Resolution #18-51: Resolution Approving a Settlement Agreement by and between the Vernon Township Municipal Utilities Authority, Vernon Township and Mountain Creek Resort, Inc. and Authorizing the Execution Thereof

Date of Adoption: December 20, 2018

WHEREAS, Vernon Township (“Vernon”) and Mountain Creek Resort, Inc. (“Mountain Creek”) entered into a sewer agreement dated October 24, 2005 (“2005 Sewer Agreement”), in which Mountain Creek agreed, subject to the terms thereof, to pay the debt service on the sewer bonds (as that term is defined in the settlement agreement), plus certain costs associated with the development, construction, operation, and maintenance of the project, less the revenue obtained by Vernon for sewer charges on an annual basis; and

WHEREAS, by agreement dated on July 18, 2012, Vernon and Mountain Creek entered into an agreement (“Sewer Agreement”), which modified and superseded the 2005 Sewer Agreement; and

WHEREAS, subject to the terms thereof, the Sewer Agreement Obligations continue annually until the sewer bonds are paid in full; and

WHEREAS, on May 15, 2017 (the “Petition Date”), Mountain Creek and certain of its affiliates each filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code, commencing their Chapter 11 cases (collectively, the “Chapter 11 Cases”) in the United States Bankruptcy Court for the District of New Jersey under case number 17-19899 (SLM) (the “Court”);

WHEREAS, Vernon and the Vernon Township Municipal Utilities Authority (“VTMUA”) (collectively, the “Vernon Parties”) allege that Mountain Creek subsequently defaulted on its obligations under the Sewer Agreement; and

WHEREAS, on November 13, 2017, Vernon filed a proof of claim [Claim No. 140] asserting that the sum of $28,345,874.94 (the “Vernon Township Claim”) is due under the Sewer Agreement and further alleging that such sums are secured by assets of Mountain Creek; and

WHEREAS, on November 13, 2017, the VTMUA filed a proof of claim [Claim No. 141] (the “VTMUA Claim,” and together with the Vernon Township Claim, the “Vernon Claims”) asserting that the sum of $28,345,874.94 is due under the Sewer Agreement and further alleging that such sums are secured by assets of Mountain Creek; and

WHEREAS, on March 30, 2018, the Vernon Parties filed an adversary proceeding (the “Vernon Adversary Proceeding”) in the Chapter 11 Cases captioned In re Mountain Creek Resort, Inc., et al., (Township of Vernon et al. v. Mountain Creek Resort, Inc., et al.), Adv. Pro. No. 18-01664 (SLM) (Bankr. D.N.J. Mar. 30, 2018), seeking, among other things, a declaration that the Vernon Parties hold first priority liens on all of Mountain Creek’s real property to secure in excess of $28 million allegedly due under the Sewer Agreement; Mountain Creek and all the other defendants in the Vernon Adversary Proceeding disputed that the Vernon Parties hold liens, or are entitled to assert any liens, on any of Mountain Creek’s property including its real estate; and

WHEREAS, on June 5, 2018, following a May 31, 2018 status conference in the Vernon Adversary Proceeding, the court entered an order pursuant to D.N.J. LBR 9019(a)(1) [Adv. Pro. Doc. No. 20] (the “Mediation Order”) requiring that the parties to the Vernon Adversary Proceeding make a good faith attempt to settle the litigation through mediation; and

WHEREAS, after engaging in several mediation sessions with all of the parties to the Vernon Adversary Proceeding, and separate negotiations among the Vernon Parties and Mountain Creek, the Vernon Parties and Mountain Creek have reached an agreement to resolve the Vernon Adversary Proceeding and the Vernon Claims and all claims arising from or relating to the Sewer Agreement and the transactions relating thereto; and

WHEREAS, a settlement agreement (the “Settlement Agreement”) has been drafted and approved by counsel for the Vernon Parties and counsel for Mountain Creek and other interested parties; and

WHEREAS, the Settlement Agreement sets forth the complete understanding of the Vernon Parties and Mountain Creek as it relates to the issues raised by the Vernon Parties in the Adversary Proceeding including, inter alia, the Vernon Claims and all claims arising from or relating to the Sewer Agreement and the transactions relating thereto; and

WHEREAS, the VTMUA desires to authorize the execution of the Settlement Agreement.

NOW THEREFORE BE IT RESOLVED by the Board of Commissioners of the Vernon Township Municipal Utilities Authority that the Settlement Agreement in the form attached hereto as Exhibit A is hereby approved.

BE IT FURTHER RESOLVED that the Chair of the Board of Commissioners of the Vernon Township Municipal Utilities Authority is hereby authorized and directed to execute the Settlement Agreement.