<PAGE>

                         Exhibit 10.16 - FIRST AMENDMENT
                                       TO
                               OPERATING AGREEMENT
                                       OF
                                  UPK/DMB, LLC

     This First Amendment to Operating Agreement of UPK/DMB, LLC ("Amendment")
is entered into as of this 2nd day of October, 2000 between United Park City
Mines Company, a Delaware corporation ("UPK"), and DMB Park City, LLC an Arizona
limited liability company ("DMB") as the sole members of UPK/DMD, LLC, a
Delaware limited liability company ("Company").

                                    RECITALS

     UPK and DMB have formed the Company and have entered into that certain
Operating Agreement of UPK/DMB, LLC ("Agreement") as of June 15, 2000.

     UPK and DMB, as the sole Members of the Company now wish to amend the
Agreement as herein set forth.

     NOW THEREFORE, the Members amend the Agreement as follows:

     The provisions of Section 7.2(a) are amended by adding the following new
language at the end thereof:

     "Notwithstanding anything to the contrary in Section 7.1 of this Agreement,
UPK is permitted to collaterally assign, pledge, hypothecate, grant a security
interest in and otherwise encumber (collectively called a "Security Interest")
all or any portion of the shares of UPK's stock or UPK's Member interest
("Interest") in the Company, including its right to distributions
("Distributions") of Net Cash Flow under Sections 3.1 or 9.2(d) hereof, as
security for a loan to UPK from a third party lender ("Lender"); provided,
however, that such Security Interest in the Interest or Distributions shall be
subordinate and subject to the security interest granted to the Company to
secure present and future Tax Loans under Section 3.3(c). A foreclosure of such
Security Interest in the event of a default under such loan in which the Lender
or a third party acquires the Interest, or the exercise by the Lender of a right
only to receive Distributions whether or not a default exists under the loan,
will be a permitted Transfer under this Agreement. If the Interest of UPK in the
Company is Transferred to the Lender or other third party, UPK shall remain
liable for its obligations under this Agreement and the Contribution Agreement
unless the Lender or other third party becomes a Substituted Member of the
Company and assumes such obligations and has the then legal and financial
capability to perform such obligations. If UPK shall grant a Security Interest
in only its right to Distributions and the Lender shall exercise the right to
receive such Distributions, the Lender shall not become a Substituted Member in
the Company and shall be treated as an assignee of a Member's interest with only
the rights and subject to the limitations set forth in Section 7.3 hereof, and
UPK shall continue to be liable for all of its obligations under this Agreement
and the Contribution Agreement. In the event of a foreclosure of the Interest of
UPK, or an election by the Lender to receive the Distributions of UPK under
Sections 3.1 or 9.3(d) hereof, the Company shall have no obligation to make any
further Tax Loans to UPK, whether the UPK Tax Amounts arose prior to or after
such foreclosure or as a result thereof, or result from Distributions being
assigned to the Lender, and the Company shall continue to have the right to
receive Distributions which would have been made to UPK to the extent necessary
to repay Tax Loans as required by Section 3.3(b) hereof. In the event of a
foreclosure of the Interest of UPK, the Lender or other new Substituted Members
shall have the right to obtain Tax Loans under Section 3.3 of this Agreement,
provided, however that for the purpose of calculating whether a Tax Loan is
required to be made, the existence of an Unfunded Tax Amount shall be calculated
as if UPK (and not the new Substituted Member) were still a member of the
Company and all Tax Loans made thereafter (in the amount calculated as if UPK
were still a Member) shall be made to the new Substituted Member who shall be
liable for the repayment thereof pursuant to the terms of section 3.3 of this
Agreement."
<PAGE>

     In Section 10.14, in the definition of "Protocol Termination" the date of
"July 15, 2000" is deleted and the date "October 17, 2000" is inserted in place
thereof.

     In Section 10.14, the subsection entitled "Construction Pre-conditions"
shall be deleted in its entirety and the following substituted therefor:

     "Construction Preconditions" means: (a) with respect to all of the
Properties or any portion thereof which are to be physically impacted by
development thereon, UPK has received the required storm water permit for the
Excluded Properties; (b) with respect to the Flagstaff Property and related
infrastructure, the Company has received final approval from the appropriate
governmental agency of the Protocol, UPK or the Company has acquired or has
binding enforceable agreements to acquire, subject to no contingencies or title
exception matters which are unacceptable to DMB in its reasonable discretion,
the Marsac Claim, the Burns Claims, and the Deer Valley Claims which are part of
the Claims Property, the Access Properties to the extent alternative access is
still required by the City, and the BLM Fractions located in the Flagstaff
Property, and (c) with respect to the Bonanza Property and related
infrastructure, the Company has received final approval from the appropriate
governmental agency of the Protocol, and that UPK or the Company has acquired or
has binding enforceable agreements to acquire, subject to no contingencies or
title exceptions which are unacceptable to DMB in its reasonable discretion, the
Wallace Claims and the Daderko Claims which are part of the Claims Property, and
the BLM Fractions located in the Bonanza Property. In the case of the
"enforceable agreements" mentioned above, upon the written request of UPK
accompanied by the final form of an agreement to be entered into with any third
party with respect to a Claims Property, an Access Property or the BLM
Fractions, DMB will specify in writing any objections DMB may have to any
contingencies or other terms of the proposed agreement, and in the absence of a
modification or amendment to the form of the proposed contract thereafter, DMB
shall not make additional further objections to the terms, including
contingencies, of the proposed agreement; provided, however, that the foregoing
shall not affect the right of DMB to object to title matters with respect to the
property covered by such proposed agreements under the terms of Section 11 of
the Contribution Agreement.

     In Section 10.14, the subsection entitled "Voluntary Termination Date"
shall be deleted in its entirety and the following substituted therefor:

          "Voluntary Termination Date" means, unless extended by mutual
          agreement of the Members, (i) an Automatic Termination on October 31,
          2000 by UPK if UPK has not approved the Initial Conceptual Plan, the
          Initial Business Plan, and the Initial Budget by written notice on or
          before such date, (ii) an Automatic Termination on October 17, 2000 by
          both Members if the Members have not approved the Protocol by written
          notice on or before such date, (iii) as of December 31, 2000 by DMB if
          DMB has at any time prior to January 11, 2001 elected, by a
          Termination Notice given to UPK, a Density Termination or a Title
          Termination, (iv) December 31, 2000 by DMB if DMB has given UPK a
          Termination Notice for a Bonanza Potable Water Termination on or
          before such date, and (v) an Automatic Termination on December 31,
          2000 by UPK if DMB fails to file the Amended Density Application on or
          prior to such date.
<PAGE>

Execution of this First Amendment shall constitute timely approval of the
Protocol in the form attached hereto as Exhibit A by DMB and UPK in accordance
with the Operating Agreement.

In Section 10.14, the requirement of final approval of the appropriate
government agency of the Protocol set forth in subsections (b) and (c),
respectively, in the definitions of Construction Precondition shall be deemed
satisfied by receipt from the EPA of a comfort letter or series of letters or
other communications, actions or orders which, with respect to either the
Flagstaff Property or the Bonanza Property, respectively, would satisfy a
prudent real estate developer engaged in marketing of residential lots or units
within the Properties to buyers of properties in like price ranges. Satisfaction
of this condition shall be subject to Disagreement Resolution in accordance with
Section 5.12.

In Sections 5.5 and 5.6, the date for approval of the Initial Conceptual Plan,
the Initial Conceptual Business Plan and the Initial Budget by UPK is changed to
October 31, 2000 (from September 30, 2000).

Exhibit B to the Agreement is hereby deleted and Exhibit B attached hereto is
substituted therefor.

All capitalized terms used but not defined herein shall have the meanings set
forth in the Agreement. All references to "Agreement" in the Agreement shall
hereafter refer to the Agreement as amended by this Amendment. Except as amended
by this Amendment, the Agreement shall remain in full force and effect.

     Executed as of the date above first written.


                                        DMB PARK CITY, LLC, an Arizona
                                        limited liability company

                                        By: DMB Realco LLC, an Arizona limited
                                            liability company, Sole Member

                                            By: DMB Associates, Inc., an Arizona
                                                corporation, Manager

                                            By: /s/ Drew Brown
                                                ----------------------------
                                            Its: President

                                        UNITED PARK CITY MINES COMPANY,
                                        a Delaware corporation

                                        By: /s/ Joseph Lesser
                                            ----------------------------
                                        Its: Chairman