David C. Hutchinson, et al. - Page 9




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               During the transition period, VCI, not VRI, was responsible            
          for decisions and costs of any further improvements made to the             
          Golf Course and to the Clubhouse.                                           
               Up until July 19, 1996, the day the Golf Course and the                
          Clubhouse opened, all property-related insurance relating to the            
          Golf Course and the Clubhouse was paid by VRI.  After July 19,              
          1996, VCI paid all property-related insurance relating to the               
          Golf Course and the Clubhouse.                                              
               Under the Contract, any increase or decrease in the                    
          underlying fair market value of the Golf Course and the Clubhouse           
          that occurred during the transition period, would accrue, not to            
          VRI, but to VCI.                                                            
               In 1997, because of potential conflicts of interest between            
          VRI and the board of directors of VRI, some members of the Club,            
          individually and on behalf of VCI, filed a lawsuit against VRI              
          and the individual owners of VRI (namely, petitioners).  One of             
          the issues in the lawsuit involved the validity of the Contract.            
               On April 21, 1999, VRI, petitioners, VCI, and members of VCI           
          arrived at a comprehensive settlement of the above lawsuit.                 
          Pursuant to the settlement, on April 21, 1999, VRI turned over to           
          VCI operation and management of the Golf Course and the                     
          Clubhouse, and the deed and legal title to the Golf Course and              
          the Clubhouse were transferred out of escrow to VCI.                        








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