except as provided in the next sentence, to Parcels A, B or
C. At the Closing of Parcels A, B and C, Seller shall deliver a certificate to
Buyer setting forth the above representations and warranties as they relate to
Parcels A, B and C, together with the relevant exceptions thereto or
modifications thereof (the "Exceptions to the Representations"). Until such
Closing, Seller agrees to notify Buyer of the Exceptions to the Representations
as same are applicable to the Development Portions (as such term is defined in
Section 10.19(k) hereof) of Parcels A, B and C if and when Seller becomes aware
of same.
Section 4.2. Express Covenants. In addition to the covenants
contained elsewhere in this Agreement, it is hereby covenanted and agreed as
follows:
(a) If, with Seller's permission and prior to Closing,
Buyer enters onto the Property, inspects or tests the Property, interviews
personnel, inspects documents relating thereto, or otherwise conducts any due
diligence, Buyer shall timely pay for all such inspections, tests and
interviews, discharge all liens which may arise therefrom, and repair or
restore any and all damage or injury to the Property resulting from such entry,
inspections, tests, or interviews. The provisions of this Section 4.2(a) shall
survive any termination of this agreement.
(b) Seller shall comply with all Laws and Restrictions
affecting the Property, which if not complied with would have a material and
adverse affect on the Property, from the date of this Agreement to the Closing
Date, provided, however, Seller shall not be required to spend more than
$500,000 in the aggregate in connection with such compliance and Seller shall
have no obligation whatever in connection with off-site mitigation, whether
such mitigation would affect Seller's property not the subject of this
agreement, or elsewhere ("Off-Site Mitigation") in connection with the
Development other than as set forth in the Operating Agreement.
(c) From the date of this Agreement to the Closing Date,
Seller will (i) manage, maintain, operate and service the Property consistent
with Seller's existing standards, (ii) keep the Property and every portion
thereof in its current condition consistent with its present management
standards subject to normal wear and tear, and damage by fire, other casualty,
so-called acts of God, or other events beyond Seller's reasonable control,
<PAGE>
(iii) timely perform all its obligations under all Contract Obligations
including, without limitation, the payment of all bills, charges, invoices,
salaries, benefits and other expenses arising in connection with the Property
which obligations, if not complied with, would have a material adverse effect
on the Property subsequent to Closing (iv) not modify, terminate, cancel,
extend or amend any existing Contract Obligations, other than in the ordinary
course of business or with Buyer's prior written approval (which approval shall
not be unreasonably withheld, conditioned, or delayed), nor enter into any new
contracts or arrangements, other than in the ordinary course of business, which
will affect the Property on or after the Closing Date, other than with the
prior written approval (which approval shall not be unreasonably withheld,
conditioned, or delayed) of Buyer, (v) not grant any new easements or rights of
way without Buyer's prior written approval (which approval shall not be
unreasonably withheld, conditioned, or delayed), and (vi) maintain in full
force and effect Seller's existing master property and public liability
insurance coverage as respects the Property or commercially reasonable
replacement insurance coverage.
Section 4.3. Breaches of Representations/Warranties and Covenants.
Within ten days after notification in writing prior to the Initial Closing by
Buyer to Seller of any breach by Seller of the representations, warranties and
covenants set forth in Sections 4.1 and 4.2 above or elsewhere in this
Agreement (or, if the cure or remedy thereof reasonably requires more than ten
days, within a reasonable time after such notification but in all events prior
to the Initial Closing, provided that steps to effect a cure or remedy have
been commenced within such ten day period and are pursued with all due
diligence), if Seller fails to cure or otherwise remedy the breach prior to the
Initial Closing, Buyer shall have the right either (i) to terminate this
Agreement (which, except as otherwise provided in Section 10.15 to the
contrary, in the absence of fraud on the part of Seller, shall be Buyer's sole
and exclusive remedy in the event of a breach prior to the Initial Closing of
any representation or warranty made by Seller under this Agreement) by so
notifying Seller and Escrow Agent and, upon receipt of such notice, Escrow
Agent shall immediately pay to Buyer the entire Deposit and the interest
thereon and, after receipt by Buyer of the Deposit and the interest thereon,
this Agreement shall terminate and be null and void and of no further force or
effect, except for those matters which by the terms of this Agreement are
expressly to survive termination of this Agreement; or (ii) in the case of (a)
a fraudulent representation made by Seller or (b) a breach by Seller of any
covenant made by Seller under this Agreement including, without limitation, a
breach of Seller's covenant to convey title to the Property to Buyer in
accordance with the provisions of this agreement, to sue Seller for specific
performance of Seller's obligations and covenants hereunder (Seller
acknowledging to Buyer that the Property is unique and therefore Buyer does not
possess an adequate remedy at law), and also for damages. Notwithstanding
anything contained in this Agreement to the contrary, (i) if the Initial
Closing occurs, neither party shall have any rights or remedies resulting from
or arising out of a breach by the other of any representation, warranty, or
covenant made by the other, to the extent such non-breaching party had actual
knowledge of any such breach prior to the Initial Closing, and (ii) no
representation, warranty, covenant, undertaking or agreement shall be deemed to
have been breached by Seller, and no representation or warranty of Seller shall
be deemed to be untrue, inaccurate or incomplete, unless all the breaches,
untruths, inaccuracies or incompletenesses on an aggregate basis would have a
material adverse effect on Buyer or the Property.
Section 4.4. Indemnification.
(a) Seller's Indemnity. Subject to the provisions of
Section 4.3 hereof, after the Closing, Seller agrees to indemnify, protect and
defend Buyer against and hold Buyer harmless from any and all claims, demands,
<PAGE>
liabilities, losses, damages, costs and expenses, including, without
limitation, all reasonable attorneys' fees, asserted against, incurred or
suffered by Buyer resulting from (i) any personal injury or property damage
occurring in, on or about the Property or relating thereto before the Closing
Date, from any cause whatsoever, except actions or inactions of Buyer, it's
agents, employees and contractors, or (ii) the untruth, inaccuracy or breach of
any of the representations or warranties made by Seller pursuant to Section 4.1
of this Agreement. In respect of subclause (i) of this Section 4.4(a), Seller's
obligations shall survive the Closing for a period of two years and in respect
of subclause (ii) of this Section 4.4(a), shall survive for the period, if any,
that the respective representation or warranty survives as set forth in Section
10.6 hereof.
(b) Buyer's Indemnity. Subject to the provisions of Section
4.3 hereof, Buyer agrees to indemnify, protect and defend Seller against and
hold Seller harmless from any and all claims, demands, liabilities, losses,
damages, costs and expenses, including, without limitation, all reasonable
attorneys' fees, asserted against, incurred or suffered by Seller resulting
from (i) any of the actions described in Section 4.2(a) above and/or the entry
or presence upon the Property by Buyer, or its agents, employees and
contractors, including, without limitation, any such entry or presence in
connection with the process of conducting Buyer's due diligence, (ii) any
personal injury or property damage occurring in, on or about the Property, or
relating thereto, on or after the Closing Date, from any cause whatsoever
except for injury or damage caused by the action or inaction of Seller, its
agents, employees and contractors, or (iii) the untruth, inaccuracy or breach
of any of the representations or warranties made by Buyer pursuant to this
Agreement. Buyer's obligations under this Section 4.4(b) shall survive the
Closing or a termination of this Agreement for a period of two years.
Section 4.5. Buyer's Representations. In addition to the
representations and warranties contained elsewhere in this Agreement, Buyer
hereby makes the following representations and warranties to and for the
benefit of Seller, each of which representations and warranties in this
Agreement (i) is material and being relied on by Seller, (ii) is made as an
inducement to Seller to enter into this Agreement and consummate the
transaction contemplated hereby, (iii) is true in all respects as of the date
of this Agreement, and (iv) shall survive the Initial Closing for a period of
one year:
(a) There is no litigation, action or administrative
proceeding pending or, to the best of Buyer's knowledge, threatened, which does
or will materially and adversely affect Buyer's ability to perform its
obligations under this Agreement or any documents executed by Buyer pursuant to
this Agreement.
(b) To the best of Buyer's knowledge, none of the
representations or warranties in this Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statement of facts contained therein not misleading.
(c) Buyer is not the subject of any voluntary or
involuntary proceedings in bankruptcy, reorganization or similar proceedings
under the Federal bankruptcy laws or under any state laws relating to the
protection of debtors, nor has Buyer made any general assignment for the
benefit of creditors and, to the best of Buyer's knowledge, no involuntary
proceedings in bankruptcy against Buyer have been threatened.
(d) Buyer is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Colorado, with
full corporate power and authority, and duly qualified to perform all of its
<PAGE>
obligations under this Agreement and any documents executed by Buyer pursuant
hereto; Buyer has the full right and authority to enter into this Agreement and
consummate the sale, transfer and assignment contemplated by it. The person or
persons signatory to this Agreement on behalf of Buyer have full power and
authority to bind Buyer; the execution and performance by Buyer of this
Agreement and any documents executed by Buyer pursuant hereto shall not
constitute or result in a violation or breach by Buyer of any judgment, order,
writ, injunction or decree issued or imposed upon Buyer, or result in a
violation of any Laws and Restrictions; and no approval, consent, order,
authorization, designation, or filing (other than recording), except of a
ministerial nature, by or with any judicial or governmental authority is
required in conjunction with Buyer's execution of this Agreement and the
performance of its obligations hereunder.
ARTICLE V
TITLE, ESCROW AND CLOSING
Section 5.1. Conditions of Title. Seller shall convey title to the
Property in accordance with this Agreement to Buyer upon the Closing Date by
good and sufficient Grant Deed in the form attached hereto as Exhibit L (the
"Deed"), subject to no exceptions other than the following (the "Conditions of
Title"):
(a) The lien for local real estate taxes and assessments
not yet due or payable;
(b) Those items set forth in Schedule B - Section 2 of the
Title Report; and
(c) Liens (other than deeds of trust and mortgages),
provided the Title Company insures Buyer against the collection of same from
the Property.
Section 5.2. Title Insurance. Buyer's obligation to purchase the
Property shall be subject to the irrevocable commitment of the Title Company to
issue, upon payment of its normal premium on the close of escrow of the
transaction contemplated by this Agreement, its CLTA Owner's Policy of Title
Insurance with extended coverage (Form B, Rev. 10/17/70), together with a
non-imputation endorsement, insuring Buyer in the full amount of the Purchase
Price that fee simple title to the Land and Improvements is vested in Buyer
subject only to the Conditions of Title, in the current CLTA form.
Section 5.3. Closing Date. Buyer and Seller shall cause the Closing
to occur at the offices of Sherman & Howard, 633 Seventeenth Street, Suite
3000, Denver, Colorado, commencing at 10:00 a.m. on the Closing Date. The
Closing Date for the Initial Closing shall be on February 29, 2000, provided,
however, (i) the parties shall, in good faith, attempt to execute all documents
at a pre-closing on the day prior to the Closing Date, and (ii) Buyer shall
have the right to postpone the Closing Date to any business day on or before
March 31, 2000 by (a) so notifying Seller and (b) adding an additional $500,000
to the Deposit (the "Additional Down Payment") by paying said sum to the Title
Company by immediately available federal wire transfer of funds or by good
unendorsed certified check of Buyer, in both cases no later than February 29,
2000. If Buyer pays the Additional Down Payment, then the term "Deposit" shall
thereafter mean the sum of $1,000,000. In addition to any rights to postpone
the Closing Date which Seller may have pursuant to any other provision of this
Agreement, Seller shall have the right to postpone the Closing Date to any
<PAGE>
business day which is not more than thirty (30) days following the date Buyer
is obligated to close pursuant to this Agreement.
Section 5.4. Deposits and Deliveries by Seller. Seller shall deliver
or cause to be delivered on the Closing Date, the following documents:
(a) A duly executed and acknowledged Deed.
(b) A duly executed and acknowledged Operating Agreement.
(c) A duly executed and acknowledged Obligations Assumption
Agreement.
(d) A duly executed and acknowledged Exclusive Agreement.
(e) [intentionally omitted prior to execution]
(f) [intentionally omitted prior to execution]
(g) [intentionally omitted prior to execution]
(h) [intentionally omitted prior to execution]
(i) A duly executed and acknowledged Non-Residential
Property Agreement.
(j) A duly executed and acknowledged Affidavit of
Non-Foreign Status (the "Non-Foreign Affidavit") and Real Estate Reporting
Transferor Identification form.
(k) Evidence acceptable to the Title Company and reasonably
acceptable to Buyer's counsel that the documents delivered to Buyer by Seller
at closing have been duly authorized and duly executed by Seller.
(l) A Closing Statement (hereinafter referred to as the
"Closing Statement") evidencing all prorations between Seller and Buyer and
expenses of the transaction contemplated herein which are disbursed on the
Closing Date.
(m) Such affidavits and other documents as reasonably may
be required by the Title Company so as to enable the Title Company to furnish
Buyer with the owner's title insurance policy, containing as exceptions only
the Conditions of Title.
Section 5.5. Deposits and Deliveries by Buyer. Buyer shall deliver
or cause to be delivered on the Closing Date, each of the following documents
and funds:
(a) Federal wire transfer of immediately available funds to
an account designated by Seller, in the amount of the cash portion of Purchase
Price less (a) the amount of the Deposit, and (b) Buyer's one-half share of the
interest on the Deposit as set forth in Section 2.2(a) (the "Purchase Funds").
<PAGE>
(b) Evidence reasonably acceptable to Seller's counsel that
the documents delivered to Seller by Buyer at closing have been duly authorized
and executed by Buyer.
(c) A duly executed counterpart of the Closing Statement.
(d) A duly executed Buyer's Affidavit and Agreement.
(e) Evidence of the due formation of Buyer and
qualification of Buyer to do business in California.
(f) A duly executed and acknowledged Contract Assignment.
(g) A duly executed and acknowledged Obligations Assumption
Agreement.
(h) A duly executed and acknowledged Operating Agreement.
(i) A duly executed and acknowledged Exclusive Agreement.
(j) [intentionally deleted prior to execution]
(k) [intentionally deleted prior to execution]
(l) [intentionally deleted prior to execution]
(m) [intentionally deleted prior to execution]
(n) A duly executed and acknowledged Non-Residential
Property Agreement.
(o) Except as otherwise set forth in Section 10.19 hereof,
a duly executed and acknowledged $5,000,000 promissory note (the "$5M Note")
and the deed of trust securing the $5M Note (the "Deed of Trust"), which $5M
Note and Deed of Trust shall be in the forms attached hereto and made a part
hereof respectively as Exhibits M and N.
(p) A duly executed and acknowledged deed of trust securing
the obligations specified on Exhibit P hereof (the "Second Deed of Trust"), and
which Second Deed of Trust shall be in the form attached hereto and made a part
hereof as Exhibit P.
Section 5.6. Closing. The transaction contemplated herein shall be
closed when the Title Company is irrevocably committed to issue the title
insurance described in Section 5.2 above. The transaction contemplated herein
shall be closed with the assistance of the Title Company, and the Title Company
shall:
(a) Record the Deed;
(b) Record the Deed of Trust;
(c) Record the Second Deed of Trust;
<PAGE>
(d) Issue to Buyer the owner's policy of title insurance
described in Section 5.2 above; and
(e) Deliver to Seller the Purchase Funds, the Deposit and
the interest on the Deposit.
Section 5.7. Prorations.
(a) Rents and other income, if any, current taxes, service,
management, operating and maintenance expenses shall be prorated between Seller
and Buyer as of the Closing Date. Installments of taxes and assessments levied,
due and payable on or before the Closing Date shall be paid in full by Seller.
Seller shall be entitled to receive and retain all income with respect to the
Property and shall be obligated to pay all expenses with respect to the
Property for all time periods through and including the date prior to the
Closing Date. Buyer shall be entitled to receive and retain all such income and
shall be obligated to pay all such expenses for all time periods commencing on
or after the Closing Date. In the event that the 1999 and 2000 real property
taxes and district assessments are not available as of the Closing Date, the
proration shall be based upon the latest available information, and Seller and
Buyer shall effect a reconciliation between them within sixty days after the
actual amount of 1999 and 2000 taxes is available. Rent shall be prorated based
on the actual number of days in the month during which the Closing occurs.
Income and expenses (other than property taxes and assessments) shall be
prorated on the basis of the cash method of accounting. All rents and other
sums received by Buyer on or after the Closing Date shall be applied first to
rent and other obligations owing for the month during which the Closing Date
occurs, and thereafter to rent and other obligations then owing for months
after the month during which the Closing Date occurs, and thereafter to rent
and other obligations owing for months prior to the month during which the
Closing Date occurs, then to Buyer's costs of collection, if any, including
attorneys' fees, provided that Buyer shall have no obligation to collect
delinquent rents for Seller's account. There shall be no proration between
Seller and Buyer with respect to insurance premiums, as Buyer will obtain its
own insurance with respect to the Property.
(b) All items subject to proration pertaining to the period
prior to the Closing Date shall be credited or charged to Seller, and all such
prorations pertaining to the period on or following the Closing Date shall be
credited or charged to Buyer. For purposes of this paragraph, installment
payments of assessments (other than the normal regularly recurring real
property taxes affecting the Property) payable following the Closing shall be
deemed to pertain to periods following the Closing Date notwithstanding the
fact that the assessment was imposed, or first became a lien, prior to Closing.
Seller and Buyer shall cooperate to produce as complete and accurate as
reasonably possible prior to the Closing Date a schedule of prorations to be
made as of the Closing Date. All prorations which can be liquidated accurately
or reasonably estimated as of the Closing Date shall be made on the Closing
Date by Federal wire transfer to the Title Company for disbursement by the
Title Company in accordance with the Closing Statement. All other prorations,
and adjustments to initial estimated prorations, shall be made by Buyer and
Seller with due diligence and cooperation within 60 days following the Closing
Date, or such later time as may be required to obtain necessary information for
proration, by cash payment to the party yielding a net credit from such
prorations from the other party. Such cash payment shall be made within ten
business days of demand for payment by the party entitled to receive such
payment and, if not timely paid, such amount due shall bear interest from the
date due until the date of actual payment at an interest rate of ten percent
(10%) per annum.
<PAGE>
(c) Seller shall pay in full all invoices, bills and other
obligations for the management, operation, servicing and maintenance of the
Property pertaining to the period prior to the Closing Date, including all
water, gas, electricity, sewer and other utility charges or rental agreements
with respect to the Property entered into on or before the Closing Date,
whether the invoices, bills or other evidence of such obligations are received
prior to, on or following the Closing Date.
(d) At the Initial Closing, Newco shall reimburse Seller
and East West Partners, Inc. respectively for the expenses incurred by each of
them prior to the Closing as set forth on Exhibit R.
(e) The provisions of this Section 5.7 shall survive the
Closing.
Section 5.8. Closing Costs. Except as the following may relate to
any financing Buyer employs in connection with this transaction or as otherwise
provided on Exhibit R, Seller shall pay any excise taxes imposed by any
governmental authority on this transaction, the cost of all transfer, sales and
conveyance taxes on this transaction, recording fees, one-half of any escrow
fees charged by the Title Company, Seller's legal fees and title insurance
premiums. Subject to Section 10.12 below, in addition Seller shall be solely
responsible for the cost (including payment of prepayment fees or other
charges) to pay off in full, and have canceled and discharged of record, all
liens, encumbrances and other instruments of record other than the approved
Conditions of Title. Buyer shall pay one-half of any escrow fees charged by the
Title Company, and Buyer's legal fees and costs incurred in connection with the
contemplated transaction. All other costs of this transaction, if any, shall be
borne by the parties in accordance with the terms of this Agreement.
Section 5.9. Possession. Upon the Closing, the right to possession
of the portion of the Property being conveyed to Buyer shall transfer to Buyer
and Seller shall transfer and deliver to Buyer the originals of all instruments
and documents evidencing or relating to the Contract Obligations as same relate
to the portion of the Property being conveyed to Buyer, to the extent the same
are within the possession or control of Seller, which have not yet been
delivered to Buyer. On the Closing Date, Seller shall notify in writing all
parties with whom Seller has entered into oral or written contracts or
arrangements pertaining to the Property as same relate to the portion of the
Property being conveyed to Buyer, including, without limitation, all utility
companies, of the transfer of the Property from Seller on the Closing Date and
directing that sums due from such parties be made to Buyer, or Buyer's order,
from and after the Closing Date. All such sums, to the extent they pertain to
periods prior to Closing, shall be credited to Seller as a proration under
Section 5.7 above. All deposits, if any, made by Seller with any utility
company shall be transferred for the benefit of Buyer and credited to Seller as
a proration under Section 5.7.
Section 5.10. Filing of Reports. The Title Company shall be solely
responsible for the timely filing of any reports or returns required pursuant
to the provisions of Section 6045(e) of the Internal Revenue Code of 1986 (and
any similar reports or returns required under any state or local laws) in
connection with the closing of the transaction contemplated in this Agreement.
<PAGE>
ARTICLE VI
LIQUIDATED DAMAGES/ SPECIFIC PERFORMANCE
Section 6.1. Liquidated Damages. In the event that Buyer shall
default in the performance of its obligations under this Agreement on or before
the Initial Closing, then the entire Deposit (notwithstanding the fact that
only a portion of the Property may have been required to be conveyed at the
Initial Closing), together with all interest thereon, shall be paid by Title
Company to Seller as liquidated damages and not as a penalty (except that,
notwithstanding the foregoing limitation, Seller shall also be entitled to
receive in addition to the entire Deposit and interest thereon (i) any sums due
Seller pursuant to Section 4.4(b) above and (ii) the benefit of Buyer's
covenants under Section 10.15 below, Buyer's obligations set forth in these
clauses (i) and (ii), hereafter collectively referred to as the "Survival
Obligations"), . BUYER AND SELLER HEREBY ACKNOWLEDGE AND AGREE THAT SELLER'S
DAMAGES WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE OR ESTIMATE, AND THE
AMOUNT OF THE ENTIRE DEPOSIT AND INTEREST THEREON, TOGETHER WITH THE SURVIVAL
OBLIGATIONS, IS THE PARTIES BEST AND MOST ACCURATE PRE-ESTIMATE OF THE DAMAGES
SELLER WOULD SUFFER IN THE EVENT THE TRANSACTION PROVIDED FOR IN THIS AGREEMENT
FAILS TO CLOSE UNDER THE FOREGOING CONDITIONS, AND IS REASONABLE UNDER THE
CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS AGREEMENT. BUYER AND SELLER AGREE
THAT THE SELLER'S RIGHT TO RECEIVE THE ENTIRE DEPOSIT AND INTEREST THEREON AS
LIQUIDATED DAMAGES TOGETHER WITH THE SURVIVAL OBLIGATIONS SHALL BE THE SOLE AND
EXCLUSIVE REMEDY OF SELLER IN THE EVENT OF A BREACH OF THIS AGREEMENT BY BUYER.
- ------------------------- -------------------------
Seller's Initials Buyer's Initials
Section 6.2. Multiple Closings. In the event of Multiple Closings,
the provisions of Exhibit T shall govern defaults by Buyer under this Agreement
occurring subsequent to the Initial Closing.
ARTICLE VII
DAMAGE AND DESTRUCTION, CONDEMNATION
Section 7.1. Damage and Destruction. If prior to the Initial Closing
the Property is damaged by any casualty prior to Closing, Seller shall
immediately notify Buyer in writing upon learning of the same (the "Casualty
Notice") and if:
(a) Ten percent (10%) or less in value or in acreage of the
Land is destroyed or materially damaged, then Seller and Buyer shall proceed
with the Initial Closing as provided for in this Agreement without repair of
the casualty damage, and without any reduction in or credit against the
Purchase Price; or
(b) Greater than ten percent (10%) in value or in acreage
of the Land is destroyed or materially damaged, then Buyer must elect not later
than thirty (30) calendar days after receipt of the Casualty Notice to either
<PAGE>
(i) terminate this Agreement by giving notice to such effect to Seller (in
which event the Deposit shall be returned to Buyer and neither Seller nor Buyer
shall have any further obligations or liabilities one to the other hereunder
except as otherwise provided hereunder) or (ii) proceed with the Initial
Closing as set forth herein without repair of the casualty damage and without
any reduction in or credit against the Purchase Price, receive an assignment of
Seller's rights in any insurance proceeds which remain unpaid to Seller in
connection with such casualty, and receive a credit against the Purchase Price
in the amount of any amounts previously paid to Seller as insurance proceeds in
connection with such casualty less the cost of collecting the same.
Section 7.2. Condemnation. Seller shall notify Buyer immediately
upon learning of the occurrence of the institution or maintenance of any
condemnation or similar proceeding with respect to the Property (the
"Condemnation Notice"). In the event any such condemnation or other proceedings
are instituted or maintained and is prior to the Initial Closing, and the same
would materially impair the Development, Buyer at its option may either (i)
terminate this Agreement within fifteen days after receiving the Condemnation
Notice, in which event the Deposit shall be promptly returned to Buyer and
neither Seller nor Buyer shall have any further obligations or liabilities one
to the other hereunder except as otherwise provided hereunder; or (ii)
consummate the transaction contemplated herein without any reduction in or
credit against the Purchase Price in which event Buyer shall receive from
Seller at Closing all condemnation proceeds previously paid to Seller (less the
cost of collecting the same) and an assignment of any such proceeds payable in
respect to such condemnation or other proceedings subsequent to the Closing
(less the cost previously incurred by Seller in collecting the same).
ARTICLE VIII
COMMISSIONS
Section 8.1. Brokerage Commission and Finder's Fee.
(a) Each party to this Agreement represents and warrants to
the other that no person or entity can properly claim a real estate commission,
real estate finder's fee, real estate acquisition fee or other real estate
brokerage-type compensation (collectively, "Real Estate Compensation") based
upon the acts of that party with respect to the transaction contemplated by
this Agreement. Seller agrees to indemnify, defend and hold Buyer harmless from
any loss, cost or expense (including but not limited to attorneys' fees)
resulting from any claim whatsoever for Real Estate Compensation, whether or
not the transaction contemplated herein is closed and consummated, resulting
solely from the actions of Seller. Seller and Buyer each hereby agrees to
indemnify, defend and hold the other harmless from any loss, cost or expense
(including but not limited to attorneys' fees) resulting from any breach by the
indemnifying party of its representation and warranty in this Section 8.1(a).
(b) Seller acknowledges that East West Partners, Inc., but
not Newco, may pay its general partner(s), investment manager and/or affiliates
compensation in connection with this transaction at East West Partners, Inc.'s
sole cost and expense.
(c) The provisions of this Section 8.1 shall survive the
Closing and the termination of this Agreement.
<PAGE>
ARTICLE IX
PARKING, CAPITAL IMPROVEMENTS, GOLF COURSE AND PROPERTY/RENTAL
MANAGEMENT, RIGHT OF FIRST OFFER ON RESORT
Section 9.1. Ski Resort Parking. Seller and Buyer agree to work
together to preserve the amount of existing skier parking. If such parking is
eliminated by the Development pursuant to the Master Development Plan,
replacement parking will be built on land owned by Seller or on a portion of
the Excess Property. Seller agrees to bear the cost of constructing the first
250 replacement parking spaces or Seller may elect not to replace such 250
spaces. Buyer shall pay for the cost of constructing all replacement parking in
excess of the first 250 spaces that will be eliminated (the "Excess 250
Spaces"). Buyer shall not have the right to eliminate the Excess 250 Spaces
until all such spaces have been replaced. The location of the land for the
Excess 250 Spaces, the configuration of the parking, the timing of the
construction and whether the location of such parking spaces will be on land
owned by Seller (in which event such land will be supplied by Seller to Buyer
at no cost to Buyer) or by Newco, will all be subject to the reasonable
approval of Seller. Buyer agrees that Seller shall have the right to disapprove
the location of the Excess 250 Spaces, if such spaces are not in close
proximity to the spaces being replaced. The provisions of this Section 9.1
shall survive the Closing.
Section 9.2. Capital Improvements. Provided Newco timely complies
with all of the provisions of the $5M Note and the Deed of Trust, Seller agrees
to make the following capital improvements during the summer of 2000 at a
budgeted cost of approximately $5,000,000:
(a) Completion of trails and Lookout Lift;
(b) New equipment rental facilities;
(c) Expansion of snow making capabilities; and
(d) Real estate trail.
Section 9.3. Intentionally Deleted.
Section 9.4. Intentionally Deleted.
Section 9.5. Intentionally Deleted.
Section 9.6. Project Land. In order to defer the time consuming
process of legally subdividing portions of the Property and to expedite
obtaining governmental approval of the Development, Buyer and Seller hereby
acknowledge and agree that the Property to be conveyed at Closing may consist
of more real property (the "Excess Property") than is (i) ultimately desired by
them to be conveyed or (ii) reflected in the Purchase Price. The Excess
Property is identified in Exhibit Q hereof and shall be reconveyed by Buyer to
Seller as soon as practical following the Closing, free and clear of all liens,
deeds of trust, judgments and encumbrances of any nature other than the
Conditions of Title. Buyer agrees to use best efforts at Buyer's sole cost and
expense to subdivide the portions of the Property conveyed to Buyer in order to
convey the Excess Property back to Seller. Buyer agrees that Excess Property
may exist within the real property contained within the Black Outline.
<PAGE>
ARTICLE X
GENERAL PROVISIONS
Section 10.1. Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and (i) personally delivered, (ii)
sent by United States mail, registered or certified mail, postage prepaid,
return receipt requested, (iii) sent by Federal Express or similar nationally
recognized overnight courier service, or (iv) transmitted by facsimile and in
all cases addressed as follows, and such notice shall be deemed to have been
given upon the date of actual receipt or delivery (or refusal to accept
delivery) at the address specified below (or such other addresses as may be
specified by notice in the foregoing manner) as indicated on the return receipt
or air bill or, in the case of facsimile transmission upon confirmation of
transmission as indicated by the sender's facsimile machine:
To Seller: Booth Creek Ski Holdings, Inc.
1000 S. Frontage Road West
Suite 100
Vail, Colorado 81657
Attention: Christopher P. Ryman
and
Elizabeth J. Cole
Telephone: (970) 476-3190
Facsimile: (970) 479-0291
with copies to: Michael D. Beck, Esq.
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
Telephone: (212) 407-4920
Facsimile: (212) 407-4990
and
Thomas E. Rohlf, Esq.
Loeb & Loeb LLP
1000 Wilshire Blvd.
Suite 1800
Los Angeles, California 90017
Telephone: (213) 688-3696
Facsimile: (213) 688-3460
To Buyer: East West Partners, Inc.
100 East Thomas Place
P.O. Drawer 2770
Avon, Colorado 81620
Attention: Harry H. Frampton III
<PAGE>
and
Blake L. Riva
Telephone: (970) 845-9200
Facsimile: (970) 845-7205
with copies to: James R. Wear, Esq.
Wear Travers & Davis PC
1000 S. Frontage Rd. W.
Suite 200
Vail, Colorado 81657
Telephone: (970) 476-7646
Facsimile: (970) 476-7118
and
James L. Cunningham, Esq.
and
James F. Wood, Esq.
Sherman & Howard L.L.C.
633 Seventeenth Street
Suite 3000
Denver, Colorado 80202
Telephone: (303) 299-8356 (Cunningham)
(303) 299-8154 (Wood)
Facsimile: (303) 298-0940
To the Title First American Title Insurance Company
Company: 228 East 45th Street
New York, New York 10017-3303
Attn: Christopher Burdick, Esq.
Telephone: (212) 850-0627
Facsimile: (212) 331-1514
Section 10.2. Agreement, No Modifications. This Agreement, together
with the exhibits attached to this Agreement, incorporates all agreements,
warranties, representations and understandings between the parties to the
Agreement with respect to the subject matter hereof and constitutes the entire
agreement of Seller and Buyer with respect to the purchase and sale of the
Property. Any prior or contemporaneous correspondence, memoranda,
understandings, offers, negotiations and agreements, oral or written, are
merged herein and replaced in total by this Agreement and the exhibits hereto
and shall be of no further force or effect. This Agreement may not be modified
or amended except in a writing signed by Seller and Buyer.
Section 10.3. Time. Time is of the essence in the performance of the
parties' respective obligations set forth in this Agreement.
<PAGE>
Section 10.4. Attorneys' Fees. In the event of any action or
proceeding at law or in equity between Buyer and Seller (including an action or
proceeding between Buyer and the trustee or debtor in possession while Seller
is a debtor or between Seller and the trustee or debtor in possession while
Buyer is a debtor, in a proceeding under the Bankruptcy Code (Title 11 of the
United States Code) or any successor statute to such Code) to enforce or
interpret any provision of this Agreement or to protect or establish any right
or remedy of either Buyer or Seller hereunder, the unsuccessful party to such
action or proceeding shall pay to the prevailing party all costs and expenses,
including, without limitation, reasonable attorneys' and paralegals' fees and
expenses, incurred in such action or proceeding and in any appeal in connection
therewith by such prevailing party, whether or not such action, proceeding or
appeal is prosecuted to judgment or other final determination, together with
all costs of enforcement and/or collection of any judgment or other relief. The
term "prevailing party" shall include, without limitation, a party who obtains
legal counsel or brings an action against the other by reason of the other's
breach or default and obtains substantially the relief sought, whether by
compromise, settlement or judgment. If such prevailing party shall recover
judgment in any such action, proceeding or appeal, such costs, expenses and
attorneys' and paralegals' fees shall be included in and as part of such
judgment.
Section 10.5. Relationship. It is not intended by this Agreement to,
and nothing contained in this Agreement shall, create any partnership, joint
venture, financing arrangement or other agreement between Buyer and Seller.
Notwithstanding the foregoing, it is contemplated that EWRD V and Newco will be
formed prior to Closing and additional entities may be formed subsequent to
Closing, but unless and until EWRD V, Newco, or such additional entities are
formed, no partnership or joint venture shall be created by virtue of this
Agreement. No term or provision of this Agreement is intended to be, or shall
be, for the benefit of any person, firm, organization or corporation not a
party hereto, and no such other person, firm, organization or corporation shall
have any right or cause of action hereunder.
Section 10.6. No Merger. The obligations, covenants, representations
and warranties, and the remedies for breach of them, set forth in this
Agreement shall not merge with transfer of title but shall remain in effect for
a period of time either specifically as provided in this Agreement, or as
follows:
(a) The provisions of Sections 4.1(a), (c), (f), (g), (h),
(j), (k), (l), and (t) shall survive the Initial Closing for a period of one
year, except that the provisions of Section 4.1(t) that are applicable to the
provisions of Sections 4.1(i), (o), (r) and (s) shall not survive the Initial
Closing.
(b) The provisions of Sections 4.1 (e) and (m) shall
survive the Initial Closing for a period of two years.
(c) The provisions of Sections 4.1(i), (o), (r) and (s),
shall not survive the Initial Closing.
(d) The provisions of Sections 4.1(b), (d), (n), (p) and
(q) shall survive the Initial Closing for the earlier of (a) a three year
period or (b) as such provisions relate to any particular development parcel,
for a period of three months following the commencement of actual construction
on such parcel.
<PAGE>
Section 10.7. Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the parties to this Agreement and their
respective successors and permitted assigns. Buyer shall have no right to
assign its interest under this Agreement except only to Newco and shall, in
accordance with the provisions of this Agreement immediately prior to Closing,
assign its interest under this Agreement to Newco.
Section 10.8. Further Assurances. Whenever and so often as requested
by Buyer or Seller, the other party promptly will execute and deliver or cause
to be executed and delivered all such other and further instruments, documents
or assurances, and promptly do or cause to be done all such other things, as
may be necessary and reasonably required to vest more fully in the requesting
party all rights, interests, powers, benefits, privileges and advantages
conferred or intended to be conferred upon it by this Agreement.
Section 10.9. Counterparts. This Agreement may be executed in one or
more counterparts, and each such counterpart shall be deemed to be an original;
all counterparts so executed shall constitute one instrument and shall be
binding on all of the parties to this Agreement notwithstanding that all of the
parties are not signatory to the same counterpart.
Section 10.10. Construction. This Agreement shall be governed by and
construed under the laws of the State of California. The parties acknowledge
that each party and its counsel have reviewed and revised this Agreement, and
that no rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall be employed in the interpretation of
this Agreement, any amendments or exhibits to it, or any document executed and
delivered by either party in connection with this Agreement. All captions in
this Agreement are for reference only and shall not be used in the
interpretation of this Agreement or any related document. If any provision of
this Agreement shall be determined to be illegal or unenforceable, such
determination shall not affect any other provision of this Agreement and all
such other provisions shall remain in full force and effect.
Section 10.11. Termination. If Buyer does not deposit the Deposit
with the Title Company, on or before the No Return Date, then this Agreement
shall terminate, and neither Buyer nor Seller shall have any further
obligations or liabilities to one another except as otherwise provided
hereunder.
Section 10.12. Seller's Inability. Except as otherwise provided in
Section 10.19, if at the Initial Closing, as the Initial Closing may be
extended pursuant to the provisions of this Agreement, Seller is unable to
convey title to the Property in accordance with the terms of this Agreement,
either (i) as a consequence that all of the Property does not consist of
Conveyable Tracts, (ii) as the result of any other inability to convey, (iii)
in accordance with any representations or warranties made by Seller hereunder
or (iv) because Seller did not obtain the Consent, the sole responsibility of
Seller will be to instruct the Title Company to pay the Deposit and the
interest thereon to Buyer and, upon the giving of such instructions, this
Agreement shall be terminated and neither Buyer nor Seller shall have any
further claim against the other by reason of this Agreement, except as
otherwise provided in this Agreement. In respect to both the Initial Closing
and all subsequent Closings, except as otherwise expressly provided in this
Agreement Seller may, but shall not be required to, take any measures of any
kind, bring any action or proceeding, or incur any expense, in order to correct
any misrepresentations or breach of any warranty or remove any objection to
title that Buyer has not agreed hereunder to accept. Buyer, nevertheless, may
accept such title as Seller may be able to convey, without reduction of the
<PAGE>
Purchase Price or any credit or allowance against the same and without any
other liability on the part of Seller, and provided that Buyer irrevocably
waives in writing any right or claim against Seller in connection therewith. If
Buyer does not agree to accept such title, the Parcel or Parcels so affected
shall no longer be the subject of this Agreement and Buyer shall have no rights
with respect thereto. The acceptance of the Deed by Buyer shall be deemed to be
a full performance and discharge of every agreement and obligation on the part
of Seller to be performed pursuant to the provisions of this Agreement, except
those, if any, that herein specifically are stated to survive the Closing.
Unless so specifically stated, no agreement, covenant, warranty or
representation made herein shall survive the Closing. If the Property is
affected by any lien, encumbrance or question of title not expressly consented
to herein by Buyer or which the Buyer is not required to take title subject to,
Seller shall, subject to the following provisions of this Section 10.12, have
the privilege to remove or satisfy the same or cause the Title Company to
insure Buyer against the collection of same from the Property and shall be
entitled to an adjournment of the Closing Date for a period or periods not
exceeding ninety (90) days (in the aggregate) in connection therewith. If as of
the Closing Date the aggregate of all monetary liens of record (exclusive of
deeds of trust/mortgages) is less than $2,000,000, then Seller shall satisfy
such liens or cause the Title Company to insure Buyer against the collection of
same from the Property within the ninety (90) day extension period set forth in
the previous sentence. If as of the Closing Date the aggregate of all monetary
liens of record (exclusive of deeds of trust/mortgages) equals or exceeds
$2,000,000 and Seller does not elect to use its privilege of removing or
satisfying same or causing the Title Company to insure Buyer against the
collection of same from the Property, Buyer may either (i) take a credit, as
its sole and exclusive remedy, equal to the lesser of (a) $2,000,000, and (b)
the amount of the liens not removed or satisfied or so insured against, towards
the Purchase Price and close on the Closing Date or (ii) terminate this
Agreement. In the event of Multiple Closings, the $2,000,000 figure set forth
above shall be prorated, so that the figure applicable to the conveyance of any
particular portion of the Property shall be the sum of $2,000,000 multiplied by
a fraction, the numerator of which is the number of Units that can be developed
pursuant to the Master Development Plan on the portion of the Property to be
conveyed and the denominator of which is 2,300.
Section 10.13. Additional Re: Due Diligence. Buyer agrees that
Buyer's failure to commence or complete any investigations, inspections or due
diligence with respect to the Property or the transactions contemplated
hereunder, for any reason whatsoever including, without limitation, by reason
of Seller's default or Seller's unwillingness to cooperate with Buyer and/or
provide any access, information, or documents Buyer may desire or request,
shall not constitute a default by Seller hereunder or extend or otherwise
affect the No Return Date in any way.
Section 10.14. Confidentiality. In connection with Buyer's analysis
of the transactions contemplated hereunder (collectively, the "Transaction"),
Buyer has requested from Seller certain information which is confidential,
proprietary or otherwise not generally available to the public. As a condition
to Seller disclosing such information, Buyer agrees, as set forth below, to
treat confidentially such information and any information heretofore furnished
and any other information which Seller or any of its respective Representatives
(defined below) may furnish to Buyer and irrespective of its form, whether oral
or written, and any and all summaries, projections, compilations, studies,
abstracts, analyses or other documents prepared by or on behalf of Buyer which
contain or are in any way prepared from or based upon, in whole or in part, any
such information furnished by Seller (collectively, the "Evaluation Material").
The term "Evaluation Material" does not include information which
(i) is or becomes generally available to the public other than as a result of a
<PAGE>
disclosure by Buyer or its Representatives in violation of this Agreement or
(ii) becomes available to Buyer from a source other than Seller or its
Representatives.
Unless the context hereof clearly requires the contrary, as used in
this Section 10.14, the terms Seller and Buyer or any other reference in this
Section 10.14 to either of them shall include the respective affiliated
companies and other affiliated entities of Seller or Buyer, as the case may be,
and the respective directors, officers, employees, partners, affiliates (which,
in the case of Buyer, shall include Crescent Development Management
Corporation), lenders and prospective lenders, agents, representatives,
accountants, attorneys, or other advisors of each (sometimes collectively
referred to herein as "Representatives").
Buyer agrees that it will not use the Evaluation Material to compete
with Seller and that the Evaluation Material furnished to it will be kept
confidential by and used solely for the purpose of evaluating the Transaction;
provided, however, that the Evaluation Material may be disclosed to any
Representative who needs to know such information for the purpose of evaluating
the Transaction so long as such Representative is notified of the confidential
nature of such information and is required to treat such information
confidentially. In any event, Buyer will be responsible for any use of the
Evaluation Material by it or by any of its Representatives in breach of this
Agreement.
Buyer agrees that it will not make copies of the Evaluation Material
except as necessary for the purpose of evaluating the Transaction, and that
within five days after the request of Seller, Buyer will promptly redeliver to
Seller all copies of the Evaluation Material in the possession of Buyer or its
Representatives and that Buyer will destroy all memoranda, notes and other
writings constituting Evaluation Material (other than this Agreement) prepared
by such party or any of its Representatives.
Buyer agrees that, except as permitted by the fourth and eighth
paragraphs of this Section 10.14, it will not, and it will direct its
Representatives not to, make any disclosure that Buyer is having or has had
discussions with, or has received Evaluation Material from Seller concerning
the Transaction.
Buyer and Seller agree that money damages would not be an adequate
remedy for any breach by them of this Section 10.14 and that in addition to all
other remedies, including money damages, to which the aggrieved party may be
entitled, the aggrieved party shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach, and each
party agrees to waive, and to use best efforts to cause its Representatives to
waive, any requirement for the securing or posting of any bond in connection
with such remedy. This paragraph is intended to supercede, and shall supercede,
the liquidated damages provisions appearing elsewhere in this Agreement.
In the event that Buyer or its Representatives are requested or
required (by oral questions, interrogatories, requests for information,
documents subpoena, civil investigative demand or similar process) to disclose
any Evaluation Material or the fact that the Evaluation Material has been made
available, it is agreed that, if permitted by law, Buyer and its
Representatives will provide Seller with prompt written notice of each such
request or requirement, so that Seller may seek an appropriate protective order
or other appropriate remedy and/or waive compliance with the provisions of this
<PAGE>
Agreement. It is further agreed that if, in the absence of a protective order
or other appropriate remedy or the receipt of a waiver hereunder, Buyer, in the
opinion of its counsel, is compelled to disclose Evaluation Material to any
party or else stand liable for contempt or suffer other censure or penalty,
Buyer may disclose such information to such party without liability hereunder,
provided that it furnishes only that portion of the Evaluation Material which,
in the opinion of such counsel, is legally required and makes reasonable
efforts, at the expense of Seller, to obtain reliable assurances of
confidential treatment of the Evaluation Material being disclosed.
The provisions of this Section 10.14 shall survive any termination
of this Agreement and the Closing.
Section 10.15. Reimbursable Expenses (a) If the Initial Closing
fails to occur and this Agreement is terminated, including, without limitation,
a termination pursuant to Section 10.11 or 10.12 hereof, and/or if the Initial
Closing fails to occur by reason of a default by Buyer, then the product of all
due diligence, inquiries and investigations undertaken or performed by or on
behalf of Buyer shall be delivered to Seller within ten (10) days thereafter,
including, without limitation, all studies, reports or other materials and all
materials comprising the Valuable Due Diligence Materials, as hereinafter
defined (collectively, "Due Diligence Materials"). Subject to the provisions
hereinafter provided, if the Initial Closing failed to occur for any reason,
other than Buyer's default or a termination pursuant to Section 10.11, Seller
shall reimburse Buyer within six (6) months following the termination of this
Agreement for all reasonable costs and expenses of unaffiliated third parties
incurred by Buyer for the Valuable Due Diligence Materials, in an amount not to
exceed $250,000, provided that (i) all of the Due Diligence Materials are
delivered to Seller within ten (10) days of the termination of this Agreement,
and (ii) within said ten (10) day period Buyer notifies and directs, in a form
reasonably acceptable to Seller, all third party providers of the Due Diligence
Materials that said providers shall deal with Seller as if Seller originally
ordered and paid for said materials. The term "Valuable Due Diligence
Materials" means Due Diligence Materials which are of reasonable value to
Seller, including, without limitation, information that would substantially
facilitate a future sale of all or any substantial portion of the Property or
which is applicable generally to any future use or development of the Property
(as opposed to relating specifically to the Development). (b) In addition to
the foregoing, but subject to the provisions hereinafter provided, if the
Initial Closing fails to occur solely because of Seller's inability to convey
title to at least a portion of the Property as required hereunder, then Seller
shall reimburse Buyer for the actual and reasonable out-of-pocket expenses
incurred by Buyer, in a total amount not to exceed $500,000 (less any amount
Seller is required to reimburse Buyer for the Valuable Due Diligence
Materials), in connection with this transaction with the exception of Buyer's
(or any affiliate thereof) attorneys' fees and disbursements, within six months
following the termination of this Agreement, provided Borrower has delivered
the Due Diligence Materials to Seller as required under this Section 10.15.
The parties acknowledge that the Closing is contingent upon
obtaining of the consent (the "Consent") to the Closing from both the holder of
the current Deed of Trust affecting the Property and the holders of certain
bonds issued by Seller. Notwithstanding anything contained in this Section
10.15 to the contrary, if Seller has not been able to obtain the Consent by
February 21, 2000 and Seller gives Buyer notice of such inability on or before
February 23, 2000 then, unless Buyer waives its right to receive the payments
provided to be made by Seller pursuant to the provisions of this Section 10.15
by notice to Seller given no later than February 25, 2000, Seller shall have
the right to terminate this Agreement in which event the Deposit and the
interest thereon shall be returned to Buyer and neither Buyer nor Seller shall
have any further obligations or liabilities under this Agreement except as
otherwise provided hereunder. Buyer's obligations to deliver the Due Diligence
Materials to Seller pursuant to the provisions of this Section 10.15 are in
addition to the damages provided to be paid to Seller pursuant to the
<PAGE>
provisions contained in Sections 2.2 and 6.1 and any other provision of this
Agreement. The provisions of this Section 10.15 shall survive any termination
of this Agreement.
Section 10.16. Additional Re: Consent. If on the date scheduled for
Initial Closing the Consent has not been obtained, (a) then in addition to any
other rights Seller may have under this Agreement to postpone or adjourn the
closing, Seller shall be entitled on notice to Buyer to postpone and adjourn
the Initial Closing for up to an additional sixty (60) days and (b) provided
that Buyer (i) is not then in default under any provision of this Agreement,
(ii) has deposited the Additional Down Payment with the Title Company, (iii)
waives in a writing delivered to Seller (together with Buyer's Consent Notice,
as hereafter defined) all conditions to the Initial Closing other than matters
first appearing of record after the date Buyer adjourns the Initial Closing
pursuant to the provisions of this Section 10.16, and (iv) covenants in a
writing delivered to Seller (together with Buyer's Consent Notice) in good
faith to diligently undertake all activities, including, without limitation,
performing all due diligence, to advance and further the Development from the
date of Buyer's Consent Notice through the date of closing, (the "Continued Due
Diligence"), then Buyer shall be entitled on notice to Seller (the "Buyer's
Consent Notice") to postpone and adjourn the Initial Closing to a date not
later than September 30, 2000. If following the delivery of Buyer's Consent
Notice and prior to Seller's obtaining the Consent, Buyer ceases the Continued
Due Diligence for more than fifteen (15) days following notice from Seller to
Buyer, then Seller shall have the right to terminate this Agreement with the
same effect as if the Consent had not been obtained pursuant to Section 10.12
hereof. If after the delivery of Buyer's Consent Notice, Seller obtains the
Consent, Seller shall have the right to accelerate the Initial Closing to any
business day occurring on or after thirty (30) days following delivery of a
notice to such effect to Buyer.
Section 10.17. Exculpation. Buyer agrees that the liability of
Seller under this Agreement, and with respect to all matters pertaining to or
arising out of this Agreement, shall be limited to Seller's interest in the
Property. In addition, under no circumstances shall either Buyer or Seller make
claims against or seek to impose any personal liability upon any individual,
including, without limitation, any general or limited partner, officer,
director, employee or shareholder.
Section 10.18. Re: Exhibits. (a) At the request of Buyer, prior to
the Initial Closing Seller and Buyer shall use all reasonable good faith
efforts to attempt to negotiate a definitive operating agreement for the Option
Agreement referred to on Exhibit K. (b) Seller and Buyer shall cooperate in
good faith to complete all of the unfinished Exhibits to this Agreement and to
the Operating Agreement prior to the Initial Closing.
Section 10.19. Modifications to Closing Conditions.
(a) If Buyer requests any changes or modifications to the
Master Development Plan prior to the Initial Closing, Seller shall not
unreasonably withhold Seller's consent to such changes or modifications, unless
such changes or modifications would (i) increase Seller's infrastructure costs
under the Operating Agreement, unless Buyer agrees to pay for such increased
costs or (ii) affect the Village Core (as such term is defined in the Operating
Agreement) or the Excess Property, in either of which events Seller may
withhold Seller's consent in Seller's sole and absolute discretion.
(b) Seller will only be obligated to close if Seller is
able to convey all of the Property at the Closing as Conveyable Tracts and if
Seller is unable to so convey the Property, the provisions of Section 10.12
<PAGE>
shall govern. Notwithstanding the foregoing, if Seller is able to convey some,
but not all of the Parcels as Conveyable Tracts, or if Seller's lenders will
consent to the conveyance of some, but not all of the Parcels that are
Conveyable Tracts, then, subject to all of the provisions of this Agreement,
the Closing shall nevertheless occur (and in such event, such Closing shall be
the Initial Closing), provided that Seller can, at a minimum, convey the
Parcels described as E, F, G, H, I, J, K and Q on the Master Development Plan
(the "Initial Site"), as Conveyable Tracts and in such event the following
provisions shall govern:
(i) The purchase price of the Initial Site shall be
the sum of $10,000,000 payable in cash at the Initial Closing (and towards
which the Deposit shall be credited) and the provisions of Section 5.5(o) of
this Agreement and all references in this Agreement to the $5M Note and the
Deed of Trust shall be deleted. At Seller's option, the Initial Site and/or any
subsequent Parcel to be conveyed pursuant to this Agreement may contain Excess
Property. The $5,000,000 balance of the Purchase Price shall be paid in cash as
Seller conveys Additional Real Property to Buyer (as hereinafter defined). The
term "Additional Real Property" shall mean real property that consists of
additional Parcels not conveyed at the Initial Closing or, in lieu thereof, at
Seller's sole and exclusive option, all or any portion of parcels 15, 16, 17,
18 or 27 referenced on the Auerbach Plot (as such term is defined in Section
10.19(b)(vii)). The purchase price for each parcel of Additional Real Property
shall be the sum of $5,000,000 multiplied by a fraction, the numerator of which
is the number of Units that can be developed pursuant to the Final Master
Development Plan on the parcel of Additional Real Property to be conveyed at
that time and the denominator of which is equal to the excess of (a) 1,800 over
(b) the number of Units that can be developed on Parcel 26 (as such term is
defined in Section 10.19(b)(vii) pursuant to the Final Master Development Plan.
Notwithstanding any other provision of this Agreement to the contrary, the
unpaid portion of the $5,000,000 balance of the Purchase Price shall be paid to
Seller in cash on the date which is the earlier to occur of (a) the conveyance
to Buyer of Parcels A, B, and C (or all of the Development Portions (defined in
Section 10.19(k) below) of Parcels A, B and C) or (b) the date upon which
Seller has conveyed sufficient real property to Buyer so that Buyer has the
right to develop 1,800 Units on such real property.
(ii) As soon as the proposed single family subdivision
(the "EFG Subdivision") affecting a portion of Parcels E, F and G has received
the requisite approvals so that the EFG Subdivision Land (as hereafter defined)
comprises one or more legally conveyable parcels, Buyer shall, within 20 days
of Seller's written request, reconvey to Seller from time to time the EFG
Subdivision Land or subdivided portions thereof for no consideration subject
only to the Conditions of Title. Buyer and Seller shall equally share the cost
of any transfer taxes for such reconveyance. Pending such reconveyance, Seller
shall retain the sole equitable ownership interest in the EFG Subdivision Land.
If the complete EFG Subdivision occurs at a time prior to the conveyance of the
Initial Site by Seller to Buyer, then, Seller shall have the right to exclude
the EFG Subdivision Land from the conveyance of the Initial Site. Seller shall
thereafter have the right to sell the EFG Subdivision Land free and clear of,
and not subject to any of the provisions of, Exhibit F hereof. The term "EFG
Subdivision Land" shall mean the real property which is identified as Northstar
Unit 7 and 7A on the plat prepared by Auerbach Engineering Group dated October,
1999, including, without limitation, all common areas and related roadways and
rights appurtenant thereto, including rights of way and access.
(iii) As to all Parcels other than the Initial Site,
Seller shall have the option of conveying some or all of such Parcels at the
<PAGE>
Initial Closing or any subsequent Closing, together with additional land
located outside of the Black Outline (in which event such additional land shall
be Excess Property), or delay conveying such Parcels until such Parcels are
subdivided into Conveyable Tracts in accordance with the provisions, and
subject to the conditions, set forth in this Section 10.19(b)(vi).
(iv) The Second Deed of Trust shall only be subject to
the Conditions of Title.
(v) Section 9.2 shall be modified so that Seller will
only be obligated to spend the sum of $3,000,000 in the summer of 2000 for the
performance of the work set forth in Section 9.2(a). Seller shall be obligated
to spend $2,000,000 for the balance of the work set forth in Section 9.2
pro-rata as Seller receives the balance of the $5,000,000 of the Purchase Price
pursuant to section 10.19(b)(i) above. Any costs or expenses that Seller incurs
after the date of this Agreement in connection with the items enumerated in
Section 9.2 shall be in partial satisfaction of Seller's obligations hereunder
and under Section 9.2.
(vi) Seller shall use its best efforts to obtain
subdivision approval for the portion of the Property not conveyed at the
Initial Closing so that such Property is subdivided into Conveyable Tracts
("Subdivision Approval"). If any Off-Site Mitigation is required as a condition
to obtaining Subdivision Approval, such Off-Site Mitigation shall be the sole
cost, expense and responsibility of Buyer, except as otherwise set forth in the
Operating Agreement. If and when Seller obtains Subdivision Approval for any
one or more of the Parcels not yet conveyed to Buyer, Seller shall promptly
notify Buyer ("Seller's Subdivision Notice"). The Closing of the Parcel or
Parcels referred to in Seller's Subdivision Notice shall occur on the thirtieth
(30th) day (or if such day is not a business day, on the next succeeding
business day) following Seller's giving to Buyer of Seller's Subdivision
Notice. Buyer agrees to diligently cooperate with Seller to obtain Subdivision
Approval. If Seller has been unable to obtain the Subdivision Approval for any
portion of the balance of the Property not conveyed to Buyer at the Initial
Closing on or before the fifth anniversary of the date of the Initial Closing,
then Seller shall have no further obligation to subdivide or convey to Buyer
the balance of the Property under this Agreement, and at such time Seller shall
be deemed to have fully performed all of Seller's obligations under this
Agreement except for those provisions that expressly survive closing set forth
in Section 10.6(a)-(d) above but the balance of the Property shall nevertheless
remain subject to the provisions of Exhibit F.
(vii) Seller shall have the right to substitute
"Parcel 26" (as hereafter defined) in the place of and in lieu of the Initial
Site. The term "Parcel 26" shall mean the parcel of real property designated as
26 and consisting of all or a portion of Parcels E, F, G, H, I, J, K, Q and N
and Excess Property, as shown on the "Exhibit Depicting Separately Saleable
Parcels in Trimont's Ownership" prepared by Auerbach Engineering Group and
dated February 4, 2000 (the "Auerbach Plot"). Parcel 26 is also known as
Resultant Parcel 2 and described in that certain Resolution To Approve a Minor
Boundary Line Adjustment (MBR-9987) recorded November 23, 1993, as Instrument
No. 93-087531 of the official records of Placer County.
(c) As to all of the Parcels, Buyer shall only have the
right to develop the portions of the Property lying inside of the Black
Outline.
<PAGE>
(d) Simultaneous with the conveyance of Parcel P, Buyer and
Seller shall execute a lease in the form annexed hereto as Exhibit S (the
"Lease") leasing to Seller all of the improvements on Parcel P, together with
the necessary easements for access and maintenance, until such time as the
improvements thereon have been (A) separately subdivided and reconveyed to
Seller subject only to the Conditions of Title, or (B) relocated to other land
of Seller pursuant to the provisions of the Operating Agreement. Seller shall
have the right to record a memorandum of the Lease and Buyer shall cooperate
with Seller to prepare, execute and record same.
(e) Buyer agrees that all land on the Master Development
Plan that does not lie within the Black Outline that is conveyed to Buyer
comprises a portion of the Excess Property.
(f) Buyer shall grant Seller either permanent (for Property
that Buyer shall retain) or temporary (for Property that will be reconveyed to
Seller pursuant to the provisions of this Agreement) easements, and rights of
access, use, occupancy, maintenance and repair (collectively, an "REA"), as
Buyer and Seller reasonably agree are required or may be reasonably useful to
benefit Seller's property, Seller's resort operations or Seller's use of the
Essential Ski Property and Excess Property.
(g) Until Buyer commences construction on an individual
Parcel, Seller shall have the right to continue to use all undeveloped Parcels
for all resort related activities, including, without limitation, cross-country
skiing and biking. Seller shall indemnify Buyer against such use and Seller
shall maintain adequate insurance and will name Buyer as an additional insured
thereon.
(h) Buyer will allow Seller to utilize Buyer's utility cuts
for placement by Seller of compatible utility lines therein.
(i) Seller shall retain all timber, mineral and Water
Rights, including the collection of surface run off water from the Property,
subject to:
(i) as to timber, Buyer shall designate which timber
shall be cut; but Seller shall perform all logging activities in coordination
with Buyer and Seller shall retain all proceeds therefrom;
(ii) Seller shall retain the sole and exclusive right
to determine all logging activities on Excess Property and Seller shall retain
all proceeds therefrom; and
(iii) as to the Water Rights, Buyer and Seller shall
reasonably agree as to the appropriate method of supplying water to service the
needs of the Development.
(j) Buyer acknowledges that there is an existing
ski-corridor through Parcel R which Buyer must preserve and which will be
subject to an REA.
(k) In lieu of conveying all of Parcels A, B and C, Seller
shall have the right to subdivide and convey to Buyer only those portions of
Parcels A, B and C as are contemplated to be developed pursuant to the Final
<PAGE>
Master Development Plan (the "Development Portions") and shall have the option
of delaying the conveyance of Parcels A, B and C until such subdivisions have
been completed.
(l) Seller shall retain a portion of the Density
attributable to the Property necessary for the development of 60 Units on
Seller's remaining property, together with any portion of the Density, if any,
required to maintain and utilize all existing structures on Seller's remaining
property. None of these 60 Units shall be subject to the provisions of Exhibit
F.
(m) Seller agrees to cause to be prepared and delivered to
Buyer following the Initial Closing an CLTA/ASCM survey of the Property
prepared by a duly licensed surveyor reasonably acceptable to Buyer and Title
Company showing the dimensions and boundaries of the Land, the dimensions and
locations of all Improvements "as built" and in all other respects reasonably
satisfactory to Buyer and the Title Company (the "Survey"), which Survey shall
be accompanied by a surveyor's certificate in a form reasonably acceptable to
Buyer and the Title Company (the "Surveyor's Certificate"). If the Initial
Closing occurs, the cost of the Survey and the Surveyor's Certificate shall be
paid one-half by Seller and one-half by East West Partners, Inc. ("East West")
and in such event, East West shall reimburse Seller for East West's one-half
share of such cost within ten (10) days following the delivery of the Survey
and the Surveyor's Certificate to Buyer. Otherwise the cost of the Survey and
the Surveyor's Certificate shall be the obligation of Seller.
(n) Notwithstanding any provision of this Agreement to the
contrary, in the event of Multiple Closings, if a particular provision of this
Agreement does not contemplate Multiple Closings, then the following provisions
shall govern:
(i) Any document that is to be delivered, term or
condition to be satisfied or proration to be made that is applicable to all of
the Property shall be modified by the agreement of Seller and Buyer acting
reasonably to account for the Multiple Closings; and
(ii) The period of survival for the representations
and warranties shall, to the extent such representation or warranty would, in
all likelihood, only be discovered to be incorrect upon physical development of
the relevant portion of the Property, be modified so that the period of
survival is measured from the date of conveyance of such portion of the
Property. In all other cases, the periods set forth in Section 10.6 shall
govern and be measured from the date of the Initial Closing.
(o) Buyer, at Buyer's sole and exclusive option, shall have
the right to elect not to take title to a particular Parcel (the "Deleted
Parcel"), in which event the following provisions shall govern:
(i) there shall be no reduction in the Purchase Price,
or the portion of the Purchase Price applicable to the group of Parcels that
the Deleted Parcel is included within pursuant to this Agreement;
(ii) if such Parcel is one or more of D, L, M or R,
then the portion of the Density applicable to the Deleted Parcel pursuant to
the Master Development Plan shall be transferred to the balance of D, L, M and
R, as the case may be, and the numerator set forth in Section 10.19(b)(i) above
<PAGE>
applicable to the first conveyance of any of Parcels D, L, M and R shall
instead be the sum of (a) the number of Units applicable to the Parcel to be
conveyed pursuant to the Master Development Plan plus (b) the number of Units
applicable to the Deleted Parcel pursuant to the Master Development Plan; and
(iii) the Deleted Parcel shall not be subject to the
provisions of Exhibit F hereof.
The IN WITNESS WHEREOF, Buyer and Seller have executed
this Agreement as of the date and year first written above:
SELLER:
TRIMONT LAND COMPANY, a
California corporation
By: /s/ Christopher P. Ryman
----------------------------------
Name: Christopher P. Ryman
Title: President
BUYER:
EAST WEST PARTNERS, INC., a
Colorado corporation
By: /s/ Harry H. Frampton III
----------------------------------
Name: Harry H. Frampton III
Title: Chairman
<PAGE>
Exhibit A
LAND
Buyer acknowledges and agrees that, in addition to the information
disclosed in Exhibit A, Seller has applied and is awaiting approval for the
development of a ski-run through Parcel Q and Seller currently contemplates the
construction of such ski-run in the summer of 2000.
Graphic of map January, 2000 - Master Development Plan -
Northstar-at-Tahoe omitted.
<PAGE>
Exhibit B
[Obligations Assumption Agreement]
<PAGE>
Exhibit C
[List of Contracts to be Assumed]
1. At the Initial Closing, Buyer shall assume the obligations of Seller
under the Agreement between Northstar Club, LLC and Seller, a copy of which has
heretofore been delivered to Buyer. Buyer shall then have the right to
reasonably select the portion of the Property that will be used to satisfy the
terms of such agreement, and if such portion has not yet been conveyed by
Seller to Buyer, Seller shall cooperate with Buyer to effectuate the terms of
such agreement.
2. Items set forth in a letter from Tamra N. Underwood, Esq. to James R.
Wear, Esq. dated December 14, 1999, to the extent such items relate to all or
any portion of the Property.
3. To the extent the Property includes the "Photo Shop", Agreement between
Trimont Land Company and SharpShooter Corporation, dated July 17, 1998.
4. Agreement Terminating Option and Amending Agreement to Purchase and
Sell Real Property, dated the ____ day of September, 1999, between Trimont Land
Company and Northstar Club LLC.
<PAGE>
Exhibit D
[Operating Agreement]
The form of Operating Agreement representing Exhibit D to the
Agreement for Purchase and Sale of Real Property has been filed as Exhibit 10.2
to the Company's Report on Form 10-Q for the quarterly period ended January 28,
2000.
<PAGE>
Exhibit E
[Contract Assignment]
<PAGE>
Exhibit F
[Exclusive Agreement]
Items To Be Included In Agreement:
1. Term: Ten (10) years from the date of the Initial Closing
2. Property: Right of First Offer on undeveloped property Seller may
wish to sell from time to time (consisting of all, or
any portion of, Seller's remaining approximately 6,000
undeveloped acres) and any portion of the Property that
was not conveyed to Seller after the five year period
specified in Section 10.19.
3. Purchase Price: 8% of Gross Sales; No upfront cash payment
4. No Recording: This agreement shall not be recorded and shall terminate
with respect to any portion of the real property that is
foreclosed upon by an unrelated third party lender.
5. Conditions: - Subject to mutual agreement of parties as to
integration with Master Development Plan
- Seller to bear no infrastructure costs, except that if
Seller does not convey to Buyer all of the Property
pursuant to Section 10.19(b)(vi), then any of such
Property that is subsequently conveyed to Buyer pursuant
to the provisions of this Exhibit shall bear the
infrastructure costs as set forth in the Operating
Agreement as if such Property were conveyed to Buyer as
originally contemplated by this Agreement.
- Execution of any applicable REA
- Buyer to perform studies re: development potential
6. Other: - To be conveyed free of all deeds of trust and other
liens.
Not applicable to transfers to (i) affiliated persons or
entities, but any such transfers shall thereafter be
subject to Right of First Offer which shall continue to
"run with the land," (ii) governmental or
quasi-governmental entities in exchange for development
rights or otherwise, or (iii) for the purpose of
constructing employee or affordable housing.
<PAGE>
Exhibit G
[Intentionally Deleted Prior to Execution]
<PAGE>
Exhibit H
[Intentionally Deleted Prior to Execution]
<PAGE>
Exhibit I
[Intentionally Deleted Prior to Execution]
<PAGE>
Exhibit J
[Non-Residential Property Agreement]
Items To Be Included In Agreement:
1. Term:
2. Property: - All Non-Residential Property
- Option to Purchase when complete
3. Purchase Price: At "cost" (to be defined)
4. Conditions: To be conveyed unencumbered
5. Other:
<PAGE>
Exhibit K
[Option Agreement]
Items To Be Included In Agreement:
1. Term: Option must be exercised during a one (1)
year "window" period commencing on the
second anniversary of the Closing
2. Property: Golf course and property management company
(i.e. both or neither)
3. Purchase Price: 50% of EBITDA (with EBITDA to be not less
than 95% of EBITDA for the 1998/99 fiscal
year for purposes of establishing the
purchase price) x 10 (less 50% of any debt)
4. Capitalization: To be determined
5. Conditions: Seller and EWRD V to form LLC (i.e. Newco
II) to own and operate
6. Other Ventures: New golf course, real estate brokerage firm
,transportation company, etc.[to be part of
NewcoII? Newco III?)
7. Other: The Purchase Price entitles EWRD V to a 50%
interest in Newco II, with Seller
owning the other 50% interest.
<PAGE>
Exhibit L
Form of Grant Deed
<PAGE>
Exhibit M
Demand Note
There shall be no preconditions to Seller's ability to draw down the
money pursuant to the $5M Note.
Any costs or expenses that Seller incurs after the date of this
Agreement in connection with the items enumerated in Section 9.2 shall be in
partial satisfaction of Seller's obligations under Section 9.2.
<PAGE>
Exhibit N
Deed of Trust
This Deed of Trust shall only be subject to the Conditions of Title.
<PAGE>
Exhibit O
Personal Property
All personal property delineated on this Exhibit shall be conveyed
to Buyer by a quit claim bill of sale without payment of additional
consideration at the Closing.
NONE.
<PAGE>
Exhibit P
Second Deed of Trust
a) The Second Deed of Trust shall secure the following obligations:
(1) Newco's obligation to promptly subdivide the Property to permit
the reconveyance to Seller of the Excess Property;
(2) Newco's obligations to reconvey the Excess Property to Seller
subject only to the title exceptions set forth in the Title Report upon the
satisfaction of (1) above;
(3) Newco's obligation to convey the balance of the Village Core
upon the event of any "break-up" as set forth in the Operating Agreement; and
(4) Newco's obligation to pay to Seller the Minimum Booth Creek
Return (as such term is defined in the Operating Agreement).
b) Until such time as the Excess Property is reconveyed to Seller, Seller
shall be obligated to release from the lien of the Second Deed of Trust
portions of the Property that do not contain Excess Property (other than (i)
deminis portions of Excess Property that are not necessary or related to the
operation of the Northstar Report, in the reasonable opinion of Seller, or (ii)
Excess Property that has become subject to a REA approved by Seller) as such
portions are subdivided and designated as development parcels. After the Excess
Property has been reconveyed to Seller, the lien of the Second Deed of Trust
shall be released from all of the Property except the Village Core and Parcel
P. Seller shall be obligated to release the lien of the Second Deed of Trust
from (i) portions of the Village Core as such portions are subdivided and
designated as development parcels and (ii) from Parcel P after the facilities
are removed therefrom as contemplated by the Operating Agreement and after the
resort infrastructure (i.e. the snow making equipment and other resort
infrastructure) are either subdivided and conveyed to Seller subject only to
the title exceptions set forth in the Title Report, or , if such site cannot be
legally subdivided, then following the recordation of an REA (not subordinate
to any prior matters of record) necessary for Seller's continued use of such
infrastructure.
c) The Second Deed of Trust shall be non-interest bearing and shall be
subordinate only to the Deed of Trust and the Conditions of Title.
d) If to record the Second Deed of Trust, the Second Deed of Trust must
contain an amount that is secured thereby, or if a filing fee is required to be
paid to record the Second Deed of Trust based upon the amount secured by the
Second Deed of Trust, then in either or both events, such sum shall be
$22,500,000.
<PAGE>
Exhibit Q
Excess Property
a) If conveyed by Seller to Buyer, the Excess Property shall consist
of the following:
(1) The Essential Ski Property (as such term is defined in
the Operating Agreement);
(2) Those portions of the Village Core (as such term is
defined in the Operating Agreement) that are not to be developed by
Newco pursuant to the Master Development Plan;
(3) Any excess real property conveyed to Newco to facilitate
the closing but that is not required for the Development, or as
otherwise set forth in the Master Development Plan;
(4) The EFG Subdivision Land; and
(5) The Clock Tower building, the free standing buildings in
the immediate vicinity of the Clock Tower, the Gondola Building, the
Base Lift Locations, and the existing drop off area for cars in the
front portion of the village on Parcels A, B and C.
(6) Any real property designated as Excess Property in
Section 10.19 of this Agreement.
b) Seller shall have the right to remove, alter, replace, maintain
and repair all Excess Property Improvements and Buyer shall grant Seller an REA
for Seller to enjoy such rights.
c) Buyer shall have no right to construct any improvements on the
Excess Property.
d) Any parcels of land that cannot, in the reasonable opinion of
Seller, be subdivided and reconveyed to Seller as the result of non-compliance
of such parcel with applicable zoning or subdivision requirements shall no
longer be considered Excess Property after the appropriate REA in connection
with such parcels for the benefit of Seller have been recorded, and are not
subject to any title matters of record other than the Conditions of Title.
<PAGE>
Exhibit R
Agreed upon Deal Expense to be reimbursed to Buyer or Seller by
Newco at the Closing.
1. All costs of third party consultants and direct out of pocket costs for
due diligence (but not employee salaries or overhead) incurred by either Buyer
or Seller in connection with the Development, including all legal fees, other
than those of Loeb & Loeb L.L.P., Sherman & Howard LLC and Wear Travers & Davis
P.C.
2. Seller's costs and expenses in obtaining the Subdivision Approval.
3. The fees and disbursements of Auerbach Engineering Group incurred by
Buyer or Seller in connection with or related to this Agreement or the
Development.
<PAGE>
Exhibit S
Form of Lease pursuant to Section 10.19.
(1) Seller shall not pay rent.
(2) Seller shall not be responsible for real estate taxes.
(3) Seller shall be responsible for costs of maintenance,
repair, insurance and operation.
<PAGE>
Exhibit T
Provisions dealing with default by Buyer following the Initial Closing.
1. This Agreement shall terminate and Buyer shall have no further rights
to acquire any of the Property if Buyer materially defaults under this
Agreement and such default is not cured within ten days following notice from
Seller to Buyer or if Buyer or its affiliates or assignee thereof commits a
Funding Default or a Material Manager Breach under the Operating Agreement. In
any of such events, the provisions of the Exclusive Agreement shall also
immediately terminate.
OPERATING AGREEMENT
OF
NORTHSTAR HOLDINGS, LLC
[date]
THE OWNERSHIP INTERESTS IN THIS LIMITED LIABILITY COMPANY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR STATE SECURITIES
AUTHORITIES AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
MANAGER THAT REGISTRATION IS NOT REQUIRED. THE SALE OR OTHER TRANSFER OF THE
OWNERSHIP INTERESTS IS ALSO RESTRICTED BY CERTAIN PROVISIONS IN THIS AGREEMENT.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1: FORMATION AND DEFINITIONS.....................................- 1 -
1.1 Formation.....................................................- 1 -
1.2 Name..........................................................- 1 -
1.3 Members.......................................................- 1 -
1.4 Economic Interest.............................................- 1 -
1.5 Office and Agent..............................................- 1 -
1.6 Foreign Qualification.........................................- 1 -
1.7 Term..........................................................- 2 -
1.8 Definitions...................................................- 2 -
ARTICLE 2: PURPOSES AND POWERS...........................................- 2 -
2.1 Principal Purpose.............................................- 2 -
2.3 Other Purposes................................................- 3 -
2.4 Powers........................................................- 3 -
ARTICLE 3: CAPITAL OF THE COMPANY........................................- 4 -
3.1 Contributions.................................................- 4 -
3.2 Additional Contributions in Excess of Capital Commitment......- 5 -
3.3 The Property..................................................- 7 -
3.4 Capital Accounts..............................................- 7 -
3.5 Transfer......................................................- 8 -
3.6 No Withdrawal of Capital......................................- 8 -
3.7 No Interest on Capital........................................- 8 -
3.8 No Drawing Accounts...........................................- 8 -
3.9 Management Fee................................................- 8 -
3.10 Contributions in the Event of an Emergency....................- 9 -
3.11 Working Capital Reserve......................................- 10 -
ARTICLE 4: INCOME AND LOSSES............................................- 10 -
4.1 Allocation of Net Income and Net Loss........................- 10 -
4.2 Company Minimum Gain Chargeback..............................- 13 -
4.3 Minimum Gain Chargeback for Member Nonrecourse Debt..........- 13 -
4.4 Qualified Income Offset......................................- 13 -
4.5 Limit on Loss Allocations....................................- 14 -
4.6 Net Loss from Member Nonrecourse Debt........................- 14 -
4.7 Nonrecourse Deductions.......................................- 14 -
4.8 Section 754 Adjustments......................................- 14 -
4.9 Reversal of Mandatory Allocations............................- 14 -
4.10 Compliance with Code.........................................- 14 -
<PAGE>
4.11 Tax Allocations -- Section 704(c)............................- 14 -
4.12 Allocation on Transfer.......................................- 14 -
ARTICLE 5: DISTRIBUTIONS................................................- 15 -
5.1 Distributions Generally......................................- 15 -
5.2 Special Distributions........................................- 16 -
5.3 Payment......................................................- 16 -
5.4 Withholding..................................................- 16 -
5.5 Distribution Limitation......................................- 16 -
5.6 Booth Creek Return...........................................- 17 -
ARTICLE 6: MANAGEMENT...................................................- 17 -
6.1 Management...................................................- 17 -
6.2 Actions or Decisions by the Manager..........................- 18 -
6.3 Actions or Decisions Requiring Reasonable Consent............- 19 -
6.4 Actions or Decisions Requiring Discretionary Consent of
Booth Creek..................................................- 20 -
6.5 Amendment of Agreement.......................................- 22 -
6.7 Effect of Dissolution, Resignation or Retirement.............- 23 -
6.8 Other Activities.............................................- 23 -
6.9 Payment of Management Costs..................................- 23 -
6.10 Master Development Plan......................................- 23 -
6.11 Annual Plan..................................................- 23 -
6.12 Amendments to Annual Plan....................................- 24 -
6.13 Off-Site Mitigation..........................................- 24 -
ARTICLE 7: MEETINGS OF MEMBERS..........................................- 24 -
7.1 Special Meetings.............................................- 24 -
7.2 Place........................................................- 24 -
7.3 Notice.......................................................- 24 -
7.4 Waiver of Notice.............................................- 24 -
7.5 Record Date..................................................- 25 -
7.6 Quorum.......................................................- 25 -
7.7 Manner of Acting.............................................- 25 -
7.8 Proxies......................................................- 25 -
7.9 Meetings by Telephone........................................- 25 -
7.10 Action Without a Meeting.....................................- 25 -
ARTICLE 8: LIABILITY OF A MEMBER........................................- 25 -
8.1 Limited Liability............................................- 25 -
8.2 Capital Contribution.........................................- 26 -
8.3 Capital Return...............................................- 26 -
8.4 Reliance.....................................................- 26 -
<PAGE>
ARTICLE 9: INDEMNIFICATION..............................................- 26 -
9.1 Indemnification by Company...................................- 26 -
9.2 Expense Advancement..........................................- 27 -
9.3 Insurance....................................................- 27 -
ARTICLE 10: ACCOUNTING AND REPORTING.....................................- 27 -
10.1 Fiscal Year..................................................- 27 -
10.2 Accounting Method............................................- 27 -
10.3 Tax Classification...........................................- 27 -
10.4 Returns......................................................- 28 -
10.5 Reports......................................................- 28 -
10.6 Annual Audit.................................................- 28 -
10.7 Books and Records............................................- 28 -
10.8 Information..................................................- 29 -
10.9 Banking......................................................- 30 -
10.11 No Partnership...............................................- 32 -
ARTICLE 11: DISSOLUTION..................................................- 33 -
11.1 Dissolution..................................................- 33 -
11.2 Events of Withdrawal.........................................- 33 -
11.3 Continuation.................................................- 34 -
11.4 Payment for Rights...........................................- 34 -
ARTICLE 12: LIQUIDATION..................................................- 34 -
12.1 Liquidation..................................................- 34 -
12.2 Priority of Payment..........................................- 34 -
12.3 Liquidating Distributions....................................- 35 -
12.4 No Restoration Obligation....................................- 36 -
12.5 Liquidating Reports..........................................- 36 -
12.6 Certificate of Cancellation..................................- 36 -
ARTICLE 13: TRANSFER RESTRICTIONS........................................- 36 -
13.1 General Restriction..........................................- 36 -
13.2 No Member Rights.............................................- 36 -
13.3 Permitted Transferee.........................................- 36 -
13.4 General Conditions on Transfers..............................- 37 -
13.6 Rights of Transferees........................................- 38 -
13.7 Security Interest............................................- 38 -
13.8 Sale of Resort...............................................- 39 -
13.9 Break-Up Remedy..............................................- 39 -
13.10 Reserved.....................................................- 41 -
ARTICLE 14: DISPUTE RESOLUTION...........................................- 43 -
<PAGE>
ARTICLE 15: GENERAL PROVISIONS...........................................- 43 -
15.1 Amendment....................................................- 43 -
15.2 Representations..............................................- 43 -
15.3 Unregistered Interests.......................................- 44 -
15.4 Waiver of Dissolution Rights.................................- 45 -
15.5 Waiver of Partition Right....................................- 45 -
15.6 Waivers and Consents.........................................- 45 -
15.7 Equitable Relief.............................................- 45 -
15.8 Remedies for Breach..........................................- 45 -
15.9 Costs........................................................- 46 -
15.10 Indemnification..............................................- 46 -
15.11 Counterparts.................................................- 46 -
15.12 Notice.......................................................- 46 -
15.13 Deemed Notice................................................- 46 -
15.14 Partial Invalidity...........................................- 46 -
15.15 Entire Agreement.............................................- 47 -
15.16 Benefit......................................................- 47 -
15.17 Binding Effect...............................................- 47 -
15.18 Further Assurances...........................................- 47 -
15.19 Headings.....................................................- 47 -
15.20 Terms........................................................- 47 -
15.21 Governing Law................................................- 47 -
<PAGE>
OPERATING AGREEMENT
OF
NORTHSTAR HOLDINGS, LLC
This Operating Agreement is made as of [date], by and between Trimont Land
Company, a California corporation ("Booth Creek") and East West Resort
Development V, L.L.L.P., a Delaware limited liability limited partnership
("EWRD V"), as all of the Members of Northstar Holdings, LLC, a Delaware
limited liability company. In consideration of our mutual promises and
obligations, and with the intent of being legally bound, we agree as follows:
ARTICLE 1: FORMATION AND DEFINITIONS
1.1 Formation. The Company was formed on [date] by filing a Certificate of
Formation with the Delaware Secretary of State pursuant to the Act and on
behalf of all of the initial Members of the Company. Unless expressly provided
otherwise (or reasonably implied by an express provision) in this Agreement,
the rights, duties and liabilities of the Members of the Company will be as
provided in the Act, the provisions of this Agreement will control to the
extent permitted by the Act, and the conflicting provisions of the Act will be
deemed waived to the maximum extent permitted in the Act.
1.2 Name. The name of the Company is Northstar Holdings, LLC. The business of
the Company will be conducted under such name, as well as any other name or
names as the Company may from time to time determine.
1.3 Members. The name and address of each Member of the Company (admitted as
provided in 3.1) is set forth on the attached Exhibit A.
1.4 Economic Interest. The Economic Interest initially held by each Member is
set forth on the attached Exhibit B. The economic interest of the Company in
each Project LLC will in all cases be 80% (such that EWRD V and the EWRD
Parties have, in the aggregate, an 80% indirect and direct interest in each
Project LLC and Booth Creek has a 20% indirect interest in each Project LLC),
subject to the other provisions of this Agreement providing for dilution under
certain circumstances.
1.5 Office and Agent. The initial registered office of the Company in Delaware
will be at 1013 Centre Road, Wilmington, New Castle County, Delaware 19805, and
its registered agent will be the Corporation Service Company. The Company may
change its registered office or registered agent in Delaware in accordance with
the Act.
<PAGE>
1.6 Foreign Qualification. The Manager will [a] cause the Company to be
qualified or registered as a foreign limited liability company under the
provisions of California law and cause such status to be maintained for so long
as the Company owns any real property or otherwise transacts business in the
State of California, and [b] cause the Company to be registered under the
assumed or fictitious name statutes or similar laws in the State of California
and in any other jurisdiction in which the Company transacts business. The
initial registered office of the Company in California is located at
_________________________ [To be filled in with the physical address of the
East West office in the Northstar area], and its initial registered agent in
California is _________________[To be filed in with the name of the principal
East West employee located in the Northstar area]. The Company may subsequently
change its registered office or registered agent in California in accordance
with the Beverly Killea Limited Liability Company Act of the State of
California. The Company will also apply to the Colorado Secretary of State for
a certificate of authority to transact business in Colorado. The initial
registered office of the Company in Colorado is located at 100 E. Thomas Place,
Beaver Creek Resort, Avon, Colorado 81620, and its initial registered agent in
Colorado is Christina V. Wright. The Company may subsequently change its
registered office or registered agent in Colorado in accordance with the
Colorado Limited Liability Company Act. The Company will apply for any required
certificate of authority to do business in any other state or jurisdiction, as
required or appropriate.
1.7 Term. The Company will be effective from the date its Certificate of
Formation is filed with the Delaware Secretary of State and will continue in
perpetuity, unless and until a Dissolution occurs under 11.1 and a Certificate
of Termination is filed with the Delaware Secretary of State pursuant to 12.6.
1.8 Definitions. Certain definitions used in this Agreement are defined in
Exhibit U.
ARTICLE 2: PURPOSES AND POWERS
2.1 Principal Purpose. Subject to the provisions of this Agreement, the
business and sole purpose of the Company is, whether directly or indirectly
through one or more Project LLC's, [a] to acquire, own, hold, construct,
develop, operate, sell, or otherwise dispose of the Property and the Ten Year
Option Property, if any, [b] to form, capitalize, operate, and dispose of an
entity or entities to engage in such other operating businesses as are agreed
to in writing by EWRD V and Booth Creek, [c] to borrow money pursuant to one or
more construction loans or otherwise in accordance with this Agreement in
furtherance of the business of the Company and to issue promissory notes or
other evidences of indebtedness in connection with such borrowings, [d] to
grant one or more mortgages, deeds of trust, pledges or other liens on or
security interests in all or any portion of the assets of the Company (subject
to restrictions set forth elsewhere in this Agreement) to secure the Company's
obligations as debtor under any loans, lines of credit, debt offerings, credit
facilities, or other financing arrangements from time to time established to
finance any portion of the Company's activities, or [e] to do any and all other
acts or things which may be reasonably incidental or necessary to carry on the
business of the Company as contemplated by this Agreement. Except as otherwise
<PAGE>
provided in this Agreement, the Company will not engage in any other activity
or business, and no Member will have any authority to hold itself out as a
general agent of another Member in any other business or activity.
2.2 Certain References. The Company expects to own and operate each Project
through a Project LLC created exclusively for that purpose. For convenience of
reference in this Agreement, the Company is sometimes referred to as the owner
of a Project and the entity which sells, transfers or otherwise conveys a
Project. No such reference should be construed to evidence any intent that any
Project is, in fact, owned directly by, or sold, transferred or disposed of
directly by, the Company, that any assets or liabilities relating to any one
Project are to be commingled with any assets or liabilities relating to any
other Project, or that the creditors of any one Project are to have access to
the assets of any other Project to satisfy their claims. Where the context so
requires, any reference to the Company will be construed instead to be a
reference to the relevant Project LLC, and any reference to the sale, transfer
or disposition of a Project by the Company will be construed instead to be a
reference to the sale, transfer or disposition of that Project by the relevant
Project LLC, or to the sale, transfer or disposition by the Company of its
Ownership Interest in the relevant Project LLC.
2.3 Other Purposes. The Company may engage in activities related or incidental
to its principal purpose, as well as any other business or investment activity
agreed to in writing by the affirmative Vote of all Members. However, as
provided in the Act, the Company may not engage in the business of granting
policies of insurance, assuming insurance risks, issuing debt instruments for
circulation as money or receiving deposits of money.
2.4 Powers. The Company has all of the powers granted to a limited liability
company under the Act, including, without limitation, the power:
[a] to conduct its business, carry on its operations and have and exercise all
powers granted to a limited liability company by the Act, in the State of
California or in any other state, territory, district or possession of the
United States, or any foreign country in which the conduct of business by
the Company may be necessary, convenient or incidental to the
accomplishment of the purposes of the Company;
[b] to acquire, own, hold, operate, maintain, finance, improve, construct,
renovate, expand, lease, sell, convey, mortgage, transfer, demolish or
dispose of all or part of the Property, the Ten Year Option Property, if
any, and the Ancillary Property, if any, as may be necessary, convenient
or incidental to the accomplishment of the purposes of the Company;
[c] to enter into, perform and carry out contracts of any kind, including,
without limitation, contracts with any Member, any Affiliate of any Member
or any agent of the Company necessary, convenient, desirable or incidental
to the accomplishment of the purposes of the Company;
<PAGE>
[d] to sue and be sued, complain and defend and participate in administrative
or other proceedings, in its name;
[e] to appoint officers, employees and agents of the Company, define their
duties and fix their compensation, if any;
[f] to indemnify any Person in accordance with the Act, subject to the
provisions of this Agreement, and to obtain any and all types of
insurance;
[g] to cease its activities and cancel its Certificate of Formation;
[h] to negotiate, enter into, renegotiate, extend, renew, terminate, modify,
amend, waive, execute, acknowledge or take any other action with respect
to any lease, contract, agreement, deed of trust, security agreement,
pledge, collateral assignment, or other lien on the assets of the Company;
[i] to pay, collect, compromise, litigate, arbitrate or otherwise adjust or
settle any and all claims or demands of or against the Company or to hold
such proceeds against the payment of contingent liabilities; and
[j] to make execute and file any and all documents or instruments necessary,
convenient, desirable or incidental to the accomplishment of the purposes
of the Company.
ARTICLE 3: CAPITAL OF THE COMPANY
3.1 Contributions.
[a] Each Member separately agrees to make the Initial Contribution to the
Company in cash in the amounts, in the manner, and at the times set forth
opposite such Member's name on the attached Exhibit C. Each Member agrees
to make such Member's Initial Contribution by confirmed wire transfer of
money, in United States dollars and immediately available funds, to the
Company's account (or, alternatively, such payment may be made as the
Company may otherwise agree).
[b] To the extent that the balance of the EWRD Capital Commitment Account is
less than the Capital Commitment, and except to the extent that an
insufficiency of funds results from an Emergency, EWRD will make
Additional Contributions, at such times and in such installments as EWRD V
reasonably determines are necessary to fund the expenditures contemplated
by the Master Development Plan and each subsequent Annual Plan and to fund
the operations of the Company in the ordinary course of its business.
<PAGE>
[c] If Booth Creek reasonably determines that Additional Contributions are
required to be made by EWRD V under [b], Booth Creek may give Notice to
EWRD V of the amount which Booth Creek reasonably believes should be
contributed by EWRD V pursuant to [b]. Such Notice will include an
explanation of the reasons Booth Creek believes such Additional
Contributions are required. To the extent that Additional Contributions
are required under [b], EWRD V will make such Additional Contributions
within 30 days after receipt of such Notice.
[d] Any breach by EWRD V of its obligations under [c] will be a "Funding
Default." Within 30 days after the occurrence of a Funding Default, Booth
Creek may give Notice of such Funding Default to EWRD V, and if Booth
Creek fails timely to give such Notice, Booth Creek will be deemed to have
waived its remedies with respect to such Funding Default. Following the
receipt of any such Notice, [i] the Company will be required to convey to
Booth Creek, by grant deed, the Conveyance Property, free and clear of all
liens and encumbrances (except for Permitted Liens), on or prior to the
later of [A] the date which is 60 days after EWRD V's receipt of such
Notice and [B] the date which is 30 days after the date on which the
Conveyance Property may first be legally conveyed, [ii] Booth Creek will
be required to pay to EWRD V, the Break-Up Infrastructure Costs (excluding
Excess Infrastructure Costs) with respect to the Conveyance Property, such
payment to be made at the time the Conveyance Property is conveyed to
Booth Creek by the delivery of an unsecured promissory note in the form of
Exhibit L, [iii] the Company will continue to develop the Projects other
than the Projects located on the Conveyance Property, but will be required
to develop such Projects with reasonable diligence after such time as
Booth Creek has caused the development of the Village Core to be more than
80% completed in accordance with the Master Development Plan, as amended
from time to time, [iv] upon conveyance of the Conveyance Property to
Booth Creek, this Agreement will be automatically amended, without the
requirement of a signature or any other action by any Person, such that
all of the provisions in 6.3 (other than 6.3[b]) are moved to, and are
governed by, the provisions of 6.2, and the provisions of 6.4[i] are moved
to, and are governed by, the provisions of 6.3, and [v] Booth Creek may
make Additional Contributions to the Company which will be deemed
Additional Contributions for Excess Capital and bear a Preferred Return of
15% until the closing of a purchase and sale under 13.12[b]. In addition,
Booth Creek will have the remedy set forth in 13.12[a] with respect to a
Funding Default.
[e] Except as otherwise provided in 3.1, 3.2 and 3.10, no Member is permitted
or required to make Capital Contributions to the Company. The remedies
provided for in this 3.1, including the remedies provided for by reference
to 13.12[a], are the sole and exclusive remedies of Booth Creek with
respect to any Funding Default.
3.2 Additional Contributions in Excess of Capital Commitment.
<PAGE>
[a] During any period in which EWRD V has satisfied its Capital Commitment,
either Member, in good faith, may propose by Notice to the other Member
that the Members make Additional Contributions for Excess Capital to the
Company, in an amount reasonably determined by the proposing Member to
fund the costs of developing the Property and the Ten Year Option
Property, if any. In addition, if an Emergency has occurred, the Members
may make Additional Contributions for Excess Capital as provided in 3.10.
[b] If both Members, in the exercise of their reasonable discretion, agree
that the making of such Additional Contributions for Excess Capital is in
the best interests of the Company in order to complete any Project as to
which additional capital is necessary in order to maximize return to the
Members, each Member will have the right (but not the obligation) to make
its pro rata share of the proposed Additional Contributions for Excess
Capital in proportion to such Member's Funding Percentage. If either
Member fails to make its pro rata share of the proposed Additional
Contribution for Excess Capital within 90 days after receipt of the Notice
from the other Member, such other Member may make the entire proposed
Additional Contribution for Excess Capital. Additional Contributions for
Excess Capital will bear a 15% Preferred Return, but will not result in a
change to the Economic Interests of the Members except as provided in
3.10. If Booth Creek elects to make its pro rata share of a proposed
Additional Contribution for Excess Capital and EWRD V does not elect to
make its pro rata share of such proposed Additional Contribution for
Excess Capital, then, subject to the right of first offer provisions in
[c], the Company may, at the discretion of Booth Creek, admit additional
Persons (each, a "New Member") to the particular Project LLC to which
Booth Creek's Additional Contribution for Excess Capital will be
allocated. Any contribution by a New Member must be made in cash.
[c] If Booth Creek desires to admit a New Member to a Project LLC as provided
in [b], Booth Creek will give Notice (an "Admission Notice") to EWRD V
setting forth the terms on which it proposes to admit a New Member,
including the amount of cash which such New Member would contribute and
the economic interest which such New Member would receive. For a period of
90 days following the receipt of an Admission Notice, EWRD V (or its
nominee) may elect to make such cash contribution on the terms set forth
in the Admission Notice by giving Notice to Booth Creek. If EWRD V (or its
nominee) makes such election and contributes such cash to the applicable
Project LLC within such 90 day period, EWRD V (or its nominee) will become
the New Member on the terms set forth in the Admission Notice, subject to
such New Member's full compliance with the other terms of the Operating
Agreement of the applicable Project LLC relating to the admission of new
members. If EWRD V (or its nominee) does not timely give such Notice and
make such contribution, Booth Creek may, in its discretion, cause the
applicable Project LLC to admit a New Member on the terms set forth in the
Admission Notice, subject to such New Member's full compliance with the
other terms of the Operating Agreement of the applicable Project LLC
relating to the admission of new members; but if such admission is not
made within 180 days following the expiration of the 90-day period
referenced in the preceding sentence, Booth Creek's right to admit such
New Member will expire and the provisions of this 3.2 will again become
applicable to the proposed admission of such New Member. If a New Member
is admitted in accordance with the provisions of this 3.2, any indirect
<PAGE>
dilution to the Economic Interests of the Members caused by such admission
will be borne proportionally by both Members, notwithstanding the
provisions of Section 1.4.
3.3 The Property.
[a] Real Estate Purchase Agreement; Assignment. Concurrently with the Members'
execution of this Agreement [i] East West Partners, Inc. will assign to
the Company all of its right, title and interest in and to the Real Estate
Purchase Agreement such that the Company is substituted as the "Purchaser"
under such agreement in the place and stead of East West Partners, Inc.,
[ii] the Company will assume all of the obligations of the "Purchaser"
under the Real Estate Purchase Agreement, and [iii] EWRD V will, and will
cause any Affiliate of EWRD V to, assign or cause to be assigned to the
Company all of their respective rights, titles and interest, if any, in
and to all tangible and intangible property relating to the investigation,
evaluation and prospective ownership, development, construction, financing
and operation of the Property and the Projects, and the marketing and sale
of the Units, including, all inspection reports, environmental
investigation reports, appraisals and other due diligence studies and
materials, all engineering or architectural plans, specifications,
drawings, and artists renderings, and copies of all other materials which
would be relevant to the Company's ownership, development, improvement,
operation, financing, refinancing or disposition of the Property and the
Projects, and its marketing and sale of the Units, but excluding such
materials as are subject to attorney-client privilege or attorney work
product privilege and any other confidential and proprietary materials
prepared by EWRD V or its Affiliates which are not useful in connection
with the development of the Property and the Projects.
[b] Trademark License Agreement. Concurrently with the Members' execution of
this Agreement, the Company and Booth Creek will enter into the Trademark
License Agreement in the form of Exhibit O, to be effective as of the date
of this Agreement.
3.4 Capital Accounts. A Capital Account will be maintained for each Member and
credited, charged and otherwise adjusted as required by Section 704(b) of
the Code and the Section 704(b) Regulations. Each Member's Capital Account
will be:
[a] Credited with [i] the amount of money contributed by the Member as an
Initial Contribution or an Additional Contribution, [ii] the Fair Market
Value of property contributed by the Member as an Initial Contribution or
Additional Contribution (net of liabilities that the Company assumes or
takes property subject to), [iii] the Member's allocable share of Income
and Net Income, and [iv] all other items properly credited to Capital
Account;
[b] Charged with [i] the amount of money distributed to the Member by the
Company, [ii] the Fair Market Value of property distributed to the Member
<PAGE>
by the Company (net of liabilities that the Member assumes or takes
subject to), [iii] the Member's allocable share of Losses, Net Losses,
Nonrecourse Deductions, and Member Nonrecourse Deductions, and [iv] all
other items properly charged to Capital Account; and
[c] Otherwise adjusted as required by the Section 704(b) Regulations.
Any unrealized appreciation or depreciation with respect to any asset
distributed in kind will be allocated among the Members in accordance with the
provisions of Article 4 as though such asset had been sold for its Fair Market
Value, as determined by agreement of the Members, on the date of Distribution,
and the Members' Capital Accounts will be adjusted to reflect both the deemed
realization of such appreciation or depreciation and the Distribution of such
property.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of the Capital Accounts are intended to comply with the Section
704(b) Regulations and will be interpreted and applied in a manner consistent
with such Regulations and any amendment or successor provision thereto.
3.5 Transfer. If all or any part of an Ownership Interest is Transferred in
accordance with this Agreement, the Capital Account of the Transferor that is
attributable to the Transferred interest will carry over to the Transferee.
3.6 No Withdrawal of Capital. Except as specifically provided in this
Agreement, no Member will be entitled to withdraw all or any part of such
Person's Capital Contribution from the Company prior to the Company's
Dissolution and Liquidation, or, when such withdrawal of capital is permitted,
to demand a distribution of property other than money or as otherwise provided
in this Agreement.
3.7 No Interest on Capital. No Member will be entitled to receive interest on
such Person's Capital Account or Capital Contribution. Any Member having an
Unpaid Preferred Return will be entitled to a Preferred Return as provided in
this Agreement.
3.8 No Drawing Accounts. The Company will not maintain a drawing account for
any Member. All Distributions to Members will be governed by Article 5
(relating to Distributions not in Liquidation of the Company) and by Article 12
(relating to Distributions in Liquidation of the Company).
3.9 Management Fee. EWRD V (or an Affiliate of EWRD V) will be entitled to
receive a management fee equal to 3% of the Gross Sales Price of each Unit,
calculated and paid on a Project by Project basis. The Company will pay the
estimated management fee in advance, in equal monthly payments, beginning on
the Management Fee Commencement Date for each Project. The estimated management
fee will be based upon the Gross Sales Prices of the Units specified in the
Master Development Plan and Annual Plan(s), and the number of months over which
<PAGE>
such estimated management fee will be paid will likewise be based on the
expected duration of the Project as set forth in the applicable Annual Plan(s).
EWRD V will refund to the Company any overpayments of such fee, and the Company
will pay to EWRD V any underpayments of such fee, as soon as is reasonably
practicable and in any event promptly after the sales of all Units for a given
Project are completed. Such management fee will be deemed an operating expense
of the Company (and not a Distribution). Except as provided in this Agreement,
no Member or Affiliate of a Member will be entitled to any salary or other form
of compensation paid by the Company for services rendered to the Company (other
than a Member's share of Distributions).
3.10 Contributions in the Event of an Emergency. If an Emergency has occurred,
EWRD V, at its option, may make Additional Contributions for Capital Commitment
(to the extent of the Capital Commitment) in an amount necessary to mitigate
the effects of such Emergency, and if EWRD V does not make such contributions
within 10 days after receipt of a Notice from Booth Creek which states that an
Emergency has occurred and specifies in reasonable detail the nature of such
Emergency, Booth Creek may, to the extent of EWRD V's Capital Commitment,
contribute an amount equal to the Additional Contribution for Capital
Commitment which EWRD V did not make, and such contribution will be deemed an
Additional Contribution for Excess Capital of Booth Creek. If an Emergency has
occurred and EWRD V has satisfied its Capital Commitment, either Member may
propose that the Members make Additional Contributions for Excess Capital in an
amount necessary to mitigate the effects of such Emergency by giving a Notice
to the other Member which states that an Emergency has occurred and specifies
in reasonable detail the nature of such Emergency. For a period of 10 days
after the non-proposing Member's receipt of such Notice, each Member will have
the right to make its pro rata share (based on its Funding Percentage) of
Additional Contributions for Excess Capital in the amount set forth in the
Notice. To the extent that either Member does not contribute its pro rata share
of such Additional Contributions for Excess Capital, the other Member may (but
is not required to) contribute such amount. If an Emergency has occurred, to
the extent that EWRD V does not make an Additional Contribution for Capital
Commitment or contribute its pro rata share of an Additional Contribution for
Excess Capital, and Booth Creek elects to do so on EWRD V's behalf, the
Economic Interest of Booth Creek will be increased and the Economic Interest of
EWRD V will be decreased by an amount (expressed as a percentage) equal to a 4%
Economic Interest for each $1,000,000 of Additional Contributions which Booth
Creek makes on behalf of EWRD V (but not on its own behalf) (or such
proportionately lesser or greater percentage as is determined by a
proportionately greater or lesser Additional Contribution than $1,000,000),
except that the maximum percentage by which EWRD V's Economic Interest may be
reduced by one or more such events is 40%. Thus, if the amount contributed by
Booth Creek on behalf of EWRD V exceeds $10,000,000, any such Additional
Contributions by Booth Creek on behalf of EWRD V in excess of $10,000,000 will
not result in dilution of EWRD V's Economic Interest but will be entitled to a
Preferred Return, as provided in 3.2. If EWRD V's Economic Interest is diluted
pursuant to this 3.10, Exhibit B will be appropriately amended to reflect the
adjusted Economic Interests. The dilution remedy provided for in this 3.10 is
the sole and exclusive remedy of Booth Creek if, in the event of an Emergency,
EWRD V fails to make an Additional Contribution for Capital Commitment or its
pro rata share of an Additional Contribution for Excess Capital, as the case
may be, except only that if the amount contributed by Booth Creek on behalf of
<PAGE>
EWRD V exceeds $2,000,000, Booth Creek may also, in addition to such dilution
remedy, invoke the Break-Up Remedy pursuant to 13.9 as if a Deadlock had
occurred.
3.11 Working Capital Reserve. The Manager may establish and maintain a working
capital reserve for operating expenses, capital expenditures, repairs,
replacements, contingencies and other anticipated costs relating to the
Company's business. Such working capital reserve will be consistent with the
Company's Annual Plan with respect to the pertinent Fiscal Year, except that
the Manager may increase reserves above such amounts if the Manager reasonably
determines that such action is necessary to protect the Company against an
Emergency.
3.12 Authorization of Emergency Loans. If an Emergency has occurred or is
likely to occur, the Manager may (but is not obligated to), without other
authorization from the Members, make a loan (an "Emergency Loan") to the
Company in an amount determined by the Manager in its reasonable discretion
sufficient to prevent or mitigate the effects of the Emergency; but the
aggregate principal amounts of all outstanding Emergency Loans will not exceed
$500,000. Each Emergency Loan will be unsecured, will be payable in full as set
forth in 5.1(b), will be prepayable at the election of the Company, without
penalty or premium, and will bear simple interest, compounded annually, from
the date such funds are advanced at the lower of [a] a fluctuating rate equal
to 2% above the prime rate announced by The Wall Street Journal from time to
time or [b] the maximum rate permitted by applicable law. No Emergency Loan may
be made at any time when EWRD V has not satisfied its Capital Commitment.
ARTICLE 4: INCOME AND LOSSES
4.1 Allocation of Net Income and Net Loss. Except as provided in 4.2 through
4.11, the Company's Net Income or Net Loss, as the case may be, and each item
of income, loss and deduction entering into the computation thereof, for each
Fiscal Year will be allocated to the Members as follows:
[a] Net Income for such Fiscal year will be allocated as follows:
[i] first, an amount of Net Income equal to the excess of [x] the amount
that has been distributed to Booth Creek pursuant to 5.1[a] for such
Fiscal Year and all prior Fiscal Years over [y] all Net Income
previously allocated to Booth Creek pursuant to this 4.1[a][i] for
such Fiscal Year and all prior Fiscal Years, will be allocated to
Booth Creek;
[ii] second, an amount of Net Income equal to the excess of [x] the amount
of Net Loss that has been allocated to the Members pursuant to
4.1[b][vii] for such Fiscal Year and all prior Fiscal Years over [y]
all Net Income previously allocated to the Members pursuant to this
4.1[a][ii] for such Fiscal Year and all prior Fiscal Years, will be
allocated to the Members in proportion to each Member's share of such
excess of [x] over [y];
<PAGE>
[iii]third, an amount of Net Income equal to the excess of [x] the amount
of Net Loss that has been allocated to the Members pursuant to
4.1[b][vi] for such Fiscal Year and all prior Fiscal years over [y]
all Net Income previously allocated to the Members pursuant to this
4.1[a][iii] for such Fiscal Year and all prior Fiscal Years, will be
allocated to the Members in proportion to each Member's share of such
excess of [x] over [y];
[iv] fourth, an amount of Net Income equal to the excess of [x] the amount
of Net Loss that has been allocated to the Members pursuant to
4.1[b][v] for such Fiscal Year and all prior Fiscal Years over [y]
all Net Income previously allocated to the Members pursuant to this
4.1[a][iv] for such Fiscal Year and all prior Fiscal Years, will be
allocated to the Members in proportion to each Member's share of such
excess [x] over [y];
[v] fifth, an amount of Net Income equal to the excess of [x] the amount
of Net Loss that has been allocated to the Members pursuant to
4.1[b][iv] for such Fiscal Year and all prior Fiscal Years over [y]
all Net Income previously allocated to the Members pursuant to this
4.1[a][v] for such Fiscal Year and all prior Fiscal Years, will be
allocated to the Members in proportion to each Member's share of such
excess of [x] over [y];
[vi] sixth, an amount of Net Income equal to the excess of [x] the amount
of Net Loss that has been allocated to EWRD V pursuant to 4.1[b][iii]
for such Fiscal Year and all prior Fiscal years over [y] all Net
Income previously allocated to EWRD V pursuant to this 4.1[a][vi] for
such Fiscal Year and all prior Fiscal Years, will be allocated to
EWRD V;
[vii]seventh, an amount of Net Income equal to the excess of [x] the
amount of Net Loss that has been allocated to EWRD V pursuant to
4.1[b][ii] for such Fiscal Year and all prior Fiscal years over [y]
all Net Income previously allocated to EWRD V pursuant to this
4.1[a][vii] for such Fiscal Year and all prior Fiscal Years, will be
allocated to EWRD V;
[viii] eighth, an amount of Net Income equal to the excess of [x] the
amount of Net Loss that has been allocated to the Members pursuant to
4.1[b][i] for such Fiscal Year and all prior Fiscal Years over [y]
all Net Income previously allocated to the Members pursuant to this
4.1[a][viii] for such Fiscal Year and all prior Fiscal Years, will be
allocated to the Members in proportion to each Member's share of such
excess of [x] over [y];
<PAGE>
[ix] ninth, an amount of Net Income equal to the excess of [x] the
Preferred Return for Excess Capital for such Fiscal Year and all
prior Fiscal Years over [y] all Net Income previously allocated to
the Members pursuant to this 4.1 [a][ix] for such Fiscal Year and all
prior Fiscal Years, will be allocated to the Members in proportion to
each Member's share of such excess of [x] over [y];
[x] tenth, an amount of Net Income equal to the excess of [x] the
Preferred Return for Capital Commitment for such Fiscal Year and all
prior Fiscal Years over [y] all Net Income previously allocated to
EWRD V pursuant to this 4.1[a][x] for such Fiscal Year and all prior
Fiscal Years;
[xi] eleventh, an amount of Net Income equal to the excess of [x] the
Preferred Return for Land for such Fiscal Year and all prior Fiscal
Years over [y] all Net Income previously allocated to EWRD V pursuant
to this 4.1[a][xi] for such Fiscal Year and all prior Fiscal Years;
and
[xii]twelfth, any remaining Net Income will be allocated to the Members in
proportion to their respective Economic Interests.
[b] Net Loss for such Fiscal Year will be allocated as follows:
[i] first, an amount of Net Loss equal to the excess of [x] all Net
Income previously allocated to the Members pursuant to 4.1[a][viii]
or 4.1[a][xii] for such Fiscal Year and all prior Fiscal Years over
[y] the sum of all Net Loss previously allocated to the Members
pursuant to this 4.1[b][i] for such Fiscal Year and all prior Fiscal
Years and all Distributions made pursuant to 5.1[i] or 12.2[i] for
such Fiscal Year and all prior Fiscal Years, will be allocated to the
Members in proportion to each Member's share of such excess of [x]
over [y];
[ii] second, an amount of Net Loss equal to the excess of [x] all Net
Income previously allocated to the Members pursuant to 4.1[a][vii] or
4.1[a][xi] for such Fiscal Year and all prior Fiscal Years over [y]
the sum of all Net Loss previously allocated to the Members pursuant
to this 4.1[b][ii] for such Fiscal Year and all prior Fiscal Years
and all Distributions made pursuant to 5.1[f] or 12.2[h] for such
Fiscal Year and all prior Fiscal Years, will be allocated to the
Members in proportion to each Member's share of such excess of [x]
over [y];
[iii]third, an amount of Net Loss equal to the excess of [x] all Net
Income previously allocated to EWRD V pursuant to 4.1[a][vi] or
4.1[a][x] for such Fiscal Year and all prior Fiscal Years over [y]
the sum of all Net Loss previously allocated to EWRD V pursuant to
this 4.1[b][iii] for such Fiscal Year and all prior Fiscal Years and
all Distributions made pursuant to 5.1[e] or 12.2[g] for such Fiscal
Year and all prior Fiscal Years, will be allocated to EWRD V;
<PAGE>
[iv] fourth, an amount of Net Loss equal to the excess of [x] all Net
Income previously allocated to the Members pursuant to 4.1[a][v] for
such Fiscal Year and all prior Fiscal Years and the sum for all
Members of their Adjusted Capital Contribution Amount for Land and
their Adjusted Capital Contribution Amount for Capital Commitment,
over [y] all Net Loss previously allocated to the Members pursuant to
this 4.1[b][iv] for such Fiscal Year and all prior Fiscal Years, will
be allocated to the Members in proportion to each Member's share of
such excess of [x] over [y];
[v] fifth, an amount of Net Loss equal to the excess of [x] the sum of
all Net Income previously allocated to the Members pursuant to
4.1[a][iv] or 4[a][ix] for such Fiscal Year and all prior Fiscal
Years over [y] the sum of all Net Loss previously allocated to the
Members pursuant to this 4.1[b][v] for such Fiscal Year and all prior
Fiscal Years and all Distributions made pursuant to 5.1[c] or 12.2[e]
for such Fiscal Year and all prior Fiscal Years will be allocated to
the Members in proportion to each Member's share of such excess of
[x] over [y];
[vi] sixth, an amount of Net Loss equal to the excess of [x] the sum of
all Net Income previously allocated to the Members pursuant to
4.1[a][iii] for such Fiscal Year and all prior Fiscal Years and the
aggregate Adjusted Capital Contribution Amounts for Excess Capital
over [y] the sum of all Net Loss previously allocated to the Members
pursuant to this 4.1[b][vi] for such Fiscal year and all prior Fiscal
Years will be allocated to the Members in proportion to each Member's
share of such excess of [x] over [y]; and
[vii]seventh, any remaining Net Loss will be allocated to the Members in
proportion to their respective Economic Interests.
4.2 Company Minimum Gain Chargeback. Notwithstanding any other provision of
this Agreement to the contrary, if in any Fiscal Year or other period there is
a net decrease in the amount of the Company Minimum Gain, then the minimum gain
chargeback described in Regulations Section 1.704-2(f) and (g) will apply.
4.3 Minimum Gain Chargeback for Member Nonrecourse Debt. Notwithstanding any
other provision of this Agreement to the contrary other than 4.2 if in any year
there is a net decrease in the amount of the Member Minimum Gain, then the
partner minimum gain chargeback described in Regulations Section 1.704-1(i)(5)
will apply.
4.4 Qualified Income Offset. Notwithstanding any other provision of this
Agreement to the contrary (except 4.2 and 4.3 which will be applied first), if
in any Fiscal Year or other period a Member unexpectedly receives an
adjustment, allocation or distribution described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), which adjustment, allocation or
<PAGE>
distribution causes or increases a deficit balance in such Member's Adjusted
Capital Account, such Member will be specially allocated items of Income in
accordance with the qualified income offset provisions described in Regulations
Section 1.704-1(b)(2)(ii)(d).
4.5 Limit on Loss Allocations. Notwithstanding the provisions of 4.1, or any
other provision of this Agreement to the contrary, Net Loss (or items thereof)
will not be allocated to a Member if such allocation would cause or increase a
deficit balance in such Member's Adjusted Capital Account and will be
reallocated to the other Members, subject to the limitations of this 4.5.
4.6 Net Loss from Member Nonrecourse Debt. Any Loss attributable to Member
Nonrecourse Debt will be allocated to the Member who bears the economic risk of
loss with respect to such debt.
4.7 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year or other
period will be allocated among the Members in accordance with their respective
Economic Interests.
4.8 Section 754 Adjustments. To the extent an adjustment to the adjusted tax
basis of any Company asset under Sections 734(b) or 743(b) is required to be
taken into account in determining Capital Accounts under Regulations Section
1.704-1(b)(2)(iv)(m), the amount of the adjustment to the Capital Accounts will
be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis), and the gain or loss
will be specially allocated to the Members in a manner consistent with the
manner in which their Capital Accounts are required to be adjusted under
Regulations Section 1.704-1(b)(2)(iv)(m).
4.9 Reversal of Mandatory Allocations. In the event that any Income or Net Loss
is allocated pursuant to 4.2 through 4.5, subsequent Income or Net Loss (or
items thereof) will first be allocated (subject to 4.2 through 4.5) to the
Members in a manner which will result in each Member having a Capital Account
balance equal to that which would have resulted had the original allocation of
Income or Net Loss (or items thereof) pursuant to 4.2 through 4.5 not occurred.
4.10 Compliance with Code. The foregoing provisions of this Agreement relating
to the allocation of Net Income and Net Loss are intended to comply with
Regulations under Section 704(b) of the Code and will be interpreted and
applied in a manner consistent with such Regulations.
4.11 Tax Allocations -- Section 704(c). In accordance with Section 704(c) of
the Code and the related Regulations, income, gain, loss and deduction with
respect to any property contributed to the capital of the Company, solely for
tax purposes, will be allocated among the Members so as to take account of any
variation between the adjusted basis to the Company of the property for federal
income tax purposes and the initial Book Value of the property. If the Book
Value of any Company asset is adjusted as described in the definition of Book
Value, subsequent allocations of income, gain, loss and deduction with respect
to that asset will take account of any variation between the adjusted basis of
the asset for federal income tax purposes and its Book Value in the same manner
as under Section 704(c) and Regulations Section 1.704-3(b). Allocations under
this 4.11 are solely for purposes of federal, state and local taxes.
<PAGE>
4.12 Allocation on Transfer. If any interest in the Company is transferred, or
is increased or decreased by reason of the admission of a new Member or
otherwise, during any Fiscal Year, the Company will allocate Net Income or Net
Loss or items thereof to the Persons who were the holders of such interest
during such Fiscal Year by closing the books of the Company upon such transfer,
increase, or decrease, or, if the Members agree otherwise, under a different
method permitted by the Code.
ARTICLE 5: DISTRIBUTIONS
5.1 Distributions Generally. Subject to 5.2 and 5.5, after the payment of all
Company operating expenses payable at such time and all outstanding Company
obligations, other than Emergency Loans, payable at such time (or within 60
days thereafter), and after the establishment of working capital reserves by
the Manager under 3.11, the Company will distribute any cash it realizes from
operations as soon as practicable after its receipt of such cash, but the
Company need not make any Distributions if the total amount distributed would
be less than $50,000. All Distributions will be made to the Members in the
following order and priority to the extent of available funds:
[a] First, at such times as Booth Creek is entitled to receive the Booth Creek
Return pursuant to 5.6, an amount equal to the Unpaid Booth Creek Return
will be distributed to Booth Creek;
[b] Second, any outstanding Emergency Loans will be repaid to the Manager
(which is not a Distribution as such but is listed here to show the intent
of the Members as to the priority of payment of Emergency Loans vis-a-vis
Distributions);
[c] Third, an amount equal to the aggregate Unpaid Preferred Return for Excess
Capital of all Members as of the date of such Distribution will be
distributed to all of the Members in proportion to their Unpaid Preferred
Returns for Excess Capital as of the date of such Distribution;
[d] Fourth, an amount equal to the aggregate Adjusted Capital Contribution
Amounts for Excess Capital of all Members as of the date of such
Distribution will be distributed to all of the Members in proportion to
their Adjusted Capital Contribution Amounts for Excess Capital as of the
date of such Distribution;
[e] Fifth, an amount equal to the aggregate Unpaid Preferred Return for
Capital Commitment as of the date of such Distribution will be distributed
to EWRD V;
[f] Sixth, an amount equal to the aggregate Unpaid Preferred Return for Land
as of the date of such distribution will be distributed to EWRD V;
<PAGE>
[g] Seventh, subject to the last sentence of this 5.1, an amount equal to the
aggregate Adjusted Capital Contribution Amount for Capital Commitment as
of the date of such Distribution will be distributed to EWRD V;
[h] Eighth, subject to the last sentence of this 5.1, an amount equal to the
aggregate Adjusted Capital Contribution Amount for Land as of the date of
such Distribution will be distributed to EWRD V; and
[i] Ninth, to the Members in accordance with their respective Economic
Interests.
Except upon the Dissolution and Liquidation of the Company or the written
consent of Booth Creek, at no time prior to the seventh anniversary of this
Agreement may any Distribution be made to EWRD V pursuant to 5.1[g] or 5.1[h]
if such Distribution would reduce the Capital Commitment Account of EWRD V to
less than $10,000,000.
5.2 Special Distributions. For each Fiscal Year the Company will, during such
Fiscal Year or the immediately subsequent Fiscal Year, but not later than 90
days following the end of such Fiscal Year, use its reasonable best efforts to
distribute to each Member, with respect to such Fiscal Year, a distribution in
an amount equal to such Member's Presumed Tax Liability for such Fiscal Year (a
"Tax Distribution"). Any amount distributed pursuant to this 5.2 will be deemed
to be an advance distribution of amounts otherwise distributable to the Members
pursuant to 5.1 and will reduce the amounts that would subsequently otherwise
be distributable to the Members pursuant to 5.1 in the order they would
otherwise have been distributable. The Manager may distribute Tax Distributions
quarterly on an estimated basis prior to the end of a Fiscal Year, but if the
amounts distributed by the Manager as estimated Tax Distributions exceed the
greater of [i] the amount of Tax Distributions to which such Member is entitled
for such Fiscal Year; or [ii] the total amount of Distributions to which such
Member is entitled in such Fiscal Year; the Member will, within 15 days after
the tax return for such Fiscal Year is filed, return such excess to the Company
and such excess will be treated as a Distribution to such Member pursuant to
5.1 until it is returned.
5.3 Payment. All Distributions will be made to Members owning Ownership
Interests on the date of record, such date being the last day of the calendar
month preceding the date of Distribution, as reflected on the books of the
Company.
5.4 Withholding. If required by the Code or by state or local law, the Company
will withhold any required amount from Distributions to a Member for payment to
the appropriate taxing authority. Any amount so withheld from a Member will be
treated as a Distribution by the Company to such Member. Each Member agrees to
file timely any agreement that is required by any taxing authority in order to
avoid any withholding obligation that would otherwise be imposed on the
Company. If the amount required to be withheld with respect to a Member exceeds
the amount of Distributions payable to such Member, such excess will be treated
as a loan to the Member, payable within 10 days after such time that the
Company makes payment to the appropriate taxing authority.
<PAGE>
5.5 Distribution Limitation. Notwithstanding any other provision of this
Agreement, the Company will not make any Distribution to the Members if, after
the Distribution, the liabilities of the Company (other than liabilities to
Members on account of their Ownership Interests) would exceed the Fair Market
Value of the Company's assets or if the Distribution would otherwise likely
render the Company unable to pay its liabilities as they mature. With respect
to any property subject to a liability for which the recourse of creditors is
limited to the specific property, such property will be included in assets only
to the extent the property's Fair Market Value exceeds its associated
liability, and such liability will be excluded from the Company's liabilities.
5.6 Booth Creek Return. For purposes of determining when Booth Creek is
entitled to receive the Booth Creek Return (as defined below), the Manager will
establish an account which [a] has an initial balance of zero, [b] is increased
by EWRD V's Initial Contribution, Additional Contributions for Capital
Commitment which are used to pay Infrastructure Costs (excluding Excess
Infrastructure Costs), Preferred Return for Capital Commitment to the extent
that such Preferred Return arises from Additional Contributions for Capital
Commitment which are used to pay Infrastructure Costs (excluding Excess
Infrastructure Costs), and Preferred Return for Land, and [c] is decreased by
8% of the Gross Sales Price of each Unit sold. The balance of such account at
any given time is referred to in this Agreement as the "Aggregate Account
Balance." During any period in which the Aggregate Account Balance is equal to
zero, Booth Creek will be entitled to 8% of the Gross Sales Price of each Unit
sold during such period (the "Booth Creek Return"). Distributions of the Booth
Creek Return will be made in accordance with 5.1 and 12.2.
ARTICLE 6: MANAGEMENT
6.1 Management.
[a] Powers of the Manager. Subject to the provisions of the Act, subject to
the fiduciary obligations and limitations imposed upon it by law, and
except as otherwise provided in this Agreement, the Manager will have the
right, power and authority to do (or cause to be done) any and all things
necessary, proper, convenient or advisable to administer and carry on the
business and affairs of the Company. Except as otherwise provided in this
Agreement, no Person dealing with the Company will be required to inquire
into the authority of the Manager to take any action or make any decision.
Except for the Manager and except as otherwise provided in this Agreement,
no Member will take part in the operations, management or control of the
Company's business, transact any business in the Company's name, or have
the power to sign documents for or otherwise bind the Company. Except as
otherwise provided in this Agreement, the Manager has the rights,
authority and powers of a manager with respect to the Company's business
and assets as provided in the Act as in effect on the date this Agreement
becomes effective. If an event of Withdrawal occurs with respect to the
Manager, the other Members may appoint a new Manager upon a Vote of the
holders of a majority of the Economic Interests held by such other
Members.
<PAGE>
[b] General Duties. Within the resources available to the Company, the Manager
will administer the business and affairs of the Company in such a manner
as to develop, construct, market and sell the Project in an expeditious
and cost effective manner, subject to delays, cost overruns and other
events beyond its reasonable control, but in no event will the Manager be
liable for breach of such standard of care unless it engages in grossly
negligent or willful misconduct. The authority and obligations of the
Manager will include, without being limited to, the authority to, and the
duty to use reasonable efforts to:
[i] Implement the Master Development Plan and each Annual Plan in all
material respects;
[ii] Cause the conduct of the Company's business to comply in all material
respects with all applicable laws;
[iii]Cause the Company to pay all real property taxes, loans, professional
and service contract fees, insurance premiums and other obligations
of the Company as the same may become due and payable;
[iv] Maintain on behalf of the Company and the Project public liability,
fire, earthquake and extended coverage and other insurance in such
forms and amounts, and from such insurers as it reasonably deems
necessary, but in any event complying with the minimum insurance
requirements set forth in Exhibit M; and
[v] Promptly notify the Members in writing of [A] material financing
proposals, business opportunities or offers to purchase any of the
Property or the Projects; [B] the commencement by or against the
Company of any material Proceeding, as well as any settlement
proposals related to such Proceeding and any material changes in the
status of any such Proceeding from time to time; and [C] such other
matters as reasonably may be of interest to the Members, together
with any recommendations the Manager may have with respect to such
matters, but the Manager will not be liable to the Company or any
Member for damages for any failure to notify under this 6.1[b][v].
6.2 Actions or Decisions by the Manager. Without limiting the generality of
6.1, the following actions or decisions by (or affecting) the Company will be
made by the Manager, without any requirement of approval by any other Person:
[a] Subject to 6.4[g], [h], and [i], the borrowing of money and the issuance
of promissory notes or other evidences of indebtedness in connection with
such borrowings;
[b] Subject to 6.4[g]], the granting of a mortgage, deed of trust, pledge or
other lien on or security interest in all or any portion of the assets of
<PAGE>
the Company to secure the Company's obligations as debtor under any loans,
lines of credit, debt offerings, credit facilities, or other financing
arrangements established from time to time;
[c] The sale of developed parcels of property or Units in the ordinary course
of the Company's business consistent with any Annual Plan then in effect,
provided that Units may not be sold at prices lower than 80% of the list
price of such Units (as set forth in the then current Annual Plan), except
on an isolated basis;
[d] The acquisition of Ancillary Property;
[e] The acquisition of the Ten Year Option Property (if offered to the Company
pursuant to the Exclusive Agreement entered into pursuant to the Real
Estate Purchase Agreement);
[f] Subject to 6.3[l], the initiation and prosecution of any Proceeding in the
name of and on behalf of the Company or any Project LLC in the ordinary
course of business, including the enforcement of rights of the Company
against Booth Creek or its Affiliates under any of the agreements
contemplated by 6.2[i], the enforcement of rights against contractors,
subcontractors, vendors, suppliers, trade creditors, escrow agents with
respect to any escrow, and purchasers and tenants of any of the Units;
[g] The voluntary Dissolution: [i] of any Project LLC after the Project
Completion Date with respect to such Project LLC or [ii] of the Company
after the Project Completion Date of all Projects;
[h] The purchase by the Company of the Ownership Interests of any Member or
Transferee, on such terms as are determined by the Manager and such Member
or Transferee;
[i] The entry into and performance and enforcement, on behalf of the Company,
of agreements, if any, entered into with Booth Creek or its Affiliates;
[j] The contribution of parcels of the Property, the Ancillary Property, and
the Ten Year Option Property to one or more Project LLC's in exchange for
ownership interests in such Project LLC, and the allocation (as determined
by the Manager in its reasonable discretion) of Land Costs, Infrastructure
Costs and other costs to such Project LLC;
[k] The payment to EWRD V of reimbursable expenses pursuant to 6.9 and a
management fee pursuant to 3.9;
[l] Subject to 6.3[b] and 6.4[k] and [l], the development of the Property in
accordance with the Master Development Plan;
[m] With respect to each Project LLC, the entry into and performance of a
Sub-Management Agreement with East West Partners, Inc., an Affiliate of
<PAGE>
EWRD V, in the form attached as Exhibit T, and a Listing Agreement with an
Affiliate of EWRD V, on terms customary for brokerage agreements relating
to properties of the type and in the area held by the pertinent Project
LLC at the time such listing agreement is executed, including terms
regarding real estate brokerage commissions payable to the broker; and
[n] The management of the day-to-day operation of the Company, in a manner not
inconsistent with the Annual Plan then in effect.
6.3 Actions or Decisions Requiring Reasonable Consent. The following actions or
decisions by (or affecting) the Company are subject to the approval of Booth
Creek, but such approval may not be unreasonably withheld, conditioned or
delayed:
[a] The engagement of one or more Persons to prepare a development and zoning
plan and to obtain all requisite government approvals with respect to the
possible development of the Ten Year Option Property;
[b] Subject to 6.4[k] and [l], any changes to the Master Development Plan that
affect in any material respect the exterior design, mix, sizes and number
of Units, lift access, trail location, parking, and the boundaries of the
Ancillary Property;
[c] The selection and removal of general contractors to construct the
Projects;
[d] The approval of each Annual Plan (and amendments to such Annual Plans) as
provided in 6.11 and 6.12;
[e] In the absence of an Emergency, causing the Company to exceed expenditures
in any Annual Plan with respect to any Fiscal Year by more than 20% in the
aggregate;
[f] The development of the Ten Year Option Property, including the trading of
density from existing development parcels other than the Village Core;
[g] Dissolution prior to the Project Completion Date of all Project LLC's;
[h] The making of loans by the Company in connection with the Projects or,
subject to 6.4[h], the guaranty by the Company of obligations of third
parties in connection with the Projects;
[i] The selection and removal of the accountants chosen to conduct annual
audits of the Company's financial statements under 10.6; initially, the
Company's accountants will be Arthur Andersen & Co.;
[j] The general sales price structure (that is, the range of list prices of
the Units);
<PAGE>
[k] The sale of Units at a price lower than 80% of the lowest end of the range
of list prices of such Units (as set forth in the then current Annual
Plan), other than on an isolated basis; and
[l] The initiation and prosecution of any Proceeding against a California
governmental agency or otherwise not in the ordinary course of the
Company's business.
6.4 Actions or Decisions Requiring Discretionary Consent of Booth Creek. The
following actions or decisions by (or affecting) the Company are subject to the
approval of Booth Creek, which Booth Creek may grant or withhold in its sole
and absolute discretion (subject to a duty to act in good faith):
[a] The sale, exchange or other disposition of any, or of all or substantially
all, of the Company's assets, substantially as an entirety, other than as
permitted in 6.2[c];
[b] The expansion of the Company's business beyond its principal purpose, or
beyond related or incidental activities;
[c] The payment of compensation to any Member or Affiliate of a Member for
services rendered to the Company, other than [i] such Member's share of
Income, [ii] payments made pursuant to 6.9 and 3.9, or [iii] as otherwise
provided in this Agreement;
[d] The admission of an additional Member other than a Permitted Transferee
pursuant to Article 13;
[e] The distribution of any assets in kind;
[f] Any transaction between the Company and EWRD V or any Affiliate of EWRD V
(other than a Project LLC);
[g] The granting of any mortgage, deed of trust or other security interest in
[i] any parcel included in the Village Core, unless in connection with the
development of that specific parcel or [ii] the Essential Ski Property;
[h] Subjecting to any recourse of any third party [i] any parcel in the
Village Core (subject to customary carve-outs such as fraud and breach of
environmental representations and warranties or unless in connection with
the development of that specific parcel) or [ii] the Essential Ski
Property;
[i] Any Borrowing or Encumbrance [A] to the extent such Borrowing or
Encumbrance is entered into for any purpose other than [i] preventing or
mitigating an Emergency and is in accordance with 3.12, or [ii] obtaining
funds for construction of a Project (or the refinancing of a construction
loan with another loan if the proceeds of such other loan are used to fund
<PAGE>
construction costs) or [B] entered into for the purpose of obtaining funds
for the construction of a Project, unless [i] the balance of the Capital
Commitment Account has been equal to the Capital Commitment at any point
in time, [ii] Booth Creek has waived the Capital Commitment, or [iii] such
construction financing relates to a particular Project, no Property other
than the Property associated with such Project is subjected to a mortgage,
deed of trust, pledge or lien in connection with the development of such
Project, and the aggregate amount outstanding under all construction loans
(after giving effect to the construction loan to be entered into) does not
exceed three times the balance of EWRD V's Capital Commitment Account at
the time such construction loan is entered into;
[j] The acquisition of real property not in accordance with the Annual Plan
then in effect which would result in a material expansion of the scope of
the Projects, such as the acquisition of real property to construct a golf
course;
[k] The development of any Essential Ski Property;
[l] Any changes to the Master Development Plan that affect in any material
respect, within the Village Core, the exterior design, mix, sizes and
number of Units, lift access, trail location and parking;
[m] The sale of undeveloped parcels of the Property or Ten Year Option
Property; and
[n] Any decision to cause the operating agreement for any Project LLC to be,
in any material respect, other than in the form of Exhibit J, or to cause
any Person other than EWRD Parties, the Company and any Persons admitted
pursuant to 3.2[b] to hold interests in such Project LLC (except for
transferees admitted as members in accordance with the provisions of such
operating agreement), or to cause the Company's economic interest in such
Project LLC to be less than 80% (except as contemplated by 3.2[b]);
6.5 Amendment of Agreement.
[a] Notwithstanding anything to the contrary contained in 6.1, 6.2, 6.3, and
6.4, the Manager will have the power, without any requirement of approval
by any other Person, to amend this Agreement as may be required to reflect
the admission, substitution, termination, or Withdrawal of Members in
accordance with this Agreement; and
[b] Notwithstanding anything to the contrary contained in 6.1, 6.2, 6.3 and
6.4, and except as provided in 3.1[d], 3.4, 6.5[a], 13.9[b][iv] and
13.11[b], this Agreement will not be amended without the affirmative Vote
of all Members, duly evidenced by a writing signed by each Member.
[c] Any duly adopted amendment to this Agreement is binding upon, and inures
to the benefit of, each Person who holds an Ownership Interest at the time
<PAGE>
of such amendment, without the requirement that such Person sign the
amendment or any republication or restatement of this Agreement.
6.6 Administration and Termination of Affiliate Contracts. Any material
decision or action of the Company relating to the enforcement of any contract
between the Company and any Affiliate of EWRD V will be made by Booth Creek in
its reasonable discretion, acting alone (subject to a duty to act in good
faith). Regardless of any terms in any such contract to the contrary, each
contract between the Company and an Affiliate of EWRD V will, if Booth Creek so
elects by Notice to EWRD V, terminate immediately upon [a] the commission of
any Material Manager Breach by EWRD V or any of its Permitted Transferees (but
if the Break-Up Remedy is exercised in connection with such Material Manager
Breach, contracts may be terminated by Booth Creek only to the extent such
contracts involve the Village Core or the Essential Ski Property); [b] the
Dissolution of the Company pursuant to 11.1; [c] the occurrence of an event of
Withdrawal suffered by EWRD V; or [d] upon an East West Change of Control.
Termination of any such Affiliate contract pursuant to this 6.6 will be without
liability whatsoever to the Company, regardless of anything to the contrary in
such Affiliate contract.
6.7 Effect of Dissolution, Resignation or Retirement. If any Member voluntarily
dissolves, resigns from or retires from the Company, such withdrawing Member
will, without further act, become a Transferee of such Member's Ownership
Interest (with the limited rights of a Transferee as set forth in 13.6).
6.8 Other Activities. As a mutual inducement to cause the Members to enter into
this Agreement, EWRD V, Booth Creek and certain of their respective Affiliates
and other Persons have entered into the Master Non-Competition Agreement in the
form of Exhibit I.
6.9 Payment of Management Costs. The Company will pay for all direct,
out-of-pocket costs and expenses (including the On-Site Management Allowance)
reasonably incurred by the Manager on behalf of the Company in connection with
the management of the Company's affairs, but not the general and administrative
expense of the Manager or any of its Affiliates.
6.10 Master Development Plan. The Members have approved the
Master Development Plan of the Company which contains the initial
Annual Plan and is attached as Exhibit G.
6.11 Annual Plan. The Manager will cause to be prepared and delivered to the
Members, on or before November 15 of each Fiscal Year, an Annual Plan for the
next Fiscal Year for review and approval by the Members. Each such Annual Plan
will include a narrative section discussing the material features of the Annual
Plan, a projection of the development, construction, marketing and sales
operations of the Company (including projected completion dates) for the next
succeeding Fiscal Year and each quarter thereof and a narrative section
comparing the projected budgets contained within such Annual Plan to the prior
Fiscal Year's actual results (to the extent available). Each budget contained
in the Annual Plan will be prepared in a format and level of detail
substantially equivalent to Exhibit R. As soon as practicable after any
<PAGE>
proposed Annual Plan is delivered to each Member, but no later than 20 business
days after receipt by each Member, each Member will provide the Manager with
its comments regarding the proposed Annual Plan. A failure to respond within
such 20 business day period after receipt by each Member of the proposed Annual
Plan will constitute a waiver of such Member's right to comment regarding such
Annual Plan and will constitute such Member's acceptance of such Annual Plan.
The proposed Annual Plan will contain substantially the following statement, in
bold face type and in all capital letters: "A FAILURE TO RESPOND TO THE MANAGER
WITH COMMENTS CONCERNING THIS PROPOSED ANNUAL PLAN WITHIN 20 BUSINESS DAYS
AFTER RECEIPT OF THIS PROPOSED ANNUAL PLAN WILL CONSTITUTE A WAIVER OF THE
RIGHT TO COMMENT ON SUCH PROPOSED ANNUAL PLAN AND WILL CONSTITUTE ACCEPTANCE OF
SUCH PROPOSED ANNUAL PLAN." If a Member does not provide comments to the
Manager regarding the proposed Annual Plan, then such proposed Annual Plan will
be deemed to constitute the Annual Plan for the Fiscal Year in question,
subject to amendment from time to time as provided in 6.12. No later than 20
business days after receipt of each Member's comments regarding the Annual
Plan, the Manager will reasonably respond to such comments. The Manager and the
Members will use their reasonable best efforts to resolve any questions with
respect to revisions to the proposed operating plan and to agree upon an Annual
Plan for the Fiscal Year in question prior to the beginning of the Fiscal Year
to which such Annual Plan relates. If the Manager and the Members cannot
resolve such questions prior to the commencement of the Fiscal year to which
the Annual Plan in question relates, the Manager will continue to manage,
maintain, supervise and direct the Company in accordance with its reasonable,
good faith belief as to the best interests of the Company.
6.12 Amendments to Annual Plan. If any change of circumstance occurs during any
Fiscal Year that the Manager reasonably believes makes it necessary to increase
expenditures under any Annual Plan by more than 20% in the aggregate, the
Manager will prepare a proposed amended Annual Plan, as the case may be, and
will deliver it to the Members, at which time the procedures applicable to the
approval of an Annual Plan under 6.11 will apply (as if such proposed amended
Annual Plan were for the entire Fiscal Year).
6.13 Off-Site Mitigation. The costs of off-site mitigation required by any
governmental authority as a condition to development of the Property will be
borne by the Company, but to the extent such mitigation includes a requirement
to construct employee housing, Booth Creek will use its best efforts to convey
to the Company (or otherwise make available for such housing), at no cost to
the Company, land which is owned by Booth Creek, is sufficient for the
construction of such housing, and is at a location reasonably satisfactory to
Booth Creek.
ARTICLE 7: MEETINGS OF MEMBERS
7.1 Special Meetings. Meetings of the Members, for any purpose or purposes, may
be called at any time by any Member, but will in any case be held quarterly.
<PAGE>
7.2 Place. The Manager may designate any place within Eagle County, Colorado,
as the place of meeting for any meeting of the Members. If no designation is
made, or if a special meeting is otherwise called, the place of meeting will be
the Company's registered office in Colorado.
7.3 Notice. Notice of any meeting must be given not less than 5 days nor more
than 30 days before the date of the meeting to all Members, but in case of an
Emergency, such meeting may be called on one (1) Business Day's notice. Such
Notice must state the place, day, and hour of the meeting and the purpose for
which the meeting is called.
7.4 Waiver of Notice. Any Member may waive, in writing, any Notice required to
be given to such Member, whether before or after the time stated in such
Notice. Any Member who signs minutes of action (or written consent or
agreement) will be deemed to have waived any required Notice with respect to
such action.
7.5 Record Date. For the purpose of determining Members entitled to Notice of
or to vote at any meeting of Members, the date on which Notice of the meeting
is first given will be the record date for the determination of Members. Any
such determination of Members entitled to vote at any meeting of Members will
apply to any adjournment of a meeting.
7.6 Quorum. A quorum at any meeting of Members will consist of Members who
together own sufficient Ownership Interests to take the action proposed to be
taken at the pertinent meeting. Any meeting at which a quorum is not present
may adjourn the meeting to a place, day and hour without further Notice.
7.7 Manner of Acting. If a quorum is present at any annual or special meeting
of the Company, the affirmative Vote of Members as set forth in Article 6 will
be the act of the Members.
7.8 Proxies. At any meeting of Members, a Member may vote in person or by
written proxy given to another Member. Such proxy must be signed by the Member
or by a duly authorized attorney-in-fact and filed with the Company before or
at the time of the meeting. No proxy will be valid after eleven months from the
date of its signing unless otherwise provided in the proxy. Attendance at the
meeting by the Member giving the proxy will revoke the proxy during the period
of attendance.
7.9 Meetings by Telephone. Members may participate in a meeting by means of
conference telephone or similar communications equipment by which all Members
participating in the meeting can hear each other at the same time. Such
participation will constitute presence in person at the meeting and waiver of
any required Notice.
7.10 Action Without a Meeting. Any action required or permitted to be taken at
a meeting of Members may be taken without a meeting if the action is evidenced
by one or more written consents describing the action taken, signed by Members
owning total Economic Interests sufficient for the particular action as set
<PAGE>
forth in Article 6. Action so taken is effective when sufficient Members
approving the action have signed the consent, unless the consent specifies a
later effective date. The Members who take any such action will promptly notify
any Members not executing any such written consent concerning the action so
taken by the Members.
ARTICLE 8: LIABILITY OF A MEMBER
8.1 Limited Liability. Except as otherwise provided in the Act, the debts,
obligations and liabilities of the Company (whether arising in contract, tort
or otherwise) will be solely the debts, obligations and liabilities of the
Company, and neither the Manager nor any Member of the Company (including any
Person who formerly held such status) is liable or will be obligated personally
for any such debt, obligation or liability of the Company solely by reason of
such status. No individual trustee, officer, director, shareholder, member,
manager, partner, employee, agent or attorney of any entity Member, in its
individual capacity as such, will have any personal liability for the
performance of any obligation of such Member under this Agreement solely by
reason of such status.
8.2 Capital Contribution. Each Member is liable to the Company for any Capital
Contribution or Distribution that has been wrongfully or erroneously returned
or made to such Person in violation of the Act, the Certificate or this
Agreement. No Member is liable to the Company to make any Additional
Contribution, but in the case of a Funding Default, Booth Creek will have the
remedies set forth in 3.1[d] and 13.12[a].
8.3 Capital Return. If any Member receives a Distribution from the Company, the
Member will have no liability under the Act or other applicable law for the
amount of the Distribution after the expiration of three years from the date of
the Distribution, unless an action to recover the Distribution from the Member
is commenced prior to the expiration of the three-year period and an
adjudication of liability against the Member is made in such action. The amount
of any Distribution returned to the Company by a Member or paid by a Member for
the account of the Company or to a creditor of the Company will be added to the
account or accounts from which it was subtracted when it was distributed to the
Member.
8.4 Reliance. Any Member (including the Manager) will be fully protected in
relying in good faith upon the records of the Company and upon such
information, opinions, reports or statements by [a] any of the Company's other
Members, employees or committees or [b] any other Person who has been selected
with reasonable care as to matters such Person reasonably believes are within
such other Person's professional or expert competence. Matters as to which such
reliance may be made include the value and amount of assets, liabilities,
Income and Losses of the Company, as well as other facts pertinent to the
existence and amount of assets from which distributions to Members might
properly be made.
ARTICLE 9: INDEMNIFICATION
<PAGE>
9.1 Indemnification by Company. To the maximum extent permitted by law, the
Company will defend, indemnify and hold harmless the Members (including the
Manager, in its capacity as a manager) and their respective Affiliates, and the
partners, members, shareholders, directors, officers, and legal counsel of such
Members and their Affiliates, and may defend, indemnify and hold harmless the
agents and employees of any of the foregoing (each such Person so indemnified,
an "Indemnitee") from and against any and all liabilities, losses, claims,
judgments, fines, settlements and damages incurred by the Indemnitee or by the
Company arising out of any claim based upon any acts performed or omitted to be
performed by the Indemnitee or by the Company in connection with the
organization, management, business, operations or property of the Company,
including costs, expenses and attorneys' fees (which may be paid as incurred)
expended in the settlement or defense of any such claims, except to the extent
that the claim giving rise to such indemnification rights: [a] arises out of
gross negligence (which for purposes of this Agreement means an act or failure
to act with reckless disregard of the consequences of such act or failure to
act), [b] willful misconduct, [c] a Material Manager Breach by the Manager, or
[d] a material breach of this Agreement by any Member. Any amounts indemnified
pursuant to this 9.1 will be recoverable only from the assets of the Company
and not from the Members. Notwithstanding the foregoing, no Member or Affiliate
of a member will be indemnified under this Agreement for any such liabilities,
losses, claims, judgments, fines, settlements or damages incurred [a] in its
capacity as an independent contractor of the Company (the indemnification
provisions, if any, in the independent contractor agreement between such Person
and the Company will apply instead) or [b] as a result of any claim brought
against it by any of its shareholders, partners, members or Affiliates, or in
the case of EWRD V, brought against it by any EWRD Parties who may, directly or
indirectly, be members of a Project LLC.
9.2 Expense Advancement. With respect to the reasonable expenses incurred by
the Manager or a Member who is a party to a Proceeding, the Company will
provide funds to such Person in advance of the final disposition of the
Proceeding if [a] such Person furnishes the Company with such Person's written
affirmation of a good-faith belief that it has met the standard of conduct
described in 9.1, [b] such Person agrees in writing to repay the advance if it
is determined that it has not met such standard of conduct, and [c] the Company
determines that, based on then known facts, indemnification is permissible
under this Article.
9.3 Insurance. The indemnification provisions of this Article do not limit a
Member's or the Manager's right to recover under any insurance policy
maintained by the Company. If, with respect to any loss, damage, expense or
liability described in 9.1, any Member or the Manager receives an insurance
policy indemnification payment which, together with any indemnification payment
made by the Company, exceeds the amount of such loss, damage, expense or
liability, then such Person will immediately repay such excess to the Company.
ARTICLE 10: ACCOUNTING AND REPORTING
<PAGE>
10.1 Fiscal Year. For income tax and accounting purposes, the Fiscal Year of
the Company will end on December 31 in each year (unless otherwise required by
the Code).
10.2 Accounting Method. For income tax and accounting purposes, the Company
will use the accrual method of accounting (unless otherwise required by the
Code).
10.3 Tax Classification. Notwithstanding any other provision of this Agreement,
no Member, Manager or employee of the Company may take any action (including,
but not limited to, the filing of a U.S. Treasury Form 8832 Entity
Classification Election) which would cause the Company to be characterized as
an entity other than a partnership for federal income tax purposes without the
affirmative unanimous Vote of the Members.
10.4 Returns. The Company will use reasonable efforts to cause the preparation
and timely filing of all tax returns required to be filed by the Company
pursuant to the Code, as well as all other tax returns required in each
jurisdiction in which the Company does business.
10.5 Reports. The Manager, at the expense of the Company, will use reasonable
efforts to cause to be prepared and distributed to the Members the following
reports:
[a] Monthly: an income statement and a balance sheet, prepared in accordance
with GAAP, within seven (7) business days after the last day of each month
on a monthly and year-to-date basis.
[b] Quarterly: an income statement, balance sheet, a statement of cash flows
and statements of the Company's equity on a quarterly basis, prepared in
accordance with GAAP, within ten (10) business days following the last day
of each calendar quarter.
[c] Other: From time to time and with reasonable promptness, such other
financial statements, budgets, plans, schedules, narrative information,
and further information in respect of the business, affairs and financial
condition of the Company as any Member may reasonably request.
[d] Annual: unaudited annual financial statements prepared on an annual basis
within ten (10) business days after the last day of each year.
10.6 Annual Audit.
<PAGE>
[a] Each Fiscal Year, an audit will be made by the Company's accountants at
the expense of the Company. The audit will be conducted in accordance with
generally accepted auditing standards, and will cover all of the assets,
properties, liabilities and net worth of the Company and the Project LLC's
as well as its and their dealings, transactions and operations during such
Fiscal Year, together with all other matters customarily included in such
accountings and audits or as may be reasonably required by the Manager.
Any Member will have the right to audit the Company's financial statements
and those of any Project LLC. If such an audit occurs, the Member
requesting the audit will have the books of the Company or the Project LLC
audited or re-audited, as the case may be, at that Member's expense, but
if the audit or re-audit discloses a variance of 5% or greater in the net
income or loss of the Company or the Project LLC, from that specified in
the financial statements for the period audited, the audit or re-audit
will be a Company expense.
[b] At the expense of the Company, within 90 days after the last day of each
Fiscal Year, the Manager will furnish the Members with a copy of such
audited financial statements promptly after they become available.
10.7 Books and Records.
[a] The following books and records of the Company will be kept at its
registered office in Colorado: [i] a current list, set forth in
alphabetical order, of the full name and last known business, residence or
mailing address of each Member, [ii] the original of the Certificate and
of this Agreement, as amended (as well as any signed powers of attorney
pursuant to which any such document was executed), [iii] a copy of the
Company's federal, state and local income tax returns and reports, and
annual financial statements of the Company, for the six most recent years,
[iv] minutes, or minutes of action or written consent, of every annual and
special meeting of the Company and [v] copies of this Agreement, all
amendments to this Agreement and all amended and restated version of this
Agreement and copies of any prior operating agreement pertaining to the
Company but no longer in effect, and [vi] copies of any writings,
permitted or required with respect to any Member's obligation to make any
Capital Contributions.
[b] The Manager, at the Company's expense, will keep at the Company's
principal office separate books of account for the Company which will show
a true and accurate record of all costs and expenses incurred, all credits
made and received and all income derived in connection with the operation
of the Company business in accordance with generally accepted accounting
principles consistently applied as to the Company's financial position and
results of operations.
[c] Each Member will, at its sole expense, have the right, at any time without
Notice to the other, to examine, copy and audit the Company's books and
records during normal business hours.
<PAGE>
[d] All books, records (including bills and invoices), reports and returns of
the Company required by this Article 10 will be maintained in a manner and
form reasonably determined by the Manager.
10.8 Information. Each Member has the right, from time to time and upon
reasonable demand, to obtain from the Company: [a] a current list of the full
name and last known business, residence or mailing address of each Member, [b]
a copy of the Certificate and of this Agreement, as amended (as well as any
signed powers of attorney pursuant to which any such document was executed),
[c] a copy of the Company's federal, state and local income tax returns and
reports and annual financial statements of the Company, for the six most recent
years, [d] minutes, or minutes of action or written consent, of every meeting
of the Members of the Company, [e] true and full information regarding the
amount of money and a description and statement of the agreed value of any
other property or services contributed or to be contributed by each Member, and
the date on which each became a Member, [f] true and full information regarding
the status of the business and financial condition of the Company, and [g]
other information regarding the affairs of the Company as is just and
reasonable. Any demand by a Member under this 10.8 must be by Notice to the
Company. Any inspection or copying of the Company's books and records under
this 10.8 will be during normal business hours, and at the expense of the
Member making the demand.
10.9 Banking. The Company may establish one or more bank or financial accounts
and safe deposit boxes. The Company may authorize one or more individuals to
sign checks on and withdraw funds from such bank or financial accounts and to
have access to such safe deposit boxes, and may place such limitations and
restrictions on such authority as the Company deems advisable.
10.10 Tax Matters Partner.
[a] The Manager is hereby designated tax matters partner ("Tax Matters
Partner") as defined in Section 6231(a)(7) of the Code. The Tax Matters
Partner will take no action (other than ministerial action or any action
specifically permitted under this 10.10) without the prior approval of the
Members. The Tax Matters Partner will not be required to take any action
or incur any expenses for the prosecution of any administrative or
judicial remedies in its capacity as Tax Matters Partner unless the
Members agree on a method of sharing expenses incurred in connection with
the prosecution of such remedies. As long as the Tax Matters Partner is
not negligent and acts in good faith pursuant to instructions it receives
from the Members or from the Company, the Company will indemnify and hold
harmless the Tax Matters Partner from and against any and all liabilities
incurred by the Tax Matters Partner in connection with any activities or
undertakings taken by it in its capacity as Tax Matters Partner.
[b] The Tax Matters Partner will be responsible for undertaking the statutory
responsibilities of the "tax matters partner" pursuant to Subchapter C of
Chapter 63 of Subtitle F of the Code, as set forth in the Code and the
Treasury Regulations. The Tax Matters Partner will fully comply with the
requirements of Temporary Treasury Regulations Section 301.6223(g)-1 and
<PAGE>
any successor provision, including providing each Member with notices of
the following:
[i] The Tax Matters Partner will, within five (5) business days after the
mailing by the Service of the notice specified in Section 6223(a)(1),
forward a copy of that notice to each Member.
[ii] The Tax Matters Partner will, within five (5) business days after the
mailing by the Service of the notice specified in Section 6223(a)(2),
forward a copy of that notice to each Member.
[iii]The Tax Matters Partner will promptly furnish to each Member
information with respect to the following (in the case of any action,
within five (5) business days of taking that action):
[A] Closing conference with the examining agent;
[B] Proposed adjustments, rights of appeal, and requirements for
filing of a protest;
[C] Time and place of any appeals conference;
[D] Acceptance by the Internal Revenue Service (the "Service");
[E] Consent to the extension of the period of limitations with
respect to all Members;
[F] Filing of a request for administrative adjustment (including a
request for substituted return treatment under Section
301.6227(b)-2T) on behalf of the Company;
[G] Filing by the Tax Matters Partner or any other Member of any
petition for judicial review under Section 6226 or 6228(a);
[H] Filing of any appeal with respect to any judicial determination
provided for in Section 6226 or 6228(a), and;
[I] Final judicial redetermination.
[c] Except as otherwise provided in the Code, the tax treatment of any Company
item will be determined at the Company level.
<PAGE>
[d] Any Member has the right to participate in any administrative proceeding
relating to the determination of Company items at the Company level.
[e] Members will furnish the Tax Matters Partner with such information
(including information specified in Section 6230(e) of the Code) as it may
reasonably request to permit it to provide the Internal Revenue Service
with sufficient information to allow proper notice to the Members in
accordance with Section 6223 of the Code.
[f] Every Member will, on the Member's return, treat a Company tax item in a
manner which is consistent with the treatment of such item on the
Company's return unless the Member has given the Company prior written
notice of inconsistent treatment identifying the inconsistency. If any
Member intends to file a Notice of Inconsistent Treatment under Section
6222(b) of the Code, that Member will, at least ten (10) business days
prior to the filing of that notice, notify the other Members of the intent
and the manner in which such Member's intended treatment of a Company item
is (or may be) inconsistent with the treatment of that item by the
Company.
[g] The Tax Matters Partner will not enter into any extension of the period of
limitations for making assessments on behalf of any other Member without
first securing the written consent of that Member.
[h] No Member will file, pursuant to Section 6227 of the Code, a Request for
Administrative Adjustment of Company items for any Company taxable year
without first notifying all other Members. If all other Partners agree
with the requested adjustment, the Tax Matters Partner will file the
Request for Administrative Adjustment on behalf of the Company. If
unanimous consent is not obtained within 30 days (or, if shorter, within
the period required to timely file the Request for Administrative
Adjustment), any Member, including the Tax Matters Partner, may file a
Request for Administrative Adjustment on its own behalf.
[i] The Tax Matters Partner will not, in its capacity as Tax Matters Partner,
file a petition under Section 6226, 6228, 6234 or other Sections of the
Code with respect to any Company item, or other tax matters involving the
Company, without the unanimous consent of all of the Members. Any Member
intending to file a petition under Sections 6226, 6228, 6234 or other
Sections of the Code with respect to any Company item, or other tax
matters involving the Company, will notify the other Members at least ten
(10) business days in advance of filing of that intention and the nature
of the contemplated proceeding. If any Member intends to seek review of
any court decision rendered as a result of the proceeding instituted under
the preceding part of this 10.10, that Member will notify the other
Members of that intended action at least ten (10) business days in advance
of filing a petition for review.
[j] The Tax Matters Partner will not bind the other Members to a settlement
agreement without obtaining the written concurrence of the other Members
that would be bound by that agreement. Any other Member that enters into a
<PAGE>
settlement agreement with the Secretary of the Treasury with respect to
any Company items, as defined by Section 6231(a)(3) of the Code, will
notify the other Members of that settlement agreement and its terms within
ten (10) business days from the date of settlement.
[k] The provisions of this 10.10 will survive the termination of the Company
or the termination of any Member's interest in the Company and will remain
binding on the Members for a period of time necessary to resolve any and
all matters regarding the federal and, if applicable, state income
taxation of the Company. The Company will retain its records with respect
to each Fiscal Year until the expiration of the period within which
additional federal or state income tax may be assessed for such year.
10.11 No Partnership. The classification of the Company as a partnership will
apply only for federal (and, as appropriate, state and local) income tax
purposes. This characterization, solely for tax purposes, does not create or
imply a general partnership between the Members for state law or any other
purpose. Instead, the Members acknowledge the status of the Company as a
limited liability company formed under the Act.
10.12 Confidentiality. The Members agree to keep confidential, and to cause
their respective Affiliates to keep confidential, all books, records, financial
statements, tax returns, budgets, business plans and projections of the
Company, all other information concerning the business, affairs and properties
of the Company, and all of the terms and provisions of this Agreement, subject
to [a] any obligation to comply any applicable law, any rule or regulation of
any legal authority or securities exchange or any subpoena or other legal
process to make information available to the Persons entitled to possess it,
and [b] disclosure to attorneys, accountants, financial advisors, lenders and
other Persons who receive such information subject to an obligation to hold it
in confidence. The Members (and their Affiliates) will maintain such
confidentiality to the same degree as a reasonably prudent person would, and
such obligation will continue until such time, if any, as any such confidential
information either is, or becomes, a matter of public knowledge.
ARTICLE 11: DISSOLUTION
11.1 Dissolution. Dissolution of the Company will occur upon the first to occur
of [a] the decision of the Manager, in accordance with 6.2[g] or 6.3[g]; [b] an
event of Withdrawal of a Member and the election of the remaining Members to
dissolve in accordance with 11.3; [c] the sale, transfer or other disposition
of all of the Property or the Projects upon the receipt of the consideration
(including collection of any promissory notes or other evidences of
indebtedness received as consideration) paid for such sale, transfer or other
disposition; [d] the election of Booth Creek or EWRD V, in connection with an
election by Booth Creek to exercise the Break-Up Remedy under 13.9[b][v]; and
[e] the decision of all of the Members to dissolve the Company.
11.2 Events of Withdrawal. An event of Withdrawal of a Member occurs when any
of the following occurs:
<PAGE>
[a] With respect to any Member, upon the voluntary withdrawal, retirement or
resignation of the Member by Notice to the Company;
[b] With respect to any Member that is a corporation, upon filing of articles
of dissolution of the corporation;
[c] With respect to any Member that is a partnership, a limited liability
company or a similar entity, upon dissolution and liquidation of such
entity (but not solely by reason of a technical termination under Section
708(b)(1)(B) of the Code);
[d] With respect to any Member that is a trust, upon termination of the trust;
[e] With respect to any Member, the Bankruptcy of the Member; or
[f] Any other event which terminates the continued membership of a Member in
the Company; other than a Transfer to a Permitted Transferee.
Within 10 days following the happening of any event of Withdrawal with respect
to a Member, such Member must give Notice of the date and the nature of such
event to the Company.
11.3 Continuation. Subject to 11.1[b], in the event of Withdrawal of a Member,
the Company will be continued, and all Members will have the right to cause the
Company to be continued, unless the remaining Members unanimously elect to
dissolve. If the Company is so continued, with respect to any Member as to
which an event of Withdrawal has occurred, such Member or such Member's
successor-in-interest (as the case may be) will, without further act, cease to
be a Member and will have only those limited rights afforded a Transferee of an
Ownership Interest pursuant to 13.6.
11.4 Payment for Rights. The Company agrees to pay $100 to any Member (or to
such Member's successor-in-interest, as the case may be) as to whom an event of
Withdrawal occurs, and each Member agrees that if an event of Withdrawal occurs
with respect to it, it will accept such payment, as full consideration for the
change in rights applicable to it as a result of 11.3. Such payment will be
made not later than one year after the event of Withdrawal occurs.
ARTICLE 12: LIQUIDATION
12.1 Liquidation. Upon Dissolution of the Company, the Company will immediately
proceed to wind up its affairs and liquidate pursuant to this Article 12. The
Manager or if the Manager fails to act, any Person appointed by Members owning
more than 50% of the Economic Interests held by all Members other than the
Manager, will act as the liquidating trustee. The winding up and Liquidation of
the Company will be accomplished in a businesslike manner as determined by the
<PAGE>
liquidating trustee. A reasonable time will be allowed for the orderly
Liquidation of the Company and the discharge of liabilities to creditors so as
to enable the Company to minimize any losses attendant upon Liquidation. Any
gain or loss on disposition of any Company assets in Liquidation will be
allocated to Members in accordance with the provisions of Article 4. Any
liquidating trustee is entitled to reasonable compensation for services
actually performed, and may contract for such assistance in the liquidating
process as such Person deems necessary or desirable. Until the filing of a
certificate of cancellation under 12.6, and without affecting the liability of
the Members and without imposing liability on the liquidating trustee, the
liquidating trustee may settle and close the Company's business, prosecute and
defend suits, dispose of its property, discharge or make provision for its
liabilities, and make Distributions in accordance with the priorities set forth
in this Article.
12.2 Priority of Payment. The assets of the Company will be distributed in
Liquidation in the following order of priority to the extent of available
funds:
[a] to creditors by the payment or provision for payment of the debts and
liabilities of the Company (other than any loans or advances that may have
been made by any Member or any Affiliate of a Member) and the expenses of
Liquidation;
[b] to the setting up of any reserves that are reasonably necessary for any
contingent, conditional or unmatured liabilities or obligations of the
Company;
[c] to the repayment of any loans, including Emergency Loans, or advances to
the Company that were made by any Member or any Affiliate of a Member
(according to the relative priority of repayment of such loans and
proportionally among loans of equal priority if the amount available for
repayment is insufficient for payment in full);
[d] an amount equal to the aggregate Adjusted Capital Contribution Amounts for
Excess Capital of all Members as of the date of such Distribution will be
distributed to all of the Members in proportion to their Adjusted Capital
Contribution Amounts for Excess Capital as of the date of such
Distribution;
[e] an amount equal to the aggregate Unpaid Preferred Return for Excess
Capital of all Members as of the date of such Distribution will be
distributed to all of the Members in proportion to their Unpaid Preferred
Returns for Excess Capital as of the date of such Distribution;
[f] an amount equal to the sum of the Adjusted Capital Contribution Amount for
Land, the Adjusted Capital Contribution Amount for Capital Commitment, and
the Minimum Booth Creek Return, each determined as of the date of such
Distribution, will be distributed to the Members pro rata in accordance
with the ratio that each component of such sum bears to the total sum;
amounts distributed to EWRD V pursuant to this 12.2[f] will be charged in
order first to the Adjusted Capital Contribution Amount for Land and then
the Adjusted Capital Contribution Amount for Capital Commitment;
<PAGE>
[g] an amount equal to the aggregate Unpaid Preferred Return for Capital
Commitment as of the date of such Distribution will be distributed to EWRD
V;
[h] an amount equal to the aggregate Unpaid Preferred Return for Land as of
the date of such Distribution will be distributed to EWRD V; and
[i] to the Members in accordance with their Economic Interests.
12.3 Liquidating Distributions. The liquidating Distributions due to the
Members will be made by selling the assets of the Company and distributing the
net proceeds. Notwithstanding the preceding sentence, but only upon the
affirmative Vote of all Members, the liquidating Distributions may be made by
distributing the assets of the Company in kind to the Members in proportion to
the amounts distributable to them pursuant to 12.2, and valuing such assets at
their Fair Market Value (net of liabilities secured by such property that the
Member takes subject to or assumes) on the date of Distribution. Any valuation
by appraisal will be made in accordance with 3.4. Each Member agrees to save
and hold harmless the other Members from such Member's proportionate share of
any and all such liabilities which are taken subject to or assumed. Appropriate
and customary prorations and adjustments will be made incident to any
Distribution in kind. The Members will look solely to the assets of the Company
for the return of their Capital Contributions, and if the assets of the Company
remaining after the payment or discharge of the debts and liabilities of the
Company are insufficient to return such contributions, they will have no
recourse against any other Member. The Members acknowledge that 12.2 may
establish Distribution priorities different from those set forth in the
provisions of the Act applicable to Distributions upon Liquidation, and the
Members agree that they intend, to that extent, to vary those provisions by
this Agreement.
12.4 No Restoration Obligation. Except as otherwise specifically provided in
Article 8, nothing contained in this Agreement imposes on any Member an
obligation to make an Additional Contribution in order to restore a deficit
Capital Account upon Liquidation of the Company.
12.5 Liquidating Reports. A report will be submitted with each liquidating
distribution to Members made pursuant to 12.3, showing the collections,
disbursements and distributions during the period which is subsequent to any
previous report. A final report, showing cumulative collections, disbursements
and distributions, will be submitted upon completion of the liquidation
process.
12.6 Certificate of Cancellation. Upon Dissolution of the Company and the
completion of the winding up of its business, the Company will file a
certificate of cancellation (to cancel the Certificate) with the Delaware
Secretary of State pursuant to the Act. At such time, the Company will also
file an application for withdrawal of its certificate of authority in any
jurisdiction where it is then qualified to do business.
<PAGE>
ARTICLE 13: TRANSFER RESTRICTIONS
13.1 General Restriction. No Person may Transfer all or any part of such
Person's Ownership Interest in any manner whatsoever except to a Permitted
Transferee, and then, in each case, only if the requirements of 13.4 have also
been satisfied. Any other Transfer of all or any part of an Ownership Interest
is null and void, and of no effect.
13.2 No Member Rights. No Member has the right or power to confer upon any
Transferee, other than a Permitted Transferee of an Ownership Interest (subject
to 13.4), the attributes of a Member in the Company. No Transferee of all or
any part of an Ownership Interest (including any Transferee in a Transfer which
occurs by operation of law to a Person who is not a Permitted Transferee), will
succeed, by virtue of such Transfer, to any rights as a Member in the Company.
13.3 Permitted Transferee. Subject to the requirements set forth in 13.4, a
Member may Transfer all or any part of such Member's Ownership Interest to any
of the following Persons ("Permitted Transferees"):
[a] With respect to the Transfer of all of an Ownership Interest (including,
in the case of the Manager, a Transfer of all of its rights and
obligations as the Manager), any Transferee; but if such Transfer
constitutes a Booth Creek Change of Control or an East West Change of
Control, the other provisions of this Agreement regarding such change of
control will also apply;
[b] With respect to the Transfer of less than all of an Ownership Interest,
any Transferee approved in writing by all of the other Members, such
approval not to be unreasonably withheld, delayed or conditioned; but if
such Transfer constitutes a Booth Creek Change of Control or an East West
Change of Control, the other provisions of this Agreement regarding such
change of control will also apply; and
[c] In the case of Booth Creek, to any Transferee in connection with a sale of
the Resort to such Transferee, if EWRD V has not exercised the right of
first offer set forth in the Resort Right of First Offer Agreement, but if
such Transfer constitutes a Booth Creek Change of Control, the other
provisions of this Agreement regarding such change of control will also
apply.
13.4 General Conditions on Transfers. No Transfer of an Ownership Interest will
be effective unless all of the conditions set forth below are satisfied:
[a] Unless waived by the Company, the Transferor signs and delivers to the
Company an undertaking in form and substance satisfactory to the Company
to pay all reasonable expenses incurred by the Company in connection with
the Transfer (including, but not limited to, reasonable fees of counsel
and accountants and the costs to be incurred with any additional
<PAGE>
accounting required in connection with the Transfer, and the cost and fees
attributable to preparing, filing and recording such amendments to the
Certificate or other organizational documents or filings as may be
required by law);
[b] Unless waived by the Company, the Transferor delivers to the Company an
opinion of counsel for the Transferor satisfactory in form and substance
to the Company to the effect that the Transfer of the Ownership Interest
is in compliance with the applicable federal and state securities laws,
and a statement of the Transferee in form and substance satisfactory to
the Company making appropriate representations and warranties in respect
to compliance with the applicable federal and state securities laws and as
to any other matter reasonably required by the Company;
[c] The Transferor signs and delivers to the Company a copy of the assignment
of the Ownership Interest to the Transferee (substantially in the form of
the attached Exhibit D);
[d] The Transferee signs and delivers to the Company an agreement
(substantially in the form of the attached Exhibit E) to be bound by this
Agreement;
[e] The Transfer is in compliance with the other provisions of this Article;
and
[f] The Transfer does not constitute a violation of or an event of default
under, or give rise to a right to accelerate any indebtedness described in
any note, mortgage, loan agreement or similar instrument or document to
which the Company or any Project LLC is a party, unless the violation or
event of default is waived by the parties to any such instrument or
document.
The Transfer of an Ownership Interest will be effective as of 12:01 a.m.
(Mountain Time) on the first day of the month following the month in which all
of the above conditions have been satisfied. Upon the effective date, the
Company will amend Exhibit B to reflect the new Economic Interests.
No Transfer by the Manager or any other Member will relieve it of any
liabilities accrued during the period prior to the Transfer.
13.5 Admission. Without the consent of any other Member, and subject to the
provisions of 13.4, [a] the Manager will cause any Permitted Transferee of a
Member to be admitted as a Member, and [b] the Manager may cause any Permitted
Transferee of its Ownership Interest to be admitted as a Member and substituted
for it as the Manager (in which event, all references in this Agreement to EWRD
V will refer to such Transferee). Any other Transferee of an Ownership Interest
(including any Transferee in a Transfer which occurs by operation of law to a
Person who is not a Permitted Transferee) will not become a substitute Member
of the Company.
13.6 Rights of Transferees. Any Transferee of all or any part of an Ownership
Interest (including any Transferee in a Transfer which occurs by operation of
law to a Person who is not a Permitted Transferee) who is not admitted as a
substitute Member in accordance with this Agreement has no right [a] to
participate or interfere in the management or administration of the Company's
<PAGE>
business or affairs, [b] to Vote or agree on any matter affecting the Company
or any Member, [c] to require any information on account of Company
transactions, or [d] except as provided in the next succeeding sentence, to
inspect the Company's books and records. The only rights of a Transferee of all
or any part of an Ownership Interest who is not admitted as a substitute Member
in accordance with this Agreement are [x] to obtain the information specified
in 10.8 if the Transferee executes a confidentiality agreement (in form and
substance satisfactory to the Manager in its sole discretion) concerning such
information, [y] to receive the allocations and Distributions to which the
Transferor was entitled as if the Transferee held the Ownership Interest of the
Transferor (to the extent of the Ownership Interest Transferred), and [z] to
receive all necessary tax reporting information. The Company, the Manager, and
the Members will not owe any fiduciary duty of any nature to a Transferee who
is not admitted as a substitute Member in accordance with this Agreement.
However, each Transferee of all or any part of an Ownership Interest (including
both immediate and remote Transferees) will be subject to all of the
obligations, restrictions and other terms contained in this Agreement as if
such Transferee were a Member. To the extent of any Ownership Interest
Transferred, the Transferor Member does not possess any right or power as a
Member and may not exercise any such right or power directly or indirectly on
behalf of the Transferee.
13.7 Security Interest. The pledge or granting of a security interest, lien or
other encumbrance in or against all or any part of a Member's Ownership
Interest is a Transfer that is subject to the provisions of 13.4, but such a
Transfer does not cause the Member to cease to be a Member. The foreclosure or
transfer in lieu of foreclosure of an Ownership Interest is a Transfer that is
subject to all of the provisions of Article 13. Upon foreclosure or sale in
lieu of foreclosure of any such secured interest, the secured party will be
entitled to receive the allocations and Distributions as to which a security
interest has been granted by such Member. In no event will any secured party be
entitled to exercise any rights of a Member under this Agreement (unless and
until such Person is admitted as a substitute Member), and such secured party
may look only to such Member for the enforcement of any of its rights as a
creditor. In no event will the Company have any liability or obligation to any
Person by reason of the Company's payment of a Distribution to any secured
party as long as the Company makes such payment in reliance upon written
instructions from the Member to whom such Distributions would be payable. Any
secured party will be entitled, with respect to the security interest granted,
only to the Distributions to which the assigning Member would be entitled under
this Agreement, and only if, as and when such Distribution is made by the
Company. Neither the Company nor any Member will owe any fiduciary duty of any
nature to a secured party. Reference to any secured party includes any assignee
or successor-in-interest of such Person.
13.8 Sale of Resort. If Booth Creek commences the right of first offer
provisions in the Resort Right of First Offer Agreement in connection with a
proposed sale of the Northstar Ski Area and Resort (the "Resort"), Booth Creek
will by Notice to EWRD V (given at the same time that Booth Creek commences the
right of first offer under the Resort Right of First Offer Agreement) combine
such right of first offer with a right of first offer to purchase all of Booth
Creek's Ownership Interest, such that EWRD V must elect to purchase both the
Resort and the Ownership Interest if it elects to exercise the right of first
offer with respect to the Resort. The provisions of the Resort Right of First
<PAGE>
Offer Agreement relating to such right of first offer (such as the duty to
transfer the Ownership Interest free and clear of all liens and encumbrances
and covenants of further assurance) will also apply to the right of first offer
of Booth Creek's Ownership Interest, and the closing for the two transactions
will occur simultaneously. If EWRD V elects not to exercise such right of first
offer, Booth Creek will be free to sell its Ownership Interest to the purchaser
of the Resort as provided in the Resort Right of First Offer Agreement (but if
Booth Creek in fact sells the Resort to such purchaser, such purchaser also
must purchase such Ownership Interest on the terms specified in the Resort
Right of First Offer Agreement), and such purchaser will be admitted as a
Member of the Company, subject to 13.4 and to EWRD V's right to invoke the
Booth Creek Change of Control Remedy specified in 13.11.
13.9 Break-Up Remedy.
[a] If, prior to the Project Completion Date of all Projects, an East West
Change of Control occurs or Deadlock occurs, Booth Creek may elect to
exercise the Break-Up Remedy, by giving Notice to EWRD V not later than 30
days after Booth Creek receives Notice from EWRD V that an East West
Change of Control has occurred or within 30 days after Deadlock occurs, as
the case may be. If, prior to the Project Completion Date of all Projects,
Deadlock occurs, EWRD V may elect to exercise the Break-Up Remedy, by
giving Notice to Booth Creek within 30 days after Deadlock occurs.
[b] If Booth Creek or EWRD V elects to exercise the Break-Up Remedy, [i] the
Company will be required to convey to Booth Creek, by grant deed, the
Conveyance Property, free and clear of all liens and encumbrances (except
for Permitted Liens), on or prior to the later of [A] the date which is 60
days after EWRD V's receipt of such Notice and [B] the date which is 30
days after the date on which the Conveyance Property may first be legally
conveyed, [ii] Booth Creek will be required to pay to EWRD V, the Break-Up
Infrastructure Costs with respect to the Conveyance Property, such payment
to be made at the time the Conveyance Property is conveyed to Booth Creek
by the delivery of an unsecured promissory note in the form of Exhibit L,
[iii] the Company will continue to develop the Projects other than the
Projects located on the Conveyance Property, but will be required to
develop such Projects with reasonable diligence after such time as Booth
Creek has caused the development of the Village Core to be more than 80%
completed in accordance with the Master Development Plan, as amended from
time to time, [iv] if no East West Change of Control has occurred, upon
conveyance of the Conveyance Property to Booth Creek, this Agreement will
be automatically amended, without the requirement of a signature or any
other action by any Person, such that all of the provisions in 6.3 (other
than 6.3[b]) are moved to, and are governed by, the provisions of 6.2, and
the provisions of 6.4[i] are moved to, and are governed by, the provisions
of 6.3, and [v] if an East West Change of Control has occurred, if Booth
Creek elects the Break-Up Remedy in connection with such East West Change
of Control, and if a Deadlock thereafter occurs (with the beginning
measurement date in the definition of Deadlock being the date that Booth
Creek so exercises the Break-Up Remedy), then the Company will be
dissolved at the election of Booth Creek or EWRD V (with such election to
be made within 30 days after such Deadlock occurs). The foregoing remedies
<PAGE>
are referred to as the "Break-Up Remedy." The right of Booth Creek to
exercise the Break-Up Remedy in the context of an East West Change of
Control reflects the agreement of the Members that a substantial portion
of the consideration and inducement for Booth Creek to enter into this
Agreement and the Real Estate Purchase Agreement is Booth Creek's
expectation that Harry H. Frampton, III or the Key East West Employees
will develop the Projects; accordingly, the conveyance to Booth Creek of
the Essential Ski Property and the Village Core upon an East West Change
of Control is not intended to be a penalty or a forfeiture but is intended
to reflect a shifting of rights to Booth Creek to control the Essential
Ski Property and the Village Core, and to develop, and gain profit from
the development of, the Village Core.
[c] The remedies provided for in this 13.9 are the sole and exclusive remedies
of Booth Creek if prior to the Project Completion Date of all Projects, an
East West Change of Control occurs or Deadlock occurs.
[d] From and after the exercise of any Break-Up Remedy, the remedy provided in
Section 3.1[d], or the Booth Creek Change of Control Remedy, Parcel P of
the Property will remain the site of the Resort's existing maintenance
building and related facilities and equipment until such time as EWRD V,
at the expense of the Company and upon reasonable advance written Notice
to Booth Creek: [i] relocates the maintenance building and such related
facilities and equipment to, or constructs comparable (i.e. comparable in
size, utilities services and infrastructure) facilities on, a site outside
the Property reasonably satisfactory to Booth Creek and EWRD V or [ii]
pays to Booth Creek an amount equal to the lesser of the cost of
relocating such facilities or constructing comparable facilities.
Following any such construction, EWRD V, at the Company's expense, also
will demolish and remove the existing maintenance building and related
facilities. Any such relocation or demolition will be undertaken during a
season in which the facility is not in active use by the Resort.
Furthermore, following such relocation or demolition, all snow making
equipment, ski lifts, and other Essential Ski Property, currently located
on Parcel P will remain intact indefinitely and will continue to be
available for use by the Resort without interruption and in the same
manner as at the present. The Company will accommodate its development and
sale of Parcel P to these requirements.
13.10 Reserved.
13.11 Booth Creek Change of Control.
[a] If a Booth Creek Change of Control occurs, EWRD V may elect to exercise
the Booth Creek Change of Control Remedy, by giving Notice to Booth Creek
not later than 30 days after EWRD V receives Notice from Booth Creek that
a Booth Creek Change of Control has occurred.
<PAGE>
[b] If EWRD V elects to exercise the Booth Creek Change of Control Remedy,
this Agreement will be automatically amended, without the requirement of a
signature or any other action by any person, such that, on any particular
date of determination after EWRD V's election, as to all of the Property
other than the Conveyance Property, all of the provisions in 6.3 (other
than 6.3[b]), are moved to, and are governed by the provisions of, 6.2,
and 6.4[l] and 6.4[i] are moved to, and governed by the provisions of,
6.3. The foregoing remedy is referred to as the "Booth Creek Change of
Control Remedy."
13.12 Buy-out in the Event of Material Manager Breach.
[a] If a Material Manager Breach occurs, Booth Creek may elect to purchase all
of the Manager's Ownership Interests by giving Notice (an "Offer Notice")
to EWRD V within 30 days after the occurrence of such Material Manager
Breach. If such election is timely made, Booth Creek will be required to
purchase, and EWRD V will be required to sell, EWRD V's entire Ownership
Interest in the Company to Booth Creek for cash in an amount equal to the
sum of 90% of the Unpaid Preferred Return of EWRD V and 90% of the Capital
Account balance of EWRD V, both as determined as of the date of closing
under 13.12[b] (the "Purchase Price"). Similarly, if Booth Creek gives an
Offer Notice, all other Members and Transferees of EWRD V and such other
Members and EWRD Parties owning interests in the Project LLC's (other than
the Company and other than any New Member under 3.2[b], even if such New
Member is an EWRD Party) will be obligated to sell, and Booth Creek will
be obligated to purchase, the Ownership Interests of such Persons in the
Company and the ownership interests of such Persons in the Project LLC's,
at the same time as the sale and purchase of the Ownership Interest of
EWRD V, at a price equal to the sum of 90% of the Unpaid Preferred Return
of such Persons and 90% of the Capital Account balances of such Persons
(which, in the case of EWRD Parties owning interests in the Project LLC's,
will be determined under analogous provisions); EWRD V will cause the
operating agreement for each Project LLC to contain provisions to the
foregoing effect and will cause all EWRD Parties to comply with such
provisions. If the Material Manager Breach referenced in this [a] is a
Funding Default, then [i] the 30-day period referred to above will be
changed to 120 days, [ii] the reference to 90% will be changed to 50% for
purposes of the Purchase Price to be paid to EWRD V, its Transferees, and
the EWRD Parties, and [iii] no payment for any Unpaid Preferred Return
will be included in the Purchase Price.
[b] The closing of a purchase and sale under this 13.12 will be held at the
principal offices of the Company on a mutually acceptable date not more
than 90 days after EWRD V's receipt of the Offer Notice. At any such
closing, Booth Creek will tender payment of the Purchase Price to EWRD V
and the other Persons by the delivery of unsecured promissory notes in the
form of Exhibit L (except that, in the case of a Funding Default, all
principal and accrued interest will be due and payable on the third
<PAGE>
anniversary of the closing, and, in the case of a Material Manager Breach
other than a Funding Default, all principal and accrued interest will be
due and payable in equal monthly installments of principal and interest
commencing six months after the closing and continuing to the third
anniversary of the closing, at which time all unpaid principal and accrued
interest will be due and payable in full), and EWRD V and such other
Persons will assign their Ownership Interests or ownership interests in
the Project LLC's to Booth Creek free and clear of all liens, claims and
encumbrances. All parties will execute such documents as may be necessary
to effectuate such purchase and sale.
[c] If an event or circumstance occurs which is both a Material Manager Breach
and an East West Change of Control, Booth Creek may elect either the
remedy set forth in this 13.12 or the Break-Up Remedy.
[d] If a Material Manager Breach occurs (other than a Funding Default), then
in addition to the other remedies specified in this 13.12, Booth Creek
will have the right to recover its actual damages resulting from such
Material Manager Breach (but not indirect, consequential or punitive
damages or lost profits) to the extent such actual damages exceed
$1,000,000. The remedies provided for in 13.12[a] and this 13.12[d] are
the sole and exclusive remedies of Booth Creek with respect to a Material
Manager Breach that is not a Funding Default.
ARTICLE 14: DISPUTE RESOLUTION
If a dispute of any kind arises under or in connection with, or relates
to, this Agreement (including any dispute concerning its construction,
performance or breach), the conduct of the Company's business, or any other
matter relating to the Company, between the Company, the Manager, the Members,
or any combination of such parties, the rights of the parties to the dispute
will be governed by the Arbitration Agreement. The parties do not intend to be
required to submit to arbitration the resolution of a Deadlock, but either
Member may arbitrate the questions of whether Deadlock has occurred, whether
Booth Creek has unreasonably withheld, conditioned or delayed its approval of
an action under 6.3, or whether Booth Creek has failed to act in good faith in
withholding its approval of an action or decision under 6.4. No other disputes
arising out of this Agreement will be subject to arbitration under the
Arbitration Agreement. By executing this Agreement, each Member agrees that
such Member has become a party to the Arbitration Agreement, without the
necessity of signing the Arbitration Agreement as a separate document. Any
Transferee (whether or not substituted as a Member) also will become a party to
the Arbitration Agreement, in each case without the necessity of signing the
Arbitration Agreement as a separate document.
ARTICLE 15: GENERAL PROVISIONS
15.1 Amendment. This Agreement may be amended by the affirmative Vote of all
Members or as provided in 6.5, or as provided elsewhere in this Agreement. Any
amendment will become effective upon such approval, unless otherwise provided.
Notice of any proposed amendment must be given at least 5 days in advance of
<PAGE>
the meeting at which the amendment will be considered (unless the approval is
evidenced by duly signed minutes of action). Any duly adopted amendment to this
Agreement is binding upon, and inures to the benefit of, each Person who holds
an Ownership Interest at the time of such amendment, without the requirement
that such Person sign the amendment or any republication or restatement of this
Agreement.
15.2 Representations. Each Member represents and warrants to each other Member
that, as of the signing of this Agreement:
[a] If such Member is an entity, such Member is duly organized, validly
existing and in good standing under the laws of the jurisdiction where it
purports to be organized, and is a United States Person; has all requisite
power to own, lease and operate its assets, properties and business and to
carry on its business as now conducted, and is duly qualified or licensed
to do business as a foreign corporation, partnership or limited liability
company and is in good standing in every jurisdiction in which the nature
of its business or the location of its properties requires such
qualification or licensing, except for such jurisdictions where the
failure to so qualify or be licensed would not have a material adverse
effect upon its ability to perform fully its obligations under this
Agreement or any related agreement.
[b] Such Member has full power and authority to enter into and perform this
Agreement and all other related agreements to be executed by it and to
perform fully its obligations under this Agreement and such related
agreements;
[c] All actions necessary to authorize the signing and delivery of this
Agreement, and all other related agreements, and the performance of
obligations under it, have been duly taken;
[d] This Agreement has been duly signed and delivered by a duly authorized
officer or other representative of such Member (if such Member is an
entity) and constitutes the legal, valid and binding obligation of such
Member enforceable in accordance with its terms (except as such
enforceability may be affected by applicable Bankruptcy, insolvency or
other similar laws affecting creditors' rights generally, and except that
the availability of equitable remedies is subject to judicial discretion);
[e] No consent or approval of any other Person is required in connection with
the signing, delivery and performance of this Agreement by such Member;
[f] The signing, delivery and performance of this Agreement do not violate [i]
the organizational documents of such Member (in the case of a Member not
an individual), [ii] in any material respect, any applicable law or order,
or [iii] any material agreement to which such Member is a party or by
which such Member is bound;
[g] Such Member has had an opportunity to perform any due diligence deemed
necessary or desirable.
<PAGE>
15.3 Unregistered Interests. Each Member [a] acknowledges that the Ownership
Interests are being offered and sold without registration under the Securities
Act of 1933, as amended (the "Securities Act"), or under similar provisions of
state law, [b] acknowledges that such Member is fully aware of the economic
risks of an investment in the Company, and that such risks must be borne for an
indefinite period of time, [c] represents and warrants that such Member is
acquiring an Ownership Interest for such Member's own account, for investment,
and with no view to the distribution of the Ownership Interest, [d] agrees not
to Transfer, or to attempt to Transfer, all or any part of its Ownership
Interest without registration under the Securities Act and any applicable state
securities laws, unless the Transfer is exempt from such registration
requirements, and [e] represents and warrants that such Member has either alone
or with its "purchaser representatives," as that term is defined in Rule
5.01(h) under the Securities Act, such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
its investments in the Company. Each Member further acknowledges that the
Company has made available to such Member, at a reasonable time prior to its
acquisition of its Economic Interest, the opportunity to ask questions and
receive answers concerning the terms and conditions of such acquisition and to
obtain any additional information which the Company possesses or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
of the information furnished by the Company and the Manager in connection with
such acquisition.
15.4 Waiver of Dissolution Rights. The Members agree that irreparable damage
would occur if any Member should bring an action for judicial dissolution of
the Company. Accordingly, each Member accepts the provisions under this
Agreement as such Person's sole entitlement on Dissolution of the Company and
waives and renounces such Person's right to seek a court decree of dissolution
or to seek the appointment by a court of a liquidator for the Company. Each
Member further waives and renounces any alternative rights which might
otherwise be provided by law upon the Withdrawal of such Person and accepts the
provisions under this Agreement as such Person's sole entitlement upon the
happening of such event.
15.5 Waiver of Partition Right. Each Member waives and renounces any right that
it may have prior to Dissolution and Liquidation to institute or maintain any
action for partition with respect to any real property held by the Company.
15.6 Waivers and Consents. No waiver of any breach of any of the terms of this
Agreement will be effective unless such waiver is in writing and signed by the
Member against whom such waiver is claimed. No course of dealing will be deemed
to amend or discharge any provision of this Agreement. No delay in the exercise
of any right will operate as a waiver of such right. No single or partial
exercise of any right will preclude its further exercise. A waiver of any right
on any one occasion will not be construed as a bar to, or waiver of, any such
right on any other occasion. Any consent of a Member required under this
Agreement must be in writing and signed by such Member to be effective. No
consent given by a Member in any one instance will be deemed to waive the
requirement for such Member's consent in any other or future instance.
<PAGE>
15.7 Equitable Relief. If any Member proposes to Transfer all or any part of
its Ownership Interest in violation of the terms of this Agreement, the Company
or any Member may apply to any court of competent jurisdiction for a temporary
injunctive order prohibiting such proposed Transfer except upon compliance with
the terms of this Agreement (with the merits of such claim to be determined by
arbitration under the Arbitration Agreement), and the Company or any Member may
institute and maintain an arbitration action under the Arbitration Agreement
against the Person proposing to make such Transfer to compel the specific
performance of this Agreement. Any attempted Transfer in violation of this
Agreement is null and void, and of no force and effect. The Person against whom
such action or proceeding is brought waives the claim or defense that an
adequate remedy at law exists, and such Person will not urge in any such action
or proceeding the claim or defense that such remedy at law exists.
15.8 Remedies for Breach. Except for the requirement to arbitrate disputes
provided for in Article 14 and as otherwise provided in this Agreement, the
rights and remedies of the Members set forth in this Agreement are neither
mutually exclusive nor exclusive of any right or remedy provided by law, in
equity or otherwise, and all legal remedies (such as monetary damages) as well
as all equitable remedies (such as specific performance) will be available for
any breach or threatened breach of any provision of this Agreement.
15.9 Costs. If the Company or any Member retains counsel for the purpose of
enforcing or preventing the breach or any threatened breach of any provision of
this Agreement or for any other remedy relating to it, then the prevailing
party will be entitled to be reimbursed by the nonprevailing party for all fees
and costs so incurred (including reasonable attorney's fees, but excluding the
fees and expenses of the arbitration relating to the arbitrator, secretarial
and stenographic or other assistance, rental of space and other direct expenses
(as determined by the arbitrator), all of which will be paid by the parties in
equal shares). The rights of the prevailing party to recover such fees and
costs will be separate from, will survive and will not be merged into any
judgment. The "prevailing party" will mean the party who receives substantially
the relief desired, whether by settlement, dismissal, summary judgment,
judgment or otherwise.
15.10 Indemnification. Each Member hereby indemnifies and agrees to hold
harmless the Company and each other Member from any liability, cost or expense
arising from or related to any act or failure to act of such Member which is in
violation of this Agreement.
15.11 Counterparts. This Agreement may be signed in multiple counterparts (or
with detachable signature pages). Each counterpart will be considered an
original instrument, but all of them in the aggregate will constitute one
agreement. Telecopies of signatures will be given effect for purposes of the
signature page of this Agreement and any amendments to this Agreement.
15.12 Notice. All notices, consents, approvals, waivers, elections and other
communications (collectively "Notices") under this Agreement will be in writing
and will be either delivered or sent addressed as follows: [a] if to the
Company, at the Company's registered office in Colorado, and [b] if to any
<PAGE>
Member, at such Person's home or business address as then appearing in the
records of the Company. In computing time periods, the day of Notice will be
excluded. For Notice purposes, a day means a calendar day. Copies of all
Notices will be sent to Crescent Development Management Corporation at: COPI
Colorado, L.P., at: 306 West Seventh Street, Suite 1000, Fort Worth, Texas
76102, facsimile: (817) 339-2220, or such other address or facsimile number as
it designates by Notice given to the Members and the Company in accordance with
this 15.12.
15.13 Deemed Notice. Any Notices given to any Member in accordance with this
Agreement will be deemed to have been duly given and received: [a] on the date
of receipt if personally delivered or if sent by U.S. mail, postage prepaid,
[b] the date of receipt, if sent by registered or certified U.S. mail, postage
prepaid, [c] one business day after receipt, if sent by confirmed facsimile or
telecopier transmission, or [d] one business day after having been sent by a
nationally recognized overnight courier service with confirmation of delivery.
15.14 Partial Invalidity. Wherever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law. However, if for any reason any one or more of the provisions of
this Agreement are held to be invalid, illegal or unenforceable in any respect,
such action will not affect any other provision of this Agreement. In such
event, this Agreement will be construed as if such invalid, illegal or
unenforceable provision had never been contained in it.
15.15 Entire Agreement. This Agreement (including its Exhibits) contains the
entire agreement and understanding of the Members concerning its subject matter
and supersedes all prior agreements, understandings and negotiations, both
written and oral, among the Members with respect to the subject matter of this
Agreement.
15.16 Benefit. The contribution obligations of each Member will inure solely to
the benefit of the other Members and the Company, without conferring on any
other Person any rights of enforcement or other rights.
15.17 Binding Effect. This Agreement is binding upon, and inures to the benefit
of, the Members and their Permitted Transferees, but any Transferee will have
only the rights specified in 13.6 unless admitted as a substitute Member in
accordance with this Agreement.
15.18 Further Assurances. Each Member agrees, without further consideration, to
sign and deliver such deeds, assignments, endorsements, evidences of transfer
and other instruments and documents and give such further assurances as are
consistent with the provisions of this Agreement and necessary to perform its
obligations under this Agreement.
15.19 Headings. Article and section titles have been inserted for convenience
of reference only. They are not intended to affect the meaning or
interpretation of this Agreement.
15.20 Terms. Terms used with initial capital letters will have the meanings
specified, applicable to both singular and plural forms, for all purposes of
<PAGE>
this Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural includes the other, as the context requires or permits. The
word include (and any variation) is used in an illustrative sense rather than a
limiting sense. The word day means a calendar day.
15.21 Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware (without considering
Delaware choice of law provisions). Any conflict or apparent conflict between
this Agreement and the Act will be resolved in favor of this Agreement, except
as otherwise required by the Act.
[remainder of page intentionally left blank, signatures follow]
<PAGE>
All of the Members have signed this Operating Agreement of Northstar Holdings
LLC, to be effective from the date first mentioned above, notwithstanding the
actual date of signing.
East West Resort Development V, L.L.L.P.,
as member and manager, by HF Holding Corp.,
as general partner
[date] By:
------------------------------------
Harry H. Frampton, III, Chairman
Trimont Land Company,
a California corporation
[date] By:
------------------------------------
[name and title]
<PAGE>
LIST OF EXHIBITS
Exhibit A Names and Addresses of Members
Exhibit B Economic Interests
Exhibit C Initial Capital Contributions
Exhibit D Assignment of Ownership Interest
Exhibit E Transferee's Agreement
Exhibit F Arbitration Agreement
Exhibit G Master Development Plan
Exhibit H Description of the Property
Exhibit I Master Non-Competition Agreement(term sheet only)
Exhibit J Form of Project LLC Operating Agreement
Exhibit K Infrastructure Standards
Exhibit L Form of Promissory Note
Exhibit M Minimum Insurance Requirements
Exhibit N Ten Year Option Property
Exhibit O Trademark License Agreement
Exhibit P Essential Ski Property
Exhibit Q Resort Right of First Offer Agreement (term sheet
only)
Exhibit R Annual Plan
Exhibit S Assumed Parcel Values
Exhibit T Form of Sub-Managment Agreement
Exhibit U Definitions
<PAGE>
EXHIBIT A
Names and Addresses of Members
East West Resort Development V, L.L.L.P.
Attention: Harry H. Frampton, III
c/o East West Partners, Inc.
100 East Thomas Place
P.O. Drawer 2770
Avon, Colorado 81620
Trimont Land Company
Attention: Betsy Cole and Chris Ryman
1000 South Frontage Road
Suite 100
Vail, CO 81657
<PAGE>
EXHIBIT B
Economic Interests
Member Initial Economic
------ ------- --------
Interests
- ---------
East West Resort Development V, L.L.L.P. 75%
Trimont Land Company 25%
<PAGE>
EXHIBIT C
Initial Capital Contributions
Member Cash Amount
------ -----------
As, when and in the
manner contemplated by
As of the date of the Real Estate Purchase
Operating Agreement Agreement
------------------- ------------------------
East West Resort Development $10,000,000 $5,000,000
V, L.L.L.P
Trimont Land Company $ 1,000 0
<PAGE>
EXHIBIT D
Assignment of Ownership Interest
The undersigned Transferor hereby transfers and assigns a __________% Ownership
Interest rounded to four decimal points) in Northstar Holdings, LLC, a Delaware
limited liability company, to ______________________________, as Transferee.
The Capital Account of the Transferor that is attributable to the transferred
Ownership Interest will carry over to the Transferee. The Ownership Interest
transferred is subject to all of the terms and conditions of that certain
Operating Agreement of Northstar Holdings, LLC, dated as of [date], as such
Agreement may be amended, including the obligation to arbitrate disputes as set
forth in the Operating Agreement and the Arbitration Agreement.
Transferor:
-------------------------------------------
Date
<PAGE>
EXHIBIT E
Transferee's Agreement
As a Transferee of an Ownership Interest in Northstar Holdings, LLC, a Delaware
limited liability company governed by an Operating Agreement dated as of
[date], the undersigned agrees to be bound as a party to such Agreement (which,
as it may be amended, is hereby incorporated by reference), including the
obligation to arbitrate disputes as set forth in the Operating Agreement and
the Arbitration Agreement. The Transferee acknowledges and agrees that, unless
admitted as a Member of the limited liability company as provided in such
Agreement, the Transferee will have only the limited rights of an assignee as
specified by law.
Name of Transferee:
-------------------------------------------
Date
Address:
-----------------------------------
-----------------------------------
Taxpayer ID Number:
------------------------
Telephone Number:
--------------------------
Fax Number:
--------------------------------
<PAGE>
EXHIBIT F
Arbitration Agreement
This Arbitration Agreement (this "Agreement") is made as of [date], by and
among Northstar Holdings, LLC, a Delaware limited liability company (the
"Company"), and all of the Members of the Company and Transferees of such
Members, as evidenced by their execution of the Operating Agreement of the
Company dated the same date as this Agreement or related transfer documents.
Each initial Member has become a party to this Agreement by virtue of having
executed the Operating Agreement, and each new Member and each Transferee of
any Member will become a party to this Agreement without having executed a
counterpart of this Agreement. This Agreement is an exhibit to the Operating
Agreement and has been incorporated into, and is a part of, the Operating
Agreement.
Recitals
Except as otherwise provided, the parties desire that any and all disputes
arising out of, or pertaining in any way to, the Operating Agreement, be
governed by and settled pursuant to this Agreement. Each capitalized term not
otherwise defined in this Agreement is intended to have the meaning given to
such term in the Operating Agreement.
Agreement
1. Amicable Resolution. The parties will attempt to settle any dispute
between them amicably. To this end, the parties will consult and negotiate to
reach a solution. If the parties mutually agree, they may seek to resolve the
dispute through mediation. However, nothing in this paragraph will preclude
either party from commencing arbitration at any time, subject to the terms of
this Agreement.
2. Obligation to Arbitrate. Except as otherwise provided in the Operating
Agreement, any dispute, controversy, or claim arising out of or relating in any
way to the Operating Agreement will be settled by binding arbitration conducted
in accordance with this Agreement, but the parties do not intend to be required
to submit to arbitration the resolution of a Deadlock. However, either Member
may arbitrate the questions of whether Deadlock has occurred, whether Booth
Creek has unreasonably withheld, conditioned or delayed its approval of an
action under Section 6.3, or whether Booth Creek has failed to act in good
faith in withholding its approval of an action or decision under Section 6.4 of
the Operating Agreement.
3. Commencement of Arbitration.
[a] Notice. Any party may at any time initiate an arbitration under the
Agreement by giving a written notice of arbitration (the "Notice") to the other
<PAGE>
party or parties to the dispute. The Notice will contain a statement of any
dispute in sufficient detail to apprise the other party of [i] the nature and
scope of each dispute, [ii] the initiating party's position and [iii] the
relief sought. The other party will, within 30 days after receipt of the
Notice, or within such other period of time as the parties may agree, deliver
its response to the initiating party (the "Answer"), which will contain its
statement of the dispute, its positions and any counterclaims that it seeks.
The initiating party will then have 20 days, or such other period as the
parties may agree, to deliver its response (the "Reply") to any counterclaim
raised in the Answer. No amendments to the Notice, Answer or Reply will be
permitted without the consent of the other party or of the arbitrator. Upon the
appointment and acceptance of the arbitrator, a copy of the Notice, Answer and
Reply will be given to the arbitrator promptly as they become available. A
hearing will be commenced within 30 days after completion of discovery, unless
the arbitrator grants a continuance upon a showing of good cause by any party.
At least 21 days before the date for such hearing, the parties will exchange
copies of exhibits to be offered as evidence and a list of witnesses who will
testify at such hearing. Once commenced, the hearing will proceed day to day
until completed unless the arbitrator grants a continuance upon a showing of
good cause by any party. Any party may cause to be prepared, at its expense, a
written transcription or electronic recordation of such hearing.
[b] Selection of an Arbitrator. There will be one neutral arbitrator. If,
within 20 days after the Notice provided for in paragraph 3[a], the parties to
the dispute have been unable to agree upon a mutually acceptable arbitrator,
they will request that the Judicial Arbiter Group, Inc. appoint an arbitrator
from among its panel of available arbitrators. If the Judicial Arbiter Group,
Inc. is unable to appoint an arbitrator, any party may petition the district
court for the City and County of Denver to appoint a single neutral arbitrator
provided that such arbitrator is a retired state or federal judge with at least
five years experience in civil matters. The arbitrator may appoint a secretary
to assist the tribunal in the administrative arrangements for the proceedings.
The arbitrator may also employ such stenographic and other assistance as the
arbitrator deems necessary.
4. Failure to Participate. If a party, having been given notice and
opportunity, fails or refuses to appear or participate in an arbitration or in
any stage of the arbitration, the proceedings will nevertheless be conducted to
conclusion and final award. Any award rendered under such circumstances will be
as valid and enforceable as if both parties had appeared and participated fully
at all stages of the arbitration.
5. Place of Arbitration. The place of arbitration will be within the City
and County of Denver, Colorado, as selected by the arbitrator, unless the
parties otherwise mutually agree in writing.
6. Confidentiality. The parties and the arbitrator will treat as
confidential all aspects of the arbitration proceedings (including the
pleadings, discovery, testimony, evidence, briefs and the award), unless the
parties otherwise agree in writing.
7. Preliminary Meeting. The arbitrator will hold a preliminary meeting
with the parties, at a time and place determined by the arbitrator, for the
<PAGE>
discussion of procedural matters (prior to the issuance of such procedural
directives by the arbitrator) and for discussion of such other matters as the
arbitrator may determine.
8. Procedures. The procedures to be followed in any arbitration under the
Transaction Agreements will be as prescribed in this Agreement and in such
additional directives, consistent with the terms of this Agreement, that are
issued by the arbitrator following consultation with the parties. Unless
otherwise agreed by the parties, the procedures will provide for the submission
of briefs by the parties, the introduction of documents and the oral testimony
of witnesses, cross-examination of witnesses, oral arguments, the closure of
the proceedings and such other matters as the arbitrator may deem appropriate.
Except as provided otherwise in this Agreement, the arbitrator will regulate
all matters relating to the conduct of the arbitration and any other question
of arbitration law or procedure in accordance with this Agreement and as
otherwise provided in the Commercial Arbitration Rules of the American
Arbitration Association (the "Rules") and the Colorado Arbitration Act (the
"Act"). If any conflict exists between the provisions of the Rules and the Act,
the provisions of the Act will prevail.
9. Limitations and Laches. As a preliminary issue, the arbitrator may, in
response to a motion to dismiss or a motion for summary judgment, render an
award determining the merits of such claim before considering the substantive
merits of the arbitration claim.
10. Discovery. The parties agree that discovery will be handled
expeditiously, and the arbitrator will define the limits of discovery,
including the number of depositions that may be taken, after considering the
complexity of the issues and the amount in controversy, but each party will be
entitled to take at least four depositions and the period for discovery will be
at least 90 days from the date such arbitrator is selected pursuant to 3[b] of
this Agreement. Discovery procedures available in litigation before the courts
will not apply in an arbitration conducted pursuant to this Agreement. However,
each party will produce relevant and non-privileged documents (or copies of
such documents) as requested by the other party. All disputes regarding
discovery will be promptly resolved by the arbitrator.
11. Affidavits. Each party may submit evidence in the form of sworn
affidavits, but, upon the request of the other party, the party submitting the
affidavit will make the affiant available for cross-examination. If the affiant
is not made available for cross-examination, the affidavit will not be
considered as evidence by the arbitrator unless the arbitrator finds that the
affiant is beyond the control of the party offering the affidavit or the
affiant is unavailable, and the interests of justice require consideration of
the evidence submitted by the affiant.
12. Time of Proceedings. It is the intent of the parties that, barring
extraordinary circumstances, any arbitration, including the issuance of the
arbitrator's award, will be concluded within 8 months after the date the Notice
is received by the arbitrator. The arbitrator will use his or her best efforts
to issue the final award or awards within a period of 30 days after closure of
the proceedings (but failure to do so will not be a basis for challenging the
award).
<PAGE>
13. Written Opinion. Any award or portion of an award, whether final, will
be in a writing signed by the arbitrator and will state the reasons upon which
the award or portion of the award is based.
14. Entry of Judgment. Judgment on the arbitration award may be entered in
any federal or state court having jurisdiction. Subject to governing law and
court rules, the federal and state courts located in the states where the U.S.
principal business office of each party is located will have jurisdiction over
an action brought to enforce the rights and obligations created in or arising
from this Agreement, and each party irrevocably submits to the jurisdiction of
such courts. Notwithstanding the above, application may be made by a party to
any court of competent jurisdiction wherever situated for enforcement of any
judgment and the entry of whatever orders are necessary for such enforcement.
15. Governing Law. The arbitrator's decision will be made pursuant to the
relevant substantive law of the State of Delaware.
16. Provisional Relief. Any party may apply to a court that would
otherwise have jurisdiction for preliminary injunctions and other similar
provisional or interim measures, including, without limitation, where [a] any
Member or Transferee proposes to sell, exchange, assign, pledge, encumber, gift
or otherwise dispose of, whether voluntarily or by operation of law, all or any
part of its interest in the Company in violation of the Operating Agreement, or
[b] any event or circumstance arises such that the Company or any party would
be expressly injured and no adequate remedy at law would exist for such party.
Any application to a court for such purposes may include, but is not limited
to, a request for a temporary injunction prohibiting such proposed disposition
except on compliance with the Operating Agreement and a request to compel
specific performance of the Operating Agreement. Any attempted transfer in
violation of the Operating Agreement will be null and void and of no force and
effect. With respect to any attempted transfer in violation of the Operating
Agreement, the party or third party against whom such action or proceeding is
brought waives the claim or defense that an adequate remedy at law exists, and
such party or third party agrees not to urge in any such action or proceeding
the claim or defense that such remedy at law exists. The merits of such claims
between the parties that gave rise to the need for such injunctive relief,
including any entitlement to permanent injunctive relief, will be determined by
arbitration in accordance with the provisions of this Agreement. The parties
agree that any measures ordered by the arbitrator may be immediately and
specifically enforced by a court otherwise having jurisdiction over the
parties.
17. Time and Notice. All notices, requests, demands, claims, and other
communications under this Agreement will be in writing. Any notice, request,
demand, claim, or other communication under this Agreement will be deemed duly
given only if it is sent by registered or certified mail, return receipt
requested, postage prepaid, or by courier, telecopy or facsimile (together with
a copy of such writing concurrently sent by registered or certified mail,
return receipt requested, postage prepaid) and addressed to the intended
recipient [a] if to a Member other than EWRD V, as set forth in the Company's
records, and [b] if to EWRD V or the Company, to:
<PAGE>
Copy to:
Attn: Harry H. Frampton, III James F. Wood, Esq.
100 East Thomas Place Sherman & Howard L.L.C.
Beaver Creek Resort 633 17th Street, Suite 3000
P.O. Drawer 2770 Denver, CO 80202
Avon, CO 81620 Telecopy: 303-298-0940
Telecopy: 970-845-7205
Notices will be deemed given three business days after mailing if sent by
certified mail, when delivered if sent by courier, and one business day after
receipt of confirmation by person or machine if sent by telecopy or facsimile
transmission. Any party may change the address to which notices, requests,
demands, claims and other communications under this Agreement are to be
delivered by giving the other parties notice in the manner set forth in this
Agreement. Copies of all notices will be given to COPI Colorado, L.P., at: 306
West Seventh Street, Suite 1000, Fort Worth, Texas 76102, facsimile: (817)
339-2220, or such other address or facsimile number as it designates by Notice
given to the Members and the Company in accordance with this paragraph 17.
18. Extra Contractual Claims. Extra contractual claims of a party, such as
those arising out of allegations of bad faith or misrepresentation, are within
the jurisdiction of the arbitrator. Accordingly, the arbitrator has the power
to grant exemplary, statutory, punitive or other damages in excess of
compensatory damages. However, the initiating party with respect to such extra
contractual claims will have the burden to prove such claims in accordance with
the applicable standard of proof applied to such claims in civil cases decided
under the laws of the State of Colorado.
19. Costs. All fees and expenses of the arbitration relating to the
arbitrator, secretarial and stenographic or other assistance, rental of space
and other direct expenses (as determined by the arbitrator) will be paid by the
parties in equal shares. The arbitrator will notify the parties, from time to
time, of estimated amounts to be advanced in order to meet all such anticipated
expenses, and each party will advance its share promptly. Other fees and
expenses of the arbitration (including attorneys' fees, the fees of accounting,
actuarial or other experts, and the cost of bonds) will be paid by the party
incurring them, but the party prevailing on substantially all of its claims
will be entitled to recover such fees and expenses from the other party unless
the arbitrator specifically determines otherwise in the interests of fairness.
20. Expeditious Proceeding. The parties desire that any arbitration under
this Agreement proceed expeditiously (subject to the needs and procedures of
the arbitrator). The parties instruct the arbitrator to impose reasonable
sanctions to insure that the arbitration proceeds expeditiously. The parties
will make a good-faith effort to cause no unnecessary delays or obstacles to
the arbitration process.
<PAGE>
21. Treatment of Parties as a Group. For purposes of selection of an
arbitrator under paragraph 3[b] and the payment of costs under paragraph 20, if
any group of Persons elects to have their interests represented collectively,
such Persons may also elect to be considered one party.
22. Headings. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
23. Miscellaneous. This Agreement constitutes the entire understanding of
the parties with respect to the procedures by which any dispute between any of
them arising under the Transaction Agreements will be resolved, and may not be
modified except in a writing signed by all parties. This Agreement is binding
upon, and inures to the benefit of, the parties and upon their respective
permitted transferees and other successors-in-interest.
Northstar Holdings, LLC
By: East West Resort Development V,
L.L.L.P., its manager
By: HF Holding Corp., its general partner
By:
----------------------------------------
Its:
---------------------------------------
[The signatures of the Members and Transferees are provided by virtue of their
execution of the Operating Agreement or related transfer documents.]
<PAGE>
EXHIBIT G
MASTER DEVELOPMENT PLAN
<PAGE>
EXHIBIT H
DESCRIPTION OF THE PROPERTY
<PAGE>
EXHIBIT I
MASTER NON-COMPETITION AGREEMENT
Term Sheet
Territory: Five county Lake Tahoe region
Scope: All businesses of any sort; any ownership, direct or indirect, and any
status as officer, director, manager, consultant, etc.
Parties covered: Frampton, Ryman, Cole, Booth Creek and Controlled Affiliates,
East West and Controlled Affiliates, and, after Frampton ceases to be
principally responsible for the management of East West, the East West Key
Managers. [NOT any of the Crescent entities, Gillett, CIBC, or John Hancock or
their respective affiliates, and not Ryman or Cole once he or she ceases to be
employed by (or retained as a consultant by) Booth Creek, Gillett, CIBC, John
Hancock, or any other Controlled Affiliates, and not any East West Key Manager
once he or she ceases to be employed by (or retained as a consultant by) East
West or any of its Controlled Affiliates]
Term: the later of (a) five years and (b) two years after the date that 90% of
the Units are sold
Duty: covered parties may not engage in business in the Territory during the
Term unless they first offer it to a new entity to be formed by EWRD V (or its
assignee) and Booth Creek (or its assignee)
Carveout: the noncompete will not apply to (a) South Lake Tahoe Ski Resort, (b)
existing resort management business at Northstar and South Lake Tahoe, and
involvement by Booth Creek and its Affiliates in retail businesses located on,
and inherently related to, the ski resort operations at Northstar and South
Lake Tahoe (such as ski and snowboard sales, repair, and rental; restaurants in
the resort) (c) any expansion of the ski operations of Northstar or the South
Lake Tahoe Ski Resort onto contiguous property or (d) any other ski resort in
which Booth Creek acquires an interest, but the non-compete will apply to any
ancillary property management, hospitality or brokerage business related to any
such ski resort.
Material terms of new entity:
o Delaware llc
o Booth Creek and EWRD V each have a right to a 50% interest;
the non-proposing side can elect to participate at a lesser
rate (down to 20%), but the proposing side can then
terminate the proposal and not engage in the business.
Also, if the nonproposing side decides to participate at
less than 50% (but at least 20%), the proposing side can
<PAGE>
bring in a new party to pick up whatever the non-proposing
side declines, but the proposing side still must retain 50%
(or at least have control over the interest of the new
party). If the non-proposing side is unwilling to put in
its pro rata share of required capital for its interest
(i.e., at least 20%), then the proposing side is free to
pursue the business (and the declining member is not). The
amount and type (debt vs equity) of capital required is to
be determined by the proposing party in good faith, with
the generally stated goal of putting in the minimum amount
of capital to operate the business prudently, consistent
with avoiding the need for owner and affiliate guarantees
and obtaining borrowed funds on commercially reasonable
terms
o As long as EWRD V (together with any new party whose
interest EWRD V controls) has a 50% or greater interest in
the new entity and the pertinent business is an EWRD V
Business (as defined below), then EWRD V or its affiliate
has day-to-day authority, with major decision veto power
held by Booth Creek, similar in structure to Northstar
Holdings LLC; roles are reversed if Booth Creek (together
with any new party whose interest Booth Creek controls) has
a 50% or greater interest in the new entity and the
pertinent business is a Booth Creek Business (as defined
below). If the business in neither an EWRD V Business nor a
Booth Creek Business (and it is owned 50/50), then the
party who was primarily responsible for developing the
business plan and proposing that the parties enter into the
business will be the party with day-to-day authority (with
major decision veto power held by the other party). If it
is not clear who was primarily responsible for developing
the business plan and proposing that the parties enter into
the business, then the business will be managed by joint
decision.
o EWRD V Business means any business primarily engaged in
resort property management, hotel management, travel agency
services, tour company services, internet access and
services, transportation, mortgage brokerage, real property
development, golf course development and operation
(including associated restaurants and clubs), management of
private clubs and the development of one or more golf
courses (and related restaurants, clubs and other
businesses) at Waddle Ranch (the so-called "Pritzker
Parcel"). Booth Creek Business means any business primarily
engaged in restaurant ownership or operation (excluding
club and golf course restaurants), retail sales of skis,
snowboards and related products, including ski and
snowboard clothing and accessories, ski and snowboard
repair and rental and _____________________.
o Market rate management fee to be paid to manager
o Standard of care, indemnification, replacement of manager,
deadlock, and dissolution provisions to be structured
substantially the same as Northstar Holdings LLC
o Additional operating capital, if needed (as reasonably
determined by either party in a 50/50 entity or by the
<PAGE>
majority holder in a non-50/50 entity), and additional
equity needed for cash acquisitions (as determined by both
members or the majority member, as the case may be), is
invested on a pro rata basis with "preemptive rights"; if
either side declines to contribute its pro rata share, then
dilution occurs based on a fair market value determination
o Issuance of ownership interests and the resultant pro rata
dilution (in the context of acquisitions from unrelated
parties) is within control of manager; no "preemptive
rights" apply
o Approximately 10% of equity in entity to be available for
key employee options
o Shotgun provision can be exercised by either party in a
50/50 entity after 5 years, or by a majority holder after 3
years, or by a minority holder after 7 years; the shotgun
operates separately from other entities
<PAGE>
EXHIBIT J
FORM OF PROJECT LLC OPERATING AGREEMENT
[to be attached upon entry into Northstar Holdings, LLC Operating
Agreement]
<PAGE>
EXHIBIT K
INFRASTRUCTURE STANDARDS
See Attached.
<PAGE>
EXHIBIT L
FORM OF PROMISSORY NOTE
$__________________
_____________, 200__ Eagle County, Colorado
For valuable consideration, the receipt of which is acknowledged by the
undersigned ("Maker"), Maker promises to pay to the order of
___________________ ("Holder") the sum of $________________, which amount will
bear interest at a rate of 8% per annum from the date of this Promissory Note.
All principal and accrued interest will be immediately due and payable on the
earlier of: [a] the date Maker or any transferee of Maker, directly or
indirectly, obtains a loan for the construction of improvements on all or any
portion of the Conveyance Property (as defined in the Operating Agreement of
Northstar Holdings, LLC) from Northstar Holdings, LLC to Maker, and [b] the
first anniversary of the closing of the conveyance of the Conveyance Property.
Any principal and accrued interest that is not paid when due will bear interest
at a rate of 13% per annum from the date such amounts are due until paid. Maker
may prepay part or all of this Promissory Note at any time. Capitalized terms
not defined herein have the meaning given to them in the Operating Agreement of
Northstar Holdings, LLC.
Maker agrees to pay all reasonable attorneys' fees and costs incurred by
Holder in connection with the enforcement of this Promissory Note (whether or
not suit is commenced).
This Promissory Note will be governed by the laws of the State of
Delaware.
The address of Maker for purposes of the giving of notice will be Trimont
Land Company, 1000 South Frontage Road, Suite 100, Vail, Colorado 81657,
attention: Betsy Cole and Chris Ryman, until Maker gives written notice to
Holder that a different address should be used. The address of Holder for
purposes of making payments due under this Promissory Note and the giving of
notices will be East West Resort Development V, L.L.L.P., c/o East West
Partners, Inc., 100 East Thomas Place, P.O. Drawer 2770, Avon, Colorado 81620,
attention: Harry H. Frampton, III, until Holder gives Maker written notice that
a different address should be used.
[Name of Maker]
By:
-------------------------------------------------
Title:
----------------------------------------------
<PAGE>
EXHIBIT M
MINIMUM INSURANCE REQUIREMENTS
With respect to the Land, Comprehensive General Liability Insurance for Bodily
Injury and Property Damage with limits no lower than $1,000,000 per occurrence
and $2,000,000 in the aggregate.
With respect to vertical construction (condominiums, townhomes, etc.), property
insurance written on a builder's risk policy form in the amount of the initial
contract sum including, but not limited to, coverage against the perils of
fire, extended coverage, theft, vandalism, malicious mischief, collapse,
windstorm, falsework, testing and startup, temporary building and debris
removal, including demolition.
<PAGE>
EXHIBIT N
TEN YEAR OPTION PROPERTY
<PAGE>
EXHIBIT O
TRADEMARK LICENSE AGREEMENT
<PAGE>
EXHIBIT P
ESSENTIAL SKI PROPERTY
<PAGE>
EXHIBIT Q
RESORT RIGHT OF FIRST OFFER AGREEMENT
(term sheet)
1. If Booth Creek (or any Affiliate of Booth Creek) elects to sell all or any
part of the Resort, or any interest in the Resort, EWRD V (and its
assignees) will have, for a period of 90 days following receipt of a
notice from Booth Creek which states the price at which it is willing to
sell, a right of first offer to purchase the Resort at the price specified
by Booth Creek in such notice.
2. If EWRD V does not timely exercise its option to purchase the Resort (or
interest in the Resort), Booth Creek will be free to sell the Resort (or
interest in the Resort) to any third party, but if the price to be paid by
the third party is less than 95% of the price at which the Resort was
offered to EWRD V, Booth Creek must once again offer EWRD V (and its
assignees) the right to purchase the Resort (or interest in the resort).
<PAGE>
EXHIBIT R
ANNUAL PLAN
<PAGE>
EXHIBIT S
ASSUMED PARCEL VALUES
Parcel Assumed Value
- ------ -------------
<PAGE>
EXHIBIT T
FORM OF SUB-MANAGEMENT AGREEMENT
SUB-MANAGEMENT AGREEMENT
This agreement (this Agreement") is dated as of [date], and is between
Prototype, LLC, a Delaware limited liability company (the "Project Entity"),
and East West Partners, Inc., a Colorado corporation (the "Sub-Manager").
RECITALS
The Project Entity was formed for the purpose contemplated in the Project
Entity's Operating Agreement dated as of [date] (the "Operating Agreement").
Northstar Holdings, LLC, a Delaware limited liability company (the "Master
LLC") is the "manager" of the Project Entity as contemplated by Delaware
limited liability company law; however, the Project Entity desires to appoint
the Sub-Manager as a sub-manager to oversee the day-to-day operations of the
Project Entity pursuant to this Agreement. Each capitalized term used but not
defined in this Agreement has the meaning assigned to it in the Operating
Agreement.
AGREEMENT
16 Sub-Manager Powers. Subject to the fiduciary obligations imposed upon
it by law, and except as provided in this Agreement, the Sub-Manager will have
complete and unrestricted power and authority to manage the business,
properties and day-to-day activities of the Project Entity in its sole and
exclusive discretion, except as otherwise directed in writing by the Master
LLC.
17 Specific Powers. The Sub-Manager has the following specific powers
(except as otherwise expressly provided in this Agreement), any and all of
which may be exercised by the Sub-Manager without obtaining the consent of the
Master LLC or any of the Members but all of which must be exercised, consistent
with the standard of care articulated in Section 4, in a manner to cause the
Project Entity to comply in all material respects with the Project Entity's
(x) Operating Agreement and (y) Annual Plan, as such Annual Plan may be amended
from time to time:
17.1 To sell, exchange or otherwise dispose of any part of the assets of
the Project Entity in the ordinary course of business;
17.2 To operate and manage, at the expense of the Project Entity, any
property or business acquired by or on behalf of the Project Entity;
<PAGE>
17.3 To make all payments required of the Project Entity pursuant to this
Agreement, including all direct and indirect costs and expenses
incurred in the conduct of Project Entity business;
17.4 To establish reasonable reserves for the Project Entity's working
capital, operating expenses, capital improvements and debt service;
17.5 To execute on behalf of the Project Entity any and all documents or
instruments of any kind which the Sub-Manager may deem appropriate in
carrying out the purposes of the Project Entity, except with respect
to the borrowing of money if the aggregate of the principal amounts
borrowed by the Project Entity exceeds $50,000;
17.6 Unless the aggregate of the principal amounts borrowed by the Project
Entity exceeds $50,000, to borrow money on behalf of the Project
Entity from banks, other lending institutions or other sources or to
otherwise incur debt for capital expenditures, for acquisition of
real property, and for other Project Entity purposes, and to secure
or provide for the repayment of such borrowing;
17.7 To purchase or lease on behalf of the Project Entity property,
including real property, for Project Entity use;
17.8 To purchase, at the expense of the Project Entity, liability and
other insurance to protect the Project Entity's properties and
business;
17.9 To hold Project Entity properties in the name of the Project Entity
or the name of a nominee chosen by the Sub-Manager;
17.10To maintain, at the expense of the Project Entity, adequate records
of all operations of the Project Entity;
17.11To make and revoke tax elections on behalf of the Project Entity;
17.12To select and employ, at the expense of the Project Entity, such
legal counsel, certified public accountants or other consultants as
are deemed by the Sub-Manager to be appropriate for any Project
Entity purpose;
17.13To enter into contracts and other transactions for any Project Entity
purpose, except as otherwise prohibited by this Agreement;
<PAGE>
17.14To engage in other activity on behalf of the Project Entity
customary or incident to the acquisition, ownership, operation,
development, management and disposition of real property; and
17.15 To request Emergency Loans as provided in the Operating Agreement.
18 Reimbursement of Costs. The Project Entity will reimburse the
Sub-Manager and any Affiliate of the Sub-Manager for all direct, out-of-pocket
costs and expenses incurred on behalf of the Project Entity and in connection
with Project Entity affairs. Reimbursable costs include architectural, legal
and survey fees (and other direct out-of-pocket expenses) incurred with respect
to the acquisition and development of the property acquired by the Project
Entity, but do not include general and administrative expenses of the
Sub-Manager.
19 Standard of Care. The parties intend that the standard of care
applicable to the Sub-Manager in performing its obligations under this
Agreement will be to act with the reasonable belief that such action is in the
best interests of the Company. In addition to the foregoing, the Sub-Manager
will use reasonable efforts to perform its duties in all material respects in
conformity with the Project Entity's Approved Project Plan (as amended by an
Approved Annual Business Plan or otherwise). The Sub-Manager will not be liable
to the Project Entity or the Members for any act or omission performed or
omitted by it in accordance with the foregoing standard of care.
20 Indemnification. The Project Entity will indemnify and hold harmless
the Sub-Manager and each of its present and future shareholders, officers,
directors, employees and agents from any loss, liability or damage incurred or
suffered by the Sub-Manager or any such Person by reason of any act performed
or omitted to be performed, or alleged to have been performed or omitted, by
the Sub-Manager or any such Person in connection with the business of the
Sub-Manager (including any judgment, award, settlement, costs and other
expenses, and reasonable attorneys' fees incurred in connection with the
defense of any actual or threatened claim or action based on any such act or
omission). However, if the action or omission to act of the Sub-Manager or any
such Person caused the loss, liability, or damage incurred or suffered, then
neither the Sub-Manager nor any such Person may receive indemnification or
avoid liability by reason of this provision with respect to any claim as to
which the Sub-Manager or any such Person is found by a final arbitration award
to have acted contrary to Section 2 or contrary to the standard of care
described in Section 4, and similarly neither the Sub-Manager nor such Person
may receive indemnification to the extent that the loss, liability or damage
incurred or suffered is found by a final arbitration award to have been caused
by the breach of this Agreement by Sub-Manager. Any such indemnification will
only be paid from the assets of the Project Entity and will be made promptly
following the fixing of the loss, liability or damage incurred or suffered by
final arbitration award, court order, settlement agreement or otherwise (except
that any attorneys' fees and the expenses of defense may be paid as incurred).
<PAGE>
21 Management Fee. In consideration for the Sub-Manager's services
pursuant to this Agreement, the Project Entity will pay the Sub-Manager a
management fee in accordance with Section 6.11 of the Operating Agreement of
the Master LLC.
22 Termination.
22.1 The Project Entity may terminate the services of the Sub-Manager
under this Agreement upon the occurrence of any of the grounds for
termination set forth in Section 6.6 of the Operating Agreement of
the Master LLC or for Cause. "Cause" means a final arbitration award
finding (i) fraud, bad faith, willful misconduct or gross negligence
by the Sub-Manager in the performance of its duties under this
Agreement, which action results in a material loss or detriment to
the Project Entity; (ii) a failure to perform under this Agreement in
accordance with Section 2 or the standard of care described in
Section 4, which action in either case results in a material loss or
detriment to the Project Entity; (iii) a material breach of this
Agreement by Sub-Manager, which breach remains uncured for a period
of 30 days after the Master Partnership gives the Sub-Manager notice
of such breach; provided, however, that if the breach is of such a
nature that it cannot reasonably be cured within such 30-day period,
but if it is curable and the Sub-Manager in good faith begins efforts
to cure it within such 30-day period (and proof of such efforts is
demonstrated to the Project Entity) and continues diligently to do
so, it shall have a reasonable (as determined by the Project Entity
in good faith) additional period thereafter to effect the cure; (iv)
Harry H. Frampton, III ("Frampton") ceases to be "Actively Involved"
(as defined in the limited partnership agreement of East West Resort
Development V, L.L.L.P., a Delaware limited liability limited
partnership ("EWRD V") (the manager of the Master LLC)) in the Master
LLC, EWRD V or in the general partner of EWRD V, other than by reason
of an Incapacity of Frampton (as such term is defined in the limited
partnership agreement of EWRD V), except that no such final
arbitration award shall be required if it is manifest that Frampton
is no longer Actively Involved (other than by reason of an Incapacity
of Frampton); or (v) Frampton or the general partner of EWRD V
breaches the provisions of Section 8.8 of the limited partnership
agreement of EWRD V.
22.2 The Sub-Manager may terminate this Agreement upon 30 days' written
notice; such notice may not be given earlier than the date that the
Project Entity has been dissolved, its business has been wound up,
and articles of dissolution for the Project Entity have been filed
with the Colorado Secretary of State.
22.3 In the event of termination of this Agreement, the Project Entity
will pay the Sub-Manager all amounts due under this Agreement as of
the date the termination is effective. The requirements of this
Section will be subject to the resolution of any disputes between the
parties regarding payments, as provided in Section 9.
<PAGE>
23 Covenants of the Sub-Manager. The Sub-Manager will devote such time,
effort and attention as may be reasonably necessary, advisable or appropriate
to manage and direct the operations, business and affairs of the Project
Entity.
24 Arbitration. If a dispute of any kind arises under or in connection
with, or relates to, this Agreement (including any dispute concerning its
construction, performance or breach) the rights of the parties to the dispute
will be governed by the Arbitration Agreement which is attached to and is a
part of the Operating Agreement of the Project Entity.
25 Power of Attorney. Upon request by the Sub-Manager, the Project Entity
will provide designated principals of the Sub-Manager with powers of attorney
or other documents of authority as may be required by any entity with which the
Sub-Manager does business on behalf of the Project Entity, sufficient to permit
the Sub-Manager to carry out its duties under this Agreement.
26 General Provisions.
26.1 Modification and Waiver.
(1) No modification, variation, or amendment to this Agreement
will be effective unless embodied in a writing signed by the parties.
(2) No course of dealing will be deemed to amend or discharge
any provision of this Agreement. No delay in the exercise of any
right will operate as a waiver of such right. No single or partial
exercise of any right will preclude its further exercise. A waiver of
any right on any one occasion will not be construed as a bar to, or
waiver of, any such right on any other occasion.
26.2 Remedies for Breach. Subject to the terms of the Arbitration
Agreement, the rights and remedies of the parties set forth in this
Agreement are neither mutually exclusive nor exclusive of any right
or remedy provided by law, in equity or otherwise. Subject to the
terms of the Arbitration Agreement, the parties agree that all legal
remedies (such as monetary damages) as well as all equitable remedies
(such as specific performance) will be available for any breach or
threatened breach of any provision of this Agreement.
26.3 Costs. If either party retains counsel for the purpose of enforcing
or preventing the breach or any threatened breach of any provision of
this Agreement or for any other remedy relating to it, then the
prevailing party will be entitled to be reimbursed by the
nonprevailing party for all costs and expenses so incurred (including
reasonable attorney's fees, costs of bonds, and fees and expenses for
expert witnesses).
<PAGE>
26.4 Counterparts. This Agreement may be signed in multiple counterparts
(or with detachable signature pages). Each counterpart will be
considered an original instrument, but all of them in the aggregate
will constitute one agreement.
26.5 Notices. All notices under this Agreement will be in writing and will
be either delivered or sent addressed as follows:
If to the Project Entity at:
Attention: Harry H. Frampton, III
c/o East West Partners, Inc.
100 East Thomas Place
P.O. Drawer 2770
Avon, Colorado 81620
With a copy to:
Attention: James F. Wood, Esq.
Sherman & Howard L.L.C.
Suite 3000
633 - 17th Street
Denver, Colorado 80202
If to the Sub-Manager at:
Attention: Harry H. Frampton, III
c/o East West Partners, Inc.
100 East Thomas Place
P.O. Drawer 2770
Avon, Colorado 81620
With a copy to:
Attention: James F. Wood, Esq.
Sherman & Howard L.L.C.
Suite 3000
633 - 17th Street
Denver, Colorado 80202
or to such other address as from time to time supplied by any party
to the other by notice as required by this Agreement. In computing
time periods, the day of notice will be included. For notice
purposes, a day means a calendar day.
<PAGE>
26.6 Deemed Notice. Any notices given to any party in accordance with this
Agreement will be deemed to have been duly given: [i] on the date of
receipt if personally delivered, [ii] five days after being sent by
U.S. mail, postage prepaid, [iii] the date of receipt, if sent by
registered or certified U.S. mail, postage prepaid, [iv] one business
day after receipt, if sent by confirmed facsimile or telecopier
transmission, or [v] one business day after having been sent by a
nationally recognized overnight courier service.
26.7 Partial Invalidity. Wherever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and
valid under applicable law. However, if for any reason any one or
more of the provisions of this Agreement are held to be invalid,
illegal or unenforceable in any respect, such action will not affect
any other provision of this Agreement. In such event, this Agreement
will be construed as if such invalid, illegal or unenforceable
provision had never been contained in it.
26.8 Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties concerning its subject matter.
26.9 Benefit. The contribution obligations of each party will inure solely
to the benefit of the other party, without conferring on any other
Person any rights of enforcement or other rights.
26.10Binding Effect. This Agreement is binding upon, and inures to the
benefit of, the parties, their successors and assigns.
26.11Further Assurances. Each party agrees, without further consideration,
to sign and deliver such other documents of further assurance as may
reasonably be necessary to effectuate the provisions of this
Agreement.
26.12Headings. Article and Section titles have been inserted for
convenience of reference only. They are not intended to affect the
meaning or interpretation of this Agreement.
26.13Terms. Terms used with initial capital letters will have the meanings
specified, applicable to both singular and plural forms, for all
purposes of this Agreement. All pronouns (and any variation) will be
deemed to refer to the masculine, feminine or neuter, as the identity
of the Person may require. The singular or plural includes the other,
as the context requires or permits. The word include (and any
variation) is used in an illustrative sense rather than a limiting
sense. The word day means a calendar day.
26.14Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Colorado (without
<PAGE>
considering Colorado choice of law provisions). Any conflict or
apparent conflict between this Agreement and the Act will be resolved
in favor of this Agreement, except as otherwise required by the Act.
26.15Interest on Past Due Amounts. Any amounts not paid when due under
this Agreement will bear interest until such amounts are paid, at the
floating rate of four percent per annum above the "prime rate"
published from time to time by The Wall Street Journal, or at the
maximum rate permitted by law, whichever is lower.
26.16Attorneys Fees and Costs. Either party will be entitled to reasonable
attorneys fees and costs from the other party incurred in connection
with the enforcement of any of its rights under this Agreement
against such other party.
The parties have caused this Sub-Management Agreement to be executed as of
the date set forth above.
EAST WEST PARTNERS, INC.
By
---------------------------------------------------------
Harry H. Frampton, III, President
Prototype, LLC
By: Northstar Holdings, LLC., its manager
By: East West Resort Development V, L.L.L.P., its manager
By: HF Holding Corp., its general partner
By
---------------------------------------------------------
Harry H. Frampton, III, President
<PAGE>
EXHIBIT U
DEFINITIONS
Act: the Delaware Limited Liability Company
Act, as amended from time to time.
Additional Contribution: a Capital Contribution
(other than the Initial Contribution)
that a Member makes to the Company.
Additional Contribution for
Capital Commitment: any Additional Contribution by EWRD V
other than an Additional Contribution
for Excess Capital.
Additional Contribution for
Excess Capital: an Additional Contribution by any
Member pursuant to 3.2.
Adjusted Capital Account: with respect to any Member, the Capital
Account of that Member increased by [i]
the Member's share of Company Minimum
Gain and Member Minimum Gain and [ii]
any amount such Member is obligated to
restore to the Company upon liquidation
of such Member's interest in the
Company (or which is so treated
pursuant to Regulation Section
1.704-1(b)(2)(ii)(c)), and decreased by
the items described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5)
and (6).
Adjusted Capital Contribution
Amount for Capital Commitment: as of any Computation Date, an amount
equal to [i] the aggregate Additional
Contributions for Capital Commitment
made by EWRD V on or prior to the
computation Date, less [ii] all
Distributions made to EWRD V on or
prior to the Computation Date pursuant
to 12.2[f] and 5.1[g] or deemed made to
EWRD V on or prior to the Computation
Date pursuant to 5.1[g] pursuant to the
second sentence of 5.2.
Adjusted Capital Contribution
Amount for Excess Capital: as of any Computation Date with respect
to any Member, an
<PAGE>
amount equal to [i] the aggregate
Additional Contributions for Excess
Capital made by such Member on or prior
to the Computation Date, less [ii] all
Distributions made to such Member on or
prior to the Computation Date pursuant
to 12.2[d] and 5.1[d] or deemed made to
that Member on or prior to the
Computation Date pursuant to 5.1[d]
pursuant to the second sentence of 5.2.
Adjusted Capital Contribution
Amount for Land: as of any Computation Date, an amount
equal to [i] the aggregate Capital
Contributions made by EWRD V used for
Land Costs on or prior to the
Computation Date, less [ii] all
Distributions made to EWRD V on or
prior to the Computation Date pursuant
to 12.2[f] and 5.1[h] or deemed made to
EWRD V on or prior to the Computation
Date pursuant to 5.1[h] pursuant to the
second sentence of 5.2.
Adjusted Unpaid Preferred
Return Amount for Capital Commitment: as of any Computation Date, an amount
equal to [i] the Unpaid Preferred
Return for Capital Commitment as of the
last day of the immediately preceding
Fiscal Year, less [ii] all
Distributions made to EWRD V on or
prior to the Computation Date pursuant
to 12.2[g] and 5.1[e] or deemed made to
EWRD V on or prior to the Computation
Date pursuant to 5.1[e] pursuant to the
second sentence of 5.2, during the
Fiscal Year within which the
Computation Date occurs.
Adjusted Unpaid Preferred
Return Amount for Excess Capital: as of the Computation Date with respect
to any Member, an amount equal to [i]
such Member's Unpaid Preferred Return
for Excess Capital as of the last day
of the immediately preceding Fiscal
Year, less [ii] all Distributions made
to that Member on or prior to the
Computation Date pursuant to 12.2[e]
and 5.1[c] or deemed made to that
Member on or prior to the Computation
Date pursuant to 5.1[c] pursuant to the
second sentence of 5.2 during the
Fiscal Year within which the
Computation Date occurs.
Adjusted Unpaid Preferred
<PAGE>
Return Amount for Land: as of any Computation Date, an amount
equal to [i] the Unpaid Preferred
Return for Land as of the last day of
the immediately preceding Fiscal Year,
less [ii] all Distributions made to
EWRD V on or prior to the Computation
Date pursuant to 12.2[h] and 5.1[c] or
deemed made to EWRD V on or prior to
the Computation Date pursuant to 5.1[c]
pursuant to the second sentence of 5.2
during the Fiscal year within which the
Computation Date occurs.
Admission Notice: the meaning given to such term in 3.2
[b].
Affiliate: with respect to any Person, any Person
that directly or indirectly controls,
is controlled by, or is under common
control with such Person, including,
without limitation, any Person that
directly or indirectly owns, controls
or holds with power to vote 10% or more
of the outstanding voting securities or
other voting ownership interests of
such Person; any Person 10% or more of
whose outstanding voting securities or
other voting ownership interests are
directly or indirectly owned,
controlled or held with power to vote
by such Person; any partnership in
which the specified Person is a general
partner; any officer or director of the
specified Person; any limited liability
company in which the specified Person
is a manager; and any entity of which
such Person is an executive officer,
director, general partner, or manager
and any family member of the specified
Person.
Aggregate Account Balance: the meaning given to such term in 5.6.
Agreement: this Operating Agreement, also known as
a limited liability company agreement
under the Act, as amended from time to
time.
Ancillary Property: one or more small (relative to the
Property) parcels of real property
which are contiguous to the Property
(or the Ten Year Option Property, if
acquired by the Company), are necessary
or desirable for the development of the
Property (or the Ten Year Option
Property, if acquired by the Company)
in accordance with the Master
Development Plan, and which Booth
<PAGE>
Creek reasonably determines are not
necessary or advisable for the
Operation of the Resort.
Annual Plan: means the annual business plan for the
Company, including a forecast of the
financial operations of the Company and
the Projects, prepared by the Manager
in accordance with 6.11 and approved by
the Members pursuant to 6.11, as the
same may be amended from time to time
by the Manager with the approval of the
Members. The Annual Plan will include
(as applicable) an annual operating
budget, working capital budget, capital
budget and a marketing budget, all
relating to the operation of the
Company and the development,
construction, marketing and sale of the
Projects, on a month-by-month basis.
Such annual budget, as the same may be
amended from time to time, will be
prepared in accordance with GAAP by the
Manager and approved by the Members
pursuant to 6.11.
Arbitration Agreement: that certain Arbitration Agreement
entered into between the Company and
each Member, in the form set forth in
Exhibit F, as it may be amended from
time to time.
Assumed Parcel Value: with respect each Parcel listed on
Exhibit S, the assumed value of such
Parcel as reflected on Exhibit S.
Bankruptcy: A Person will be deemed bankrupt if:
[a] any proceeding is commenced against
such Person as "debtor" for any relief
under bankruptcy or insolvency laws, or
laws relating to the relief of debtors,
reorganizations, arrangements,
compositions, or extensions and such
proceeding is not dismissed or stayed
within one hundred twenty (120) days
after such proceeding has commenced, or
[b] such Person commences any
proceeding for relief under bankruptcy
or insolvency laws or laws relating to
the relief of debtors, reorganizations,
arrangements, compositions, or
extensions.
<PAGE>
Book Value: with respect to any asset, the asset's
adjusted basis for federal income tax
purposes, except as follows:
[a] the initial Book Value of any asset
contributed (or deemed contributed
under section 1.708-1(b)(1)(iv) of the
Regulations) by a Member to the Company
will be the asset's Fair Market Value
at the time of the contribution;
[b] the Book Value of all Company
assets will be adjusted to equal their
respective Fair Market Values (as
determined by the Members): [i] if the
Members determine an adjustment is
necessary or appropriate to reflect the
relative economic interests of the
Members in the Company as of [A] the
acquisition of an additional interest
in the Company by any new or existing
Member in exchange for more than a de
minimis capital contribution, or [B]
the distribution by the Company to a
Member of more than a de minimis amount
of Company property as consideration
for an interest in the Company; and
[ii] as of the liquidation of the
Company within the meaning of
Regulations section
1.704-1(b)(2)(ii)(g);
[c] the Book Value of any Company asset
distributed to any Member will be the
Fair Market Value of the asset on the
date of distribution; and
[d] the Book Values of Company assets
will be increased or decreased, as
determined by the Members, to reflect
any adjustment to the adjusted basis of
the assets under Code Sections 734(b)
or 743(b), but only to the extent that
the adjustment is taken into account in
determining Capital Accounts under
Regulations section 1.704-1(b)(2)(iv)
(m).
After the Book Value of any asset has
been adjusted under clause [a], clause
[b] or clause [d] above, Book Value
will be adjusted by the Depreciation
taken into account with respect to the
asset for purposes of computing Net
Income and Net Loss.
Booth Creek: the meaning given to such term in the
preamble.
<PAGE>
Booth Creek Change of Control: any event or circumstance such that
either [a] the Resort and the Ownership
Interest of Booth Creek in the Company
are not owned and controlled by the
same Person or by Affiliates of the
same Person (except that, for purposes
of this definition, the reference to
10% in the definition of Affiliate is
changed to 51%, unless Chris Ryman or
Betsy Cole is actively involved in the
operations of such Affiliate or has
substantial day-to-day decision making
authority in the operations of such
Affiliate, in which case, the reference
to 10% is not changed to 51%), or [b]
both of Chris Ryman and Betsy Cole
cease to be actively involved in the
operations of Booth Creek or cease to
have substantial day-to-day decision
making authority in the operations of
Booth Creek, except that if both cease
to be so actively involved or cease to
have such authority by reason of being
employed by EWRD V or any of its
Affiliates, then no Booth Creek Change
of Control will be deemed to have
occurred under [b].
Booth Creek Change of Control Remedy: the meaning given to such term in 13.11.
Booth Creek Return: the meaning given to such term in 5.6.
Borrowing: the borrowing of money by the Company
or the issuance of promissory notes or
other evidence of indebtedness by the
Company in connection with the
borrowing of money.
Break-Up Remedy: the meaning given to such term in 13.9.
Break-Up Infrastructure Costs: [a] with respect to the remedy
exercised pursuant to 3.1[d], the
Infrastructure Costs (but excluding
Excess Infrastructure Costs) reasonably
attributable to the Essential Ski
Property or any portion of the Village
Core that is conveyed to Booth Creek
pursuant to 3.1[d] and which have not
previously been returned to EWRD V
pursuant to 5.1[g]; and [b] with
respect to the remedy exercised
pursuant to 13.9, Infrastructure Costs
(including any Excess Infrastructure
Costs) reasonably attributable to the
Essential Ski Property or any portion
of the Village Core that is
<PAGE>
conveyed to Booth Creek in connection
with the exercise of the Break-Up
Remedy by Booth Creek or EWRD V, and
which have not previously been returned
to EWRD V pursuant to 5.1[g] plus any
Unpaid Preferred Return for Capital
Commitment reasonably attributed to
such unreturned Infrastructure Costs.
Capital Account: the capital account of a Member
established and maintained in
accordance with 3.4.
Capital Commitment: an amount equal to $28,000,000.
Capital Commitment Account: an account with an initial balance of
zero, which is increased by EWRD V's
Initial Contribution and all Additional
Contributions for Capital Commitment by
EWRD V and is decreased by all
Distributions pursuant to 5.1[g] and
5.1[h].
Capital Contribution: any contribution of money or property
by a Member to the Company which is
either an Initial Contribution or an
Additional Contribution.
Certificate: the Certificate of Formation of the
Company, as amended from time to time.
Code: the Internal Revenue Code of 1986, as
amended from time to time (including
corresponding provisions of subsequent
revenue laws).
Company: Northstar Holdings, LLC, as formed
under the Certificate and governed by
this Agreement.
Company Minimum Gain: the amount computed under Regulations
Section 1.704-2(d)(1) with respect to
the Company's Nonrecourse Liabilities.
Computation Date: the date as of which any computation is
made.
Conveyance Property: the Essential Ski Property and the
Village Core (to the extent the same
are conveyed to the Company pursuant to
the Real Estate Purchase Agreement),
except any parcel in the Village Core
as to which the Project Commencement
Date has occurred as of
<PAGE>
the date Booth Creek gives Notice of a
Funding Default under 3.1[d] or its
election to exercise the Break-Up
Remedy under 13.9[a], as the case may
be.
Deadlock: the continued disagreement between EWRD
V and Booth Creek concerning material
matters relating to the Company's
business, such that, notwithstanding
the satisfaction by Booth Creek of its
obligation [a] to act reasonably as to
matters governed by 6.3 and [b] to act
in good faith as to matters governed by
6.4, the Company is unable to proceed
in a reasonable manner with the
completion of the Project, and the
continuation of such condition for a
period of at least 12 months, as
determined either by the agreement of
EWRD V and Booth Creek or by an
arbitrator under the Arbitration
Agreement.
Depreciation: for each taxable year or other period,
an amount equal to the depreciation,
amortization or other cost recovery
deduction allowable with respect to an
asset for the year or other period,
except that if the Book Value of an
asset differs from its adjusted basis
for federal income tax purposes at the
beginning of the year or other period,
Depreciation will be an amount which
bears the same ratio to the beginning
Book Value as the federal income tax
depreciation, amortization or other
cost recovery deduction for the year or
other period bears to the beginning
adjusted tax basis, but if the federal
income tax depreciation, amortization,
or other cost recovery deduction for
the year or other period is zero,
Depreciation will be determined with
reference to the beginning Book Value
using any reasonable method selected by
the Manager.
Dissolution: the happening of any of the events set
forth in 11.1.
Distribution: the amount of any money or the Fair
Market Value of any property
distributed by the Company to the
Members as an operating or liquidating
distribution in accordance with this
Agreement.
East West Change of Control: any event or circumstance such that
neither of the following is true: [a]
Harry H.
<PAGE>
Frampton, III is actively involved in
the operations of, and has primary
day-to-day decision making authority in
the operations of EWRD V (or any
Transferee of EWRD V as the Manager)
and [b] at least one of the East West
Key Managers are actively involved in
the operations of, and have primary
day-to-day decision making authority in
the operations of, EWRD V (or any
Transferee of EWRD V as the Manager).
East West Key Managers: Ross E. Bowker, Roger W. Lessman,
Charles I. Madison, Blake L. Riva, Mark
L. Smith, and James A. Telling plus any
other individual whom EWRD V adds to
the foregoing list and less any of the
foregoing individuals whom EWRD V
removes from the list (subject, in
either case, to the consent of Booth
Creek, such consent not to be
unreasonably withheld, delayed or
conditioned), provided such individual
has agreed to be bound by the Master
Non-Competition Agreement in the form
of Exhibit I.
Economic Interest: each Member's (or Transferee's)
percentage interest (to the nearest
one-thousandth of a percent) in the
Income of the Company as specified in
Exhibit B, as amended from time to time
in accordance with this Agreement.
Emergency: an event that causes or imminently
threatens to cause risk of a material
loss of income or property of the
Company arising from an extraordinary
circumstance or occurrence not expected
and not in the ordinary course of
business (including a loss caused by
contractual defaults and similar
occurrences if not expected and not in
the ordinary course of business), or
imminent risk of bodily injury or death
to any individual. "Emergency" includes
shortages of capital caused by such
occurrences as an uninsured casualty
loss or tort claim, a material adverse
condition with respect to the geology
or soils of the Property, the existence
of hazardous materials on the Property
or other adverse conditions, or any
other extraordinary circumstance, but
does not include shortages of capital
caused by cost overruns on the Projects
<PAGE>
or events occurring in the ordinary
course of development of the Property.
Encumbrance: the granting by the Company of a
mortgage, deed of trust, pledge or
other lien on or security interest in
any real property of the Company.
Essential Ski Property: [a] any portion of the Property or the
Ten Year Option Property specified on
Exhibit P and [b] any other portion of
the Property or the Ten Year Option
Property, that [i] Booth Creek
reasonably determines could not be
developed in the manner proposed by the
Manager without having an adverse
effect on the operation of the Resort,
[ii] if included within the definition
of Essential Ski Property, would not
have a materially adverse effect on the
densities contemplated by the Master
Development Plan, and [iii] as to which
Booth Creek provides Notice to the
Manager (specifying in reasonable
detail the reasons for such
determination) within 10 days after the
Manager provides Notice to Booth Creek
of an interest or plan to develop such
portion of Property or Ten Year Option
Property.
EWRD Party: [a] any Affiliate of EWRD V owning a
membership interest in a Project LLC
and [b] any key employee of an
Affiliate of EWRD V having direct
management duties with respect to one
or more Projects and owning a
membership interest in a Project LLC.
EWRD V: the meaning given to such term in the
preamble.
Excess Infrastructure Costs: any Infrastructure Costs to the extent
they are incurred as a result of the
development of Infrastructure to
standards higher than the
Infrastructure Standards, as reasonably
determined by EWRD V.
Fair Market Value: the cash price at which a willing
seller would sell and a willing buyer
would buy, both having full knowledge
of the relevant facts and being under
no compulsion to buy or sell, in an
arm's-length transaction without time
constraints.
<PAGE>
Fiscal Year: the period commencing on January 1 of
each year and ending on December 31 of
such year, but the first Fiscal Year
will begin on the date of this
Agreement and the last Fiscal Year will
end on the date on which the Company is
terminated.
Funding Default: the meaning given to such term in
3.1[d].
Funding Percentage: 80% with respect to EWRD V and 20% with
respect to Booth Creek.
GAAP: generally accepted accounting
principles.
Gross Sales Price: the gross sales price of an arms length
bona fide sale transaction of each of
the Units, without deduction for
commissions or selling expenses of any
nature whatsoever, and specifically
including any Unit premium but
excluding bona fide developer cash
discounts, cash allowances,
furnishings, any and all membership
initiation fees paid by the buyer of
the Unit, and Upgrades.
Income: for each Fiscal Year, each item of
income and gain as determined,
recognized and classified for federal
income tax purposes, but [a] any income
or gain that is exempt from federal
income tax will be included as if it
were an item of taxable income, [b] any
income or gain attributable to the
taxable disposition of any Company
asset will be computed by the Company
as if the adjusted basis of such asset
as of the date of the disposition were
equal in amount to the Company's Book
Value with respect to such asset as of
such date, [c] in the event of a
distribution of any Company asset,
whether or not in connection with a
liquidation of the Company, such event
will for Capital Account purposes be a
deemed taxable disposition of such
Company asset immediately prior to such
distribution and income or gain will be
computed and allocated among the
Members as if such property were
actually disposed of for an amount
realized equal to the Fair Market Value
of such asset and as if the adjusted
basis of such asset was equal to its
Book Value at such time, and [d] in the
<PAGE>
event the Book Value of any Company
asset is adjusted upwards pursuant to
the definition of Book Value the amount
of such adjustment will be taken into
account for Capital Account purposes as
income or gain from the disposition of
such Company asset and allocated among
the Members.
Indemnitee: the meaning given to such term in 9.1.
Infrastructure Costs: all direct, out-of-pocket costs
incurred by or on behalf of the Company
or any Project LLC in developing the
infrastructure for the Property and any
Ten Year Option Property (to the point
at which such infrastructure enters the
boundary of the site that is intended
to be sold to end users), including
development and construction costs
associated with roads and utilities and
the On-Site Management Allowance, but,
solely for the purposes of determining
the Unpaid Booth Creek Return,
excluding Excess Infrastructure Costs.
Infrastructure Standards: the standards set forth in Exhibit K,
which describe the standards to which
Infrastructure is expected to be
developed (but such standards do not
restrict EWRD V in any decision to
develop Infrastructure to a standard
that is higher than the Infrastructure
Standards).
Initial Contribution: the initial capital contribution made
by a Member to the Company, as
described in 3.1 and as set forth on
the attached Exhibit C.
Land Costs: the $15,000,000 purchase price of the
Property.
Liquidation: the process of winding up and
terminating the Company after its
Dissolution.
Loss: for each Fiscal Year, each item of loss
or deduction as determined, recognized
and classified for federal income tax
purposes, but [a] any Code Section
705(a)(2)(B) expenditure will be
included as if it were a deductible
expenditure, [b] any loss attributable
to the taxable disposition of any
<PAGE>
Company asset will be computed by the
Company as if the adjusted basis of
such asset as of the date of the
disposition were equal to the Company's
Book Value with respect to such asset
as of such date, [c] in the event of a
distribution of any Company asset,
whether or not in connection with a
liquidation of the Company, such event
will be a deemed taxable disposition of
such asset immediately prior to such
distribution and any loss will be
computed and allocated among the
Members as if such property were
actually disposed of for an amount
realized equal to the Fair Market Value
of such asset and as if the adjusted
basis of such asset were equal to its
Book Value at such time, [d] in the
event the Book Value of any Company
asset is adjusted downward pursuant to
the definition of Book Value, the
amount of such adjustment will be taken
into account as a loss from the
disposition of such asset and allocated
among the Members, and [e] any
deductions for Depreciation with
respect to a Company asset will be
determined as if the adjusted basis of
such asset were equal to the Book Value
of such asset pursuant to the
methodology described in Regulations
Section 1.704-1(b)(2)(iv)(g)(3).
Management Fee Commencement Date: with respect to any Project, the date
as of which the Company retains a
design firm for the purposes of
preparing an architectural plan for the
Project that is consistent with the
Master Development Plan.
Manager: EWRD V, as and when acting in its
capacity as the manager of the Company
as provided in this Agreement, and any
successor manager.
Master Development Plan: the development plan attached as
Exhibit G, as the same may be amended
or revised from time to time.
Material Manager Breach: [a] any Event of Withdrawal of EWRD V
prior to the Project Completion Date of
all Projects, [b] the occurrence of a
Funding Default, or [c] any other
breach of the terms of this Agreement
by EWRD V if [i] Booth Creek gives
Notice of such breach to EWRD V
(specifying in reasonable detail the
nature of the breach), [ii] such
<PAGE>
breach, if reasonably susceptible to
cure, remains uncured to the reasonable
satisfaction of Booth Creek for 45 days
after EWRD V's receipt of such Notice
(or if such breach cannot be cured to
the reasonable satisfaction of Booth
Creek within such 45-day period, then
EWRD V fails to proceed reasonably and
in good faith to cure such breach until
such breach is cured to the reasonable
satisfaction of Booth Creek), [iii]
such breach results in a material
detriment to the Company which either
cannot be, or is not, compensated for
by the payment of money by EWRD V to
the Company or Booth Creek, or by the
taking of any alternative or
substituted action by EWRD V that puts
the Company and Booth Creek in
substantially the same position as if
no breach had occurred.
Member: a Member as listed on the attached
Exhibit A, and any other Person
subsequently admitted to the Company as
an additional or substitute member in
accordance with the terms of this
Agreement.
Member Minimum Gain: the minimum gain attributable to Member
Nonrecourse Debt as determined under
Regulations Section 1.704-2(i)(3).
Member Nonrecourse Debt: any Nonrecourse Liability of the
Company for which any Member or related
person bears the economic risk of loss
under Regulations Section 1.752-2
within the meaning of Regulations
Section 1.704-2(b)(4).
Member Nonrecourse Deductions: Company losses, deductions or Code
Section 705(a)(2)(B) expenditures
attributable to a particular Member
Nonrecourse Debt. The amount of Member
Nonrecourse Deductions for any Fiscal
Year or other period will be determined
in accordance with the provisions of
Regulations Section 1.704-2(i)(2).
Minimum Booth Creek Return: [a] if the Company is liquidated prior
to the development of the Property
substantially in accordance with the
Master Development Plan, the sale of
all Units and the distribution,
pursuant to Article 5, of all of the
net sales proceeds derived from such
development and sale (after the payment
of the claims of the Company's
creditors), an amount equal
<PAGE>
to the difference between [i] the sum
of the Assumed Parcel Values of all
Parcels conveyed to the Company and
[ii] the sum of [A] the aggregate
amount paid by EWRD V (or its nominee)
for such Parcels under the Real Estate
Purchase Agreement, and [B] any payment
of the Booth Creek Return made under
5.1[a] or 12.2[f] or [b] if the Company
is liquidated after the development of
the Property substantially in
accordance with the Master Development
Plan, the sale of all Units and the
distribution, pursuant to Article 5, of
all of the net sales proceeds derived
from such development and sale (after
the payment of the claims of the
Company's creditors), an amount equal
to zero. For purposes of the foregoing
calculation, if any of the Conveyance
Property is conveyed to Booth Creek,
the sum of the Assumed Parcel Values of
all Parcels previously conveyed to the
Company will be decreased by an amount
equal to [i] such sum multiplied by
[ii] a fraction, the numerator of which
is the number of all Units actually
constructed or to be constructed on the
Conveyance Property as contemplated by
the Master Development Plan and the
denominator of which is the number of
all Units contemplated by the Master
Development Plan, in each case, as such
Master Development Plan is in effect at
the time of conveyance.
Net Income and Net Loss: for each Fiscal Year, (i) the excess of
the Income for such period over the
Loss for such period, or (ii) the
excess of the Loss for such period over
the Income for such period,
respectively, but Net Income and Net
Loss for a Fiscal Year will be computed
by excluding from such computation any
Income or Loss specially allocated
under 4.2 through 4.12, any Nonrecourse
Deduction, and any Member Nonrecourse
Deductions.
New Member: the meaning given to such term in
3.2[b].
Nonrecourse Deductions: Losses, deductions or Code Section
705(a)(2)(B) expenditures attributable
to Nonrecourse Liabilities of the
Company. The amount of Nonrecourse
Deductions for any Fiscal
<PAGE>
Year or other period will be determined
in accordance with the provisions of
Regulations Section 1.704-2(c).
Nonrecourse Liability: A nonrecourse liability as defined in
Regulations Section 1.752-1(a)(2) and
referred to in Regulations Section
1.704-2(b)(3).
Northstar at Tahoe: the approximately 8,000 acres of real
property owned by Booth Creek located
in Placer County, California, and
identified with more particularity in
the Real Estate Purchase Agreement.
Notice: the meaning given to such term in
15.12.
Offer Notice: the meaning given to such term in
13.8[a] or 13.12[a], as the case may
be.
On-Site Management Allowance: an amount equal to [a] the Manager's
direct, out-of-pocket costs incurred in
the on-site management of the Projects
and [b] 150% of the salaries and wages
paid to not more than seven individuals
employed or retained by the Manager or
its Affiliates who are engaged
primarily in on-site management of the
Projects, but only, in each of [a] and
[b], for the period from the Closing
under the Real Estate Purchase
Agreement and the second anniversary of
such date.
Ownership Interest: with respect to each Person owning an
interest in the Company, all of the
interests of such Person in the Company
(including an interest in the Income
and Losses of the Company, a Capital
Account interest, and all other rights
and obligations of such Person under
this Agreement).
Parcel: a parcel of property shown on the
Master Development Plan within the
black-bordered outlines.
Permitted Liens: the exceptions to title permitted as
"Conditions of Title" in Section 5.1 of
the Real Estate Purchase Agreement and
any other liens or matters created or
approved by Booth Creek.
<PAGE>
Permitted Transferee: a Person described in 13.3 to whom an
Ownership Interest may be Transferred.
Person: an individual, corporation,
partnership, limited liability company,
trust, unincorporated organization,
association or other entity.
Preferred Return for Capital for all or any portion of any Fiscal
Commitment: Year, a 12% annual rate of return, on
an amount equal to the sum of [a] the
weighted arithmetic average of the
Adjusted Capital Contribution Amount
for Capital Commitment during such
Fiscal Year or portion thereof
(calculated by taking into account the
amount of the Adjusted Capital
Contribution Amount for Capital
Commitment on each day during such
Fiscal Year or portion of a Fiscal
Year) and [b] the weighted arithmetic
average of the Adjusted Unpaid
Preferred Return Amount for Capital
Commitment during such Fiscal Year or
portion of a Fiscal Year (calculated by
taking into account the amount of the
Adjusted Unpaid Preferred Return Amount
for Capital Commitment on each day
during such Fiscal Year or portion of a
Fiscal Year).
Preferred Return for
Excess Capital: for any Member, for all or any portion
of any Fiscal Year, a 15% annual rate
of return, on an amount equal to the
sum of [a] the weighted arithmetic
average of such Member's Adjusted
Capital Contribution Amount for Excess
Capital during such Fiscal Year or
portion thereof (calculated by taking
into account the amount of such
Member's Adjusted Capital Contribution
Amount for Excess Capital on each day
during such Fiscal Year or portion of a
Fiscal Year) and [b] the weighted
arithmetic average of such Member's
Adjusted Unpaid Preferred Return Amount
for Excess Capital during such Fiscal
Year or portion of a Fiscal Year
(calculated by taking into account the
amount of such Member's Adjusted Unpaid
Preferred Return Amount for Excess
Capital on each day during such Fiscal
Year or portion of a Fiscal Year).
<PAGE>
Preferred Return for Land: for all or any portion of any Fiscal
Year, an 8% annual rate of return on an
amount equal to the sum of [a] the
weighted arithmetic average of the
Adjusted Capital Contribution Amount
for Land during such Fiscal Year or
portion thereof (calculated by taking
into account the amount of the Adjusted
Capital Contribution Amount for Land on
each day during such Fiscal Year or
portion of a Fiscal Year) and [b] the
weighted arithmetic average of the
Adjusted Unpaid Preferred Return Amount
for Land during such Fiscal Year or
portion of a Fiscal Year (calculated by
taking into account the amount of the
Adjusted Unpaid Preferred Return Amount
for Land on each day during such Fiscal
Year or portion of a Fiscal Year).
Preferred Return: [a] with respect to EWRD V, the
Preferred Return for Land, the
Preferred Return for Capital
Commitment, and the Preferred Return
for Excess Capital for EWRD V and [b]
with respect to Booth Creek, the
Preferred Return for Excess Capital for
Booth Creek.
Presumed Tax Liability: for any Member for a Fiscal Year, an
amount equal to the product of [a] the
amount of taxable income allocated to
such Member for that Fiscal Year and
[b] the Presumed Tax Rate.
Presumed Tax Rate: the combined federal and state income
tax rate, adjusted for the federal
deduction for state income taxes,
applicable during a Fiscal Year for
computing regular ordinary income tax
liabilities of a natural person
residing in Colorado in the highest
bracket of taxable income.
Proceeding: any threatened, pending or completed
action, suit or proceeding, whether
formal or informal, and whether civil,
administrative, investigative or
criminal.
Project: the acquisition, development,
operation, and sale of the Property and
the Ten Year Option Property, if any,
in phases or segments, with each phase
<PAGE>
or segment to be categorized as a
separate Project, as determined in the
Master Development Plan and Annual
Plans, as amended from time to time.
Project Commencement Date: the earlier of: [a] the commencement of
construction with respect to a
particular Project or [b] the issuance
of a construction permit and the
recordation of a construction loan deed
of trust or mortgage with respect to
such Project.
Project Completion Date: with respect to any Project, the date
on which all of the Units constructed
for such Project have been sold.
Project LLC: each limited liability company which is
created to own and operate a specific
Project.
Property: the portions of real property described
in Exhibit H which are from time to
time conveyed to the Company pursuant
to the Real Estate Purchase Agreement.
Purchase Price: the meaning given to such term in
13.12[a].
Real Estate Purchase Agreement: the Agreement for Purchase and Sale of
Real Property dated December 15, 1999
between Booth Creek and East West
Partners, Inc.
Recipient Member: the meaning given to such term in
13.11[a].
Regulations: the Treasury Regulations (including
temporary or proposed regulations)
promulgated under the Code, as amended
from time to time (including
corresponding provisions of succeeding
regulations).
Resort: the meaning given to such term in 13.8.
Resort Right of First Offer Agreement: an agreement pursuant to which Booth
Creek gives EWRD V a right of first
offer to purchase the Resort containing
the general terms contained in Exhibit
Q, which will be entered into
concurrently with this Agreement.
Tax Distribution: the meaning given to such term in 5.2.
<PAGE>
Ten Year Option Property: the parcels of real property within
Northstar at Tahoe which are identified
in Exhibit N and which Booth Creek
conveys to the Company pursuant to the
Ten Year Option Agreement entered into
pursuant to the Real Estate Purchase
Agreement.
Trademark License Agreement: The non-exclusive license agreement
between Trimont Land Company and the
Company in the form and substance of
Exhibit O.
Transfer: a sale, exchange, assignment, transfer,
pledge, transfer upon or in lieu of
foreclosure, or other disposition of an
Ownership Interest (whether voluntary,
involuntary or by operation of law)
including a pledge and transfer in
foreclosure or in lieu of foreclosure.
Transferee: a Person to whom an Ownership Interest
is Transferred in compliance with this
Agreement, who will have the rights
specified in 13.6 of this Agreement.
Transferor: a Person who Transfers an Ownership
Interest in compliance with this
Agreement.
Unit: any condominium, town home or other
residential property developed by the
Company in connection with the Project.
Unpaid Booth Creek Return: as of any Computation Date, an amount
equal to [a] the sum of the Booth Creek
Return [i] for the period beginning on
the first day of the Fiscal Year within
which such date occurs and ending on
the Computation Date and [ii] for all
prior Fiscal Years less [b] all
Distributions made to Booth Creek on or
prior to the Computation Date pursuant
to 12.2[f] and 5.1[a] or deemed made to
Booth Creek on or prior to the
Computation Date pursuant to 5.1[a]
pursuant to the second sentence of 5.2.
<PAGE>
Unpaid Preferred Return for
Capital Commitment: as of any Computation Date, an amount
equal to [a] the sum of the Preferred
Return for Capital Commitment [i] for
the period beginning on the first day
of the Fiscal Year within which such
date occurs and ending on the
Computation Date and [ii] for all prior
Fiscal Years, less [b] all
Distributions made to EWRD V on or
prior to the Computation Date pursuant
to 12.2[g] and 5.1[e] or deemed made to
EWRD V on or prior to the Computation
Date pursuant to 5.1[e] pursuant to the
second sentence of 5.2.
Unpaid Preferred Return
for Excess Capital: as of any Computation Date for any
Member, an amount equal to [a] the sum
of such Member's Preferred Return for
Excess Capital [i] for the period
beginning on the first day of the
Fiscal Year within which such date
occurs and ending on the Computation
Date and [ii] for all prior Fiscal
Years, less [b] all Distributions made
to such Member on or prior to the
Computation Date pursuant to 12.2[e]
and 5.1[c] or deemed made to such
Member on or prior to the Computation
Date pursuant to 5.1[c] pursuant to the
second sentence of 5.2.
Unpaid Preferred Return
for Land: as of any Computation Date, an amount
equal to [a] the sum of the Preferred
Return for Land [i] for the period
beginning on the first day of the
Fiscal Year within which such date
occurs and ending on the Computation
Date and [ii] for all prior Fiscal
Years, less [b] all Distributions made
to EWRD V on or prior to the
Computation Date pursuant to 12.2[h]
and 5.1[f] or deemed made to EWRD V on
or prior to the Computation Date
<PAGE>
pursuant to 5.1[f] pursuant to the
second sentence of 5.2.
Unpaid Preferred Return: as of any Computation Date, an amount
equal to [a] with respect to EWRD V,
the Unpaid Preferred Return for Land,
the Unpaid Preferred Return for Capital
Commitment and the Unpaid Preferred
Return for Excess Capital for EWRD V
and [b] with respect to Booth Creek,
the Unpaid Preferred Return for Excess
Capital for Booth Creek.
Upgrades: any so-called upgrades, options,
builder options, change orders or
custom requests ordered by the buyers
of the Units which are in addition to
the inclusions and features of the
standard unit plan and specifications
distributed in connection with the
marketing of the Units.
Village Core: parcels A, B, C, and D, as depicted on
the Master Development Plan, but any
portion of parcel D which is subdivided
and does not contain parking spaces
will not be included in the definition
of Village Core and, after all parking
spaces on parcel D have been relocated,
the entirety of parcel D will not be
included in the definition of Village
Core.
Vote: the action of the Company by the
Members in accordance with the voting
requirement set forth in Article 6,
either in meeting assembled (including
any meeting described in 7.9) or by
minutes of action (or written consent
without a meeting).
Withdrawal: the occurrence of an event which
terminates membership in the Company,
as provided in 11.2.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS OF BOOTH CREEK SKI
HOLDINGS, INC. AS OF JANUARY 28, 2000 AND FOR THE THREE MONTHS THEN ENDED,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-27-2000
<PERIOD-END> JAN-28-2000
<CASH> 1,796
<SECURITIES> 0
<RECEIVABLES> 1,944
<ALLOWANCES> 66
<INVENTORY> 3,714
<CURRENT-ASSETS> 16,068
<PP&E> 202,413
<DEPRECIATION> 46,922
<TOTAL-ASSETS> 221,754
<CURRENT-LIABILITIES> 62,494
<BONDS> 133,500
2,007
0
<COMMON> 0
<OTHER-SE> 19,582
<TOTAL-LIABILITY-AND-EQUITY> 221,754
<SALES> 0
<TOTAL-REVENUES> 44,714
<CGS> 0
<TOTAL-COSTS> 26,478
<OTHER-EXPENSES> 12,143
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,060
<INCOME-PRETAX> 1,045
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,045
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 998
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
