OACS SUMMARY OF JANUARY 1, 2011 NEW AGREEMENTS

We are pleased to announce that new Agreements between Smugglers’ Notch Management Company Ltd (SNMC) and the full homeowners have now been agreed upon by SNMC and OACS. If you choose, these Agreements will replace the existing 2009 Agreements upon your signature and will take effect retroactively to January 1, 2011.

The agreements are:

1. Smugglers’ Notch Long Term Renter Agreement,

2. Smugglers’ Notch Village Fees Agreement (previously named the Utility and other Services Agreement), and

3. Smugglers’ Notch Property Management Agreement.

The 1^st and 2^nd Agreements are to be contracted between Smugglers’ Notch Management Company Ltd and a homeowner of a full unit in the Village.

The 3^rd Agreement is to be contracted between Smugglers’ Notch Management Company Ltd and the full-owners Regime Associations and Townhouse groupings.

These three Agreements have been solely negotiated by the Executive Committee of the OWNERS ADVISORY COUNCIL, SMUGGLERS’ NOTCH RESORT (OACS), and SMUGGLERS’ NOTCH MANAGEMENT COMPANY LTD (SNMC) represented by Bill Stritzler and Lisa Howe.

Each of these Agreements vastly surpasses the homeowner rights and privileges that are contained in the current 2009 Agreements. Acceptance of the new 2011 agreements, automatically replaces the 2009 agreements.

1.      Smugglers’ Notch Long Term Renter Agreement.

a)      Term of the Agreement

The most important improvement that this agreement contains is related to the safeguarding of the market value of the individual homes.

The new agreement guarantees you that Smugglers’ Notch Resort will be required to offer a Renter program for 30 years, commencing on January 1, 2011. The current 2009 agreement allows Smugglers’ to cancel the renter program with twelve months notice. Should the vast majority of homeowners, 80%, decide that Smugglers’ renter program is inadequate and withdraw from the program, the owners will have the right to create their own rental program and have, for a reasonable fee, full access, for themselves and their rental guests, to all facilities and programs that are provided in common to all timeshare or other partial share homeowners.

The individual homeowner has the right to withdraw from the Long Term Renter Agreement by providing thirteen months notice.

The current 2009 Renter agreement does not provide protection for our property value if the current or a future Resort owner cancels the Renter Agreement thereby potentially lowering their acquisition costs for our units. In addition, the Homeowner and his rental guests will not have a guaranteed right to use any of the facilities. Only the new Long Term Renter Agreement provides assurances that protect owners in these circumstances.

b)      Rental rates

The current renter agreement calls for adjustments in annual rental rates to be made on the basis of the percentage increases or decreases in the annual package rates charged to renters in the semi annual marketing brochures. For the winter and summer seasons commencing as follows.

Winter rental rates would remain at the 2008 level until 2014 and would then be changed in accord with the above formula.

Summer rates for the years 2009 and 2010 were changed by the program rate changes in the Brochures.

The extremely negative economy over these two years has not only caused 2008 summer rental rates to be decreased by 2010, but in order to improve village occupancy the Village had to creatively alter the composition of the packages it offers to the renters, the 2011 summer rental brochure contains three different rental packages.

The effect of the above packaging changes does not allow for a logical calculation of the annual package rate change.

Therefore the 2011 Renter agreement provides that effective with the 2011 summer season the homeowner renter rate would be adjusted annually by the Consumer Price Index for All Urban Consumers (CPI-U) change, for the life of the Agreement.

The winter renter rate will continue to be set at the 2008 rate through 2013 and would then be raised by CPI-U commencing in winter 2014.

Please note that in line with this change all fees and charges of Smugglers’ in all three agreements will be adjusted annually on the same CPI-U basis.

Since a renting homeowners’ annual rental income exceeds the fees and charges from Smugglers’, the homeowner has inflationary growth in the net revenues of the home which will help to cover the inflationary growth in other costs, e.g. Property taxes, electricity etc.

OACS believes that the current stagnation of the U.S. economy has provided a forward advantage to Homeowners by using CPI-U for all annual financial adjustments. As the U.S economy begins its inevitable recovery the annual inflation reflected by changes to CPI-U will provide significant annual increases in our rental income.

2.      Smugglers’ Notch Village Fee Agreement.

The Village Fee services include the following utilities: domestic water, wastewater and maintenance of fire hydrants.  The other services component in the Village Fee include maintenance and snow removal of the common roads; maintenance of storm water collection systems; mowing and trimming of grass in the common areas; maintenance of common flower beds; trash removal from common areas; and security. There are other utility services that are optional to non-renters including telephone, voice mail, cable TV and WiFi, however these are required in homes that participate in Smugglers’ renter program.

The most significant differences contained in this agreement compared to the draft “Utility and Other Services” agreement are as follows.

a) Management philosophy regarding annual fees for the services

The new January 1, 2011 Agreement forces SNMC to view all the activities covered by this agreement as a cost centre. By definition, the fee for these services to be paid annually by the Homeowner is predetermined for the life of the Agreement, and the SNMC has the responsibility and incentive to carefully control their cost of operations. This methodology was used from 1985 until 2008 to the satisfaction of both the homeowners and the Village.

The current January 1, 2009 Agreement created a Profit Center for SNMC. By definition the costs of operation of these services is then increased by the allocation of Smugglers’ overhead and a mark-up for profit. This eliminates the incentive for careful cost management and could even act as an open check book for the Village, which requires very careful audit by the home owner representative creating the long and difficult arguments that have taken place for the past two years.

b) Pricing

The Full owner 2011 annual overall total fee has been established at the 2008 annual fee. This 2008 total fee will be held at the same level until 2013, in conformity with the five year freeze on winter rental rates.

Subsequent to 2013 the annual fee will be increased by the CPI-U for the year ended October 31 of the prior year.

The allocation of the direct Village services component which had traditionally been charged equally to all homes has been slighted weighted based on the size, value, and occupancy level of the homes with the following result, Studios and one bedroom home fees have decreased $150.00 per annum, two and three bedroom homes have remained at their 2008 level, and four and five bedroom home fees have increased by $150.00 per annum.

c)      Shuttle Bus service

The 2011 agreement provides complimentary shuttle bus service for owners and their guests.

3.      Smugglers’ Notch Property Management Agreement.

This agreement will be contracted between the Smugglers’ Notch Management Company Ltd. and the Full Owner Regime Associations and Townhouse groups.

The basic operating agreement remains as currently exists in the 2009 agreement, with the exception that all fees, charged to the Regimes/Townhouse groups and indirectly to the owners, will be increased annually by CPI-U in accordance with all other financial agreements. The responsibility for containing costs remains with SNMC.

The most significant addition to this Agreement is as follows:

Smugglers’ Notch Management Company will now offer an optional MANAGING AGENCY SERVICE as detailed in the Property Management Agreement.

Those Regimes/Townhouse groups who opt for this service will pay an annual management fee to Smugglers’ of $125.00 per Regime home in 2011. In addition the Regime/Townhouse group will pay an annual administration fee to OACS of $50.00 per Regime home in 2011. These fees are payable annually and are subject to annual increases by CPI-U.

The Property Management Agreement covers all owners within a Regime/Townhouse group, regardless of whether the owner is a Renting, Non - Renting or Self - Renting owner and there is no discrimination against non-OACS members.

Contract Administration.

OACS as stated in each of the above three agreements has the exclusive responsibility to negotiate and oversee the compliance of terms and conditions for these agreements.

The OACS Executive committee will be responsible for negotiations and overseeing the compliance of the terms and provisions of the Smugglers’ Notch Long Term Renter Agreement and the Smugglers’ Notch Village Fees Agreement.

With respect to the Property Management Agreement, however, administration will be overseen by a member of The OACS Executive Committee along with a sub committee made up of one member of each Regime/Townhouse group that opts for the Managing Agency Service.

The OACS executive committee takes great pride in the knowledge that our efforts over the past two years will have created a harmonious and constructive relationship between SNMC management and the Full owners.

We, with the support of all the renting owners, will begin, in conjunction with SNMC, a major program that eventually will see unit occupancy increase in all seasons. One aspect we intend to address at the same time, with the full cooperation of SNMC, is to restructure the rental guest reservation placement structure, so that all five star and five star plus rated homes regardless of their size will get a fair share of the rental reservations. We would hope to have this revised method in place starting with the 2011 – 2012 Winter season.

The OACS Executive Committee