MASTER DISPOSITION AND DEVELOPMENT AGREEMENT


                                 by and between


                        SOUTH TAHOE REDEVELOPMENT AGENCY

                          THE CITY OF SOUTH LAKE TAHOE

                                       and

                 AMERICAN SKIING COMPANY RESORT PROPERTIES, INC.
                         HEAVENLY RESORT PROPERTIES, LLC
                       HEAVENLY VALLEY LIMITED PARTNERSHIP
                         TRANS-SIERRA INVESTMENTS, INC.

                                       and

                              CECIL'S MARKET, INC.







<PAGE>

                         TABLE OF CONTENTS

                                                                            Page

ARTICLE 1.DEFINITIONS AND EXHIBITS............................................3
         1.01 Definitions.....................................................3
         1.02 Exhibits........................................................10

ARTICLE 2.CONDITIONS PRECEDENT TO AGENCY ISSUANCE OF BANS AND PARKING REVENUE
        BONDS.................................................................11
         2.01 Conditions Precedent to Agency Performance......................11
         2.02 Issuance of BANS................................................13
         2.03 Conditions Precedent to the Agency Issuance of Parking Garage
              Revenue Bonds...................................................13

ARTICLE 3.CONDITIONS PRECEDENT TO AGENCY ACQUISITION..........................16
         3.01 Conditions Precedent to Agency Acquisition......................16

ARTICLE 4.AGENCY ACQUISITION ACTIVITIES.......................................18
         4.01 Agency Offers to Purchase.......................................18
         4.02 Condemnation of Properties......................................18
         4.03 Acknowledgement of Agency and City Discretion...................19
         4.04 Eminent Domain Actions; Orders for Possession...................19
         4.05 TAUs, Sewer Units and CFA.......................................19

ARTICLE 5.AGENCY CONDITIONS PRECEDENT TO DISPOSITION OF PROPERTY TO DEVELOPER.19
         5.01 Conditions Precedent to Transfer of Phase 1 Development Site to
              Developers......................................................19
         5.02 Conditions Precedent to Transfer of Phase 2 Development Site to
              Developers......................................................21

ARTICLE 6.DEVELOPERS' CONDITIONS PRECEDENT TO TRANSFER OF DEVELOPMENT SITE....23
         6.01 Conditions Precedent to Transfer of Phase 1 Property to
              Developers......................................................23
         6.02 Conditions Precedent to Transfer of Phase 2 Development Site to
              Developers......................................................26

ARTICLE 7.DISPOSITION OF PROPERTY.............................................29
         7.01 Sale of Property................................................29
         7.02 Consideration...................................................29
         7.03 Orders of Possession............................................30
         7.04 Closing Condition...............................................30
         7.05 Closing Event...................................................30
         7.06 Condition of Title..............................................30
         7.07 Condition of the Property.......................................31
         7.08 Real Estate Commissions.........................................31
         7.09 Transfer of Units of Use........................................32


<PAGE>

ARTICLE 8.CONSTRUCTION........................................................32
         8.01 Commencement of Construction....................................32
         8.02 Completion of Construction......................................33
         8.03 Construction Pursuant to Plans..................................33
         8.04 Compliance with Applicable Law..................................33
         8.05 Non-Discrimination During Construction; Equal Opportunity.......34
         8.06 Preference for Local Labor......................................34
         8.07 Supplies and Materials..........................................35
         8.08 Certificate of Completion.......................................35
         8.09 Progress Reports................................................35
         8.10 Entry by the Agency.............................................35
         8.11 Taxes...........................................................36
         8.12 Insurance Requirements..........................................36
         8.13 Hazardous Materials.............................................38
         8.14 Non-Discrimination..............................................39
         8.15 Mitigation Monitoring Plan......................................39
         8.16 Use of Paul Kennedy Steakhouse Site.............................39
         8.17 Right of Entry for Parking Garage Site..........................40
         8.18 Public Art Plan.................................................40

ARTICLE 9.CONSTRUCTION OF THE PUBLIC IMPROVEMENTS.............................40
         9.01 Construction of the Public Improvements.........................40
         9.02 Progress Reports................................................41
         9.03 Mitigation Monitoring Plan......................................41
         9.04 Right to Access to Site.........................................41
         9.05 Mello-Roos District.............................................41
         9.06 Hazardous Materials.............................................43

ARTICLE 10.OBLIGATIONS WHICH CONTINUE THROUGH AND BEYOND THE COMPLETION OF
           CONSTRUCTION.......................................................45
         10.01 Maintenance....................................................45
         10.02 Childcare Obligations..........................................46
         10.03 Mechanics' Liens...............................................46
         10.04 Developers to Indemnify Agency.................................46
         10.05 Agency To Indemnify Developers.................................47
         10.06 Non-Discrimination.............................................47
         10.07 Mandatory Language in All Subsequent Deeds Leases and
               Contracts......................................................47
         10.08 Employment Opportunity.........................................48
         10.09 Owner Participation............................................48
         10.10 Lift Ticket Sales Within City..................................48
         10.11 Marketing of Quarter Share Intervals...........................49
         10.12 Compliance with Permits........................................49
         10.13 EIR/EIS Reimbursement by Agency................................49
         10.14 Parking Garage Operations......................................49
         10.15 Continuing Disclosure..........................................49

<PAGE>

         10.16 Ice Rink Operations............................................49
         10.17 Retail Operations..............................................49
         10.18 Agency Use of BANS Proceeds, Parking Garage Revenue Bond Proceeds
               and Mello-Roos Bond Proceeds...................................49

ARTICLE 11.ASSIGNMENTS AND TRANSFERS..........................................49
         11.01 Definitions....................................................49
         11.02 Purpose of Restrictions on Transfer............................50
         11.03 Prohibited Transfers...........................................51
         11.04 Permitted Transfers............................................51
         11.05 Effectuation of Certain Permitted Transfers....................51
         11.06 Other Transfers with Agency Consent............................52

ARTICLE 12.REMEDIES...........................................................52
         12.01 Application of Remedies........................................52
         12.02 Consensual Termination.........................................52
         12.03 Effect of Consensual Termination...............................53
         12.04 Agency and City Performance....................................53
         12.05 Developer Performance..........................................53
         12.06 Right of Reverter..............................................55
         12.07 Survival.......................................................56
         12.08 Modification of Terms and Conditions and Extensions of Time....56
         12.09 Scope of Termination Rights....................................57

ARTICLE 13.SECURITY FINANCING AND RIGHTS OF HOLDERS...........................57
         13.01 No Encumbrances Except for Development Purposes................57
         13.02 Holder Not Obligated to Construct..............................57
         13.03 Notice of Default and Right to Cure............................58
         13.04 Failure of Holder to Complete Improvements.....................58
         13.05 Right of Agency to Cure........................................59
         13.06 Right of Agency to Satisfy Other Liens.........................59
         13.07 Additional Mortgagee Protections...............................59

ARTICLE 14.REPRESENTATIONS AND WARRANTIES.....................................59
         14.01 Representations and Warranties of Developers...................60
         14.02 Representations and Warranties of Agency.......................60

ARTICLE 15.GENERAL PROVISIONS.................................................61
         15.01 Notices Demands and Communications.............................61
         15.02 Non-Liability of Officials Employees and Agents................63
         15.03 Time of the Essence............................................63
         15.04 Inspection of Books and Records................................63
         15.05 Title of Parts and Sections....................................63
         15.06 Applicable Law.................................................63
         15.07 Severability...................................................63
         15.08 Legal Actions..................................................63

<PAGE>

         15.09 Binding Upon Successors; Covenants to Run with Land............63
         15.10 Parties Not Co-Venturers.......................................63
         15.11 Provisions Not Merged With Grant Deed..........................63
         15.12 Entire Understanding of the Parties............................64
         15.13 Approvals......................................................64
         15.14 Amendments.....................................................64
         15.15 Force Majeure..................................................64
         15.16 Estoppel Certificates..........................................64
         15.17 Multiple Originals Counterparts................................64


Exhibit A.........Financial Plan
Exhibit B.........Gondola Right-of-Way Legal Description
Exhibit C.........Draft Tentative  Subdivision Map
Exhibit D.........Project  Executive Summary
Exhibit E.........Scope   of   Development
Exhibit F.........Site   Plan
Exhibit G.........Schedule of Performance
Exhibit H.........Form of Grant Deed
Exhibit I.........Environmental Assessment Reports and Natural Hazard Disclosure
Exhibit J.........Motel Room Retirement Schedule
Exhibit K.........Mello-Roos Rate and Method
Exhibit L.........Sources and Uses   CFA


<PAGE>

                  MASTER DISPOSITION AND DEVELOPMENT AGREEMENT

         This Master Disposition and Development Agreement is entered into as of
this _____ day of  _________________________  1999, by and among the South Tahoe
Redevelopment Agency, a public body, corporate and politic ("Agency"),  the City
of South Lake Tahoe,  a  municipal  corporation  ("City")  and  American  Skiing
Company Resort Properties, Inc., a Maine corporation ("ASCRP"),  Heavenly Resort
Properties,   LLC,  a  Nevada  limited  liability   company   ("Heavenly  Resort
Properties"),   Heavenly  Valley,   Limited  Partnership,   a  Delaware  limited
partnership ("Heavenly Valley"),  Trans-Sierra Investments, a Nevada Corporation
("TSI"), and Cecil's Market, Inc., a California  corporation ("Cecil's Market"),
(collectively,  ASCRP,  Heavenly Resort  Properties,  Heavenly  Valley,  TSI and
Cecil's Market, Inc. shall be referred to as the "Developers").

                                    RECITALS

(a)      All initially  capitalized terms used and not defined in this Agreement
         shall have the meaning ascribed to them in Article 1.

(b)      The Agency is responsible for the  implementation  of the Redevelopment
         Plan for the South Lake Tahoe  Redevelopment  Project  No. 1 adopted by
         the City Council on June 28, 1988 pursuant to ordinance  number 746, as
         amended by ordinance number 854 adopted by the City Council on December
         6, 1994 and as further  amended by ordinance  number 905 adopted by the
         City Council on July 20, 1999.

(c)      The  Redevelopment  Plan calls for the  development of visitor  serving
         facilities  on the  Development  Site,  including  the  development  of
         certain  infrastructure  improvements  necessary for the development of
         the Development Site.

(d)      The  Agency  and the  Developers  have  entered  into a  Memorandum  of
         Understanding   dated  November,   1991  whereby  the  Agency  and  the
         Developers  agreed in good faith to negotiate the terms and  conditions
         of Disposition and Development  Agreement providing for the development
         of the Development Site in a manner  consistent with the  Redevelopment
         Plan.

(e)      The  Developers  and the Agency have  proposed the  development  on the
         Development  Site of the Project.  The Project will be developed in two
         phases in accordance with this Agreement. The portions of Phase 1 to be
         developed by the Developers  will consist of the Grand Summit Hotel and
         the Grand Summit Resort Hotel Annex to be developed by Heavenly  Resort
         Properties;  the Gondola and Gondola  Park to be  developed by Heavenly
         Valley,  a public ice rink to be developed by TSI, and a public parking
         structure,  the Park Avenue  detention  basin,  the  improvement of Van
         Sickle  Street  to a public  street,  the  realignment  of Park  Avenue
         including  the  relocation of all  utilities  and the  construction  of
         streetscape  therein, and the construction of a right turn lane between
         Pioneer  Trail and Park Avenue all of which are to be  developed by the
         Agency  and the City.  Phase 2 will  consist  of the  development  of a
         quarter-share  condominium  hotel resort  development at the Lake Tahoe
         Inn site to be  developed by ASCRP,  Cecil's  Market to be developed by
         Cecil's Market,  Inc. and the  construction  of the Intermodal  Transit
         Facility, and appropriate streetscape all of which will be developed by
         the Agency and the City.  As part of the Grand  Summit  Hotel,  certain
         visitor  serving  amenities  will be  developed  including a cinema and
         retail  space.  The Agency has received  approval  from the  California

<PAGE>

         Transportation  Commission for the receipt of Proposition 116 funds for
         the development of the Intermodal Transit Center.

(f)      The City of South Lake Tahoe City Council has certified the EIR/EIS for
         the Project on June 25, 1996 and issued Special Use Permit NO. 96-49.

(g)      The Tahoe Regional  Planning  Agency  certified the EIR/EIS as complete
         and adequate and issued its permit for the Project.

(h)      Tahoe Regional Planning Agency has prepared an Environmental Assessment
         for the Gondola,  which  Environmental  Assessment has been accepted by
         TRPA and TRPA has issued its permit for the Gondola.

(i)      The City and the Agency  have  prepared  an  Addendum to the EIR/EIS to
         reflect insubstantial changes to the Project since certification of the
         EIR/EIS.  The EIR/EIS  with the  Addendum  have served as the  Agency's
         environmental  documentation  pursuant to the California  Environmental
         Quality Act ("CEQA") for  consideration  and approval of this Agreement
         and the development of the Project  contemplated  herein.  The physical
         development  contemplated  by this Agreement is within the scope of the
         program  evaluated  in the EIR/EIS  and none of the events  requiring a
         subsequent  or  supplemental  EIR pursuant to CEQA have  occurred  with
         respect to the EIR/EIS and the Project contemplated by this Agreement.

(j)      The Agency  selected the Developers to develop the Project based on the
         Developers'  experience and  qualifications  and in accordance with the
         Agency Rule for Owner Participation. The Agency has determined that the
         Developers  have the necessary  experience,  skill and ability to carry
         out the commitments contained in this Agreement.

(k)      Heavenly Resort Properties has applied to the California  Department of
         Real Estate for a  preliminary  public report  approving  acceptance of
         reservations  to purchase  quarter-share  interest in the Grand  Summit
         Hotel, and pursuant to this preliminary public report,  Heavenly Resort
         Properties has begun  accepting  deposits for  reservations to purchase
         quarter-share  interests in the Grand  Summit  Hotel.  Heavenly  Resort
         Properties acknowledges that the acceptance of reservations to purchase
         in the Grand  Summit  Hotel is being  done  solely by  Heavenly  Resort
         Properties  and the Agency has not approved or consented to the presale
         of units in the  Grand  Summit  Hotel and the  presale  of units in the
         Grand  Summit  Hotel shall in no way obligate the Agency to acquire any
         property  required by the Developers  for the  development of the Grand
         Summit Hotel.

         NOW,  THEREFORE,  in  consideration  of the  covenants  and  conditions
contained herein, the Agency and the Developers hereby agree as follows:



<PAGE>

                       ARTICLE 1. DEFINITIONS AND EXHIBITS

         Definitions.  When used in this  Agreement,  the following  terms shall
have the meanings set forth below:


         " Agency" means the South Tahoe  Redevelopment  Agency,  a public body,
corporate and politic.

         "Agreement" means this Master Disposition and Development Agreement.

         (a)"Approved Plans" means the approved  elevations,  plans and sections
of the project, dated September 15, 1996, as amended from time to time.

         (d) "ASC Affiliates"  means American Skiing Company,  a _______________
Corporation  and any affiliate or subsidiary of American  Skiing Company that is
now or at some time in the future  becomes a guarantor of those certain Series A
and Series B 12% Senior  Subordinated  Notes Due 2006 issued by American  Skiing
Company.

         (b)"Association"   means  that   certain   Quarter   Ownership   owners
association to be formed with respect to the Grand Summit Hotel component of the
Park Avenue Project.

         "Bankruptcy/Dissolution Event" means any of the following events:

         (1) Any Developer shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver,  custodian, trustee or liquidator of
the Developer or of all or a substantial  part of the property of the Developer,
(ii) commence a voluntary case under the Bankruptcy Code (as now or hereafter in
effect),  or (iii)  file a  petition  with  respect  to itself  seeking  to take
advantage of any other law relating to bankruptcy,  insolvency,  reorganization,
winding-up or composition or adjustment of debts;

         (2) A proceeding or case shall be commenced  without the application or
consent  of the  Developers  as the  case  may be,  in any  court  of  competent
jurisdiction, seeking the liquidation,  reorganization,  dissolution, winding-up
or the composition or adjustment of debts of the Developer, (ii) the appointment
of a trustee,  receiver,  custodian or  liquidator of the Developer or of all or
any substantial part of the assets of the Developer,  or (iii) similar relief in
respect of the  Developer  under any law  relating  to  bankruptcy,  insolvency,
reorganization,  winding-up or  composition  or  adjustment of debts;  provided,
however,  that  it  shall  not  be a  Bankruptcy/Dissolution  Event  under  this
subparagraph  if the case or  proceeding  is dismissed by an order of a court of
competent  jurisdiction  filed within 60 days of the commencement of the case or
proceeding; provided further that it shall not be a Bankruptcy/Dissolution Event
under this subparagraph if the appointment of a trustee, receiver,  custodian or
liquidator  shall be vacated  by the filing of an order of a court of  competent
jurisdiction no later than 60 days after such appointment.


<PAGE>

         For the  purposes of this  Agreement,  a  Bankruptcy/Dissolution  Event
shall be deemed  dismissed  only if (i) the  petition is dismissed by order of a
court of competent jurisdiction and no further rights exist from such order, and
(ii) the Developer or Developers,  as the case may be,  notifies the Agency that
such a dismissal has occurred.

         (g)  "BANS"  means  those  certain  Series  A Bond  Anticipation  Notes
described in the  financial  plan to be issued by STJPFA,  the proceeds of which
are to be  used in  whole  or in part to  finance  certain  Phase 1 and  Phase 2
Development  site  acquisition  costs,  and  the  Phase  1 and  Phase  2  Public
Improvements.

         (h) "BANS  Proceeds"  means the proceeds (net of closing costs and fees
and amounts required to fund a reserve and a capitalized  interest account) from
the sale of the BANS.


         (i) "CEQA" means the California Environmental Quality Act

         (j) "CFA"  means  square  footage of  improvements  previously  used as
commercial  real estate which is allocated to the Project and new square footage
allocated  to the  Project  by the  Community  Plan  and  the  Special  Projects
allocation  awarded by TRPA  pursuant to Chapter 33 of TRPA's Code of Ordinances
and commercial square footage transferred to the Project by TSI.

         (k) "City" means the City of South Lake Tahoe, a municipal corporation.

         (l)"Close  of Escrow" is the date Agency  conveys the land  acquired by
Agency to the Developers for each phase of the Project.

         (m)"Community Plan" means that certain Stateline/Ski Run Community Plan
adopted by TRPA on March 23, 1994, and by the City on May 3, 1994.

         (n)   "Developers"   means  each  of  American  Skiing  Company  Resort
Properties,  a Maine  Corporation,  Heavenly  Resort  Properties,  LLC, a Nevada
limited  liability  company,  Heavenly  Valley Limited  Partnership,  a Delaware
limited partnership, Trans-Sierra Investments, a Nevada corporation, and Cecil's
Market Inc., a California corporation.

         (o)  "Development  Site" means the 17 acres  bounded by Embassy  Suites
Hotel to the north,  Van Sickle Road to the east, Park Avenue to the south,  and
Highway 50 to the west.

         (p) "Draft  Tentative  Subdivision  Plan" means that  August 19,  1999,
preliminary subdivision plan prepared by Turner and Associates,  designating the
following preliminary parcels:

         Project Component                                        Parcel No.

         Cecil's Market                                                1
         Intermodal Transit Center                                   2, 12

<PAGE>

         Lake Tahoe Inn                                                4
         Grand Summit Hotel                                            5
         Ice Rink                                                      6
         Cinema                                                        7
         Public Parking Structure                                     10
         Grand Summit Annex                                          8, 9
         Public Circulation Parcels                                  3, 12
         Gondola Park                                                 13
         Cresent V                                                    14

         The Draft  Tentative  Subdivision  Map will be amended to provide  that
Parcel No. 4 will extend  underground under Parcel 2 and that Parcel 2 will only
be a surface  parcel,  and to provide that the loading dock area now included in
Parcel 10 will be included in Parcel 9.

         (q) "Drainage Basin Property" means that property upon which the Agency
intends to construct, or cause to be constructed, the Drainage Basins.

         (r)  "Drainage  Basins"  means  those  certain  drainage  basins  to be
constructed  adjacent  to Park  Avenue,  upon  land  currently  occupied  by the
Stateline  Lodge,  Park Avenue  Motel,  La Bella  Motel,  Meadowood  Lodge and a
residential four-plex.

         (s) "EIR/EIS" means that certain  EIR/EIS  prepared for the Project and
certified  by the City on June 25,  1996,  and  approved by the TRPA on June 26,
1996

         (t) "Escrow" means the escrow to be established  with the Escrow Holder
for  the  conveyance  of the  Phase  1 and  Phase  2  Development  Sites  to the
Developers.

         (u) "Escrow Holder" means First American Title Company.

         (v) "Excess Revenues" means any TOT or tax increment revenues in excess
of those  projected in the Financial  Plan which are received by Agency from the
Project and which the Agency does not require to make debt  service  payments on
any bonds or BANS issued by the Agency in accordance with the Agreement or prior
to the  date  of this  Agreement;  and is not  required  to  fund  the  Agency's
obligations  pursuant  to  this  Agreement,  all  as  further  described  in the
Financial Plan.

         (w) "Final Construction Plans" means those drawings and other documents
that  fix  and  describe  the  size  and  character  of  the  project  as to the
architectural,  structural,  mechanical  and electrical  systems,  materials and
interior and exterior finishes.

         (x)  "Financial  Plan"  means the  Financial  Plan  attached  hereto as
Exhibit A.

         (y)  "General  Contractor"  means the  general  contractor  or  general
contractors selected by the Developers to construct the Project.

         (z) "Gondola Right-of-Way" means a sixty-foot  right-of-way  commencing
at the Gondola base  station and  terminating  approximately  13,500 feet to the
southeast,  as generally described in Exhibit B, and shall include any easements

<PAGE>

necessary   for  access  to  the  gondola  and  rights  of  entry  or  temporary
construction easements necessary to facilitate the construction of the Gondola.

         (aa) "Grand Summit Annex" means that portion of the Grant Summit Resort
Hotel and commercial  space  adjacent to the Parking  Garage,  including  38,000
square feet of CFA as more particularly described in the Approved Plans.

         "Grand  Summit  Hotel"  means  the  quarter   ownership   hotel  to  be
constructed  by Heavenly  Resort  Properties.  The Grand  Summit  Hotel site was
previously known as the Park Plaza Resort.  The Grand Summit Hotel site includes
approximately 72,000 square feet of CFA.

         (cc) "Holder" means the holder of any mortgage,  deed of trust or other
security instrument approved by the Agency pursuant to Section 2.01(f).

         (dd) "Intermodal  Transit Facility" means the 4,610 square foot transit
facility to be developed by the Agency using Proposition 116 funds.

         (ee)  "Lahontan"  means the California  Regional Water Quality  Control
BoardLahontan Region.

         (ff)  "Lake  Tahoe Inn Site"  means the  property  located at 4104 Lake
Tahoe Boulevard, South Lake Tahoe, California. -------------------

         (gg) "Land Coverage Square Footage" means  impervious  coverage of land
as verified by TRPA.

         (hh)  "Lock-Off  Unit" means that portion of a Quarter  Ownership  Unit
comprising a  1-bedroom/1-bathroom  configuration  with separate  entry directly
from the  interior  corridor  and with one  connecting  door to the primary unit
portion of a Quarter Ownership Unit.

         (ii) "Mello-Roos Bond Proceeds" means the proceeds from the sale of the
Mello-Roos  Bonds (net of closing costs and fees and amounts  required to fund a
reserve and a capitalized interest account) which are to be sold as contemplated
under the Financial Plan and the Mello-Roos Rate and Method.

         (jj) "Mello-Roos Bonds" means those bonds to be issued by the Agency to
be supported by the  Mello-Roos  Special Tax as set forth in the Financial  Plan
and the Mello-Roos Rate and Method.

         (kk) "Mello-Roos  Special Tax" means an annual  Mello-Roos  special tax
which property  owners within the Project shall be obligated to pay on the terms
and for the uses set forth in the  Financial  Plan and the  Mello-Roos  Rate and
Method.


<PAGE>

         (ll) "Motel Room Retirement  Schedule" means the schedule of retirement
of TAUs,  residential  units and sewer units to be  transferred in each Phase of
the Development as property is acquired by the Agency as set forth in Exhibit J.

         (mm) "Parcel  Map" means that certain  parcel map to be prepared by the
Developers  and recorded in the official  records of El Dorado County and which,
upon recordation,  among other things will merge and reconfigure the Development
Site.

         (nn)  "Parking  Garage"  means  the  521  space  parking  garage  to be
constructed  pursuant to Section 2.03 by the Agency or the Developers as part of
Phase 1.

         (oo)  "Parking  Garage  Revenue  Bonds"  means the revenue  bonds to be
issued by or caused to be issued by the  Agency in an amount  sufficient  to pay
the costs to construct the Parking Garage.

         (pp) "Parking  Garage Revenue Bond Proceeds"  means the proceeds of the
Parking Garage Revenue Bonds (net of closing costs and fees and amounts required
to fund a reserve and a capitalized interest account).

         (qq) "Parking  Management  Agreement" means the agreement to be entered
into by and among the  Agency,  the City,  ASCRP,  Heavenly  Resort  Properties,
Heavenly  Valley,  TSI and Tahoe Crescent  Partner  governing the management and
operations of parking in and around the Development Site. The Parking Management
Agreement  will govern  management and  maintenance  of the parking  facilities,
including restrictions on parking, if any.

          (rr)  "Paul  Kennedy  Steakhouse  Site"  means that  certain  property
located at 4118 Lake Tahoe Boulevard, South Lake Tahoe, California.

         (ss) "Permit Conditions" means those certain conditions to the approval
of the Project set forth in the Use Permit and the Project Permit.

         (tt) "Phase" means a certain phase of development of the Project (which
is currently contemplated to be developed in two phases).

         (uu)"Phase  1" means  the  Phase 1  Public  Improvements,  the  Parking
Garage,  construction  of the Gondola and Gondola park,  the Grand Summit Hotel,
including  retail space,  and the Grand Summit Annex,  including the  multi-plex
cinema and the ice rink.

         (vv)  "Phase 1  Development  Site"  means the land to be  assembled  by
Agency and conveyed to Developers  pursuant to Section 7.01 for  construction of
the Phase 1 Project components as indicated in Exhibit J.

         (ww) "Phase 1 Public Improvements" means the portions of the Project to
be  constructed by the Agency and the City as part of Phase 1, which include the
realignment  of Park Avenue and the  relocation of utilities  located under Park

<PAGE>

Avenue,  the  construction  of a right turn lane between  Pioneer Trail and Park
Avenue,   the   reconstruction  of  Van  Sickle  Avenue,  the  Drainage  Basins,
improvements to Fern Avenue to create a cul-de-sac,  and appropriate streetscape
improvements to serve Phase 1.

         (xx) "Phase 2" means the Project elements to be constructed  subsequent
to the construction of Phase 1. These  components  consist of the Phase 2 Public
Improvements, Cecil's Market, and the Lake Tahoe Inn.

         (yy)  "Phase 2  Development  Site"  means the land to be  assembled  by
Agency and conveyed to Developers  pursuant to Section 7.01 for  construction of
the Phase 2 Project components as indicated in Exhibit J.

         (zz) "Phase 2 Public Improvements" means the portions of the Project to
be  constructed by the Agency and the City as part of Phase 2, which include the
Intermodal Transit Center, the SEZ Restoration and Transit Lane, and appropriate
streetscape improvements.

         (aaa) "Plans and Specifications" means all plans and specifications for
the Project submitted by the Developers and approved by the City and/or TRPA, as
applicable.

         (bbb) "Plaza  Maintenance  Agreement" means the agreement to be entered
into by and among the Agency,  the City, TSI, ASCRP,  Heavenly Resort Properties
and Heavenly Valley, Cecil's Market, Inc., governing the operation, maintenance,
security,  and uses,  including the type of vendors allowed in the public plazas
located on the Development Site.

         (ccc) "Project" means that certain project to be developed as generally
described in the Executive Summary attached hereto as Exhibit D.

         (ddd) "Project Documents" means the TRPA Code of Ordinances (including,
but not limited to,  Amended  Chapter 20 and Amended  Chapter 22  thereof),  the
EIR/EIS,  the Community  Plan, the 1996 EIR/EIS  certified for the Project,  the
Project Permit,  the Use Permit and any other document affecting the development
of the Project which contains conditions to be fulfilled by the Developers,  the
Agency or the City prior to the  construction,  occupancy  or  operation  of the
Project  imposed  by the City,  TRPA,  Lahontan,  STPUD,  or other  governmental
agency.

         (eee)  "Project  Permit"  means that  certain  Permit  for the  Project
granted by TRPA in November, 1996, and reissued on August 25, 1999.

         (ffff) "Public  Improvements" means,  collectively,  the Phase 1 Public
Improvements and the Phase 2 Public Improvements.

         (gggg)  "Quarter  Owners"  means the  owners of the  Quarter  Ownership
Units.

         (hhhh)  "Quarter   Ownership  Unit"  means  an  undivided   one-quarter
ownership  interest in a  residential  condominium  unit within the Grand Summit
Hotel and/or the Lake Tahoe Inn Site.


<PAGE>

         (iii) "Reasonable Discretion" means the discretion of the Developers or
the Agency  exercised in good faith  utilizing  those  standards  which would be
applied by the Developers or the Agency using prudent business practices under a
same or similar circumstance.

         (jjj)  "Redevelopment  Plan Area" means the linear district  stretching
along Lake Tahoe Boulevard  between Ski Run Boulevard and the  California/Nevada
state line in the City of South Lake Tahoe, and more  particularly  described in
Figure 1 of the Redevelopment Plan.

         (kkk)  "Regional  Plan" means the TRPA Regional Plan for the Lake Tahoe
Basin  (which  consists of (i) The Goals and Policies  (1986);  (ii) The Code of
Ordinances  (1987);  (iii) The Plan Area Statements (1987); and (iv) The Revised
Environmental Thresholds (1991)).

         (lll) "Residential Units" means those residential units which are to be
transferred to the Developers in place of TAUs under the terms and conditions of
this Agreement.

         (mmm) "Scope of Development" means the list of materials for and colors
of the exterior  finishes  (as  referenced  on the color board  contained in the
Scope of  Development)  of the Project (which are  consistent  with the Approved
Plans),  which list has been accepted and approved by the Agency and the City. A
copy of such list is attached hereto as Exhibit E.

         (nnn) "Schedule of Performance"  means the schedule for the performance
by the parties of the actions  required to take place pursuant to this Agreement
attached as Exhibit G.

         (ooo) "Sewer  Units" means the sewer units to be acquired by the Agency
as part of the acquisition of the Development  Site and the Drainage Basin sites
and transferred to the Developers.

         (ppp) "Site Plan" means the site plan for the Project,  a copy of which
is attached hereto as Exhibit F.

         (qqq)  "Split  Use"  means  the  use of any  multi-bedroom  unit in the
Project  Area as two or more  separate  units  with  two or more  separate  keys
issued.

         (rrr) "State" means the State of California.

         (sss) "STJPFA" means the South Tahoe Joint Powers Financing Authority.

         (ttt) "STPUD" means the South Tahoe Public Utility District.

         (uuu)  "Tahoe  Crescent  Partners"  means the Tahoe  Crescent  Partners
Limited Partnership,  beneficial owner of the 17-acre Crescent V Shopping Center
site, a component of the Project. Tahoe Crescent Partners is not a party to this
Master Disposition and Development Agreement.


<PAGE>

         (vvv) "TAU" means Tourist  Accommodation Units which must be retired by
the Agency in accordance  with terms and  conditions  of this  Agreement and the
Project Documents.

         (www) "TCP  Parcel"  means the  17-acre  parcel of land the  Crescent V
Shopping Center is located upon.

         (xxx) "TOT" means the City's  Transient  Occupancy Tax, which,  for the
privilege of occupancy in any transient  lodging  facility within the City, each
transient  is  subject to and which  consists  of twelve  percent  (12%) of rent
charged on all newly constructed visitor accommodations within any redevelopment
project area and those existing properties within any redevelopment project area
which undergo substantial  renovation,  or ten percent (10%) of the rent charged
on all other transient lodging facilities within the City.

         (yyy) "TRPA" means the Tahoe Regional Planning Agency.

         (zzz)  "TRPA  Code of  Ordinances"  means the Tahoe  Regional  Planning
Agency Code of Ordinances (which is a component of the Regional Plan).

         (aaaa) "TRPA Governing Board" means the Governing Board of the TRPA.

         (bbbb)  "Use  Permit"  means that  certain  Use  Permit of the  Project
previously issued by the City, SU 96-49.

         Any  term not  defined  in the body of this  Agreement  shall  have the
meaning set forth in the Financial Plan.

         Exhibits.  The following exhibits are attached to and incorporated into
this Agreement:

                  Exhibit A            Financial Plan
                  Exhibit B            Gondola Right-of-Way Description
                  Exhibit C            Draft Tentative Subdivision Map
                  Exhibit D            Project Executive Summary
                  Exhibit E            Scope of Development
                  Exhibit F            Site Plan
                  Exhibit G            Schedule of Performance
                  Exhibit H            Form of Grant Deed
                  Exhibit I            Environmental Assessment Reports
                                       and Natural Hazard Disclosure
                  Exhibit J            Motel Room Retirement Schedule
                  Exhibit K            Mello-Roos Rate and Method
                  Exhibit L            Sources and Uses of Commercial Floor Area



<PAGE>

               ARTICLE 2. CONDITIONS PRECEDENT TO AGENCY ISSUANCE
                        OF BANS AND PARKING REVENUE BONDS

         2.01  Conditions   Precedent  to  Agency  Performance.   As  conditions
precedent to the  Agency's  obligation  to cause the  issuance of the BANS,  the
conditions  set forth in this  Section  2.01 must  first be met or waived by the
Agency by the times  specified in the Schedule of Performance or such other date
as may be agreed upon by the Parties.

         (a) No Default.  There exists no Developer  Event of Default as defined
in Section 12.05.

          (b) Letter of Credit.  ASCRP shall  cause to be  delivered a letter of
credit  at  least  five  days  prior to the sale of the BANS in a form and in an
amount of Five Million Dollars  ($5,000,000)  meeting the requirements set forth
below,  or such other form of  security  satisfactory  to the Agency in its sole
discretion.

         The letter of credit must meet the following minimum requirements:

          (1) The letter of credit shall be from a nationally  recognized  bank,
savings  and loan  association,  investment  bank,  retirement  fund,  insurance
company, or other institutional lender with long-term debt rating of A or better
from Standard and Poors.

         (2) The letter of credit shall be irrevocable.

          (3) The letter of credit  shall  provide that the Agency may draw upon
the letter of credit to pay costs associated with the acquisition of the Phase 1
Development  Site, in the event Heavenly Resort  Properties  fails to deliver to
the Agency  performance  and payments  bonds for the  construction  of the Grand
Summit  Hotel and fully  executed  construction  contracts  for the Grand Summit
Hotel on or before  April 28,  2000.  In the event  Heavenly  Resort  Properties
delivers payment and performance bonds and fully executed construction contracts
for the Grand  Summit  Hotel on or before April 28, 2000 and at the time of such
delivery,  the amount of the  Letter of Credit  may be reduced to Three  Hundred
Thousand Dollars ($300,000).  The $300,000 Letter of Credit may be drawn upon by
the Agency to pay Development  Site acquisition  costs,  maintenance and holding
costs  associated with the Agency's  ownership of the Phase 2 Development  Site,
lost tax revenues to the City and the Agency resulting from the removal from the
Development Site of the  improvements  currently on the Development Site and the
payment  of  interest  on the  BANS in the  event  ASCRP  fails to  perform  any
conditions of this Agreement. The letter of credit may be released completely at
such time as Performance and Payment Bonds are posted for the full amount of the
construction  contract  for Phase 2. In the event the Agency draws on the letter
of credit because Heavenly Resort  Properties fails to deliver a performance and
payment bond on or before April 28, 2000 but Heavenly Resort Properties delivers
a performance and payment bond on or before September 15, 2000, the Agency shall
reimburse Heavenly Resort Properties, or the party posting the letter of credit,
the amount drawn down on the letter of credit at the time the Agency conveys the
Phase 1  Development  Site  to the  Developers.  In the  event  Heavenly  Resort
Properties does not deliver performance and payment bonds on or before September
15, 2000,  the Agency shall have no  obligation  to repay any funds drawn on the
letter of credit to the party  posting  the letter of credit and this  Agreement
shall terminate with respect to Heavenly Resort  Properties  pursuant to Section
12.05 and the Agency  shall be  entitled  to any  remedies  pursuant  to Section
12.05.

          (c) Approval of Bonds.  The City, the Agency and the STJPFA have taken
the necessary action to approve the issuance of the BANS.

         (d) Bond  Counsel  Opinion.  The  STJPFA  has  received a bond
counsel opinion opining to the tax-exempt  nature of the BANS given the intended
use of the proceeds,  in a form and substance  satisfactory to the STJPFA in its
sole discretion.

         (e) Other  Requirements.  The Developers,  the Agency, the City and the
STJPFA have met all other legal  requirements  for the  issuance of the BANS and
the use of proceeds to maintain the tax-exempt nature of the bonds.

         (f) Evidence of Financing. Heavenly Resort Properties, Heavenly Valley,
and TSI shall jointly present evidence in a form reasonably  satisfactory to the
Agency that Heavenly Resort Properties,  Heavenly Valley, and TSI have financial
commitments and equity  sufficient to fund the portions of the Project for which
Heavenly Resort Properties, Heavenly Valley, and TSI are responsible. The Agency
shall  either  approve  or  disapprove  Heavenly  Resort  Properties',  Heavenly
Valley's,  and TSI's evidence of commitment of sufficient  funds within ten (10)
days  of  receipt  of such  evidence;  provided,  however,  if  Heavenly  Resort
Properties,  Heavenly  Valley,  and  TSI  present  to  the  Agency  evidence  of
sufficient  equity or firm commitments for financing from reputable lenders with
only such  conditions  to funding as are typical for the funding  source and are
commercially reasonable in amounts at least equal to the estimated total cost of
construction  for each  Phase  of the  Development,  the  Agency  shall  approve
Heavenly Resort Properties', Heavenly Valley's, and TSI's evidence of financing.
If the Agency disapproves  Heavenly Resort  Properties',  Heavenly Valley's,  or
TSI's evidence of funds,  then Heavenly Resort  Properties,  Heavenly Valley, or
TSI, as applicable, shall have fifteen (15) days to submit revised evidence. The
periods for  submission of evidence,  review and approval or  disapproval  shall
continue to apply until  evidence of financing  has been  approved by the Agency
for all  portions of the Project in each Phase;  however,  evidence of financing
must be  approved  by the Agency no later than  forty-five  (45) days  following
execution of this Agreement, or this Agreement may be terminated by either Party
pursuant to Section 12.02.

          (g)  Contract to Purchase  Gondola  Machinery.  Heavenly  Valley shall
provide the Agency with the  opportunity to review evidence of its commitment to
purchase Gondola  machinery,  cabins, and lift towers necessary to construct the
Gondola  portion of the Project.  Such  evidence  shall take the form of a fully
executed purchase contract.

          (h) Representation and Warranties.  The representations and warranties
of the  Developers as set forth in Section 14.01 of this  Agreement  remain true
and correct.

          (i)  No  Litigation  Concerning  DDA.  There  is no  existing  pending
litigation, suit, action or proceeding before any court or administrative agency
affecting the Developers or any of them or the  Development  Site that would, if
adversely determined, adversely affect the Developers or the Development Site or
the Developers'  ability to perform their obligations under this Agreement or to
develop and operate the Project.

          (j) No Litigation  Concerning  Bonds.  There is no action  existing or
pending or threatened litigation, suit, action or proceeding before any court or
administrative  agency  affecting the BANS or the STJPFA's  ability to issue the
BANS.

          (k) Phase 1 Site Acquisition.  At least five days prior to the sale of
the BANS the  Agency  shall  have  executed  purchase  and sale  agreements  for
portions of the Phase 1 Development Site which have a total purchase price of at
least Five Million Dollars ($5,000,000).

          (l) Approval of Disbursement  Plan. The Developers and the Agency have
agreed  on the  disbursement  plan  for the  disbursement  and  use of the  BANS
Proceeds and Mello-Roos Bond Proceeds.


         (m) No Bankruptcy/Dissolution  Event. No  Bankruptcy/Dissolution  Event
shall have occurred with respect to any of the Developers or an ASC Affiliate.

          (n)  Execution of the DDA. The Agency shall have received from each of
the Developers executed copies of the DDA by no later than October 15, 1999.

          Issuance of BANS.  Upon  satisfaction  of the  conditions set forth in
Section  2.01,  the Agency and the City shall cause the STJPFA to issue the BANS
in the amounts set forth in the Financial  Plan in accordance  with the Schedule
of Performance.

         Conditions  Precedent to the Agency  Issuance of Parking Garage Revenue
Bonds. As conditions precedent to the Agency's obligations to cause the issuance
of the Parking Garage  Revenue  Bonds,  the conditions set forth in this Section
2.03 must  first be met or waived by the  Agency by the times  specified  in the
Schedule  of  Performance  or such  other  dates  as may be  agreed  upon by the
Parties.

         (a) Retail  Space Under  Construction.  The Grand Summit and the retail
space  to be  constructed  as part of the  Grand  Summit  Resort  shall be under
construction and proceeding in accordance with the Schedule of Performance.

         (b)  Parking  Study.  The Agency  shall have  received  and  approved a
Parking  Study which shows that  projected  net  revenues of the Parking  Garage
exceed projected maximum annual debt services by a margin of at least 50%.

         (c) Default.  There exists no Developer  Event of Default as defined in
Section 12.05.

          (d) Parking Rate Schedule. The City shall have approved a Parking Rate
Schedule which is acceptable to the Developers.

          (e) Approval of Bonds.  The City, the Agency and the STJPFA have taken
the  necessary  action to approve the  issuance of the  Parking  Garage  Revenue
Bonds.

          (f) Bond  Counsel  Opinion.  The  STJPFA has  received a bond  counsel
opinion  opining to the  tax-exempt  nature of the Parking  Garage Revenue Bonds
given the intended use of the proceeds, in a form and substance  satisfactory to
the STJPFA in its sole discretion.

          (g) Other Requirements.  The Developers,  the Agency, the City and the
STJPFA have met all other  legal  requirements  for the  issuance of the Parking
Garage Revenue Bonds and the use of proceeds to maintain the  tax-exempt  nature
of the bonds.

          (h) Representation and Warranties.  The representations and warranties
of the  Developers as set forth in Section 14.01 of this  Agreement  remain true
and correct.

          (i)  No  Litigation  Concerning  DDA.  There  is no  existing  pending
litigation, suit, action or proceeding before any court or administrative agency
affecting the Developers or any of them or the  Development  Site that would, if
adversely determined, adversely affect the Developers or the Development Site or
the Developers'  ability to perform their obligations under this Agreement or to
develop and operate the Project.

          (j) No Litigation  Concerning  Bonds.  There is no action  existing or
pending or threatened litigation, suit, action or proceeding before any court or
administrative  agency  affecting  the  Parking  Revenue  Bonds or the  STJPFA's
ability to issue the Parking Revenue Bonds.

          (k) No Bankruptcy/Dissolution  Event. No Bankruptcy/Dissolution  Event
shall have occurred with respect to any of the Developers or ASC Affiliate.

         In the event any of the conditions  precedent set forth in this Section
2.03 are not met and the Agency is unable to cause the  issuance  of the Parking
Garage Revenue Bonds,  the Agency shall offer to the Developers the right to buy
the Parking Garage Site for development of the Parking Garage.  In the event the
Developers  elect to acquire the Parking  Garage Site  pursuant to this  Section
2.03,  Developers  shall pay to the Agency the reuse value of the Parking Garage
Site assuming its  development  as a parking  garage and the  development of the
Project.  The  Agency  shall  only  transfer  the  Parking  Garage  Site  to the
Developers if the Developers demonstrate to the Agency's reasonable satisfaction
that they are prepared to construct the Parking Garage and they have  sufficient
funds available to construct the Parking Garage.  If the Developers do not elect
to buy the Parking Garage Site within twelve (12) months of the Agency  offering
it to the  Developers,  the Agency  shall have the option to retain the  Parking
Garage Site and  develop it with the  Parking  Garage;  provided,  however,  the
Agency and the City shall not be required to obtain the Developers'  approval of
the Parking Rate Schedule.

                         ARTICLE 3. CONDITIONS PRECEDENT
                              TO AGENCY ACQUISITION

          3.01.  Conditions  Precedent  to  Agency  Acquisition.  The  following
conditions  shall be required to be complete  prior to the Agency  acquiring the
Phase 1 Development Site and the Phase 2 Development Site:

          (a) Sale of Bonds.  The Agency  shall have sold the BANS and  received
BANS Proceeds as projected in the Financial Plan.

          (b)Agency  Appraisals.  Within the time  specified  in the Schedule of
Performance, the Agency shall cause to be completed an appraisal for each of the
properties in the Phase 1 Development  Site and the Phase 2 Development  Site to
be acquired by the Agency,  including  any goodwill  and fixtures and  equipment
appraisals, if required in the judgement of the Agency.

          (c)  Financial  Plan.  Attached  as Exhibit A to this  Agreement  is a
Financial Plan which sets forth a general cost breakdown for the construction of
the Project, including the portions to be developed by the Agency, a sources and
uses for all funds to be expended on costs  associated  with the  development of
the  Project  and a schedule of uses for the BANS  Proceeds.  Execution  of this
Agreement  by the  Developers  and the Agency  shall be deemed  approved  by all
parties  of the  Financial  Plan.  Neither  party may amend the  Financial  Plan
without the consent of the other party in writing.  Subject to the terms of this
Agreement,  each party shall be responsible for ensuring the completion of those
activities  necessary for the  implementation of the Financial Plan set forth in
the Financial Plan as an obligation of any Party.

          (d)  Lake  Tahoe  Inn  Development  Site.  In  addition  to the  above
conditions  precedent to the Agency  acquisition of the Phase 2 Property,  ASCRP
shall  provide to the  Agency,  at least  ninety  (90) days prior to the date on
which the  Developer  gives the Agency a notice of intent to  construct  Phase 2
pursuant  to Section  3.01(e),  a  development  plan for the Lake Tahoe Inn Site
which at a minimum  shall  provide  the  number of tourist  accommodation  units
projected to be  constructed  on the Lake Tahoe Inn Site, the type of TAUs to be
constructed,  the amount of  meeting  space  included  in the  development,  the
operator of the resort and  financial  information  on the rental  rates for the
TAUs,  the  sales  prices  for any  multiple  ownership  units,  and such  other
information  as is necessary for the Agency to determine the revenue  generation
capacity of the proposed development. The Agency shall approve or disapprove the
development  plan for the Lake Tahoe Inn within  thirty  (30) days of receipt of
the  development  plan.  The Agency shall  approve the  development  plan if the
development plan provides for the development of 325 units to be sold as quarter
share  interests,  and the financial  information  presented by ASCRP, or at the
Agency's  discretion,  financial  information and  projections  generated by the
Agency's  consultants,  demonstrate that the revenue generating  capacity of the
development plan is equal to the Phase 2 revenue projections as set forth in the
Financing  Plan,  the number of TAUs required to be transferred by the Agency is
not greater than 409, the development  design  component  conforms to the Agency
and City design  guidelines and is consistent with the Phase 1 design  elements,
there is at least 9,000 square feet of meeting space within the development (the
9,000 square feet of meeting space may include  meeting  space  elsewhere on the
Development Site,  including meeting space at the Gondola top station),  and the
operation plan for the resort is consistent with a four star resort.  The Agency
will not approve the development plan for the Lake Tahoe Inn Development Site if
the plan proposes  operating the  development as a Grand Summit  Resort.  If the
Agency  disapproves the  development  plan, the Agency shall notify ASCRP of the
reasons for such disapproval in writing.  ASCRP shall have thirty (30) days from
receipt of the Agency disapproval to resubmit a revised development plan. In the
event ASCRP  proposes  to sell any of the units at the site as single  ownership
units,  ASCRP shall consult with the Agency  regarding  whether such a sale will
trigger the  Agency's  housing  production  requirements  pursuant to Health and
Safety  Code  Section  33413.  In the event the sale of single  ownership  units
triggers the housing  production  requirement  ASCRP will be required to make an
in-lieu  payment  to the Agency in an amount to be  determined  by the Agency to
assist the Agency in meeting its housing production requirement.

          (e) Phase 2  Acquisitions.  The Agency shall not begin  acquisition of
the Phase 2  Development  Site until such time as ASCRP has  provided the Agency
with a notice in writing of its intent to  construct  Phase 2. ASCRP must give a
notice of intent to construct Phase 2 no later than September 1, 2001; provided,
however,  if ASCRP desires to begin construction of Phase 2 during the year 2001
building season,  ASCRP must give the Agency a notice of intent to build Phase 2
no later than  September 1, 2000.  If ASCRP fails to give the Agency a notice of
intent to build on or before  September 1, 2001,  the Agency may terminate  this
Agreement  pursuant to Section  12.05 and  exercise  any remedies the Agency may
have  pursuant  to Article  12,  unless on or before  September  1, 2001,  ASCRP
delivers to the Agency a letter of credit  meeting all of the  requirements  set
forth in Section  2.01(b)(1)  and (2) in the amount of One  Million  Six Hundred
Sixty-Three Thousand Dollars ($1,663,000).  The letter of credit may be drawn on
by the Agency to cover costs  associated  with Phase 2 Site  Acquisition  at any
time after the Letter of Credit is posted.

          (f) Evidence of Financing.  At the time ASCRP provides the Agency with
a notice of its intent to  construct  Phase 2, ASCRP and  Cecil's  Market,  Inc.
shall also present evidence in a form reasonably satisfactory to the Agency that
ASCRP and Cecil's Market, Inc. have financial  commitments and equity sufficient
to fund the portions of the Project for which ASCRP and Cecil's Market, Inc. are
responsible.  The Agency shall either approve or disapprove  ASCRP's and Cecil's
Market,  Inc.'  evidence of sufficient  funds within ten (10) days of receipt of
such evidence;  provided,  however, if ASCRP and Cecil's Market, Inc. present to
the Agency evidence of sufficient  equity or firm commitments for financing from
reputable  lenders with only such  conditions  to funding as are typical for the
funding source and are commercially  reasonable in amounts at least equal to the
estimated  total  cost of  construction  of Phase 2, the  Agency  shall  approve
ASCRP's  and  Cecil's  Market,  Inc.'  evidence  of  financing.  If  the  Agency
disapproves ASCRP's or Cecil's Market, Inc.' evidence of funds, ASCRP or Cecil's
Market,  Inc.,  as  applicable,  shall have fifteen (15) days to submit  revised
evidence.  The  periods  of  submission  of  evidence,  review and  approval  or
disapproval  shall  continue  to apply  until  evidence  of  financing  has been
approved  by the  Agency  for all  portions  of Phase 2;  however,  evidence  of
financing  must be  approved  by the Agency no later than  forty-five  (45) days
following  submission  of the original  evidence of  financing  pursuant to this
Section, or this Agreement may be terminated pursuant to Section 12.02.


                    ARTICLE 4. AGENCY ACQUISITION ACTIVITIES

          4.01 Agency Offers to Purchase. Provided the preconditions in Sections
2.01 and 3.01 have been met and subject to the provisions of this Article 4, the
Agency shall, in accordance with the provisions of Government Code Sections 7267
through  7267.9,  make offers to purchase the Phase 1  Development  Site and the
Phase 2 Development  Site in accordance  with the terms and conditions set forth
in the Schedule of Performance.  Provided the preconditions in Sections 2.01 and
3.01 have been met and  subject to the  provisions  of this  Article 4, the City
shall,  in  accordance  with the  provisions  of  Government  Code Sections 7267
through 7267.9,  make offers to purchase the property  required for the Drainage
Basins in  accordance  with the times set forth in the Schedule of  Performance.
Prior to making the initial  offer for any  property in the Phase 1  Development
Site or the Phase 2  Development  Site,  the Agency,  in  consultation  with the
Developers,  shall prepare an  acquisition  budget  estimating the costs for the
purchase of each of the parcels in the Phase 1  Development  Site or the Phase 2
Development  Site,  as  applicable,   including  any  relocation  expenses.  The
acquisition  budget shall include a reasonable  contingency  amount.  The Agency
shall not be required  to make any offer to purchase  any portion of the Phase 2
Development Site unless ASCRP has provided the Agency with a notice of intent to
construct  Phase 2 and the Agency has approved a  development  plan for the Lake
Tahoe Inn pursuant to Section 3.01(d) above.

          The Agency  shall be solely  responsible  for the payment of all costs
associated  with the  acquisition of the Phase 1 Development  Site (exclusive of
the commercial property currently owned by Cecil's Market,  Inc., subject to the
provisions  of Section  6.01(m)  and the Gondola  Right-of-Way)  and the Phase 2
Development  Site  (exclusive of the leasehold  interest in the Lake Tahoe Inn);
provided, however, in the event that, at any time, the Developers determine that
the Agency or the City is unable to timely fund the  acquisition of the property
necessary for the  development of the Project  (including the acquisition of the
property  necessary for the Drainage  Basins)  within the time frame required by
this Agreement,  the Developers may, at their option,  loan to the Agency and/or
the City, on an unsecured  basis, up to whatever  amounts of funds are necessary
to acquire the Development Site, and Agency and/or the City agree to borrow such
funds and use such funds exclusively for the purposes of acquiring the necessary
property.  In the event the Developers loan funds to the Agency and/or the City,
the Agency  and/or the City shall  repay such funds  immediately  upon  Agency's
receipt of any, and to the extent of all available Excess Revenues.

          4.02 Condemnation of Properties.  To the extent that the Agency or the
City is unable to acquire any of the property  comprising the Development  Site,
including the Gondola  Right-of-Way,  and the Drainage  Basin  Property  through
negotiation,  the Agency  and/or  the City agree to make a good faith  effort to
schedule a hearing within the time set forth in the Schedule of Performance  for
the purpose of considering a resolution of necessity  authorizing the use of the
Agency's or the City's eminent domain  authority  pursuant to California Code of
Civil Procedure Section 1230.010 et seq. in order to acquire such parcel through
the exercise of the Agency's or the City's power of eminent  domain.  The Agency
and the  City  shall  take  all  steps  necessary  to  schedule  a  hearing  for
consideration  of  a  resolution  of  necessity  by  the  County  of  El  Dorado
authorizing the use of the County's  eminent domain authority for those portions
of the Gondola Right-of-Way outside city limits, if necessary.

          4.03  Acknowledgement  of Agency and City  Discretion.  The Developers
acknowledge that the Agency and the City have absolute discretion in determining
whether or not they should  adopt a resolution  of necessity  with regard to the
property  included in the  Development  Site, the Gondola  Right-of-Way  and the
Drainage Basin Property or any portion thereof, and therefore agree that nothing
in this Agreement shall obligate the Agency or the City to adopt a resolution of
necessity  with  respect to any  portion of the  Development  Site,  the Gondola
Right-of-Way  and the Drainage  Basin Property or subject the Agency or the City
to liability for the failure of the Agency or the City to adopt such resolution.

          4.04 Eminent Domain Actions; Orders for Possession. If the Agency, the
County and/or the City adopt  resolutions  authorizing the Agency or the City to
proceed with  condemnation  proceedings to acquire any or all of the Development
Site, the Gondola Right-of-Way or the Drainage Basin Property, the Agency or the
City, as applicable,  shall promptly commence such proceedings for such portions
of the Development  Site,  make the deposit of compensation  required by law and
seek orders for  possession of the portion of the  Development  Site that is the
subject of the condemnation actions;  provided,  however, the Agency or the City
may delay  obtaining  orders of possession for the Drainage Basin Property until
May  15,  2000.  If  the  Agency  has  not  executed  voluntary  agreements  for
acquisition  of the Phase 1  Development  Site  (except for the  Drainage  Basin
Property) or obtained orders of possession for those  properties that the Agency
is unable to reach voluntary  agreement by December 15, 1999, prior to obtaining
orders of  possession  the Agency  and  Developers  shall meet and confer  about
changes to the  Schedule of  Performance.  Only after the Agency and  Developers
have agreed upon a revised Schedule of Performance shall the Agency proceed with
obtaining orders of possession for the Phase 1 Development Site.

          4.05  TAUs,  Sewer  Units  and  CFA.  When  acquiring  the  properties
comprising  the  Development  Site and the Drainage Basin  Property,  the Agency
and/or the City shall retain all TAUs,  Residential  Units,  square feet of CFA,
the Land Coverage  Square  Footage and Sewer Units located on the properties for
transfer  to the  Developers  pursuant  to Article 7. In  addition to the above,
Agency shall retain for Project use the Land Coverage  Square  Footage from APNs
29-095-011, 29-095-21 and 29-095-041.


                     ARTICLE 5. AGENCY CONDITIONS PRECEDENT
                     TO DISPOSITION OF PROPERTY TO DEVELOPER

          5.01 Conditions  Precedent to Transfer of Phase 1 Development  Site to
Developers.  In  addition  to the  completion  of the  activities  set  forth in
Articles 2, 3 and 4, as  conditions  precedent  to Heavenly  Valley's,  Heavenly
Resort Properties' and TSI's obligation to acquire the Phase 1 Development Site,
the  conditions  set forth in this  Section 5.01 must first be met by the Agency
and/or the City or waived by Heavenly Valley, Heavenly Resort Properties and TSI
by the time  specified in the Schedule of Performance or such other dates as may
be agreed upon by the Parties.

          (a)  Acquisition  of Phase 1 Development  Site. The Agency or the City
shall have acquired all of the property comprising the Phase 1 Development Site,
including the Gondola  Right-of-Way as well as the Paul Kennedy Steakhouse Site,
in fee or the Agency or the City shall have valid orders of possession for those
properties that the Agency or the City has been unable to acquire voluntarily.

          (b) Agency Acquisition of Units of Use. The Agency shall have obtained
or shall have  possession  of 294 TAUs,  50,246  CFA and 518 Sewer  Units and 18
Residential Units.

          (c) Hazardous  Materials  Clean-up.  The Agency shall have prepared an
environmental  site  assessment  for the Phase 1 Development  Site,  including a
hazardous  materials  removal  plan,  and the Agency  shall have carried out any
activities  recommended  in the site  assessment as necessary for the removal of
any  hazardous  materials  located on the Phase 1 Development  Site.  The Agency
hereby  agrees to  indemnify,  protect,  hold  harmless  and defend (by  counsel
reasonably  satisfactory to Heavenly Valley, Heavenly Resort Properties and TSI)
Heavenly Valley, Heavenly Resort Properties and TSI, their officers,  directors,
agents and  employees  and their  successors  and  assigns  from and against all
claims, losses, damages, liabilities,  fines, penalties, charges, administrative
and judicial  proceedings and orders,  judgments,  remedial action requirements,
enforcement  actions  of any  kind  and  all  costs  and  expenses  incurred  in
connection  therewith  (including,  but not  limited  to,  attorneys'  fees  and
expenses)  arising  directly or  indirectly  in whole or in part from  hazardous
materials on the Phase 1 Development  Site which were on the Phase 1 Development
Site prior to Heavenly Valley,  Heavenly Resort Properties and TSI acquiring the
Phase 1 Development Site or from the Agency's  activities related to the removal
of any  hazardous  materials  including  any costs or  expenses  incurred by the
Developers  as a result of the Agency  failing to  deliver to  Heavenly  Valley,
Heavenly  Resort  Properties and TSI the Phase 1 Development  Site in accordance
with the  Schedule  of  Performance  as a result of delays in the removal of any
hazardous materials. Upon completion of any removal of hazardous material on the
Phase 1 Development  Site, the Agency shall provide  Heavenly  Valley,  Heavenly
Resort  Properties and TSI with copies of any  certificates  or closure  letters
received by the Agency from any regulatory  bodies indicating that the hazardous
materials  have been removed and properly  disposed of. The  provisions  of this
subsection  shall survive  expiration of this Agreement or other  termination of
this Agreement, and shall remain in full force and effect.

          (d)  Demolition  of  Existing  Improvements.  The  Agency  shall  have
demolished and removed any improvements,  structures or debris currently located
on the  Phase 1  Development  Site and  shall  have  placed  the  property  in a
condition to begin construction;  provided,  however, prior to demolition of the
portion of the Lake Tahoe Inn in the Phase 1 Development  Site, ASCRP shall have
granted the Agency a right of entry to the Lake Tahoe Inn,  including  the right
to demolish the  improvements  located on the Phase 1  Development  Site. In the
event the Agency is unable to deliver the Phase 1  Development  Site to Heavenly
Valley, Heavenly Resort Properties and TSI in the time set forth in the Schedule
of Performance  as a result of delays related to the demolition of  improvements
on the Phase 1  Development  Site,  the Agency shall pay to the  Developers  any
costs  associated with such a delay,  including costs related to maintaining the
Letter of Credit required  pursuant to Section 2.01(b) and costs associated with
keeping the construction contract in effect.

          (e)  Construction  Manager.  In  the  event  there  will  be  multiple
contractors working  simultaneously at or near the Phase 1 Development Site, the
Agency shall have entered into a contract with a construction manager acceptable
to both Developers and the Agency which provides for the construction manager to
coordinate construction of the Public Improvements.

          (f) Contracts for Public Improvements. The Agency shall have taken all
steps necessary to award contracts for the Phase 1 Public Improvements.

          (g)  Parking  Management  Agreement.  The Agency,  the City,  Heavenly
Valley,  Heavenly Resort Properties,  TSI and Tahoe Crescent Partners shall have
approved a Parking Management Agreement.

          (h) Plaza Maintenance Agreement. The Agency, the City, ASCRP, Heavenly
Valley,  Heavenly Resort  Properties,  Cecil's Market,  Inc., and TSI shall have
approved the Plaza Maintenance Agreement.  The Plaza Maintenance Agreement shall
include provisions regulating  advertising signs in the Plaza, the operations of
the Plaza, reserve funding for the Plaza operations and such other provisions as
the parties may agree.

          (i) Mello-Roos District Formation.  The Agency shall have caused to be
formed a Mello-Roos District to cover the Phase 1 Development Site in accordance
with Section 9.05 below.

          5.02 Conditions  Precedent to Transfer of Phase 2 Development  Site to
Developers.  In  addition  to the  completion  of the  activities  set  forth in
Articles 2, 3 and 4, as conditions  precedent to the  Developers'  obligation to
acquire the Phase 2 Development  Site,  the conditions set forth in this Section
5.02 must first be met by the Agency or waived by ASCRP and Cecil's Market, Inc.
by the time  specified in the Schedule of Performance or such other dates as may
be agreed upon by the Parties.

          (a)  Acquisition  of Phase 2 Development  Site.  The Agency shall have
acquired all of the property  comprising  the Phase 2  Development  Site in fee,
including a fee  interest in the Lake Tahoe Inn Site,  or the Agency  shall have
valid orders of possession for those  properties that the Agency has been unable
to acquire voluntarily.

          (b) Agency Acquisition of Units of Use. The Agency shall have obtained
or shall  have  possession  of 456 TAUs,  17,610  CFA,  537 Sewer  Units,  and 1
Residential Unit.

          (c) Hazardous  Materials  Clean-up.  The Agency shall have prepared an
environmental  site  assessment  for the Phase 2 Development  Site,  including a
hazardous  materials  removal  plan,  and the Agency  shall have carried out any
activities  recommended  in the site  assessment as necessary for the removal of
any  hazardous  materials  located on the Phase 2 Development  Site.  The Agency
hereby  agrees to  indemnify,  protect,  hold  harmless  and defend (by  counsel
reasonably  satisfactory  to ASCRP and Cecil's  Market,  Inc.) ASCRP and Cecil's
Market,  Inc.,  their  officers,  directors,  agents  and  employees  and  their
successors   and  assigns  from  and  against  all  claims,   losses,   damages,
liabilities,  fines, penalties, charges, administrative and judicial proceedings
and orders, judgments, remedial action requirements,  enforcement actions of any
kind and all costs and expenses incurred in connection therewith (including, but
not limited to,  attorneys' fees and expenses) arising directly or indirectly in
whole or in part from hazardous  materials on the Phase 2 Development Site which
were on the Phase 2  Development  Site prior to ASCRP and Cecil's  Market,  Inc.
acquiring the Phase 2 Development Site or from the Agency's  activities  related
to the removal of any hazardous materials, including any costs incurred by ASCRP
and Cecil's  Market,  Inc. as a result of the Agency failing to deliver to ASCRP
and Cecil's  Market,  Inc. the Phase 2 Development  Site in accordance  with the
Schedule of  Performance  as a result of delays in the removal of any  hazardous
materials;  provided,  however,  this  indemnity  shall not cover any  hazardous
materials  located on the portions of the Phase 2 Development  Site owned by the
Developers  prior to the  Close of  Escrow,  except  that  the  Agency  shall be
responsible for the removal of asbestos from the Lake Tahoe Inn. Upon completion
of any removal of hazardous material on the Phase 2 Development Site, the Agency
shall provide ASCRP and Cecil's Market,  Inc. with copies of any certificates or
closure  letters  received by the Agency from any regulatory  bodies  indicating
that the  hazardous  materials  have been removed and properly  disposed of. The
provisions of this subsection shall survive  expiration or other  termination of
this Agreement, and shall remain in full force and effect.

          (d)  Subdivision  Map.  The  Developers  shall  have  recorded a final
subdivision  map for the Phase 2 Development  Site that is  consistent  with the
tentative subdivision map.

          (e)  Demolition  of  Existing  Improvements.  The  Agency  shall  have
demolished and removed any improvements,  structures or debris currently located
on the  Phase 2  Development  Site and  shall  have  placed  the  property  in a
condition to begin construction;  provided,  however, prior to demolition of the
Lake Tahoe Inn, ASCRP shall have granted the Agency a right of entry to the Lake
Tahoe Inn, including the right to demolish the improvements located thereon, and
Cecil's Market,  Inc. shall have granted the Agency a right of entry to the Paul
Kennedy  Steakhouse  Site,  including  the right to  demolish  the  improvements
located  thereon.  In the event the  Agency  is  unable to  deliver  the Phase 2
Development Site to ASCRP and Cecil's Market,  Inc. in the time set forth in the
Schedule  of  Performance  as a result of delays  related to the  demolition  of
improvements on the Phase 2 Development  Site, the Agency shall pay to ASCRP and
Cecil's Market,  Inc. any costs  associated  with such a delay,  including costs
related to maintaining the Letter of Credit required pursuant to Section 2.01(b)
and costs associated with keeping the construction contract in effect.

          (f)  Contracts for Public  Improvements.  The Agency or the City shall
have  taken  all  steps  necessary  to award  contracts  for the  Phase 2 Public
Improvements.

          (g)  Annexation  of County  Property.  The City shall  have  completed
annexation of the portion of property  currently  located in El Dorado  County's
jurisdiction  adjacent to the site where the Intermodal  Transit Center is to be
developed.

          (h)  Mello-Roos  District.  The Agency  shall have  caused the Phase 2
Development  Site to be annexed to the Mello-Roos  District  formed  pursuant to
Section 9.05,  below. The Developer shall consent to the annexation of the Phase
2 Development Site to the Mello-Roos District.


                        ARTICLE 6. DEVELOPERS' CONDITIONS
                    PRECEDENT TO TRANSFER OF DEVELOPMENT SITE

          6.01  Conditions   Precedent  to  Transfer  of  Phase  1  Property  to
Developers.  In  addition  to the  completion  of the  activities  set  forth in
Articles 2, 3 and 4, as  conditions  precedent  to the  Agency's  obligation  to
transfer the Phase 1 Development  Site to Heavenly Resort  Properties,  Heavenly
Valley and TSI, the  conditions set forth in this Section 6.01 must first be met
by Heavenly Resort  Properties,  Heavenly Valley and TSI or waived by the Agency
by the time  specified in the Schedule of Performance or such other dates as may
be agreed upon by the Parties; provided,  however, if Heavenly Resort Properties
and Heavenly  Valley have met all the  conditions set forth in this Section 6.01
but TSI has not met all the  conditions  set  forth in this  Section  6.01,  the
conditions precedent for the transfer of the portions of the Phase 1 Development
Site to be transferred to Heavenly  Resort  Properties and Heavenly Valley shall
be deemed to have been met.

          (a) Parking Management  Agreement.  ASCRP, Heavenly Resort Properties,
Heavenly  Valley,  TSI,  Cecil's  Market,  Inc.,  the Agency and Tahoe  Crescent
Partners shall have approved a Parking Management Agreement.

          (b)Plaza Maintenance Agreement.  Heavenly Resort Properties,  Heavenly
Valley, TSI and the Agency shall have approved a Plaza Maintenance Agreement.

          (c) Permits and Approvals. Heavenly Resort Properties, Heavenly Valley
and TSI shall have obtained and acknowledged all permits and approvals necessary
for the  construction  of Phase 1 from any  federal,  state and  local  agencies
having  jurisdiction  over  the  construction  of the  Project  and  shall be in
compliance with all such permits.

          (d)  Final  Construction  Plans.  Within  the  time  set  forth in the
Schedule of  Performance,  Heavenly Resort  Properties,  Heavenly Valley and TSI
shall  complete  or cause to be  completed  and  submit to the  Agency the Final
Construction  Plans  for Phase 1 and  simultaneously  cause  applications  to be
submitted  to the City for a building  permit for  construction  of Phase 1. The
final  construction  plans shall include  detailed  information  about  interior
finishes and design  elements.  The Agency may, at its option,  review the Final
Construction  Plans for  consistency  with the Approved Plans and the Site Plan,
and if the Agency  notifies the  Developers in writing  within fifteen (15) days
after  receipt of the Final  Construction  Plans of an  inconsistency  with this
Agreement,  then  Heavenly  Resort  Properties,  Heavenly  Valley  and TSI shall
promptly revise the Final  Construction Plans and cause the City building permit
applications to be revised to eliminate such inconsistency;  provided,  however,
if the  Agency  disapproves  of the  Final  Construction  Plans  because  of the
interior  finishes or design elements,  the Agency and the Developers shall meet
and confer regarding appropriate changes to the interior finishes. After causing
such applications to be made for a building permit,  Heavenly Resort Properties,
Heavenly Valley and TSI shall diligently pursue and obtain a building permit. No
later than ninety  (90) days  following  application  to the City for a building
permit (subject to extensions of time reasonably granted by the Agency Executive
Director  or his or her  designee  pursuant  to Section  12.08 if  issuance of a
building permit is delayed  through no fault of the Developers)  Heavenly Resort
Properties,  Heavenly  Valley and TSI shall deliver  evidence to the Agency that
Heavenly Resort Properties,  Heavenly Valley and TSI are entitled to issuance of
a building permit for Phase 1 upon payment of permit fees.

          (e) Evidence of Financing. Heavenly Resort Properties, Heavenly Valley
and TSI shall have provided the Agency with evidence  satisfactory to the Agency
in its Reasonable  Discretion of a binding  construction loan or other financing
commitments for the Grand Summit Hotel,  the Grand Summit Annex, the Gondola and
the Ice Rink in an amount  sufficient to construct  the Grant Summit Hotel,  the
Grand  Summit  Annex,  the  Gondola  and the Ice  Rink in  accordance  with  the
Financing  Plan.  In addition,  Heavenly  Valley  shall  provide the Agency with
evidence  satisfactory to the Agency in its Reasonable Discretion that the terms
of the agreement for the purchase of Gondola  equipment  have been fully met and
the purchase agreement is still in full force and effect.

          (f) Subdivision Map. The Developers,  in consultation with the Agency,
shall have prepared a subdivision map for the  Development  Site consistent with
the Draft  Tentative  Subdivision  Plan and the City shall have approved and the
Developers  or the Agency shall have  recorded a final  subdivision  map for the
Phase 1 Development Site.

          (g) Department of Real Estate  Approval.  Heavenly  Resort  Properties
shall  provide  the Agency with  evidence  of receipt of Public  Report from the
California Department of Real Estate.

          (h) Water Permits. Heavenly Resort Properties, Heavenly Valley and TSI
shall have applied for and obtained  binding  commitment from STPUD for adequate
domestic and fire  sprinkler  water supplies for the operation of Phase 1 of the
Project.

          (i) Waste  Discharge  Permit.  Heavenly  Resort  Properties,  Heavenly
Valley and TSI shall have  obtained  waste  discharge  permits from Lahontan for
Phase 1 of the Project.

          (j) Construction Contract. Heavenly Resort Properties, Heavenly Valley
and TSI shall  provide  the Agency  with an  opportunity  to review an  executed
construction  contract  for  Phase  1 of  the  Project  in  form  and  substance
acceptable to the Agency in its Reasonable  Discretion from a general contractor
of  sufficiently  strong  financial  condition to qualify as a surety to issue a
payment  and  performance  bond  and  with a  level  of  contracting  experience
acceptable to the Agency in its Reasonable Discretion.  The Agency shall approve
the  construction  contract  if the  contract is for an amount not to exceed the
amount of the  construction  financing  commitments  pursuant to Section 6.01(d)
above and the  contract  includes  the  requirements  of  Section  8.06 and 8.07
regarding local hiring and local supplies.

          (k) Performance and Payment Bonds.  Heavenly Resort Properties and TSI
shall deliver to the Agency  performance and payment bonds in form and substance
reasonably  satisfactory  to the Agency in the full  amount of the  construction
contract.  The  performance  and  payment  bonds  shall  name the  Agency as the
co-obligee.

          Said bonds should be issued by an insurance  company which is licensed
to do business in California and named in the current list of "Surety  Companies
Acceptable on Federal  Bonds" as published in the Federal  Register by the Audit
Staff Bureau of Accounts, U.S. Treasury Department and for amounts which are not
in excess of the  acceptable  amount  set forth on such list for the  respective
surety. The insurance company shall have a rating equivalent to a Best rating of
A or FSC rating of 9.

          (l)  Contract  for the  Acquisition  of the Lake Tahoe Inn.  ASCRP has
submitted to the Agency a fully executed and binding  entitlement to acquire the
Lake Tahoe Inn ("Option Agreement"). The Option Agreement shall be in full force
and  effect  until the close of escrow  on the  Phase 2  Development  Site.  Any
changes or amendments to the Option  Agreement  shall be subject to the Agency's
approval.

          (m) Transfer of CFA. TSI shall have transferred  26,920 square feet of
CFA to the Grand Summit Hotel site.

          (n) Grant Deed for Cecil's  Market.  John and Camilla  Jovicich  shall
deposit to Escrow a Grant Deed granting the property  commonly  known as Cecil's
Market,  located at 4020 U.S.  Highway 50 and the Big and Tall Store  located at
1019 Park Avenue ("Jovicich Property") to the Agency.

          (o) Insurance.  The Developers  shall furnish the Agency with evidence
of  insurance  in the amounts  and types  specified  in Section  8.12 naming the
Agency and the City as additional insured.

          (p) No Default.  There exists no Developer Event of Default as defined
in Section 12.05.

          (q) Representations and Warranties. The representations and warranties
of the Developers as set forth in Section 14.01 of the Agreement remain true and
correct.

          (r)  No  Litigation  Concerning  DDA.  There  is no  existing  pending
litigation, suit, action or proceeding before any court or administrative agency
affecting the  Developers or any of them or  Development  Site,  that would,  if
adversely determined, adversely affect the Developers or the Development Site or
the Developers'  ability to perform their obligations under this Agreement or to
develop or operate the Project.

          (s) Retail Tenant  Selection.  Prior to beginning  leasing efforts for
the retail space in the  Development,  TSI and Heavenly Resort  Properties shall
provide to the Agency for its approval or disapproval, leasing plans showing the
desired tenant mix and expected lease rate.  Approval of the leasing plans shall
be in the Agency's Reasonable Discretion.  Subsequent to approval of the leasing
plan, TSI and Heavenly Resort  Properties shall provide the Agency with biannual
reports of leasing efforts.

          (t) Agency's  Satisfaction with Developer.  Heavenly Resort Properties
has provided the Agency with evidence reasonably satisfactory to the Agency that
Heavenly Resort Properties is a single purpose entity whose sole assets are such
portion of the Phase I Development  Site that Heavenly  Resort  Properties is to
take title of and any related assets and whose sole liabilities are:

         (a)      those  approved by the Agency  pursuant to Section 2.01 (f) or
                  3.01 (f), as applicable; or

         (b)      contingent unsecured  liabilities which are fully subordinated
                  to liabilities  approved by the Agency and which would neither
                  render Heavenly Resort Properties  "insolvent" as that term is
                  defined in the United States  Bankruptcy Code or New York law,
                  nor leave Heavenly Resort Properties with  unreasonably  small
                  capital.

         TSI has provided the Agency with evidence  reasonably  satisfactory  to
the Agency that TSI is a single purpose entity whose sole assets are the portion
of the Phase I  Development  Site that TSI is to take  title of and any  related
assets and whose sole  liabilities  are related to development of the portion of
the Phase I Development Site TSI is developing.

         (u) No Bankruptcy/Dissolution  Event. No  Bankruptcy/Dissolution  Event
shall have occurred with respect to any of the Developers or an ASC Affiliate.

          6.02 Conditions  Precedent to Transfer of Phase 2 Development  Site to
Developers.  In  addition  to the  completion  of the  activities  set  forth in
Articles 2, 3 and 4, as  conditions  precedent  to the  Agency's  obligation  to
transfer  the Phase 2  Development  Site to ASCRP and Cecil's  Market,  Inc. the
conditions set forth in this Section 6.02 must first be met by ASCRP and Cecil's
Market,  Inc. or waived by the Agency by the time  specified  in the Schedule of
Performance or such other dates as may be agreed upon by the Parties;  provided,
however,  if ASCRP has met all the conditions set forth in this Section 6.02 but
Cecil's  Market,  Inc. have not met all the conditions set forth in this Section
6.02, the  conditions  precedent for the transfer of the portions of the Phase 2
Development Site to be transferred to ASCRP shall be deemed to have been met.

          (a) Permits and Approvals.  ASCRP and Cecil's Market,  Inc. shall have
obtained all permits and  approvals  necessary for the  construction  of Phase 2
from  any  federal,  state  and  local  agencies  having  jurisdiction  over the
construction  of  the  Project,  and  ASCRP  and  Cecil's  Market,  Inc.  are in
compliance with such permits.

          (b) Evidence of Financing.  ASCRP and Cecil's Market,  Inc. shall have
provided the Agency with evidence  satisfactory  to the Agency in its Reasonable
Discretion of a binding  construction  loan  commitment  for Phase 2, in amounts
sufficient to construct Phase 2 in accordance with the Financing Plan.

          (c)  Final  Construction  Plans.  Within  the  time  set  forth in the
Schedule of Performance,  ASCRP and Cecil's Market, Inc. shall complete or cause
to be completed and submit to the Agency the Final  Construction Plans for Phase
2 and  simultaneously  cause  applications  to be  submitted  to the  City for a
building permit for construction of Phase 2. The final  Construction Plans shall
include detailed  information about interior  finishes and design elements.  The
Agency may, at its option,  review the Final  Construction Plans for consistency
with the Approved Plans and the Site Plan, and if the Agency  notifies ASCRP and
Cecil's  Market,  Inc. in writing  within fifteen (15) days after receipt of the
Final Construction Plans of an inconsistency with this Agreement, then ASCRP and
Cecil's  Market,  Inc. shall promptly  revise the Final  Construction  Plans and
cause the City  building  permit  applications  to be revised to eliminate  such
inconsistency.  If the  Agency  disapproves  of the  Final  Constructions  Plans
because  of the  interior  finishes  or  design  elements,  the  Agency  and the
Developers shall meet and confer on appropriate changes to the interior finishes
and/or  design  elements.  After  causing  such  applications  to be made  for a
building  permit,  ASCRP and Cecil's Market,  Inc. shall  diligently  pursue and
obtain a building permit.  No later than ninety (90) days following  application
to the City for a building  permit  (subject to  extensions  of time  reasonably
granted by the Agency  Executive  Director  or his or her  designee  pursuant to
Section  12.08 if issuance of a building  permit is delayed  through no fault of
the  Developers),  ASCRP and Cecil's Market,  Inc. shall deliver evidence to the
Agency that the ASCRP and Cecil's  Market,  Inc.  are  entitled to issuance of a
building permit for the second Phase upon payment of permit fees.

          (d) Department of Real Estate Approval. ASCRP shall provide the Agency
with  evidence of receipt of Public Report for the sale of units in Phase 2 from
the  California  Department of Real Estate if required by the Department of Real
Estate.

          (e) Water Permits.  ASCRP and Cecil's Market,  Inc. shall have applied
for and obtained  binding  commitment from STPUD for adequate  domestic and fire
sprinkler water supplies for the operation of Phase 2.

          (f) Waste Discharge Permit.  ASCRP and Cecil's Market, Inc. shall have
obtained a waste discharge permit from Lahontan for Phase 2 of the Project.

          (g)  Construction  Contract.  ASCRP and  Cecil's  Market,  Inc.  shall
provide  the  Agency  with an  opportunity  to review an  executed  construction
contract  or  contracts  for  Phase  2 of the  Project  in  form  and  substance
acceptable to the Agency in its Reasonable  Discretion from a general contractor
of  sufficiently  strong  financial  condition to qualify as a surety to issue a
payment  and  performance  bond  and  with a  level  of  contracting  experience
acceptable to the Agency in its Reasonable Discretion.  The Agency shall approve
the  construction  contract  if the  contract is for an amount not to exceed the
amount of the construction financing commitments and equity commitments pursuant
to Section 6.02(b) above and the contract  includes the requirements of Sections
8.07 and 8.08 regarding local hiring and local supplies.

          (h)  Performance  and Payment Bonds.  ASCRP and Cecil's  Market,  Inc.
shall deliver to the Agency  performance and payment bonds in form and substance
reasonably  satisfactory  to the Agency in the full  amount of the  construction
contract.  Said bonds should be issued by an insurance company which is licensed
to do business in California and named in the current list of "Surety  Companies
Acceptable on Federal  Bonds" as published in the Federal  Register by the Audit
Staff Bureau of Accounts, U.S. Treasury Department and for amounts which are not
in excess of the  acceptable  amount  set forth on such list for the  respective
surety. The insurance company shall have a rating equivalent to a Best rating of
A or FSC rating of 9. The performance and payment bonds shall name the Agency as
the co-obligee.

          (i) No Default.  No  Developer  Event of Default as defined in Section
12.05 has occurred.

          (j) Representations and Warranties. The representations and warranties
of the Developers as set forth in Section 14.01 of the Agreement remain true and
correct.

          (k)  No  Litigation  Concerning  DDA.  There  is no  existing  pending
litigation, suit, action or proceeding before any court or administrative agency
affecting  the  Developers  or  Development   Site  that  would,   if  adversely
determined,  adversely  affect the  Developers  or the  Development  Site or the
Developers'  ability to perform  their  obligations  under this  Agreement or to
develop or operate the Project.

          (l) Insurance. ASCRP and Cecil's Market, Inc. shall furnish the Agency
with  evidence of insurance  in the amounts and types  specified in Section 8.12
naming the Agency and the City as additional insureds.

          (m) Jovicichs' Grant Deed for Paul Kennedy  Steakhouse  Site.  Cecil's
Market, Inc. shall have deposited into Escrow a Grant Deed granting title to the
Paul Kennedy Steakhouse Site to the Agency.

          (n) Agency's  Satisfaction with Developer.  The ASCRP has provided the
Agency with evidence  reasonably  satisfactory  to the Agency that the entity to
develop  the Lake Tahoe Inn Site is a single  purpose  entity  whose sole assets
will be the Lake Tahoe Inn Site  Development Site the Developer is to take title
of and any related assets and whose sole liabilities are:

         (a)      those  approved by the Agency  pursuant to Section 2.01 (f) or
                  3.01(f), as applicable; or

         (b)      contingent, unsecured liabilities which are fully subordinated
                  to liabilities  approved by the Agency and which would neither
                  render  the  development  entity  "insolvent"  as that term is
                  defined in the United States  Bankruptcy Code or New York law,
                  nor leave  the  development  entity  with  unreasonably  small
                  capital.

         (o) No Bankruptcy/Dissolution  Event. No  Bankruptcy/Dissolution  Event
shall have occurred with respect to any of the Developers or an ASC Affiliate.




                       ARTICLE 7. DISPOSITION OF PROPERTY

          7.01 Sale of Property. Within thirty (30) days following the date that
all the  conditions  set forth in Section 5.01 and 6.01 have been met or waived,
the Agency shall sell and convey Parcels 5, 8 and 9 (as shown on the Preliminary
Subdivision  Map) to Heavenly  Resort  Properties for  construction of the Grand
Summit Hotel and the Grand Summit Annex; Parcel 13 and the Gondola  Right-of-Way
to Heavenly  Valley for  construction  of the Gondola;  and the Gondola Park and
Parcels  6 and 7 to TSI for  construction  of the Ice  Rink  and the  multi-plex
cinema.  In addition to  conveying  the parcels as  designated  the Agency shall
convey to each Developer easements over Parcel 3 for ingress,  egress and public
use. In addition,  the Agency shall grant the Paul  Kennedy  Steakhouse  Site to
Cecil's  Market,  Inc. in exchange for Cecil's Market,  Inc.'  conveyance of the
Jovicich Property to the Agency. Within thirty (30) days following the date that
all the  conditions set forth in Sections 5.02 and 6.02 have been met or waived,
the Agency shall sell and convey Parcel No. 1 to Cecil's Market, Inc. and Parcel
4 to ASCRP. The conveyance of Parcel 1 to Cecil's Market, Inc. shall include the
rights,  granted by ASCRP to Cecil's  Market,  Inc.', to the use of five parking
spaces in the  underground  parking  garage  developed as part of the Lake Tahoe
Inn,  provided the parking garage is developed as  contemplated in the Site Plan
and provided, further, Cecil's Market, Inc. reimburse ASCRP for the full cost of
developing the five parking  spaces.  Cecil's  Market,  Inc. shall also have the
right to construct  access from Parcel 1 to the designated  parking  spaces.  To
accomplish the conveyance of each Phase of the Development  Site from the Agency
to the Developers,  the Parties shall establish an Escrow with the Escrow Holder
and shall execute and deliver to the Escrow Holder written instructions that are
consistent with this Agreement.

          7.02 Consideration.  In consideration to the Agency for the conveyance
of the Phase 1  Development  Site to the  Developers,  and as a condition to the
conveyance of the Phase 1 Development  Site to the  Developers,  Heavenly Resort
Properties  shall pay to the  Agency  Two  Million  Dollars  ($2,000,000),  plus
Heavenly  Valley shall  reimburse the Agency for all costs  associated  with the
acquisition of the Gondola Right-of-Way,  including legal fees and any severance
damages or special benefits awarded any property owners as a result of a partial
condemnation of property for the Gondola  Right-of-Way.  In consideration to the
Agency for the  conveyance  of the Phase 2 Development  Site to the  Developers,
ASCRP  shall  deposit  into Escrow of a grant deed  conveying  to the Agency any
right,  title or interest ASCRP has in the Lake Tahoe Inn Site. In addition,  in
consideration  of the conveyance of the Paul Kennedy  Steakhouse Site to Cecil's
Market,  Inc. at the time of conveyance of the Phase 1 Development Site, Cecil's
Market,  Inc.  shall  grant to the Agency the  Jovicich  Property  and waive any
relocation  benefits and loss of goodwill  associated with Agency acquisition of
the Jovicich Property. In consideration of the conveyance of Parcel 1 to Cecil's
Market,  Inc. at the time of conveyance of the Phase 2 Development Site, Cecil's
Market,  Inc.  shall convey to the Agency the Paul Kennedy  Steakhouse  Site and
waive  any  relocation  and  loss  of  goodwill  associated  with  the  Agency's
acquisition of the Paul Kennedy Steakhouse Site from Cecil's Market, Inc..

          7.03 Orders of Possession. If the Agency has not obtained fee title to
any portion of the Development  Site at the time set forth for conveyance to the
Developers  herein,  but has obtained a judicial order for its  possession,  the
Agency may deposit a copy of the order into Escrow, as an interim alternative to
acquiring  title and depositing  the deed for such parcel into Escrow.  Provided
the  conditions  set forth in Section 7.05 have been  satisfied,  the Escrow for
that parcel shall close within  thirty (30) days  following  the date the Agency
obtains  possession  of the parcel.  At the close of the Escrow the Agency shall
convey its right of possession to Developers by instrument reasonably acceptable
to the  Agency  and  Developers.  Following  the  deposit  of such an order into
Escrow, the Agency shall diligently proceed with its eminent domain action until
a final judgment is rendered or settlement reached.  Provided the final judgment
results in the Agency obtaining fee title to the parcel,  the Agency  thereafter
shall forthwith  deposit the Grant Deed (or such other  instrument as is ordered
by the court) for such parcel into Escrow.  In the event there is any additional
title insurance  premium costs associated with conveyance of property subject to
an order of possession the Agency shall bear the additional premium.

          7.04 Closing Condition.  The Agency shall not be required to convey to
the Developers any portion of the Development Site if a Developer's  Default has
occurred and is continuing.

          7.05 Closing Event. At each closing, the Parties shall undertake to do
or cause the following:

          (a)  Conveyance.  Except as provided in Section 7.03, the Agency shall
convey the  Development  Site in question to the  Developers by Grant Deed,  the
form of which is  attached  hereto as  Exhibit  H, or by  instrument  reasonably
acceptable to the Agency and Developers.

          (b) Agreement. The Parties shall execute and deliver such documents as
are necessary to make the Development Site subject to this Agreement.

          7.06  Condition of Title.  The Agency shall convey each portion of the
Development  Site to the  Developers  free of all liens,  encumbrances,  clouds,
conditions, and rights of occupancy and possession except:

         (a) applicable building and zoning laws and regulations;

         (b) the provisions of the Agency Grant Deed;

         (c) the provisions of this Agreement;

         (d) the provisions of the Redevelopment Plan; and

         (e) such other encumbrances as approved by the Developers.

         7.07     Condition of the Property.

          (a) "As Is" Conveyance.  The Agency shall convey the Development  Site
to the Developers free of improvements,  including subsurface  improvements.  In
addition the Agency shall have  completed  any hazardous  materials  remediation
recommended  in the  environmental  site  assessments  as set forth in  Sections
5.01(c) and 5.02(c) and shall have completed  demolition of existing  structures
as provided  for in Section  5.01(d)  and  5.02(e).  Except as  provided  for in
Sections  5.01(c),  5.02(c),  5.01(d)  and  5.02(e)  the  Agency  shall  have no
responsibility  for the suitability of the Development  Site or portions thereof
for the  development of the Project,  and if the  conditions of the  Development
Site or portions  thereof are not entirely  suitable for the  development of the
Development,  then the Developers  shall put the Development Site in a condition
suitable  for the  improvements  to be  constructed.  Except as provided  for in
Section 5.01(c) and 5.02(c) the Developers  waive any right of  reimbursement or
indemnification  from  the  Agency  for the  Developers'  costs  related  to any
physical  conditions on the Development  Site unless such condition was known to
Agency and not disclosed to the  Developers  and such  condition was not readily
discoverable  by the Developers  upon  reasonable  inspection of the Development
Site. This waiver shall survive termination of this Agreement.

          (b) Disclosure.  In anticipation of acquiring the Development Site and
in fulfillment of the requirements of Health and Safety Code Section 25359.7(a),
the Agency has no knowledge of any  hazardous  materials or  substances in or on
the Development  Site other than the information to be provided by the Agency to
the  Developers in the  environmental  assessments  to be prepared by the Agency
pursuant to Section 5.01(c) and 5.02(c), which reports shall be attached to this
Agreement as Exhibit I when completed.  In compliance with California Civil Code
Section  1102.6c,  the Agency shall provide the Developers with a natural hazard
disclosure  statement prior to the close of Escrow,  which  disclosure  shall be
attached to this Agreement as Exhibit I when completed.

          (c) Costs of Escrow and Closing.  The Agency shall pay the premium for
a CLTA Owners Policy of  insurance.  The  Developers  shall pay the costs of any
endorsements  requested by any Developer.  All other costs of Escrow (including,
without  limitation,  any Escrow  Holder's fee, costs of title company  document
preparation,  recording  fees, and transfer tax) shall be divided evenly between
the Developers and the Agency.

          7.08 Real Estate  Commissions.  Neither  party has obtained or engaged
the  services  of a real  estate  broker in this  transaction.  If a real estate
commission is claimed  through either Party in connection  with the  transaction
contemplated  by this  Agreement,  then the Party through whom the commission is
claimed  shall  indemnify,  defend and hold the other  Party  harmless  from any
liability  related to such  commission.  The  provisions  of this section  shall
survive termination of this Agreement.

          7.09  Transfer  of  Units  of  Use.  Upon  transfer  of  the  Phase  1
Development  Site to the Developers,  the Agency shall also transfer to Heavenly
Resort Properties a maximum of 294 TAUs, 43,712 square feet of CFA and the Sewer
Units the Agency acquired when the Agency acquired the Phase 1 Development Site.
Upon the transfer of the Phase 2 Development Site to the Developers,  the Agency
shall also transfer to ASCRP a maximum of 456 TAUs, 8,154 square feet of CFA and
the  Sewer  Units the  Agency  acquired  when the  Agency  acquired  the Phase 2
Development  Site,  and  15,990 CFA to Cecil's  Market,  Inc..  In the event the
Developers do not require the full number of TAUs set forth above to develop the
Project in accordance with approved plans and permits,  the number of TAUs to be
transferred by the Agency shall be reduced to the number  actually  required and
any unneeded  TAUs shall be retained by the Agency.  With respect to each Phase,
the Agency shall  transfer the Sewer Units to the  Developers  at no cost to the
Developers; provided, however, if the STPUD charges any fees for the transfer of
the Sewer Units, the Developers shall be responsible for the payment of any such
fees. The Agency shall  cooperate with the Developers in all efforts to minimize
or eliminate any fees associated with the transfer of Sewer Units.

          (f) In addition  to the CFA to be  transferred  above,  the City shall
transfer to Heavenly Resort  Properties  20,000 square feet of CFA, which square
footage is made  available in accordance  with the  Stateline-Ski  Run Community
Plan. The City shall also transfer whatever portion of the TRPA Special Projects
Allocation  of CFA is not used by the TCP Parcel,  which such balance shall at a
minimum be 4,462 square feet of CFA.

          (g)  Notwithstanding  the above,  the Agency may desire to  substitute
Residential  Units that they own for TAUs that are required in  accordance  with
the Financial Plan and the Motel Room Retirement Schedule. Residential Units may
be substituted for TAUs on a one-for-one basis,  subject to the approval of TRPA
and any other governing agencies.


                             ARTICLE 8. CONSTRUCTION

          8.01  Commencement of  Construction.  The Developers shall commence or
cause to be commenced  construction of Phase 1 of the Project within thirty (30)
days of Close of Escrow for the Phase 1 Development Site; provided,  however, if
Escrow for the Phase 1 Development Site does not close prior to July 1, 2000, as
a result of delays  that are not  within  the  control  of the  Developers,  the
Developers may delay  commencement of construction  until the year 2001 building
season  without  being in  default of this  Agreement.  If the delay in Close of
Escrow is a result of failure of the Agency to meet the conditions to conveyance
that the Agency is  responsible  for, then costs incurred by the Developers as a
result of the delay,  including  but not  limited to  interest on any letters of
credit, shall be paid by the Agency.. If Escrow for the Phase 1 Development Site
closes on or before June 30, 2000 and the Developers fail to start  construction
of the  portions of Phase 1 to be  constructed  by the  Developers  on or before
September 30, 2000, the Developers  shall pay to the Agency any interest owed on
the BANS from the date the Agency  notifies  Developers  that all  conditions to
conveyance of the Phase 1 Development  Site have been  satisfied or waived until
the Developers  commence  construction of Phase 1. The Developers shall commence
or cause to be commenced  construction  of Phase 2 of the Project  within thirty
(30) days of the close of Escrow for the Phase 2 Development Site.  Commencement
of  construction  for  purposes of this  Section  shall mean  excavation  of the
Development Site.

          8.02  Completion of  Construction.  The  Developers  shall  diligently
prosecute or cause to be prosecuted to completion the construction of each Phase
of the Project,  and shall complete or cause to be completed the construction of
each Phase of the Project no later than the time  specified  in the  Schedule of
Performance.  In the event ASCRP and Heavenly Resort Properties fail to complete
construction  of each  Phase of the  Project  within the time  specified  in the
Schedule of Performance for completion of  construction  and such failure is not
the result of the Agency  failing to convey each Phase  Development  Site to the
Developers in a timely  fashion,  ASCRP and/or Heavenly  Resort  Properties,  as
applicable,  shall pay to the Agency the daily  interest  cost  incurred  by the
Agency on the BANS for each day that  construction  continues  after the date of
completion set forth in the Schedule of Performance.

         8.03     Construction Pursuant to Plans.

          (a) The Developers shall construct,  or cause to be constructed,  each
Phase of the Project  substantially  in accordance  with the Final  Construction
Plans, the Project  Permits,  the Use Permit and the terms and conditions of all
City and other governmental approvals.

          (b) The  Developers  shall submit or cause to be submitted  for Agency
approval any proposed change in the Final  Construction  Plans which  materially
changes any portion of the Project and which would  require an  amendment to any
approval or permits obtained from the City or other governmental  agencies.  The
Agency shall  approve or disapprove a proposed  change within  fifteen (15) days
after  receipt by the Agency.  Failure to approve or disapprove  within  fifteen
(15) days shall be deemed to be approval of such change.  If the Agency  rejects
the proposed  change,  then the Agency  shall  provide the  Developers  with the
specific reasons therefor, in writing, and the approved Final Construction Plans
shall continue to control.

          (c) No change which is required for compliance  with building codes or
other government health and safety regulation shall be deemed material. However,
the Developers  must submit or cause to be submitted to the Agency,  in writing,
any  change  that is  required  for such  compliance  within ten (10) days after
making such change,  and such change  shall become a part of the approved  Final
Construction Plans, binding on the Developers.

          8.04 Compliance  with  Applicable Law. The Developers  shall cause all
work  performed in  connection  with the Property to be performed in  compliance
with (a) all  applicable  laws,  ordinances,  rules and  regulations of federal,
state,  county or municipal  governments or agencies now in force or that may be
enacted hereafter (including, without limitation, the prevailing wage provisions
of Sections 1770 et seq. of the  California  Labor Code,  but only to the extent
applicable),  and (b) all directions, rules and regulations of any fire marshal,
health  officer,  building  inspector,  or other  officer of every  governmental
agency now having or hereafter  acquiring  jurisdiction.  The work shall proceed
only after procurement of each permit,  license, or other authorization that may
be required by any governmental agency having  jurisdiction,  and the Developers
shall be responsible to the Agency for the procurement and maintenance  thereof,
as may be required of the  Developers  and all  entities  engaged in work on the
Development Site.

          8.05 Non-Discrimination  During Construction;  Equal Opportunity.  The
Developers, for themselves and their successors,  assigns, and transferees agree
that in the construction of the Project provided for in this Agreement:

          (a) They will not  discriminate  against any employee or applicant for
employment because of race, color, religion,  creed, national origin,  ancestry,
disability,    medical   condition,    age,   marital   status,    sex,   sexual
preference/orientation,  Acquired Immune Deficiency  Syndrome (AIDS) acquired or
perceived,   or  retaliation  for  having  filed  a   discrimination   complaint
(nondiscrimination  factors).  The Developers  will take  affirmative  action to
ensure that  applicants  are employed,  and that  employees are treated  without
regard to the  nondiscrimination  factors during employment  including,  but not
limited to,  activities  of  upgrading,  demotion or  transfer;  recruitment  or
recruitment advertising,  layoff or termination;  rates of pay or other forms of
compensation;   and  selection  for  training,  including  apprenticeship.   The
Developers  agree to post in  conspicuous  places,  available to  employees  and
applicants for  employment,  the applicable  nondiscrimination  clause set forth
herein:

          (b) They will  ensure that its  solicitations  or  advertisements  for
employment are in compliance with the aforementioned  nondiscrimination factors;
and

          (c) They will cause the  foregoing  provisions  to be  inserted in all
contracts for the  construction  of the Project entered into after the effective
date of this Agreement;  provided,  however, that the foregoing provisions shall
not apply to contracts or subcontracts for standard  commercial  supplies or raw
materials.

          8.06  Preference  for  Local  Labor.  The  Developers   recognize  the
importance of local labor having an opportunity,  based on merit, to be involved
in the Project.  The Developers  shall, in letting bids for the  construction of
improvements  under this  Agreement,  require  their  General  Contractor(s)  to
provide  reasonable notice to and, in response  thereto,  receive bids from, any
local contractors  and/or  subcontractors  qualified to bid as subcontractors on
such construction.  In order to be considered by the General Contractor(s) to be
a subcontractor  on the Project,  each such bid shall be submitted in compliance
with the  requirements  of the  General  Contractor(s)  which  are  consistently
applied to all bidders.  General  Contractor(s) shall create a program providing
for notice of work and  opportunity to bid as set forth in this Section 8.06 and
the means of documenting the  effectiveness  of the process in ensuring work for
qualified  local  labor.  For these  purposes,  local  labor shall be defined as
persons whose residence is within the portions of Douglas and El Dorado Counties
that are within the Tahoe Basin. If no bids are received from local contractors,
this  requirement  does  not  apply  and the  contract  may be  awarded  without
reference to this Section  8.06;  provided,  however,  on work where there is no
local bidder,  the  Developers  shall  document  their attempts to solicit local
contractors  and shall  provide such  documentation  to the Agency upon request.
Notwithstanding  the above,  the Developers shall not be required to require the
General  Contractor(s)  and the General  Contractor(s)  shall not be required to
require  its  subcontractors  or  suppliers  to hire  local  labor if either the
General Contractor(s) or its subcontractors or suppliers determines that, in any
such  instance,  such local  labor  either is  unavailable,  unqualified,  would
increase the cost of or slow down the progress of construction of the Project or
would otherwise adversely affect the Project. The Developers shall have complied
with this  provision if the Developers use  commercially  reasonable  efforts to
achieve the objective outlined herein.

          8.07 Supplies and  Materials.  In securing  supplies and materials for
use on the Project, the Developers agree to direct their General  Contractor(s),
to the extent  commercially  practicable,  to utilize local sources of supplies;
provided,  however, that their General Contractor(s) is not thereby required (i)
to contract with local suppliers at a higher price than is available  elsewhere;
(ii) to use multiple  suppliers  (because local suppliers are not able to supply
all supplies  necessary with respect to any particular scope of work);  (iii) to
use local  suppliers if the  provisions of such supplies by the local  suppliers
would slow the progress of or otherwise adversely affect the Project; or (iv) to
refrain from entering into a subcontract  with the most qualified  subcontractor
in the  business  judgment of the  General  Contractor(s)  where such  qualified
subcontractor is not procuring its supplies from local suppliers. The Developers
shall have complied with this  provision if  Developers  use their  commercially
reasonable efforts to achieve the objectives outlined herein.

          8.08  Certificate of Completion.  When the Agency has determined  that
the  obligations  of the  Developers  under  this  Article  8 have been met with
respect to any Phase of the Project,  the Developers may request that the Agency
issue a certificate to such effect (a  "Certificate of  Completion"),  which the
Agency shall execute and deliver within thirty (30) days of such a request. Such
certification  shall not be deemed a notice of completion  under the  California
Civil Code, nor shall it constitute  evidence of compliance with or satisfaction
of any  obligation of the  Developers to any holder of a deed of trust  securing
money loaned to finance the Project.  If the  Developers  request  issuance of a
Certificate of Completion but the Agency refuses,  then the Agency shall provide
the Developers with a written explanation of its refusal within thirty (30) days
of  the  Developers'  initial  request.  A  Certificate  of  Completion  may  be
requested,  and if the requirements  hereof with respect to such Phase have been
met, issued for one or more Phase of the Project.

          8.09 Progress Reports.  Until such time as the Developers are entitled
to issuance of a Certificate  of Completion,  the  Developers  shall provide the
Agency with progress  reports  regarding the status of the  construction  of the
Development,  including  reports  on the number of local  contractors  and local
laborers  working on the Project  and  reports on the  sources of  supplies  and
materials used in the construction of the Project.

          8.10 Entry by the  Agency.  The  Developers  shall  permit the Agency,
through  its  officers,  agents,  or  employees,  to enter the  Property  at all
reasonable  times  and in a safe,  unobtrusive  manner  to  review  the  work of
construction  to  determine  that such work is in  conformity  with the approved
Final  Construction  Plans or to inspect the Property for  compliance  with this
Agreement.  The Developers and the Agency shall schedule regular  inspections to
the extent  reasonable once interior  finishing work commences for the Agency to
insure that the interior  finishes  conform to the approved  Final  Construction
Plans.  The Agency is under no  obligation to (a)  supervise  construction,  (b)
inspect the Property,  or (c) inform the Developers of  information  obtained by
the Agency during any review or inspection,  and the  Developers  shall not rely
upon the Agency for any supervision, inspection, or information.

          8.11 Taxes.  At all times the  Developers  shall pay when due all real
property taxes and assessments assessed and levied on the Development Site after
the Developers take title to the Development  Site or portions thereof and shall
remove any levy or attachment made on the Development  Site. The Developers may,
however,  contest the validity or amount of any tax, assessment,  or lien on the
Development  Site;  provided,  however,  prior to contesting any tax or lien the
Developers  shall meet and confer  with the City and the  Agency,  and  provided
further the Developers will not contest any assessment on the  Development  Site
that is less than or equal to the assessments shown on the Financial Plan.



          8.12 Insurance Requirements.

          (a) Required Coverage.  ASCRP,  Heavenly Resort  Properties,  Heavenly
Valley,  TSI and Cecil's  Market,  Inc. shall maintain or cause to be maintained
and keep in force, at no cost to the Agency, the following insurance  applicable
to the Project at all times prior to the issuance of a Certificate of Completion
by the Agency, or if Certificates of Completion are issued for each Phase, until
a Certificate of Completion has been issued for each Phase:

          (1) Worker's  Compensation  insurance,  including Employer's Liability
coverage,  with limits not less than $1,000,000 each accident, if such insurance
is required by law.

          (2)Comprehensive General Liability insurance with limits not less than
$2,000,000 each occurrence  combined single limit for Bodily Injury and Property
Damage,   including  coverages  for  Contractual  Liability,   Personal  Injury,
Broadform Property Damage, Products and Completed Operations.

          (3) Comprehensive  Automobile Liability insurance with limits not less
than  $1,000,000  each  occurrence  combined  single limit for Bodily Injury and
Property Damage, including coverages for owned, non-owned and hired vehicles, as
applicable;  provided,  however,  that if the  Developers  do not  own or  lease
vehicles for purposes of this Agreement,  then no automobile  insurance shall be
required.

          (4) Property insurance covering the Project covering all risks of loss
including  earthquake (but only if it is commercially  available at a reasonable
price and with a reasonable  deductible,  which the Parties  acknowledge  is not
available as of the date of the  execution of this  Agreement)  and flood if the
Development Site is in a FEMA designated flood zone, for 100% of the replacement
value,  with  deductible not exceeding  $50,000,  and prior to the issuance of a
Certificate  of Completion,  naming the Agency as a Loss Payee,  as its interest
may appear.

          (b)  Contractor's   Insurance.   ASCRP,  Heavenly  Resort  Properties,
Heavenly  Valley,  TSI and  Cecil's  Market,  Inc.  shall each cause any general
contractor  working on the Project  under direct  contract  with the  applicable
Developer to maintain insurance of the types and in at least the minimum amounts
described in subsections  (a)(l),  (a)(2),  and (a)(3) above,  and shall require
that such insurance shall meet all of the general requirements of subsection (c)
below.   Each   Developer   shall   require  its   contractor  to  require  that
subcontractors  working on the Project under direct contract with the contractor
maintain the insurance described in subsections (a)(1), (a)(2) and (a)(3) above;
provided that  subcontractors  with  subcontracts  under  $250,000  which do not
involve  a  significant  risk of  bodily  injury  or  property  damage  shall be
permitted to maintain insurance with limits of $500,000.

          (c) Other Insurance Provisions. The general liability policies carried
by each  Developer  are to contain,  or be endorsed  to contain,  the  following
provisions and each of the Developers shall use its reasonable  efforts to cause
the general  liability and automobile  policies carried by the contractor (which
in turn shall cause its subcontractors  policies to contain),  or be endorsed to
contain, the following provisions:

          (1) The Agency,  its elected or appointed  officials,  employees,  and
agents  are  covered  as  insureds  with  respect to  liability  arising  out of
automobiles owned, leased, hired or borrowed by each Developer,  its contractors
or  subcontractors,  respectively,  and with respect to liability arising out of
work or operations performed including  materials,  parts or equipment furnished
in connection with such work or operations.

          (2) For any  claims  related  to the  Project,  the  Agency  insurance
coverage  shall be primary  insurance as respects to the Agency,  its  officers,
officials  and  employees.  Any  insurance or  self-insurance  maintained by the
Agency,  its officers,  officials and employees shall be excess of the insurance
and shall not contribute to it.

          (3) The  insurance  provided  by this policy  shall not be  suspended,
voided,  canceled,  reduced in coverage or in limits  except  after  thirty days
written notice has been provided to the Agency.

          (4) The  Worker's  Compensation  insurance  required  above shall also
contain language through which the insurance  company agrees to waive all rights
of subrogation against the Agency, its elected or appointed officials, officers,
agents,  employees  for losses paid under the terms of this  policy  which arise
from the work performed by each Developer for the Agency.

          (d) Acceptability of Insurers. Insurance is to be placed with insurers
with a current Best's rating of no less than A.VII.

          (e)  Verification  of Coverage.  Each  Developer  shall use reasonable
efforts  to  furnish  the  Agency  with  original  certificates  and  amendatory
endorsements  effecting  coverage required by this clause.  All certificates and
endorsements  are  to be  received  and  approved  by  the  Agency  before  work
commences.

          8.13 Hazardous Materials.

          (a)  Certain   Covenants  and  Agreements.   ASCRP,   Heavenly  Resort
Properties,  Heavenly Valley, TSI and Cecil's Market,  Inc. hereby each covenant
and agree that:

          (1) They shall not knowingly permit the Project or any portion thereof
to be a site for the use, generation,  treatment, manufacture, storage, disposal
or  transportation  of Hazardous  Materials or  otherwise  knowingly  permit the
presence of Hazardous Materials in, on or under the Project;

          (2) They shall keep and maintain the Project and each portion  thereof
in  compliance  with,  and shall not cause or permit the  Project or any portion
thereof to be in violation of, any Hazardous Materials Laws;

          (3) Upon receiving actual knowledge of the same they shall immediately
advise the Agency in writing of: (A) any and all enforcement,  cleanup,  removal
or other governmental or regulatory actions instituted,  completed or threatened
against  any of  the  Developers  or  the  Project  pursuant  to any  applicable
Hazardous Materials Laws; (B) any and all claims made or threatened by any third
party  against any  Developer or the Project  relating to damage,  contribution,
cost  recovery,  compensation,  loss or  injury  resulting  from  any  Hazardous
Materials (the matters set forth in the foregoing clause (A) and this clause (B)
are hereinafter referred to as "Hazardous  Materials Claims");  (C) the presence
of any Hazardous  Materials in, on or under the Project;  or (D) their discovery
of any occurrence or condition on any real property adjoining or in the vicinity
of the Project  classified  as  "borderzone  property"  under the  provisions of
California  Health and Safety Code,  Sections  25220 et seq., or any  regulation
adopted in accordance therewith,  or to be otherwise subject to any restrictions
on the  ownership,  occupancy,  transferability  or use of the Project under any
Hazardous  Materials  Laws.  The  Agency  shall  have  the  right  to  join  and
participate  in, as a party if it so elects,  any legal  proceedings  or actions
initiated in  connection  with any  Hazardous  Materials  Claims and to have its
reasonable  attorney's  fees in  connection  therewith  paid by the Developer or
Developers that are a party to any such proceeding or action.

          (4) Without the Agency's  prior  written  consent,  which shall not be
unreasonably withheld,  ASCRP, Heavenly Resort Properties,  Heavenly Valley, TSI
and Cecil's  Market,  Inc. shall not take any remedial action in response to the
presence of any Hazardous  Materials on under,  or about the Project (other than
in  emergency  situations  or  as  required  by  governmental   agencies  having
jurisdiction),  nor enter into any settlement agreement, consent decree or other
compromise in respect to any Hazardous Materials Claims.

          (b) Indemnity.  Without limiting the generality of the indemnification
set forth in Section 10.04 below,  ASCRP,  Heavenly Resort Properties,  Heavenly
Valley, TSI and Cecil's Market,  Inc. hereby agree to indemnify,  protect,  hold
harmless  and defend (by  counsel  reasonably  satisfactory  to the  Agency) the
Agency,  its boardmembers,  officers,  agents and employees from and against any
and  all  claims,  losses,  damages,  liabilities,  fines,  penalties,  charges,
administrative and judicial proceedings and orders, judgements,  remedial action
requirements;  enforcement  actions  of any kind,  and all  costs  and  expenses
incurred in connection therewith (including, but not limited to, attorney's fees
and expenses),  arising directly or indirectly, in whole or in part, out of: (1)
the failure of the  Developers  or any other person or entity to comply with any
Hazardous  Materials  Law  relating  in any  way  whatsoever  to  the  handling,
treatment, presence, removal, storage, decontamination,  cleanup, transportation
or disposal of Hazardous Materials into, on, under or from the Project;  (2) the
presence in, on or under the Project of any Hazardous  Materials or any releases
or  discharges of any Hazardous  Materials  into,  on, under or from the Project
that are brought to the Project or released or  discharged  at the Project after
the Close of Escrow;  or (3) any activity carried on or undertaken on or off the
Project,  after  the Close of  Escrow,  and  whether  by the  Developers  or any
successor in title or any employees,  agents,  contractors or  subcontractors of
the  Developers  or any  successor  in title,  or any third  persons at any time
occupying or present on the Project after Close of Escrow,  in  connection  with
the handling, treatment, removal, storage,  decontamination,  cleanup, transport
or  disposal of any  Hazardous  Materials  at any time  located or present on or
under  the  Project.   The  foregoing  indemnity  shall  further  apply  to  any
contamination  of any property or natural  resources  arising in connection with
the generation, use, handling,  treatment, storage, transport or disposal of any
such Hazardous  Materials by any of the Developers or their officer,  directors,
employees or agents  occurring  after the Close of Escrow,  and  irrespective of
whether any of such  activities  were or will be undertaken  in accordance  with
Hazardous  Materials  Laws.  The  provisions  of this  subsection  shall survive
expiration of the Term or other termination of this Agreement,  and shall remain
in full force and effect.  Each of ASCRP,  Heavenly Resort Properties,  Heavenly
Valley, TSI and Cecil's Market, Inc.  indemnification herein shall be limited to
the Project Component each entity is responsible for herein and each Developer's
own actions.

          8.14 Non-Discrimination. The Developers covenant by and for themselves
and their successors and assigns that there shall be no  discrimination  against
or segregation  of a person or of a group of persons on account of race,  color,
religion,  creed, sex, sexual orientation,  marital status, ancestry or national
origin  in the  sale,  lease,  sublease,  transfer,  use,  occupancy,  tenure or
enjoyment  of the  Development  Site,  nor shall the  Developers  or any  person
claiming under or through the  Developers  establish or permit any such practice
or practices of  discrimination  or segregation with reference to the selection,
location, number, use or occupancy of tenants, lessees,  subtenants,  sublessees
or vendees in the Development Site.

          8.15 Mitigation  Monitoring Plan. The Developers shall comply with the
mitigation monitoring plan incorporated in the EIR/EIS and adopted by the Agency
concurrently  with its approval of this Agreement as that program may be amended
from time to time.

          8.16 Use of Paul Kennedy Steakhouse Site. During construction of Phase
1, Cecil's  Market,  Inc.  shall be entitled to use the Paul Kennedy  Steakhouse
Site for retail  uses.  Cecil's  Market,  Inc.  may also sublet the Paul Kennedy
Steakhouse Site to another party to this Agreement  provided the Agency approves
the sublease  and the  sublease  contains  provisions  acceptable  to the Agency
waiving  relocation  and goodwill  benefits upon Agency  acquisition of the Paul
Kennedy Steakhouse Site for Phase 2.

          8.17  Right of Entry for  Parking  Garage  Site.  During the year 2000
building season Heavenly Resort  Properties,  Heavenly Valley and TSI shall have
the right, at their sole risk and expense,  to enter the Parking Garage Site for
the use as a construction staging area provided that Heavenly Resort Properties,
Heavenly Valley and TSI (i) provide  reasonable written notice to the Agency and
the City of such contemplated  entry; and (ii) indemnify and hold the Agency and
the City  harmless  from and  against  all  liability,  loss,  damage,  costs or
expenses (including  reasonable attorneys' fees and court costs) arising from or
as a result of the death or any person or any accident,  injury,  loss or damage
whatsoever  caused to any  person or to the  property  which  shall  occur on or
adjacent  to the Parking  Garage Site and which shall be directly or  indirectly
caused by any acts done on the Parking Garage Site or any errors or omissions of
Heavenly Resort  Properties,  Heavenly Valley or TSI or their agents,  servants,
employees or  contractors in the course of using the Parking Garage Site (except
that caused by the  intentional  misconduct  or  negligence of the Agency or the
City).  Any damage or injury to the Parking  Garage Site resulting from Heavenly
Resort  Properties',  Heavenly  Valley's or TSI's entry under this  Section 8.17
shall be promptly  repaired by Heavenly Resort  Properties,  Heavenly Valley and
TSI at Heavenly Resort  Properties',  Heavenly  Valley's and TSI's sole cost and
expense.  In the event Heavenly  Resort  Properties,  Heavenly Valley and/or TSI
fail to promptly  repair any such  damage,  the Agency and the City may do so at
Heavenly Resort Properties', Heavenly Valley's and TSI's expense.

          8.18 Public Art Plan. Upon  commencement of  construction,  the Agency
shall prepare,  with the Developers  approval, a request for proposal to artists
for  installation  of a major art piece at Park  Avenue  and  Highway  50.  Upon
receipt of proposals,  the proposals  shall be submitted to an Art Jury composed
of six members.  Three members shall be appointed by the  Developers,  by mutual
agreement among the Developers.  Three members shall be appointed by the Agency.
The Art Jury shall select a proposal for the public art piece.


                            ARTICLE 9. CONSTRUCTION
                           OF THE PUBLIC IMPROVEMENTS

          9.01 Construction of the Public Improvements.  Within thirty (30) days
of  conveyance  of the Phase 1 Property  to the  Developers,  the  Agency  shall
commence  construction  of the public  improvements to be constructed as part of
Phase 1, including the realignment of Park Avenue and shall diligently prosecute
the same to  completion;  provided,  however,  the  Agency or the City shall not
commence  construction  of the Parking Garage until the 2001 building season and
only then if the  conditions to sale of the Parking  Revenue Bonds have been met
as set forth in Section  2.03  above.  The  Agency  and the City shall  complete
construction of the Phase 1 Public Improvements within 24 months of commencement
of construction, provided, however if the Agency or the City is to construct the
Parking  Garage  pursuant to Section 2.03, the Parking Garage shall be ready for
occupancy within 9 months of commencement of constructions,  although additional
construction  may  be  required  after  occupancy.   The  specific  schedule  of
completion of the various components of the Public  Improvements shall be as set
forth in the  Schedule  of  Performance.  The  Agency and the  Developers  shall
coordinate  construction  schedules to insure that neither party's  construction
activities interfere with the other party's.

         Within thirty (30) days of conveyance of the Phase 2 Property to ASCRP,
the  Agency  shall  commence  construction  of the Phase 2 Public  Improvements,
including the Intermodal  Transit Facility,  and shall diligently  prosecute the
same to completion.  The Agency and the City shall complete  construction of the
Phase 2 Public  Improvements within 24 months of commencement of construction of
the  Phase  2  Public  Improvements.  The  Agency  and  ASCRP  shall  coordinate
construction  schedules to insure that neither party's  construction  activities
interfere with the other party's.

         The Agency  shall  diligently  prosecute or cause to be  prosecuted  to
completion the  construction  of each Phase of the Public  Improvements  and the
Parking Garage. The Agency shall construct or cause to be constructed each Phase
of  the  Public   Improvements   substantially  in  accordance  with  the  final
construction  plans for the Public  Improvements and the terms and conditions of
all governmental  approvals.  The Agency shall consult with the Developers prior
to  making  any  material  changes  in the  construction  plans  for the  Public
Improvements.

          9.02 Progress Reports.  Until such time as the Public Improvements are
complete,  the Agency  shall  provide  the  Developers  with  periodic  progress
reports,  as reasonably  requested in writing by the  Developers,  regarding the
status of the construction of the Public Improvements.

          9.03  Mitigation  Monitoring  Plan.  The Agency  shall comply with the
mitigation monitoring plan incorporated in the EIR/EIS and adopted by the Agency
concurrently  with its approval of this Agreement as that program may be amended
from time to time.

          9.04  Right to Access to Site.  The  Agency and or the City shall have
the right, at its sole risk and expense,  to enter the Development  Site for the
purposes of the construction, reconstruction, maintenance, repair or services of
any of the proposed Public  Improvements  to be located on the Development  Site
provided  that the Agency and/or the City (i) provide  reasonable  prior written
notice to the  Developers  of such  contemplated  entry and  improvements;  (ii)
coordinates  the  construction  of  such   improvements   with  the  Developers'
construction  of the Project so as to minimize any  additional  cost or delay to
the  Developers in connection  therewith;  and (iii)  indemnifies  and holds the
Developers  harmless  from and against all  liability,  loss,  damage,  costs or
expense (including  reasonable  attorneys' fees and court costs) arising from or
as a result of the death of any person or any accident,  injury,  loss or damage
whatsoever  caused to any person or to the  property  of any person  which shall
occur on or  adjacent  to the  Development  Site and which  shall be directly or
indirectly  caused by any acts done on the Site by the Agency and/or the City or
any errors or omissions of the Agency and/or the City or their agents, servants,
employees or  contractors  in the course of performing  the  obligations  of the
Agency and the City under this Agreement  (except that caused by the intentional
misconduct  or  negligence  of the  Developers).  Any  damage  or  injury to the
Development  Site  resulting  from the  Agency's or the City's  entry under this
Section  9.04  shall  be  promptly  repaired  by the  Agency  or the City at the
Agency's  or City's sole cost and  expense.  In the event the Agency or the City
fails to  promptly  repair  any such  damage,  the  Developers  may do so at the
Agency's or City's sole cost and expense.

         9.05 Mello-Roos District.

          (a) Prior to conveyance of the Phase I Property,  Agency will cause to
be formed,  and the  Developers  will  facilitate  the formation of, a community
facilities  district  pursuant  to  the  Mello-Roos   Community  Facilities  Act
(California  Government  Code  Section  5334  and  following)  (the  "Mello-Roos
District")  to  encompass  the Phase 1  Property  which  will levy a  Mello-Roos
Special Tax in accordance with this Section 9.05.

          (b) Prior to conveyance of the Phase 2 Property, Agency will take such
steps  as are  necessary  to  annex  the  Phase  2  Property  to the  Mello-Roos
District..

          (c) The  Mello-Roos  Special  Tax will not be levied  upon the Quarter
Ownership Units which are being held in inventory  pending initial sale to third
party purchasers;  provided, however, the Mello-Roos Special Tax shall be levied
upon any unsold Quarter Ownership Units which remain unsold four (4) years after
the date construction commences on each Phase.

          (d) The amount and components of the  Mello-Roos  Special Tax shall be
as set forth in the  Mello-Roos  Rate and Method  attached  hereto as Exhibit K;
provided,  however, the Developers shall not be obligated to accept title to the
Phase 1 Property  subject to the  Mello-Roos  Special Tax if the total amount of
the assessment  exceeds Five Million  Dollars  ($5,000,000)  in Mello-Roos  Bond
Proceeds plus the option for the Agency to levy an additional Mello-Roos Special
Tax in an amount not to exceed Two Million  Dollars  ($2,000,000)  in Mello-Roos
Bond Proceeds if either of the following  occur: (i) Phase 2 is not constructed,
or (ii) at the time the Agency issues  long-term  bonds to pay off the BANS, the
debt  coverage  ratio on the bonds is less than 1.25.  The Agency  shall use its
best efforts to obtain the consent of Tahoe Crescent  Partners in the Mello-Roos
District.  If the  TCP  Parcel  is  included  in the  Mello-Roos  District,  its
allocation  shall be  included  in the  portion of the  Mello-Roos  Special  Tax
allocated to the retail portions of the Project.  Prior to the annexation of the
Phase 2  Development  Site to the  Mello-Roos  District,  the full amount of the
Mello-Roos Special Tax shall attach to the Phase 2 Development Site.

          (e)The  Mello-Roos  Special Tax shall be  allocated  among the project
components as follows prior to the commencement of construction of Phase 2:

                    Grand Summit Hotel and Annex
                      (excluding  retail space)   60%
                    Gondola                       20%
                    Retail portion                20%

         The  Mello-Roos  Special  Tax  shall be  allocated  among  the  project
components  as  follows  after  commencement  of  construction  of  Phase  2 and
annexation of Phase 2 to the Mello-Roos District:

                     Grand Summit Hotel and Annex
                     (exclusive of Retail Space)                          30%
                     Lake Tahoe Inn Site                                  30%
                     Gondola                                              20%
                     Retail portion                                       20%

          (f) The Mello-Roos  Bonds shall be issued in the time set forth in the
Schedule of Performance provided the following conditions are met:

          (1) There exists no Developer's  Default under the Agreement and there
is no default  under any other  agreement  to which the  Developers  are a party
related to the Project.

          (2) The Developers  have provided to the Agency  financial  disclosure
information  necessary for the sale of the Mello-Roos  Bonds and such disclosure
satisfies the Agency's underwriters.

          (3) There is pending litigation, suit, action or proceeding before any
court or  administrative  agency  affecting the Developers or the Project,  that
would, if adversely  determined,  adversely affect the Developers or the Project
or the Developers  ability to perform their  obligations under this Agreement or
to develop and operate the Project.

          (4) The Grand Summit Hotel,  the Grand Summit  Annex,  the Gondola and
the retail space in the Grand Summit are under construction.

          (5) No  Bankruptcy/Dissolution  Event shall have occurred with respect
to any of the Developers.

          (6) The conditions set forth in the Financial Plan are satisfied.

          (g) The Developers and Heavenly Resort  Properties in particular shall
have no  liability  for the  failure  of  Quarter  Owners to pay the  Mello-Roos
Special Tax; provided, however, that this provision does not alter the liability
of individual  Quarter Owners and of the  Association for any failure to pay the
Mello-Roos  Special Tax; and provided  further,  the Developers agree to collect
the first year's Mello-Roos  Special Tax from the Quarter Owners at the time the
Developers  close  escrow on each Quarter  Ownership  interest and to direct any
escrow holders to pay such amounts to the Agency  immediately upon close of each
escrow;

          (h) The Mello-Roos  Proceeds shall be used  exclusively for the Public
Improvements  (including  property  acquisition),  payment  of  the  Developer's
obligations  to fund  Public  Art and the  Developer's  contribution  to  public
circulation areas owned by the City.

          9.06 Hazardous Materials.

          (a) Certain  Covenants and Agreements.  The Agency and the City hereby
covenant and agree that:

          (1) They shall not knowingly  permit the Parking Garage or any portion
thereof to be a site for the use, generation,  treatment,  manufacture, storage,
disposal or transportation of Hazardous  Materials or otherwise knowingly permit
the presence of Hazardous Materials in, on or under the Parking Garage;

          (2) They shall keep and maintain  the Parking  Garage and each portion
thereof in compliance  with, and shall not cause or permit the Parking Garage or
any portion thereof to be in violation of, any Hazardous Materials Laws;

          (3) Upon receiving actual knowledge of the same they shall immediately
advise the  Developers  in writing  of:  (A) any and all  enforcement,  cleanup,
removal or other  governmental or regulatory  actions  instituted,  completed or
threatened against the Agency or the City related to the Parking Garage pursuant
to any  applicable  Hazardous  Materials  Laws;  (B) any and all claims  made or
threatened  by any third  party  against  the Agency or the City  related to the
Parking Garage relating to damage,  contribution,  cost recovery,  compensation,
loss or injury resulting from any Hazardous  Materials (the matters set forth in
the  foregoing  clause (A) and this  clause (B) are  hereinafter  referred to as
"Hazardous  Materials Claims");  (C) the presence of any Hazardous Materials in,
on or under the Parking  Garage;  or (D) their  discovery of any  occurrence  or
condition  on any real  property  adjoining  or in the  vicinity  of the Parking
Garage  classified as "borderzone  property"  under the provisions of California
Health and Safety Code,  Sections  25220 et seq., or any  regulation  adopted in
accordance  therewith,  or to be otherwise  subject to any  restrictions  on the
ownership,  occupancy,  transferability  or use of the Parking  Garage under any
Hazardous  Materials  Laws.  The  Developers  shall  have the  right to join and
participate  in, as a party if they so elect,  any legal  proceedings or actions
initiated in connection  with any Hazardous  Materials  Claims and to have their
reasonable attorney's fees in connection therewith paid by the Agency and/or the
City.

          (4) Without the Developers' prior written consent,  which shall not be
unreasonably  withheld,  the  Agency  and the City  shall not take any  remedial
action in response to the presence of any  Hazardous  Materials  on,  under,  or
about the Parking  Garage (other than in emergency  situations or as required by
governmental  agencies  having  jurisdiction),  nor  enter  into any  settlement
agreement,  consent  decree,  or other  compromise  in respect to any  Hazardous
Materials Claims.

          (b) Indemnity.  Without limiting the general indemnification set forth
in Section  10.04  below,  the Agency and the City  hereby  agree to  indemnify,
protect,  hold harmless and defend (by counsel  reasonably  satisfactory  to the
Developers) the Developers,  their boardmembers,  officers, agents and employees
from and  against  any and all  claims,  losses,  damages,  liabilities,  fines,
penalties,   charges,   administrative  and  judicial  proceedings  and  orders,
judgements,  remedial action requirements,  enforcement actions of any kind, and
all costs and expenses  incurred in  connection  therewith  (including,  but not
limited to,  attorney's fees and expenses),  arising directly or indirectly,  in
whole or in part,  out of: (1) the failure of the Agency or any other  person or
entity to comply with any Hazardous Materials Law relating in any way whatsoever
to  the  handling,  treatment,  presence,  removal,  storage,   decontamination,
cleanup,  transportation  or disposal of Hazardous  Materials into, on, under or
from the Parking Garage;  (2) the presence in, on or under the Parking Garage of
any Hazardous Materials or any releases or discharges of any Hazardous Materials
into, on, under or from the Parking  Garage;  or (3) any activity  carried on or
undertaken on or off the Parking Garage and whether by the Agency or the City or
any successor in title or any employees,  agents,  contractors or subcontractors
of the Agency or the City or any successor in title, or any third persons at any
time  occupying  or  present  on the  Parking  Garage,  in  connection  with the
handling,  treatment, removal, storage,  decontamination,  cleanup, transport or
disposal of any  Hazardous  Materials at any time located or present on or under
the  Parking  Garage.  The  foregoing  indemnity  shall  further  apply  to  any
contamination  of any property or natural  resources  arising in connection with
the generation, use, handling,  treatment, storage, transport or disposal of any
such Hazardous Materials by the Agency or the City or their officers, directors,
employees or agents,  and irrespective of whether any of such activities were or
will be undertaken in accordance  with Hazardous  Materials Laws. The provisions
of this subsection shall survive  expiration of the Term or other termination of
this Agreement, and shall remain in full force and effect.







                          ARTICLE 10. OBLIGATIONS WHICH
                           CONTINUE THROUGH AND BEYOND
                         THE COMPLETION OF CONSTRUCTION

          10.01  Maintenance.   The  Developers  hereby  agree  that,  prior  to
completion  of any phase of the Project,  the portions of the  Development  Site
undergoing  construction  shall be maintained in a neat and orderly condition to
the  extent  practicable  and in  accordance  with  industry  health  and safety
standards,  and that,  once the Project or any Phase  thereof is  completed  the
Project shall be well maintained as to both external and internal  appearance of
the buildings,  the common areas,  and the parking areas.  The Developers  shall
maintain or cause to be maintained the Project in good repair and working order,
and in a neat, clean and orderly condition,  including the walkways,  driveways,
parking  areas and  landscaping,  and from time to time make all  necessary  and
proper repairs,  renewals,  and replacements.  In the event that there arises at
any  time  prior  to the  expiration  of the  term of the  Redevelopment  Plan a
condition in contravention of the above  maintenance  standard,  then the Agency
shall notify the Developers in writing of such condition,  giving the Developers
thirty  (30)  days  from  receipt  of such  notice to  commence  and  thereafter
diligently to proceed to cure said  condition.  In the event the Developers fail
to cure or commence to cure the condition  within the time  allowed,  the Agency
shall have the right to perform all acts necessary to cure such a condition.  or
to take other  recourse at law or equity the Agency may then have and to receive
from the Developers, the Agency's cost in taking such action. The parties hereto
further mutually  understand and agree that the rights conferred upon the Agency
expressly  include the right to enforce or establish a lien or other encumbrance
against any of the parcels  comprising the  Development  Site not complying with
this Agreement,  including without  limitation parcels subdivided after the date
of this  Agreement but such lien shall be subject to previously  recorded  liens
and encumbrances.  The foregoing provisions shall be a covenant running with the
land until expiration of the term of this Agreement,  enforceable by the Agency,
its successors and assigns.

          The Agency  and/or the City hereby agree that,  prior to completion of
the Parking Garage, the portions of the Development Site undergoing construction
shall be  maintained in a neat and orderly  condition to the extent  practicable
and in accordance with industry health and safety standards,  and that, once the
Parking  Garage is completed the Parking  Garage shall be well  maintained as to
both external and internal  appearance of the buildings and the common areas. In
the event the  Agency  and the City  grant to  Heavenly  Resort  Properties  and
Heavenly  Valley a right of entry to the Parking Garage Site in order to use the
Parking Garage site for a construction  staging area, Heavenly Resort Properties
and Heavenly Valley shall assume the Agency's and City's maintenance obligations
with regards to the Parking  Garage  during the term of any such right of entry.
The Agency and the City shall  maintain  or cause to be  maintained  the Parking
Garage in good  repair  and  working  order,  and in a neat,  clean and  orderly
condition, including the walkways, driveways, parking areas and landscaping, and
from  time  to time  make  all  necessary  and  proper  repairs,  renewals,  and
replacements. In the event that there arises at any time prior to the expiration
of the term of the Redevelopment  Plan a condition in contravention of the above
maintenance  standard,  then the Developers shall notify the Agency and the City
in writing of such  condition,  giving the Agency and the City  thirty (30) days
from receipt of such notice to commence and thereafter  diligently to proceed to
cure said  condition.  In the event the  Agency  and/or the City fail to cure or
commence to cure the condition  within the time allowed,  the  Developers  shall
have the right to perform all acts  necessary  to cure such a  condition,  or to
take other recourse at law or equity the Developers may then have and to receive
from the Agency and the City, the  Developers'  cost in taking such action.  The
parties hereto further  mutually  understand and agree that the rights conferred
upon the Developers  expressly include the right to attach the revenues from the
Parking  Garage  provided  such right  shall be  subordinate  to the lien on the
revenues for the Parking Revenue Bonds.

          10.02 Childcare  Obligations.  The Developers recognize the importance
of  childcare to South Lake Tahoe.  In order to assure  adequate  childcare  for
employees  of the  Developers,  Heavenly  Valley  agrees  that it will  make its
childcare  facility  currently  operated at Heavenly Ski Resort available,  on a
space available basis, to employees of the Developers at the applicable rate.

          10.03 Mechanics'  Liens. The Developers shall indemnify the Agency and
the City and hold the Agency and City harmless against and defend the Agency and
the City in any proceeding  related to any mechanic's lien, stop notice or other
claim  brought by a  subcontractor,  laborer or  material  supplier  who alleges
having  supplied  labor or  materials in the course of the  construction  of the
portions of the Project construction of which the Developer is responsible. This
indemnity  obligation  shall survive the issuance of a Certificate of Completion
by the Agency and the termination of this Agreement.

          10.04 Developers to Indemnify Agency.  The Developers shall indemnify,
defend, and hold the Agency and the City, their directors,  officers, employees,
agents,  and their successors and assigns harmless against all claims for bodily
injury,  death or property damage which arise out of or in connection with entry
onto, ownership of, occupancy in, or construction on the Development Site by the
Developers or their contractors,  subcontractors,  agents, employees or tenants.
This indemnity  obligation shall not extend to any claim arising solely from the
Agency's or the City's gross  negligence  or the  Agency's or City's  failure to
perform  its  obligations  under  this  Agreement,  and shall  survive  both the
issuance of a Certificate  of Completion by the Agency and  termination  of this
Agreement. In addition to the above indemnity,  Heavenly Resort Properties shall
indemnify the Agency, the City and their directors,  officers, employees, agents
and  successors  and  assigns  against  any claims that may arise as a result of
Heavenly  Resort  Properties  preselling  quarter-share  interests  in the Grand
Summit Hotel, including,  but not limited to, any claims of inverse condemnation
or claims from prospective purchasers.

          10.05 Agency To  Indemnify  Developers.  The Agency  shall  indemnify,
defend and hold the Developers and each of them and their  directors,  officers,
employees,  agents, and their successors and assigns harmless against all claims
for bodily injury,  death or property damage which arise out of or in connection
with entry onto,  ownership Of occupancy in, or  construction on the Development
Site by the Agency or its  contractors,  subcontractors,  agents,  employees  or
tenants.  This indemnity obligation shall not extend to any claim arising solely
from a Developer's  gross  negligence  or a  Developer's  failure to perform its
obligations  under this  Agreement,  and shall  survive  both the  issuance of a
Certificate of Completion by the Agency and termination of this Agreement.

          10.06   Non-Discrimination.   The  Developers   covenant  by  and  for
themselves   and  their   successors   and  assigns   that  there  shall  be  no
discrimination  against or  segregation  of a person or of a group of persons on
account of race,  color,  religion,  creed,  sex,  sexual  orientation,  marital
status, ancestry or national origin in the sale, lease, sublease, transfer, use,
occupancy,  tenure or enjoyment of the Development  Site by the Developers,  nor
shall the  Developers  or any person  claiming  under or through the  Developers
establish  or  permit  any such  practice  or  practices  of  discrimination  or
segregation with reference to the selection,  location, number, use or occupancy
of tenants, lessees, subtenants, subleases or vendees of the Development Site.

          10.07 Mandatory Language in All Subsequent Deeds Leases and Contracts.
All deeds,  leases or contracts  entered into by the  Developers on or after the
date of execution of this  Agreement as to any portion of the  Development  Site
shall contain the following language:


          (a) In Deeds:

         "Grantee herein  covenants by and for itself its successors and assigns
that there shall be no discrimination against or segregation of a person or of a
group of persons  on  account  of race,  color,  religion,  creed,  sex,  sexual
orientation,  marital status,  ancestry or national  origin in the sale,  lease,
sublease,  transfer, use, occupancy,  tenure or enjoyment of the property herein
conveyed  nor shall the  grantee or any  person  claiming  under or through  the
grantee  establish or permit any such practice or practices of discrimination or
segregation with reference to the selection,  location, number, use or occupancy
of tenants,  lessees,  subtenants,  subleases or vendees in the property  herein
conveyed. The foregoing covenant shall run with the land."

          (b) In Leases:

         "The lessee herein  covenants by and for the lessee and lessee's heirs,
personal  representatives  and assigns and all persons claiming under the lessee
or through the lessee that his lease is made subject to the condition that there
shall be no discrimination against or segregation of any person or of a group of
persons on account of race, color,  religion,  creed,  sex, sexual  orientation,
marital  status,  ancestry  or  national  origin  in  the  leasing,  subleasing,
transferring,  use, occupancy, tenure or enjoyment of the land herein leased nor
shall the lessee or any person claiming under or through the lessee establish or
permit any such  practice or practices of  discrimination  or  segregation  with
reference  to the  selection,  location,  number,  use or  occupancy of tenants,
lessees, subleases, subtenants, or vendees in the land herein leased."

         (c) In Contracts:

         "There shall be no discrimination  against or segregation of any person
or group of persons on account of race,  color,  religion,  creed,  sex,  sexual
orientation,  marital status,  ancestry or national  origin in the sale,  lease,
sublease,  transfer,  use,  occupancy,  tenure or  enjoyment of the property nor
shall the  transferee  or any person  claiming  under or through the  transferee
establish  or  permit  any such  practice  or  practices  of  discrimination  or
segregation with reference to the selection,  location, number, use or occupancy
of tenants, lessees, subtenants, subleases, or vendees of the land."

          10.08  Employment  Opportunity.  During the  operation of the Project,
there shall be no  discrimination by the Developers on the basis of race, color,
creed,  religion,  sex, sexual  orientation,  marital status,  national  origin,
ancestry,  or  handicap  in the hiring,  firing,  promoting,  or demoting of any
person engaged in the operation of the Development.  To the extent  practicable,
preference  for  employment  shall be given to persons  residing  in the Project
Area.

          10.09 Owner  Participation.  Pursuant to the Agency's rules  governing
re-entry  preferences  for  businesses  displaced  within the Project  Area (the
"Participation  Rules"), the Developers shall give reasonable  preferences (over
other potential tenants or lessees) in the leasing and renting of the Project to
business occupants who were displaced from their place of businesses as a result
of the Project.

          10.10 Lift Ticket  Sales  Within City.  The Agency  acknowledges  that
Heavenly Ski Resort's  historic  lift ticket sales occur beyond the City limits.
Lift ticket  sales have not been subject to tax within the  jurisdictions  where
the sale of Heavenly  lift tickets  occurs.  In  consideration  of offering lift
ticket sales within the City limits,  the Agency and the City covenant and agree
that the sale of lift tickets within the Redevelopment Project Area shall not be
subject  to any City  imposed  tax or  assessment  for so long as the Agency has
long-term  debt  related  to the  Project  outstanding  without  the  consent of
Heavenly Valley, which may be withheld for any reason whatsoever. Upon repayment
of any long term debt associated with the  Development,  the Agency and the City
may, subject to compliance with normal  procedures for imposing taxes,  impose a
lift ticket tax without Heavenly Valley's consent.

          10.11   Marketing  of  Quarter  Share   Intervals.   Heavenly   Resort
Properties,  shall use its best efforts in the marketing and sale of the Quarter
Ownership Units and the rental of the Units to achieve the revenues set forth in
the  Financial   Plan.   Developers   agree  that  any  marketing   outside  the
redevelopment project area shall comply with all applicable  regulations,  rules
and  ordinances.  This Section  shall not in any way limit the right of Heavenly
Resort  Properties to exercise its  Reasonable  Discretion  in  connection  with
marketing and sales decisions.

          10.12  Compliance  with  Permits.  The  Developers  shall  operate the
Project in compliance  with any and all permits  issued for the Project,  at all
times.

          10.13 EIR/EIS  Reimbursement by Agency. The Agency shall reimburse the
Developers for the Developers' actual expenses related to the preparation of the
EIR/EIS up to an amount of $297,000 as and when Excess Revenues exist; provided,
however,  in any single year the Developers shall not receive more than $100,000
in Excess Revenues.

          10.14 Parking Garage Operations.  The Agency or the City shall operate
the Parking Garage in accordance with the Parking Management Agreement.

          10.15 Continuing  Disclosure.  The Developers shall provide the Agency
with  information  necessary  for the  Agency  to  comply  with  the  continuing
disclosure  requirements  of the BANS and to refinance  all BANS with  long-term
debt.

          10.16 Ice Rink Operations. Upon completion of construction of Phase 1,
TSI shall be responsible for the operation of the ice rink located on Lot 6. The
ice rink shall  operate as an ice rink during the winter  season and as a public
plaza and performing arts space during the summer season.  TSI cannot change the
use of the Ice Rink without the Agency's consent.

         10.17 Retail  Operations.  Upon  completion of construction of Phase 1,
the Developers  shall not change the mix of retail tenants or the type of retail
uses in the Project without the Agency's consent. Approval of changes to the mix
or type of retail uses shall be in the Agency's Reasonable Discretion.

          10.18  Agency  Use of  BANS  Proceeds,  Parking  Garage  Revenue  Bond
Proceeds and Mello-Roos Bond Proceeds.  So long as no Developer Event of Default
has  occurred,  the Agency  shall  only use the BANS  Proceeds,  Parking  Garage
Revenue Bond  Proceeds and  Mello-Roos  Bond  Proceeds for the uses set forth in
this Agreement and such other uses as the Developers may approve.

                      ARTICLE 11. ASSIGNMENTS AND TRANSFERS

          11.01  Definitions.  As used in this  Article 11, the term  "Transfer"
means:

          (a) Any total or partial sale, assignment or conveyance,  or any trust
or power,  or any transfer in any other mode or form, of or with respect to this
Agreement or of the Project or any part  thereof or any interest  therein or any
contract or  agreement to do any of the same  excluding  any sale of the Quarter
Ownership Units; or

          (b) Any sale, assignment or conveyance,  or any trust or power, or any
transfer in any other mode or form, of or with respect to a controlling interest
in Developers or any contract or agreement to do any of the same; or

          (c) Any merger,  consolidation,  sale or lease of all or substantially
all of the assets of a Developer; or

          (d)  The  leasing  of  part  or  all of the  Development  Site  or the
improvements  thereon other than the leasing of retail space at the  Development
Site in accordance with the approved Leasing Plan.

          11.02 Purpose of Restrictions  on Transfer.  This Agreement is entered
into solely for the purpose of development  and operation of the Project and its
subsequent use in accordance  with the terms hereof.  The  Developers  recognize
that the  qualifications and identity of Developers are of particular concern to
the Agency, in view of:

          (a) The importance of the redevelopment of the Development Site to the
general welfare of the community; and

          (b) The land  acquisition  assistance  and other public aids that have
been made  available by law and by the government for the purpose of making such
redevelopment possible; and

          (c) The  reliance  by the Agency  upon the unique  qualifications  and
ability  of the  Developers  to serve as the  catalyst  for  development  of the
Development Site and upon the continuing interest which the Developers will have
in the  Development  Site to  assure  the  quality  of the  use,  operation  and
maintenance  deemed critical by the Agency in the development of the Development
Site; and

          (d) The fact that a change in ownership or control of the owner of the
Development  Site,  or of a  substantial  part  thereof,  or  any  other  act or
transaction  involving or resulting in a significant change in ownership or with
respect to the  identity  of the  parties in  control of the  Developers  or the
degree  thereof  is for  practical  purposes a transfer  or  disposition  of the
Development Site; and

          (e) The fact that the  Development  Site is not to be acquired or used
for  speculation,  but only for  development  and operation by the Developers in
accordance with the Agreement; and

          (f) The importance to the Agency and the community of the standards of
use, operation and maintenance of the Development Site.

         The   Developers   further   recognize  that  it  is  because  of  such
qualifications and identity that the Agency is entering into this Agreement with
the  Developers  and that  Transfers  are  permitted  only as  provided  in this
Agreement.

          11.03 Prohibited Transfers.  The limitations on Transfers set forth in
this Section  shall apply until a  Certificate  of Completion is issued for each
Phase of the Project.  Except as  expressly  permitted  in this  Agreement,  the
Developers represent and agree that the Developers have not made or created, and
will not make or create or suffer to be made or  created,  any  Transfer  either
voluntarily  or by  operation of law without the prior  written  approval of the
Agency which approval shall not be unreasonably withheld.

         Any Transfer made in  contravention of this Section 11.03 shall be void
and shall be deemed to be a default  under  this  Agreement  whether  or not the
Developers knew of or participated in such Transfer.

          11.04 Permitted  Transfers.  Notwithstanding the provisions of Section
11.03, the following Transfers shall be permitted and are hereby approved by the
Agency, subject to satisfaction of the requirements of Section 11.05:

          (a) Any Transfer creating a Security Financing Interest.

          (b) Any Transfer directly resulting from the foreclosure of a Security
Financing  Interest  or the  granting  of a deed  in lieu  of  foreclosure  of a
Security Financing Interest or as otherwise permitted under Article 13; or

          (c) Any  Transfer  solely  and  directly  resulting  from the death or
incapacity of an individual.

          (d) The  Transfer  of 65,500  square feet of  commercial  space in the
Grand Summit Resort Hotel to TSI.

          (e) Any transfer by ASCRP, Heavenly Resort Properties, Heavenly Valley
or TSI, to another  wholly-owned  subsidiary of the transferring  Developer made
for the purpose of facilitating financing, licensing, or other requirements that
will not have an adverse impact on the Redevelopment Plan or this Agreement.

          (f) Any  transfer of the Lake Tahoe Inn Site,  provided the Agency has
approved the Transferee,  the Transferee has demonstrated the financial capacity
to complete the  development of the Lake Tahoe Inn Site in accordance  with this
Agreement, the Transferee has demonstrated experience operating a resort complex
such as that  proposed  for the Lake  Tahoe Inn  Site,  and the  Transferee  has
assumed all of the  Developer's  obligations  with respect to the development of
the Lake Tahoe Inn Site.

          11.05 Effectuation of Certain Permitted Transfers. No Transfer of this
Agreement permitted pursuant to Section 11.04 (other than a Transfer pursuant to
a Security  Financing  Interest under Section  11.04(a) or (b)) or Section 11.06
shall be effective unless, at the time of the Transfer,  the person or entity to
which such Transfer is made, by an instrument in writing reasonably satisfactory
to the Agency and in form  recordable  among the land records,  shall  expressly
assume the  obligations of the  transferring  Developer under this Agreement and
agree to be subject to the conditions and  restrictions  to which the Developers
are subject under this  Agreement,  to the fullest extent that such  obligations
are  applicable  to the  particular  portion of or interest  in the  Development
conveyed in such Transfer. Anything to the contrary notwithstanding,  the holder
of a Security  Financing  Interest  whose  interest shall have been acquired by,
through  or under a  Security  Financing  Interest  or shall  have been  derived
immediately from any holder thereof shall not be required to give to Agency such
written  assumption  until such holder or other person is in  possession  of the
Property or entitled  to  possession  thereof  pursuant  to  enforcement  of the
Security Financing Interest.

          In the absence of specific  written  agreement by the Agency,  no such
Transfer  pursuant to Section 11.04,  assignment or approval by the Agency other
than  transfers  pursuant to Sections  11.04(d),  (e) or (f), shall be deemed to
relieve  the  Developers  or any other  party  from any  obligations  under this
Agreement.

          11.06 Other Transfers with Agency Consent. The Agency may, in its sole
discretion,  approve in writing other  Transfers as requested by the Developers.
In  connection  with such  request,  there shall be  submitted to the Agency for
review all  instruments  and other legal  documents  proposed to effect any such
Transfer.  If a requested Transfer is approved by the Agency such approval shall
be indicated to the  Developers in writing.  Such  approval  shall be granted or
denied by the  Agency  within  thirty  (30)  days of  receipt  by the  Agency of
Developers' request for approval of a Transfer.


                              ARTICLE 12. REMEDIES

          12.01  Application  of  Remedies.  This  Article  12 shall  govern the
Parties' remedies for breach or failure under this Agreement.

          12.02 Consensual Termination.  Any of the following events constitutes
a basis for a party to terminate this Agreement without fault of the other:

          (a) The Developers,  despite good faith and diligent efforts,  fail to
submit  satisfactory  evidence  of the  availability  of  finances to the Agency
within the time set forth in Section 2.01(f).

          (b) The Agency,  despite good faith and diligent efforts, is unable to
cause the issuance of the BANS.

          (c) The Agency,  the City or the County fails to adopt  resolutions of
necessity  authorizing  the filing of an eminent domain action to acquire any of
the Development Site that the Agency is unable to acquire voluntarily.

          12.03 Effect of Consensual  Termination.  After a termination pursuant
to Section  12.02,  the  Developers  shall be solely  responsible  for any costs
incurred  by the  Developers  in  performing  the terms and  conditions  of this
Agreement,  and neither party shall have any rights  against or liability to the
other  except for those  provisions  of this  Agreement  that  recite  that they
survive termination of this Agreement.

         12.04 Agency and City Performance.

          (a) Except as to events  constituting  a basis for  termination  under
Section 12.02, the breach by the Agency or the City of any material provision of
this  Agreement if uncured after  expiration of applicable  cure periods,  shall
constitute an "Agency Event of Default."

          (b) Upon the breach of any material provision of this Agreement by the
Agency or the City,  the  Developers  or any one of them shall first  notify the
Agency or the City in writing of its purported breach or failure, and the Agency
or the City shall have thirty (30) days from receipt of such notice to cure such
breach or failure  except if by the nature of such default more than thirty (30)
days is needed to cure such breach or failure, in which event, the Agency or the
City shall not be in default if such cure is commenced  within  thirty (30) days
and diligently  prosecuted to completion in all events within one hundred eighty
(180)  days  thereafter.  If the  Agency or the City does not cure  within  such
period,  then the event shall  constitute  an "Agency  Event of Default" and the
Developers  shall be entitled to any rights  afforded  them in law or in equity.
Prior to the  Developers  declaring a Agency  Event of Default,  the  Developers
shall provide the Agency or the City with a notice of their intention to declare
an Agency  Event of Default  and shall  schedule  a meet and  confer  meeting no
earlier  than  seven (7) or later than ten (10) days from the date of receipt of
said notice. The Parties shall meet and confer in good faith for a period of ten
(10) days in a process  that may  include  other  persons or  agencies,  for the
purpose of attempting to resolve any dispute before the  declaration of an Event
of Default.  If the Parties are unable to resolve the  dispute,  the  Developers
shall be entitled to declare an Agency Event of Default and shall be entitled to
exercise any rights afforded it in law and equity.

         12.05 Developer Performance.

          (a) Except as to events  constituting  a basis for  termination  under
Section 12.02,  each of the following events, if uncured after expiration of the
applicable cure period, shall constitute a "Developer's Default":

          (1)  The  Developers  or  any  one of the  Developers  do not  attempt
diligently and in good faith to cause  satisfaction of all conditions in Article
6.

          (2)  Heavenly  Resort  Properties  fails to  deliver  performance  and
payment bonds on or before April 28, 2000.

          (3) The  Developers  or any one of the  Developers  fails  to  acquire
either the Phase 1  Development  Site or the Phase 2  Development  Site from the
Agency  despite the  Agency's  fulfillment  of all  conditions  precedent to the
transfer of the Development Site.

          (4) ASCRP  fails to give the  Agency a notice  of intent to  construct
Phase 2 on or before September 1, 2001.

          (5) ASCRP  fails to give the  Agency a Notice  of intent to  construct
Phase 2 on or before September 1, 2002

          (6) The  Developers  or any one of them fails to construct the Project
in the manner and by the deadline set forth in Article 8.

          (7)The Developers or any one of them fails to construct the Project in
the manner and by the deadline set forth in Article 8.

          (8) The Developers or any one of them  completes a Transfer  except as
permitted under Article 11.

          (9) The  Developers  or any one of them  breaches  any other  material
provision of this Agreement.

          (10)A   Bankruptcy/Dissolution   Event  occurs  with  respect  to  any
Developer.

          (b) Upon the  happening of any event  described  in Section  12.05(a);
except for  12.05(a)(2) and  12.05(a)(4),  the Agency shall first notify each of
the Developers in writing of the purported breach or failure, and the defaulting
Developer  shall have thirty (30) days from  receipt of such notice to cure such
breach or failure  except if by the nature of such default more than thirty (30)
days is needed to cure such breach or failure,  in which event,  the  defaulting
Developer  shall not be in default if such cure is commenced  within thirty (30)
days and  diligently  prosecuted to completion  within one hundred  eighty (180)
days of receipt of notice. If the defaulting Developer does not cure within such
period,  a nondefaulting  Developer may cure such breach or failure within sixty
(60) days of receipt of the notice of default. If the defaulting  Developer or a
non-defaulting  Developer does not cure within such period, then the event shall
constitute a "Developer  Event of  Default."  If the  defaulting  Developer or a
non-defaulting  Developer  does not cure  within the period set forth  above the
Agency shall be entitled to exercise  any rights and remedies  permitted by law,
including,  but not limited to terminating  this  Agreement and including  those
rights  set forth in  Section  12.06  below.  Prior to the  Agency  declaring  a
Developer  Event of Default,  the Agency  shall  provide the  Developers  with a
notice of its  intention  to  declare a  Developer  Event of  Default  and shall
schedule a meet and confer  meeting no earlier  than seven (7) or later than ten
(10) days from the date of receipt of said  notice.  The Parties  shall meet and
confer in good faith for a period of ten (10) days in a process that may include
other persons or agencies,  for the purpose of attempting to resolve any dispute
before the  declaration  of an Event of  Default.  If the  Parties are unable to
resolve the dispute,  the Agency shall be entitled to declare a Developer  Event
of Default and shall be entitled to exercise  any rights  afforded it in law and
equity.  Upon the happening of the event  described in Section  12.05(a)(2)  the
Agency shall be entitled to immediately draw on the letter of credit pursuant to
Section  2.01(b).   Upon  the  happening  of  the  event  described  in  Section
12.05(a)(4),  if ASCRP posts a letter of credit in the amount of  $1,663,000  as
set forth in Section  3.01(e),  the Agency  shall not be  entitled to declare an
Event of Default and this Agreement shall continue in full force and effect.

         If the Agency terminates this Agreement  pursuant to this Section 12.05
in  addition  to any other  remedies  the Agency may have,  the Agency  shall be
entitled  to all plans,  permits  and  approvals  obtained  or  prepared  by the
breaching  Developer in  connection  with the Project and all  applications  for
permits and approvals not yet obtained but needed in connection with the Project
to  the  extent  then  prepared.  In  addition,  if  applicable,  the  breaching
Developers shall assign to the Agency any pre-sale  subscription  agreements the
breaching  Developers  have entered  into for the sale of the Quarter  Ownership
Units.  Agency shall be entitled,  pursuant to this Section 12.05 to assign such
permits,  plans and approvals and the presale  subscription  agreements to a new
developer. Any such reuse will be at sole risk of such new developer and without
liability or legal exposure to the Developers or the Developers' architect,  and
any use by such new  developer  or any sale of such  materials to any such third
party shall be  conditioned  upon such new  developer's  and such third  party's
agreement to indemnify  and hold  harmless the  Developers  and the  Developers'
architect against any loss, cost, damage or expense incurred by such third party
in connection with its use of such materials.

         12.06 Right of Reverter.

          (a) In the event that,  following  Close of Escrow on Phase 1 or Phase
2, this Agreement is terminated  pursuant to Section 12.05 and such  termination
occurs prior to issuance of a  Certificate  of  Completion  for any Phase of the
Project the Agency shall have the right subject to the  provisions of Article 13
below, to re-enter and take possession of those portions of the Development Site
for which a Certificate of Completion  has not been issued and all  improvements
thereon  and to  revest  in the  Agency  the  estate  of the  Developers  in the
Development  Site or such  portion  thereof,  provided,  however,  if the Agency
terminates  this  Agreement with respect to only some of the Developers and this
Agreement  remains in effect with  respect to other  Developers,  the Agency can
only  exercise  the right of reverter  granted  hereto with  respect to property
conveyed to the Developers subject to termination of this Agreement.

          (b)Upon  revesting in the Agency of title to the Development  Site, or
portion  thereof,  the Agency  shall  promptly use its best efforts to resell it
consistent with its obligations under state law; provided,  however, in order to
encourage  Heavenly  Valley to build the  Gondola,  the Agency shall not sell or
attempt to develop the Gondola Site for a period of four years after a Developer
Event of Default has occurred with respect to Heavenly Valley, during which time
Heavenly  Valley may continue its efforts to develop the Gondola.  Upon any sale
or contract for development the proceeds shall be applied as follows:

          (1) First, to reimburse the holder of any Security  Financing Interest
of such portion or portions of the Development  Site, in the manner set forth in
Section 13.04(a) through (e) hereof.

          (2)  Second,  to the  Agency  for any  costs it  reasonably  incurs in
acquiring,  managing or selling the  Development  Site or portion thereof (after
exercising  its right of  reverter),  including  but not  limited  to amounts to
discharge or prevent liens or encumbrances arising from any acts or omissions of
the Developers;

          (3) Third, in the event that the portion of the  Development  Site was
controlled  by a defaulting  Developer,  to reimburse  the Agency for damages to
which it is entitled  under this  Agreement by reason of the Developer  Event of
Default;

          (4) Fourth,  to the affected  Developer up to the sum of the amount of
the purchase price paid to the Agency by the Developer  pursuant to Section 7.02
for the portion of the Development Site which has reverted to the Agency as well
as the amount of the purchase price paid by the Developer for the Lake Tahoe Inn
leasehold  if the title to the Lake Tahoe Inn Site revests in the Agency and the
reasonable cost of the  improvements the Developer has placed on such portion of
the  Development  Site and such other  reasonable  costs  Developer has incurred
directly in connection with  acquisition and development of the Development Site
and any other portions of the Development Site reclaimed hereunder; and

          (5) Fifth, the remaining balance to the Agency.

          (c) Upon  request  from the  Developers,  the Agency  shall enter into
Attornment and Nondisturbance  Agreements with the Developers' tenants providing
that in the event the  Agency  exercises  its right of  reverter,  the  tenants'
leases will remain in full force and effect.

          12.07 Survival.  Upon termination of this Agreement under this Article
12,  the   following   provisions  of  this   Agreement   shall   survive:   the
indemnification  obligations in Sections  5.01(c),  5.02(c),  8.13,  10.04,  and
10.05. This Section 12.07 exists for reference purposes only, and does not alter
the scope or nature of the surviving provisions.

          12.08 Modification of Terms and Conditions and Extensions of Time. The
Agency's Executive Director with the approval of the Agency Chair and the Agency
Vice-Chair,  may agree to modification of the development  schedule set forth in
the  Schedule  of  Performance  as long as such  modifications  do not alter the
Financial Plan. The Agency may delegate the approval of waivers or modifications
as  appropriate.  No waiver of any  default or breach by the  Developers  or the
Agency or the City, as applicable,  hereunder shall be implied from any omission
by the Agency,  the City or the  Developers,  as  applicable,  to take action on
account of such default if such default persists or is repeated,  and no express
waiver shall affect any default other than the default  specified in the waiver,
and such waiver shall be operative  only for the time and to the extent  therein
stated.  Waivers of any covenant,  term, or condition contained herein shall not
be construed as a waiver of any subsequent breach of the same covenant, term, or
condition.  The  consent or approval by the Agency and the City to or of any act
by the Developers  requiring  further consent or approval shall not be deemed to
waive or render  unnecessary  the consent or  approval  to or of any  subsequent
similar  act.  The  exercise of any right,  power,  or remedy  shall in no event
constitute a cure or a waiver of any default under this Agreement,  nor shall it
invalidate  any act done pursuant to notice of default,  or prejudice the Agency
or the City in the exercise of any right, power, or remedy hereunder,  unless in
the  exercise  of any such  right,  power,  or  remedy  all  obligations  of the
Developers to Agency and the City are paid and discharged in full.

         12.09  Scope of  Termination  Rights.  Notwithstanding  anything to the
contrary contained herein, (a) no Developer's  Default with respect to any Phase
2  obligations  shall  trigger  rights of the Agency  under this Article 12 with
respect to any Phase 1 Projects; and (b) with respect to any Developer's Default
which occurs after the conveyance of any portion of the Development  Site to the
Developers  and cure of the default  requires  possession  of the portion of the
Development Site owned by the defaulting Developer,  any nondefaulting Developer
shall not be obligated to cure the  default,  and any remedies  exercised by the
Agency shall only be enforced against the defaulting  Developer and, in the case
of either (a) or (b),  this  Agreement  shall  continue in full force and effect
with respect to the nondefaulting Developers.


                         ARTICLE 13. SECURITY FINANCING
                              AND RIGHTS OF HOLDERS

          13.01 No Encumbrances Except for Development Purposes. Notwithstanding
any other  provision of this  Agreement,  mortgages  and deeds of trust,  or any
other  reasonable  method of  security,  are  permitted  to be  placed  upon the
Development  Site prior to issuance of a Certificate  of Completion but only for
the purpose of securing loans pursuant to the evidence of financing  approved by
the Agency  pursuant to Section  2.01(f) above.  Mortgages,  deeds of trust,  or
other  reasonable  security  instruments  securing  loans approved by the Agency
pursuant  to Section  2.01(f)  are each  referred  to as a  "Security  Financing
Interest."  The words  "mortgage"  and "deed of trust" as used in this Agreement
include  all other  appropriate  modes of  financing  real  estate  acquisition,
construction, and land development, including any such other modes used pursuant
to the approved evidence of financing pursuant to Section 2.01(f).

          13.02 Holder Not  Obligated to  Construct.  The holder of any Security
Financing Interest (a "Holder") authorized by this Agreement is not obligated to
construct or complete any  improvements  or to guarantee  such  construction  or
completion;  nor shall any covenant or any other  provision in this Agreement or
in  conveyances  from  the  Agency  to  the  Developers  evidencing  the  realty
comprising the Development  Site or any part thereof be construed so to obligate
such Holder.  Any Holder which  succeeds to the interest of a Developer  through
sale,  foreclosure  or deed and assignment in lieu thereof  occurring  following
issuance of a Certificate  of Completion  for the Project shall not be deemed to
be the successor in interest to the Developer  with respect to any obligation or
liability  of the  Developer  under  this  Agreement.  However,  nothing in this
Agreement  shall be deemed to permit or authorize  any such Holder to devote the
Development  Site or any  portion  thereof  to any  uses,  or to  construct  any
improvements  thereon,  other than those uses or  improvements  provided  for or
authorized by this Agreement.

          13.03  Notice  of  Default  and  Right to Cure.  Whenever  the  Agency
pursuant to its rights set forth in Article 12 of this  Agreement  delivers  any
notice or demand to the  Developers  (or any of them),  the Agency  shall at the
same time  deliver  to each  Holder of record a copy of such  notice or  demand;
provided, however, that the Agency shall have no liability to any Holder for any
failure by the Agency to provide  notice to such Holder  (provided  further that
the Agency  shall not be entitled to exercise  its rights  under  Section  12.06
hereof until such notice has been delivered and the cure period set forth in the
following  sentence has expired).  Each such Holder shall (insofar as the rights
of the Agency are  concerned)  have the right,  but not the  obligation,  at its
option,  within the same time period as is afforded  Developers plus the greater
of ninety (90) days or such longer period as reasonably may be necessary for the
Holder to obtain the right of possession  through  foreclosure,  deed-in-lieu or
appointment of a receiver  provided that within such ninety  (90)-day period the
Holder  commences and  thereafter  proceeds in good faith to obtain the right of
possession  and to cure or remedy or commence to cure or remedy any such default
or breach.  Nothing  contained  in this  Agreement  shall be deemed to permit or
authorize such Holder to undertake or continue the construction or completion of
the Project  (beyond the extent  necessary to conserve or protect the Project or
construction already made) without first having expressly assumed in writing the
obligations  of the Developer  responsible  for the Project to complete,  in the
manner provided in this Agreement, the Phase of the Project to which the lien or
title of such Holder relates.  Any such Holder properly completing such Phase of
the Project  pursuant to this paragraph shall be entitled,  upon written request
made to the Agency, to a Certificate of Completion from the Agency.

          In  the  event  of the  declaration  by the  Agency  of a  Developer's
Default,  the Agency  shall  schedule a meeting with any Holder not earlier than
seven (7) or later  than  fifteen  (15) days from the date of  declaration  of a
Developer's  Default.  The Agency and the Holders of  interests  relating to any
portion of the Development  Site subject to the  Developer's  Default shall meet
and confer in good faith to plan the disposition  and continued  construction of
the Project subject to the Developer's Default.

          13.04  Failure of Holder to Complete  Improvements.  In any case where
six  months  after  exercising  its  option to  construct  a Project  under this
Agreement, the Holder of record, has not proceeded diligently with construction,
the Agency shall be afforded the same rights against the holder as it would have
against the Developers to the extent of the obligations of the Developers  which
accrue during the period the Holder has had possession of the Development  Site.
In the  alternative,  the Agency may  purchase  the mortgage or deed of trust by
payment  to the Holder of the  amount of the  unpaid  mortgage  or deed of trust
debt, including principal and interest and all other sums due to such Holder and
secured by the mortgage or deed of trust.  If the  ownership of the  Development
Site or any part thereof has vested in the Holder, the Agency, if it so desires,
shall be entitled to a conveyance  from the Holder to the Agency upon payment to
the Holder of an amount equal to the sum of the following:

          (a) The unpaid mortgage or deed of trust debt at the time title became
vested in the Holder (less all  appropriate  credits,  including those resulting
from  collection  and  application  of rentals and other  income  derived by the
lender from operations conducted on the Property or other income received during
foreclosure proceedings);

         (b) All expenses with respect to foreclosure;

          (c) The net expenses, if any (exclusive of general overhead), incurred
by the Holder as a direct result of the subsequent management of the Property or
part thereof;

         (d) The costs of any improvements made by such Holder; and

          (e) An amount  equivalent  to the interest  that would have accrued on
the  aggregate of such amounts had all such amounts  become part of the mortgage
or deed of trust debt and such debt had  continued  in  existence to the date of
payment by the Agency.

          13.05 Right of Agency to Cure.  In the event of a default or breach by
the Developers of a Security  Financing  Interest prior to the completion of any
Phase of the Project, and the Holder of such Security Financing Interest has not
waived or  exercised  its option to complete the  Development  called for on the
Development  Site,  the Agency may cure the default,  prior to the completion of
any  foreclosure.  In such event the Agency  shall be entitled to  reimbursement
from whichever of the Developers is the party to the defaulted loan of all costs
and expenses incurred by the Agency in curing the default.

          13.06 Right of Agency to Satisfy Other Liens.  After the conveyance of
title to the  Development  Site or any portion  thereof and after the Developers
have a  reasonable  time  following  notice  from Agency to  challenge,  cure or
satisfy any liens or encumbrances on the Development Site or any portion thereof
which are not otherwise  permitted under this  Agreement,  the Agency shall have
the right to  satisfy  any such  liens or  encumbrances  and  receive  immediate
reimbursement of the cost incurred in satisfying such liens or encumbrances from
the Developers;  provided, however, that nothing in this Agreement shall require
the Developers to pay or make provision for the payment of any tax,  assessment,
lien or  charge  so long as the  Developers  in good  faith  shall  contest  the
validity  or  amount  therein  and so long as such  delay in  payment  shall not
subject the Development Site or any portion thereof to forfeiture or sale.

          13.07  Additional  Mortgagee  Protections.  The Agency  agrees to make
amendments  to this  Agreement  or  enter  into an  intercreditor  agreement  as
reasonably requested by any Holder to provide any reasonably required assurances
to such Holder and the  Agency's  Executive  Director,  with the approval of the
Agency Chair and the Agency Vice-Chair,  is hereby authorized to enter into such
amendments or  intercreditor  agreements  without  further  action by the Agency
provided such amendments do not adversely impact the Financial Plan.


                   ARTICLE 14. REPRESENTATIONS AND WARRANTIES

          14.01  Representations  and  Warranties  of  Developers.  Each  of the
entities  comprising the Developers  represents and warrants to the Agency as of
the Effective Date, as follows:

          (a)  Organization.  Each of the entities  comprising the Developers is
duly  organized,  validly  existing and in good  standing  under the laws of the
State of  California,  with full power and  authority to conduct its business as
presently  conducted and to execute,  deliver and perform its obligations  under
this  Agreement.  John and Camilla  Jovicich  are husband and wife and have full
power and authority to transact their portion of the Project.

          (b)  Authorization.  The Developers have taken all necessary action to
authorize their execution,  delivery and, subject to any conditions set forth in
this  Agreement,  performance  of the  Agreement.  Upon  the  execution  of this
Agreement, this Agreement shall constitute a legal, valid and binding obligation
of the Developers, enforceable against them in accordance with its terms.

          (c) No  Conflict.  The  execution,  delivery and  performance  of this
Agreement  and  Related  Agreements  by the  Developers  does  not and  will not
conflict  with,  or constitute a violation or breach of, or constitute a default
under (i) the charter or  incorporation  documents of the  Developers,  (ii) any
applicable law, rule or regulation binding upon or applicable to the Developers,
or (iii) any material agreements to which the Developers are a party.

          (d) No Litigation. Unless otherwise disclosed in writing to the Agency
prior  to the  Effective  Date,  there is no  existing  or,  to the  Developers'
knowledge,  pending or threatened litigation,  suit, action or proceeding before
any court or administrative  agency affecting the Developers or the Project that
would, if adversely determined,  adversely affect the Developers or the Property
or the Developers'  ability to perform their obligations under this Agreement or
to develop and operate the Project.

          14.02  Representations and Warranties of Agency. The Agency represents
and warrants to the Developers, as of the Effective Date, as follows:

          (a)  Organization.   The  Agency  is  a  redevelopment   agency,  duly
organized,  validly existing and in good standing under the laws of the State of
California,  with full power and  authority to conduct its business as presently
conducted  and to  execute,  deliver  and  perform  its  obligations  under this
Agreement and Other Agreements.

          (b)  Authorization.  The  Agency  has  taken all  necessary  action to
authorize its  execution,  delivery and,  subject to any conditions set forth in
this  Agreement,  performance  of this  Agreement.  Upon the  execution  of this
Agreement, this Agreement shall constitute a legal, valid and binding obligation
of the Agency, enforceable against it in accordance with its terms.

          (c) No  Conflict.  The  execution,  delivery and  performance  of this
Agreement by the Agency does not and will not  conflict  with,  or  constitute a
violation or breach of, or constitute a default under (a) the charter  documents
of the Agency,  (b) any  applicable  law,  rule or  regulation  binding  upon or
applicable to the Agency, or (c) any material  agreements to which the Agency is
a party.

          (d) No  Litigation.  Unless  otherwise  disclosed  in  writing  to the
Developers prior to the Effective Date, there is no existing or, to the Agency's
knowledge,  pending or threatened litigation,  suit, action or proceeding before
any court or  administrative  agency  affecting  the Agency or the Property that
would, if adversely determined, adversely affect the Agency's ability to perform
its obligations under this Agreement.


                         ARTICLE 15. GENERAL PROVISIONS

          15.01 Notices Demands and Communications. Formal notices, demands, and
communications between the Agency and the Developers shall be sufficiently given
if, in writing and delivered personally, or dispatched by certified mail, return
receipt requested,  or by facsimile transmission or reputable overnight delivery
service with a receipt showing date of delivery, to the principal offices of the
Agency and the Developers as follows:

         The Developers:  American Skiing Company Resort Properties
                          P.O. Box 450
                          Bethel, Maine  04217
                          Attention:  Chris Howard, Executive Vice President/CAO
                          Fax Number:  (207) 824-5158

                          Heavenly Resort Properties, LLC
                          P.O. Box 2180
                          Stateline, Nevada  89449
                          Attention:  Stanley W. Hansen, Senior Vice President,
                                     Real Estate



                          Gary Casteel
                          Trans-Sierra Investments
                          581 Green Acres Drive
                          Gardnerville, Nevada  89410

                          Heavenly Valley, LP
                          P.O. Box 2180
                          Stateline, Nevada  89449
                          Attention:  Dennis Harmon, Managing Director
                          Fax Number:  (702) 586-7056

                          John and Camilla Jovicich
                          4020 Lake Tahoe Boulevard
                          South Lake Tahoe, California  96150
                          Fax Number:  (530) 544-7637

         With an information
                        copy to:    Lewis S. Feldman, Esq.
                                    Feldman, Shaw & DeVore
                                    2311 Lake Tahoe Boulevard
                                    South Lake Tahoe, California  96150
                                    Fax Number:  (530) 541-5242

         Agency:                    South Tahoe Redevelopment Agency
                                    1052 Tata Lane
                                    South Lake Tahoe, California  96150
                                    Attention:  Executive Director
                                    Fax Number:  (530) 542-4054


         With an information
                        copy to:    Goldfarb & Lipman
                                    One Montgomery Street
                                    Telesis Tower, 23rd Floor
                                    San Francisco, California  94104
                                    Attention:  Karen M. Tiedemann
                                    Fax Number:  (415) 788-0999

         City:                      City of South Lake Tahoe
                                    1052 Tata Lane
                                    South Lake Tahoe, California  96150
                                    Attention:  City Manager
                                    Fax Number:  (530) 542-4054



         With an information
                        copy to:    Catherine De Camillo
                                    City Attorney
                                    City of South Lake Tahoe
                                    1052 Tata Lane
                                    South Lake Tahoe, California  96150
                                    Fax Number:  (530) 542-4054

         Such written  notices,  demands and  communications  may be sent in the
same manner to such other  addresses as the affected Party may from time to time
designate as provided in this Section  15.01.  Delivery  shall be deemed to have
occurred  at the time  indicated  on the  receipt  for  delivery  or  refusal of
delivery.

          15.02  Non-Liability  of Officials  Employees  and Agents.  No member,
official, employee or agent of the Agency or the City shall be personally liable
to the Developers or any successor in interest,  in the event of an Agency Event
of Default.

          15.03 Time of the Essence. Time is of the essence in this Agreement.

          15.04 Inspection of Books and Records. The Agency has the right at all
reasonable  times  to  inspect  and  copy  the  books,  records  and  all  other
documentation  of the Developers  pertaining to the Project until one year after
issuance of the bonds refinancing the BANS.

          15.05  Title of Parts and  Sections.  Any  titles of the  sections  or
subsections of this Agreement are inserted for convenience of reference only and
shall be disregarded in interpreting any of its provisions.

          15.06  Applicable Law. This Agreement  shall be interpreted  under the
laws of the State of California.

          15.07  Severability.  If any term of this Agreement is held in a final
disposition  by a court  of  competent  jurisdiction  to be  invalid,  then  the
remaining  terms shall continue in full force unless the rights and  obligations
of the Parties have been materially altered by such holding of invalidity.

          15.08 Legal Actions.  If any legal action is commenced to interpret or
to enforce the terms of this Agreement or to collect  damages as a result of any
breach of this Agreement,  then the Party prevailing in any such action shall be
entitled to recover  against the Party not prevailing all reasonable  attorneys'
fees and costs  incurred in such action (and any appeal or subsequent  action or
proceeding  to  enforce  any  judgment  entered  pursuant  to an  action on this
Agreement).

          15.09  Binding  Upon  Successors;  Covenants  to Run with  Land.  This
Agreement  shall  be  binding  upon  and  inure  to the  benefit  of the  heirs,
administrators,  executors,  successors in interest,  and assigns of each of the
Parties.  However,  there  shall be no  Transfer  by the  Developers  except  as
permitted in Article 11. Any reference in this Agreement to a specifically named
Party shall be deemed to apply to any successor, heir, administrator,  executor,
successor,  or assign of such Party who has  acquired an interest in  compliance
with the terms of this Agreement or under law.

          15.10 Parties Not Co-Venturers.  Nothing in this Agreement is intended
to or does  establish  the Parties as partners,  co-venturers,  or principal and
agent with one another.

          15.11 Provisions Not Merged With Grant Deed. None of the provisions of
this  Agreement  shall be  merged  by the  Grant  Deed or any  other  instrument
transferring  title to any portion of the  Property,  and neither the Grant Deed
nor any other instrument transferring title to any portion of the Property shall
affect this Agreement.

          15.12 Entire  Understanding of the Parties.  This Agreement (including
the  exhibits  to this  Agreement)  constitutes  the  entire  understanding  and
agreement of the Parties with respect to the  conveyance of the Property and the
development of the Development.

         15.13 Approvals.

          (a) Whenever this Agreement  calls for Agency  approval,  consent,  or
waiver,  the written  approval,  consent,  or waiver of the  Agency's  Executive
Director or his or her designee  shall  constitute  the  approval,  consent,  or
waiver of the Agency,  without  further  authorization  required from the Agency
Board. The Agency hereby  authorizes the Agency's  Executive  Director or his or
her  designee to deliver  such  approvals  or  consents as are  required by this
Agreement;  provided,  however,  any changes to the proposed  financing  for the
Project  must be  approved  by the Agency  Board.  Any such  action  shall be in
writing.

          (b)  All  approvals  under  this  Agreement  shall  be  subject  to  a
reasonableness standard, except where a sole discretion standard is specifically
provided.

          15.14  Amendments.  The Parties can amend this Agreement only by means
of a writing signed by both Parties.

          15.15  Force  Majeure.  In addition  to  specific  provisions  of this
Agreement,  performance by either party shall not be deemed to be in default and
an  extension  of time  shall be  granted to any  affected  time  period or date
provided  in  this   Agreement   where  delays  or  defaults  are  due  to  war;
insurrection; strikes; lock-outs; riots; floods; earthquakes; inclement weather;
fires; quarantine restrictions;  freight embargoes; lack of transportation;  the
commencement  of litigation  challenging  the validity or legality of any action
taken by Agency or City in  connection  with the Project or this  Agreement;  or
court  order;  the  failure of a  governmental  entity or agency  other than the
Agency  and the  City to take an  action  required  in order  to  implement  the
Development  within a reasonable  time;  or any other causes (other than lack of
funds of the Developers or financing) beyond the control or without the fault of
the party claiming an extension of time to perform. An extension of time for any
cause will be deemed granted if the party  claiming such extension  sends notice
to the other party within  sixty (60) days of the event  causing the need for an
extension.  Times of  performance  under this  Agreement may also be extended by
written agreement of the Agency and the Developers.

          15.16  Estoppel  Certificates.  Within  ten (10)  days  following  the
request of either party (the  "Requesting  Party") the other party shall execute
and  deliver  a  statement  concerning  the  status  of the  performance  by the
Requesting  Party under this  Agreement,  of conditions of payments due and made
and such  other  relevant  matters as the  Requesting  Party may  request.  Such
statement may be relied upon by the Requesting Party, its members,  lenders, and
prospective members, transferees and grantees.

          15.17 Multiple Originals Counterparts. This Agreement may be executed
in multiple  originals,  each of which is deemed to be an  original,  and may be
signed in counterparts.


<PAGE>




         AS OF  THE  DATE  FIRST  WRITTEN  ABOVE,  the  Parties  evidence  their
agreement to the terms of this Agreement by signing below:

Approved As To Form:               AGENCY:

By: /s/ illegible                  SOUTH TAHOE REDEVELOPMENT AGENCY,
         Agency Counsel            a public body, corporate and politic

                                   By:  illegible
                                      ------------------------------------------

                                   Its:  /s/ Chairman
                                        ----------------------------------------
                                   Dated: 10/28/99
                                         --------------------------------------
Approved As To Form:               CITY:

By: /s/ Catherine L. DiCamillo     CITY OF SOUTH LAKE TAHOE,
         City Attorney             a municipal corporation

                                   By: /s/ Judy Brown
                                      ------------------------------------------

                                   Its: Mayor
                                       -----------------------------------------

                                   Dated: 10/28/99
                                         --------------------------------------

                                   DEVELOPER:

                                   AMERICAN SKIING COMPANY RESORT PROPERTIES,
                                   a Maine corporation


                                   By: /s/ Leslie B. Otten
                                      ------------------------------------------

                                   Its:  Chairman
                                        ---------------------------------------

                                   Dated: 10/29/99
                                         --------------------------------------

<PAGE>

                                   HEAVENLY RESORT PROPERTIES, LLC,
                                   a Nevada limited liability company

                                   By: /s/ Stan Hansen
                                      ------------------------------------------

                                   Its: Manager
                                       -----------------------------------------

                                   Dated: 10/28/99
                                         --------------------------------------

                                   HEAVENLY VALLEY, Limited Partnership,
                                   a Nevada limited partnership

                                   By: /s/ Dennis Harmon
                                      ------------------------------------------

                                   Its: Managing Director
                                       -----------------------------------------

                                   Dated: 10/28/99
                                         --------------------------------------

                                   TRANS-SIERRA INVESTMENTS,
                                   a Nevada corporation

                                   By: /s/ Gary B. Casteel
                                      ------------------------------------------

                                   Its: President
                                       -----------------------------------------

                                   Dated: 10/28/99
                                         --------------------------------------


                                   CECIL'S MARKET, INC.,
                                   a California corporation

                                   By:
                                      ------------------------------------------
                                        John Jovicich

                                   Its:-----------------------------------------

                                   Dated: --------------------------------------

<PAGE>




                                    Exhibit A

                                 Financial Plan


<PAGE>


                                    Exhibit B

                     Gondola Right-of-Way Legal Description


<PAGE>

                                    Exhibit C

                        Draft Tentative Subdivision Plan


<PAGE>


                                    Exhibit D

                            Project Executive Summary


<PAGE>


                                    Exhibit E

                              Scope of Development


<PAGE>


                                    Exhibit F

                                    Site Plan


<PAGE>


                                    Exhibit G

                             Schedule of Performance


<PAGE>


                                    Exhibit H

                               Form of Grant Deed


<PAGE>


                                    Exhibit I

                        Environmental Assessment Reports
                          and Natural Hazard Disclosure


<PAGE>


                                    Exhibit J

                         Motel Room Retirement Schedule


<PAGE>


                                    Exhibit K

                           Mello-Roos Rate and Method


<PAGE>